Earnings quality,bankruptcy risk and future cash flows

Prior research suggests that the quality of accruals may be compromised where the magnitude of accruals is abnormally high, due to the presence of errors in the accruals‐estimation process (Dechow and Dichev, 2002; Richardson, 2003). A consequence of this is that abnormal accruals may not map into realised future cash flows to the extent that would normally be expected of accruals data. Indeed, the association may be insignificant if abnormal accruals consist primarily of estimation noise. Our study investigates whether abnormal accruals for UK firms provide incremental insight into future cash flows. In particular, our paper may be viewed as a development of Subramanyam (1996). We find a significant positive association between abnormal accruals and one‐year‐ahead operating cash flows. This provides a rationale for the pricing of abnormal accruals by the market (Subramanyam, 1996; Xie, 2001) and suggests that abnormal accruals are not merely the products of noise in the accruals‐estimation process. However, our results are conditional upon the probability of one‐year‐ahead bankruptcy risk (Charitou et al., 2004). We also find that abnormal accruals possess small but significant explanatory power for future cash flows even when controlling for the disaggregation of accruals into individual items (Barth et al., 2001).     

Gains from Disaggregation and the Definition of a Segment: A Note on SSAP 25

The role of line of business segment disclosure is examined in a setting in which disaggregated data is a means of mapping analysts' specialist expertise concerning the future profitability of the industry, to the consolidated profit forecast of the individual firm. Using this analysis, we show formally that relevant segmental disclosure requires that the management of a company define segments in such a way that users (and, in particular, analysts) can use their specialist forecasting expertise. We show that, unless segments are so defined, consolidated profit alone is a sufficient disclosure. This means that appropriate reportable segments may not necessarily coincide with the company's organisational structure, which is unlikely to be determined solely by factors relating to forecasting efficiency. We also provide a rationale for different types of segmental information. Measures of segmental activity enable the expected performance of the industry to be mapped to the individual firm; but using these measures alone assumes that the segment profitability mirrors its industry. The additional disclosure of segmental profit allows this mapping to be varied according to the segment's position in relation to its industry norm.     

Optimum choice of invoice currency with correlated exchange rates†

In this paper, we revisit optimal choice of invoice currency for an exporting firm in the face of exchange rate uncertainty. We demonstrate that when a vehicle currency is available, the optimum choice depends not only on the volatility of the exchange rates but the covariance between them as well. In particular, we show that when the exchange rates between the exporter and importer currencies on the one hand, and the exporter and the vehicle currency on the other, are positively correlated, vehicle currency becomes an attractive choice. The intuition underlying this novel outcome is that this regime dampens profit variability for the exporter.     

Pricing of time-varying liquidity risk in Finnish stock market: new evidence

Using two recently developed illiquidity measures, we estimate a conditional version of liquidity-adjusted capital asset pricing model (LCAPM), which allows for a time-varying decomposition of the total illiquidity premium into a level component and three risk components. The total estimated annualized illiquidity premium for the Finnish equities during 1997–2015 is 1.13–1.90% depending on the illiquidity measure. Of the three systematic liquidity risk components, risk arising from hedging of wealth shocks is the most important followed by commonality in liquidity risk, whereas flight to liquidity risk is not significantly priced in the Finnish stock market. Our results show that the liquidity risk is time varying, therefore the models estimating the risk-return relationship should address the issue of conditionality.     

Determinants of industrial development: a panel analysis of South Asian economies

Quality & Quantity - A well performing industrial sector plays an important role in poverty mitigation, unemployment reduction, trade promotion, exchange of goods and services, increased per...     

The dynamic dependence between stock markets in the greater China economic area: a study based on extreme values and copulas

This study employs the dynamic copula method and extreme value theory to investigate the dependence structure between pairs of greater China economic area (GCEA) stock markets consisting of Shanghai (SHSE), Shenzhen (SZSE), Hong Kong (HKSE), and Taiwan (TWSE) stock exchanges from July 2000 to June 2017. We also examine the impact of financial crisis on the dependence structure by considering the global financial crisis and the Chinese stock market crash (2015–2016). Many studies have shown that the benefits of portfolio diversification across the stock markets in the same region could be diminishing. However, it is interesting to see that the diversification benefits appear to be viable for investing in some GCEA pairs of stock markets (SHSE–TWSE and SZSE–HKSE).     

The knowledge spillover theory of entrepreneurship: the developing country context

International Entrepreneurship and Management Journal - This is among the few studies to test the Knowledge Spillover Theory of Entrepreneurship (KSTE) at the city level in a developing country...     

Impact of Transformational and Servant Leadership on Organizational Performance: A Comparative Analysis

The purpose of this study is to examine the impact of two comparative leadership styles on organizational performance outcomes. The leadership styles undertaken is transformational and servant leadership. A sample of 155 participants is taken from profit-oriented service sector of Pakistan. Data through survey gathered on a five point likert scale from organizations. AMOS and SPSS are used for statistical analysis. The result shows that, transformational leadership has more impact on organizational learning than servant leadership. Furthermore organizational learning enhances organizational performance. Managers and leaders of corporate sector can get benefited from this study. Their main objective is to maximize the profitability of organization thus, they can choose leadership style which polishes their abilities and helps them to achieve profit maximization.     

Asymmetric effect of exchange rate volatility on India's cross‐border trade: Evidence from global financial crisis and multiple threshold nonlinear autoregressive distributed lag model

This paper examines the asymmetric effect of exchange rate volatility on India's cross‐border trade with its major trading partners: Japan, Germany, the United States, and China. We extend previous studies in two ways. First, we examine whether global financial crisis changes the asymmetric effect of exchange rate volatility on India's cross‐border trade. Next, we divide exchange rate volatility into quintiles and examine the effect of each quintile on cross‐border trade by using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. Our findings from standard nonlinear ARDL (NARDL) indicate that the asymmetric relationship between exchange rate volatility and cross‐border trade changes as a result of global financial crisis. In addition, findings from MTNARDL indicate that in short‐run, exchange rate volatility symmetrically affects India's cross‐border trade with all sample countries whereas in long‐run it asymmetrically affects cross‐border trade. Overall, these findings are very important for policy implications and open a new dimension to exchange rate volatility and trade flows.