What is behind the magic of O-Score? An alternative interpretation of Dichev’s (1998) bankruptcy risk anomaly

Using Ohlson’s (J Account Res 18(1):109–131, 1980) measure of bankruptcy risk (O-Score), Dichev (J Fin 53(3):1131–1147, 1998) documents a bankruptcy risk anomaly in which firms with high bankruptcy risk earn lower than average returns. This study first demonstrates that the negative association between bankruptcy risk and returns does not generalize to an alternative measure of bankruptcy risk. Then, by examining the nine individual components of O-Score, I find that funds from operations (FFO) is the only component that is associated with returns. Furthermore, I show that the return-predictive power of FFO is due to cash flows from operations. Taken as a whole, this study provides evidence that Dichev’s bankruptcy risk anomaly is a manifestation of investors’ under (over)-pricing of cash flows (accrual) component of earnings, i.e., the accrual anomaly documented by Sloan (Account Rev 71(3):289–316, 1996).     

How effective is central bank communication in emerging economies? An empirical analysis of the chinese money markets responses to the people’s bank of China’s policy communications

Review of Quantitative Finance and Accounting - Central banks, in both developed and developing economies, are responding to the increased demand for transparency in monetary policy formulation and...     

Do customer profiles change over time? An investigation of the success of targeting consumers of Australia’s top 10 banks – 2009 and 2011

Segmentation and targeting are cited as being a core part of marketing strategy for any organisation. This study examines whether the top 10 Australian banks have successfully managed to segment the market and target consumers with different profiles. In doing so, it compares the profiles of those banks over 2 years, 2009 and 2011, noting any changes between the years. A sample of 52?000 Australian households, from each of the 2 years, from the Roy Morgan Single Source Survey was utilised to profile users of Australia’s top 10 banks by market share. The results suggest that there has been little difference in profiles of consumers across most Australian banks. The results challenge whether financial service companies are successfully segmenting the marketplace and asks whether the Australian financial services market is simply a mass market.