Operational Restructuring Charges and Post‐Restructuring Performance*

Firms incur restructuring charges as a result of actions intended to improve their operating performance. However, there is little evidence on whether restructuring charges are associated with improved performance. We examine a sample of firms reporting restructuring in 1991‐93 and find that the restructuring firms' earnings increase over the levels immediately before restructuring. Compared with a control sample of firms that report no restructuring, the restructuring firms improve their earnings and operating income, but evidence for improvements in cash flow from operations is mixed. In regression analysis, we find that restructuring charges are significantly positively associated with post‐restructuring changes in earnings relative to the restructuring year, but this association is largely driven by firms with multiple restructurings and firms reporting losses in the restructuring year. We find no association between restructuring charges and post‐restructuring changes in earnings relative to the year before restructuring. Restructuring charges are significantly positively associated with post‐restructuring changes in operating income and cash flow from operations for firms with multiple restructurings. In summary, restructuring charges are associated with improved earnings, but our results suggest that restructuring in the early 1990s did not necessarily guarantee improved operating performance.     

企业危机与管理舞弊的相关性研究

文章选取因年报存在管理舞弊而被证监会会处罚的上市公司为研究样本,按照一定的配比原则选取了配比样本,并计算了行业平均水平,对企业和管理舞弊之间的相关关系进行了实证分析。研究结果表明,企业危机与管理舞弊高度相关。此外,主营业务毛利率、总资产收益率等指标能够显著识     

分析师的现金流预测有用吗——基于信息供给的视角

文章考察了证券分析师现金流预测行为对盈余预测质量的影响。研究发现,相对于没有现金流预测的公司,有预测的公司其盈余预测质量更高;现金流预测的次数越多,盈余预测质量越高;以上关系在盈余波动大、经营活动现金流波动大的公司更加明显。这说明我国分析师提供现金流预测信息的确有用,能够帮助分析师改善其盈余预测质量。文章的发现具有重要的实践价值,能够帮助投资者了解分析师现金流预测对盈余预测的影响,从而更有效地利用证券分析师报告进行决策。     

Earnings Manipulation in Failing Firms

Prior literature and anecdotal evidence, most recently provided by allegations relative to Enron, Global Crossing, and WorldCom, suggest that failing firms (defined here as prebankruptcy firms) may be motivated to engage in fraudulent financial reporting to conceal their distress. I examine two research questions: (1) Are failing firms' prebankruptcy financial statements more likely to exhibit signs of material income increasing earnings manipulation than those of nonfailing firms? (2) Do auditors detect the overstatements in firms that they perceive to be failing? I predict and find that as (ex post) bankrupt firms that do not (ex ante) appear to be distressed approach bankruptcy, their financial statements reflect significantly greater material income‐increasing accrual magnitudes in nongoing‐concern years than do control firms. The accrual behavior of these firms resembles that of bankrupt firms that the Securities and Exchange Commission (SEC) has sanctioned for fraud. Like sanctioned firms, the nonstressed bankrupt firms display significantly greater (material) increases in receivables; inventory; property, plant, and equipment; sales; net working capital, current, and discretionary accruals in prebankruptcy nongoing‐concern years than do control firms. They also display significantly more negative changes in cash flows from operations and net cash and a greater disparity between accrual‐based net income and operating cash flows than do control firms, consistent with Lee, Ingram, and Howard 1999. Finally, I predict and find that these firms' going‐concern years reflect evidence consistent with auditor‐prompted reversal of previous overstatements. These results are based on parametric and nonparametric tests for various subsample combinations drawn from a sample of 293 bankrupt firms representing approximately 2,500 observations.     

基于现金流量的综合财务指标实证研究——以制造业上市公司为例

以权责发生制为基础设计的财务综合指标容易受盈余管理的影响,由此可能导致指标不能反映公司实际财务实际状况。本文以收付实现制为基础,通过主成份分析方法将多个现金流量表主要指标组合成一个综合财务指标,客观评价公司财务状况,最后选取综合绩效排名前50位中的33家制造业上市公司为样本,实证综合财务指标判断的一致性。     

Accounting Information and CEO Compensation: The Role of Cash Flow from Operations in the Presence of Earnings*

We examine the role of cash flow from operations (CFO) in chief executive officer (CEO) cash compensation. We predict that CFO is contract‐relevant in the presence of earnings, and more so when (1) the quality of earnings relative to the quality of CFO as a measure of performance is low and (2) the need for CFO as a financing source is high. Our analysis is motivated principally by normative arguments and anecdotes from financial disclosures linking CFO to managerial effort and contracts, notwithstanding the traditional role of earnings in performance measurement. We find that the weight of CFO in the compensation model is positive and significant in the presence of earnings and stock returns. We also find that the relative quality of CFO compared with that of earnings has a positive (negative) impact on the weight of CFO (earnings). We further find that the relative weight of CFO is enhanced substantially when enterprise activities crucially depend on internally generated cash flow. These findings are unaltered when we include CEO age, firm size, and risk in the model and allow the coefficients to vary across industries.     

信息技术类上市公司财务危机预警实证研究

以沪、深A股2008-2012年28家信息技术类上市公司为研究样本,利用ST公司财务危机前3年的数据初步选用21个初始预警变量;从样本的信息显著性和重复性出发,采用因子分析法等方法筛选基础预警指标,最终确定净资产增长率、净利润增长率、技术人员比率等8个指标作为模型初始变量;接着运用Logistic回归分析构建财务危机预警模型。该模型仅针对信息技术类上市公司,对公司发生财务危机前的财务状况的拟合度较高,具有较强的适用性与指导性。     

黑龙江省科技类上市公司现金流量状况分析

现金流量表,是企业重要的财务报表,它能为各类会计报表使用者提供准确的现金流量信息.通过对现金流量表的结构分析、偿债能力分析和获取现金能力分析使得广大会计报表使用者能够对黑龙江省科技类上市公司的经营状况和管理水平有一个更加充分、正确的认识.     

Financial Statement Complexity and Meeting Analysts’ Expectations

We examine whether firms with greater financial statement complexity are more likely to meet or beat analysts’ earnings expectations. We proxy for financial statement complexity using the firm's industry and year adjusted accounting policy disclosure length. Firms with more complex financial statements are more likely to just beat expectations than just miss expectations. Firms with complex financial statements appear to use expectations management to beat expectations, but do not use earnings management. Corroborating these findings, we find analysts rely more on management guidance for more complex firms. Firms with complex financial statements are also more likely to have analysts exclude items from actual “street earnings,” but tests suggest this strategy is not specifically used by complex firms to beat expectations. The effect we document is specific to analyst forecasts and not to other alternative benchmarks.     

The Link between Earnings Conservatism and the Price‐to‐Book Ratio*

We hypothesize and find that (1) earnings conservatism, the tendency of firms to recognize bad news in earnings on a more timely basis than good news, is substantially greater in portfolios of firms with lower price‐to‐book ratios than in portfolios of firms with higher price‐to‐book ratios; and (2) the negative association between earnings conservatism and the price‐to‐book ratio stems primarily from the accrual component of earnings, not the operating cash flow component of earnings. Our results suggest that studies using earnings‐returns associations to investigate cross‐sectional or time‐series differences in earnings conservatism risk drawing erroneous inferences unless the research designs control for cross‐sectional or time‐series variation in price‐to‐book ratios.     

The Impact of the Bullwhip Effect on Sales and Earnings Prediction Using Order Backlog

Recent work in the supply chain literature suggests that the variance in orders placed with suppliers will be larger than that of sales to buyers. This distortion in demand information increases as it is passed along the supply chain from customers to upstream suppliers and has been referred to as “the bullwhip effect.” In this paper, we argue that the bullwhip effect reduces the ability of order backlog to predict future sales and earnings for upstream suppliers. Results obtained from our empirical analysis support this proposition. We find that the impact of bullwhip on the predictive ability of order backlog is further accentuated in firms with longer operating cycles. Market intermediaries such as financial analysts, on average, are unable to fully account for differences in the predictive ability of order backlog. However, analysts belonging to employers that follow all firms in a vertical supply chain do a better job of understanding the impact of bullwhip on the predictive ability of order backlog. In additional tests, we find that the bullwhip effect also impedes the ability of inventory components to predict future sales and earnings.     

Do Analysts' Cash Flow Forecasts Encourage Managers to Improve the Firm's Cash Flows? Evidence from Tax Planning

Recent research finds that analysts' cash flow forecasts have meaningful financial reporting ramifications, but, to date, the identified effects are unlikely to yield meaningful cash flow benefits. This study examines whether analysts' cash flow forecasts encourage managers to enhance the firm's cash flow position through tax avoidance activities. We evaluate the change in cash tax avoidance after analysts begin issuing cash flow forecasts relative to a propensity score matched control sample of firms without cash flow forecasts. Consistent with analysts' cash flow forecasts encouraging tax avoidance that enhances the firm's cash flow health, we find a negative association between cash tax payments and analysts' cash flow coverage. Additional analysis suggests this association is driven primarily by strategies to permanently avoid rather than to temporarily defer tax payments and that increased cash tax avoidance activity represents a nontrivial component of the overall increase in reported operating cash flows after the initiation of analysts' cash flow coverage.     

隧道行为与盈余管理——基于我国家族上市公司的实证研究

本文利用"隧道行为"理论解释我国家族上市公司的盈余管理活动。通过对2002-2004年间我国家族上市公司样本的实证检验,结果发现,控制性家族控制权偏离现金流量权的程度越大,公司盈余管理幅度越高。这说明控制性家族有动机操纵盈余以隐藏其掏空公司资源的"隧道行为",从而补充了现有对公司盈余管理动机的研究。     

The Relative and Incremental Explanatory Power of Earnings and Alternative (to Earnings) Performance Measures for Returns*

We analyze the ability of earnings and non‐earnings performance metrics to explain the variability in annual stock returns for industries where we identify, ex ante, an allegedly preferred (for valuation purposes) summary performance metric. We identify three industries where earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash from operations (CFO) are preferred, and three industries where specific non‐GAAP performance metrics are preferred. As a benchmark, we also examine the ability of EBITDA and CFO to explain returns for seven industries for which earnings is the preferred metric. Results for the benchmark earnings industries show that earnings dominates EBITDA and CFO in explaining returns. All other results are inconsistent with the view that perceptions of preferred metrics are reflected in actual aggregate investment behaviors.     

Dividend Policy at Firms Accused of Accounting Fraud

Recent studies and some policy experts have posited that dividends indicate higher‐quality earnings. In this study, we test this conjecture by comparing the dividend policies of firms accused of accounting fraud to those of firms not accused of accounting fraud. Specifically, we examine whether alleged fraud firms are as likely to be dividend payers as non‐fraud firms, and whether managers of dividend‐paying fraud firms increase dividends at the same rate as managers of non‐fraud firms. Our data reveal that dividend paying status is negatively associated with the probability of committing accounting fraud. In addition, we also find that, during the alleged fraud period, the earnings–dividends relation is weaker for the alleged fraud firms relative to firms not accused of fraud. Finally, using propensity score match tests, the data provide evidence that managers of alleged fraud firms increase dividends less often than managers of firms not accused of fraud, consistent with the alleged fraud firms not being able to match the dividend policies of firms not accused of fraud. Overall, our results suggest that dividends, especially dividend increases, are associated with higher earnings quality.     

An Investigation of the Value Relevance of Alternative Foreign Exchange Disclosures*

We demonstrate analytically and empirically that valuing a firm with foreign operations in the presence of exchange rate uncertainty requires information on the foreign operating cash flows disaggregated by currency and persistence. In particular, given consolidated earnings, investors need information on the exchange gain or loss on permanent foreign operating cash flows. We extend the model to show how the permanent foreign cash flows can be used to condition the change in the translation adjustment to make it value‐relevant; however, using the permanent foreign cash flows directly is superior for valuation purposes. The empirical tests support our hypothesis that the market response to exchange rate movements is sensitive to the relative magnitudes of revenues and costs denominated in each foreign currency in which a firm has transactions. Disclosure of cash flows by currency should enhance the valuation of firms with foreign operations.     

The Effects of Financial Statement Information Proximity and Feedback on Cash Flow Forecasts*

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), in their joint Financial Statement Presentation project, are reconsidering the basic format of financial statements. The Boards’ preliminary discussions related to this joint project indicate that they intend to modify the required financial statements to increase the proximity of performance‐related information for each reported period. We provide evidence related to this potential change by investigating the effects of financial statement information proximity on investors’ ability to learn the forecast‐relevant time series properties of reported cash flows and accruals. We also examine the role feedback plays in this relationship. Our experimental results suggest that nonprofessional investors are able to more quickly learn the relation between current period cash flows and accruals and future cash flow realizations when financial statement information is presented in a single statement rather than separated into two statements. In addition, we find that nonprofessional investors exhibit lower levels of absolute forecast errors and less forecast dispersion when financial statement information is unified into a single statement. Finally, we provide evidence that nonprofessional investors who receive extensive outcome feedback on a single page initially learn more quickly and later, after learning has leveled off, accurately forecast more consistently than do investors who receive extensive or limited feedback spread across two pages. Overall, our results provide evidence on the effectiveness of alternate financial statement presentation formats and the potential usefulness of receiving more extensive feedback.     

Corporate Cash Holding in Asia

In this paper, we analyze the determinants of corporate saving in the form of changes in cash holdings for 11 Asian economies using firm‐level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in cash holdings (i.e. that the cash flow sensitivity of cash is positive) and that the positive impact of cash flow on the change in cash holdings is larger and more significant in the case of smaller and presumably more constrained firms than in the case of larger and presumably less constrained firms in both developed and developing economies. Both of these findings corroborate the importance of financial constraints in Asian firms. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis and that Tobin's q has a positive impact on the change in cash holdings, especially in the case of larger and presumably unconstrained firms.     

The usefulness of earnings versus book value for predicting stock returns and cross corporate ownership in Japan

Using a sample of Japanese firms, this paper evaluates the usefulness of the two fundamental products of an accrual accounting system, namely accrual earnings and book value of equity for predicting stock returns. Our analysis shows that both earnings and book value for Japanese firms have the ability to provide for profitable trading strategies or improved portfolio decisions, and that relative to the trading strategy based on earnings or book value alone, the trading strategy based on a combination of both earnings and book value generates substantially higher returns for all cases. This suggests that book value (or earnings) captures certain aspects of equity values that are not captured by earnings (book value). Our multivariate regression results further indicate that the predictive ability of earnings is dominated by that of book value. Finally, it is found that the predictive ability of book value is sensitive to the degree of cross corporate ownership, while it is insensitive to the degree of real estate holding.     

An Empirical Analysis of the Relationship between Cash Flow and Dividend Changes in Nigeria

The purpose of this study is to re‐evaluate the incremental information content of cash flows in explaining dividend changes, given earnings. I carry out an 882 firm‐year study by analysing the dividend changes‐cash flow relationship on a sample of 63 quoted firms in Nigeria over a wider testing period from 1984 to 1997. Despite the fact that I used a wider testing period than previous studies and more refined cash flow measures than previous studies, I also introduced dummy variables to capture economic policy changes in the economy. The association of cash flows with dividend changes is tested using the modified Lintner‐Brittain model as adopted in Charitou and Vafeas (1998) on pooled cross sectional/time series data from the full sample of observations from 1984‐97. The models are estimated using the ordinary least squares (OLS) method and I do find a significant relationship between dividend changes and cash flow unlike previous studies. The empirical results reveal that the relationship between cash flows and dividend changes depend substantially on the level of growth, the capital structure choice, size of each firm and economic policy changes.