Missing quarterly earnings benchmarks, CEO cash compensation and institutional ownership

Research suggests that transient institutions, i.e., institutions with short-term investment horizon,make management focus on short-term earnings goals. This study examines incentive in terms of CEO cash compensation that explains why management concentrates on short-term earnings results when transient institutions hold high levels of ownership. Using quarterly consensus analysts＇ expectations as a proxy for short-term earnings benchmarks, the author finds that CEO cash compensation and the frequency with which management misses quarterly earnings benchmarks in a year （MISSNUMt） are more strongly negatively associated in firms with high transient institutional ownership than in firms with low transient institutional ownership, suggesting that transient institutions strengthen the inverse relation between CEO cash pay and missing short-term earnings benchmarks and hence increase pressure on management in terms of cash pay for short-term results. Moreover, the author shows that change in CEO cash compensation is positively associated with change in transient institutional ownership, consistent with the idea that selling shares by transient institutions influences the boards of portfolio firms in CEO cash compensation decision. This study contributes to the governance literature and is relevant to business managers by providing additional evidence that transient institutions provide less patient capital and may not benefit long-run firm value creation.     

Earnings disaggregation and analysts＇ forecasts

Accounting concepts dictate that separately disclosed components should contain separate useful information. This paper examines the relations between income statement components and analysts＇ earnings forecasts and forecast errors. Regressions explaining earnings forecasts using earnings components provide a better fit than regression using just aggregate income to explain forecasts. We interpret this as consistent with the hypothesis that analysts use incremental information in components not available in aggregate income. However, additional tests based on predictability of forecast errors indicate that analysts do not incorporate all information available in components into earnings forecasts. In addition, this inefficiency appears to increase at longer forecast horizons.     

Are Islamic incomes relevance to commercial banks in Malaysia？

A significant price-to-earnings relation is evident in many research findings, which includes study on Malaysia Stock Markets, that the strength, consistency and magnitude of the relation are not as large as those reported in institutionally more developed markets. However, the price adjustment is stronger if price reaction is measured over a long periods, which is consistent to speculative trading. Firm-specific variables such as revenue, firm size and debt-equity have no incremental information content beyond earnings implies that the market monitoring process in an emerging market focuses on earnings only during financial announcement. Therefore, this paper revisited the study on the relevant of accounting banks in Malaysia using the earnings response coefficients, earnings by looking at Islamic Income for commercial which are the earnings-to-share return coefficients that are estimated for sub earnings components by including Islamic banking incomes in the analysis. This paper discovered that though there is a positive effect, the earnings from Islamic banking operation are small. Thus, the total earnings as well as the sub-categories of earnings of banks appear to enter the pricing considerations of investors.     

The effect of earnings forecast precision on firm value and insider trading under voluntary disclosure in Taiwan

Taiwan changed its earnings forecast policy from mandatory to voluntary disclosure in 2005. In this study, the inferences of voluntary earnings forecast are examined based on forecasts issued by listed firms. This study suspects that insiders have a temptation to strategically manipulate financial forecast information to influence markets and thus receive extra rents. Under the new earnings forecast disclosure policy, the number of disclosing firm decreases but the precision of earnings forecast increases. The empirical result from dynamic panel data evidences the forecast error of voluntary disclosure may negatively impact firm values. Furthermore, there is a positive relationship between insiders＇ trading profit and manipulation of earnings forecasts. As volatility in insider manipulation increases, it is difficult for the investors to predict the real intention of insiders, and insiders may achieve greater benefits from trading. This study also observes that many listed companies hold investor conferences to provide earnings guidance in Taiwan. The reason may be that investor conference is more flexible and has less forecast error cost than the formal financial forecast. This study provides important insights into earnings forecast policy in emerging markets. The competent authority should improve corporate governance and develop monitoring functions to abate forecast manipulation.     

What are affecting earnings quality： A summarization

Researches on factors that affecting earnings quality are significant for regulators＇ decisions and the improving of earnings quality. After reviewing the research findings on what are affecting earnings qualities from the following 6 fields： accounting standards, firm characteristics, board and auditing committees＇ characteristics, managerial characteristics, auditing firm characteristics and other factors, the author conclude the current findings and foresee the future research focus on earnings quality.     

How value relevant are earnings when they are transitory？ Empirical evidence for France

Capital market participants take seriously into consideration the value relevance of earnings for security valuation. This study examines the value relevance of earnings when earnings are transitory, i.e., there is great variability in earnings. It hypothesizes that the relationship between earnings and security returns worsens when earnings are transitory and this robustness is country specific. The dataset consists of more than 1,100 French firm-year observations over a nine year period. Empirical results show that when earnings are transitory, investors pay more attention to operating cash flows and less attention to earnings, a result indicating that investors penalize firms with unstable earnings. These results should be of great importance to financial analysts, investors and bankers for investing and credit decisions, especially after the recent global financial crisis.     

The analysis of determinants of going concern audit report

Going concern is one of essential things for user to make a financial decision. This research aims to explore factors that caused the issuance of going concern audit report by auditor. This research adds two new variables, audit size and audit committee, besides the other factors that cause auditor issue a going concern audit report. This research uses a regression logistic analysis to determine the relationship of each variable （liquidity, solvability, profitability, cash flow, audit firm size and audit committee） to going concern audit report. Different from previous researches, the results of this research show that liquidity, profitability, cash flow, and audit committee are not significant to influence the issuance of audit opinion. Audit size has a more significant relationship to audit opinion, while solvability is the most significant factor.     

Does investor protection affect the choice of earnings management methods through real activity manipulation and accrual manipulation？ Asian comparison

This paper examines systematic differences in earnings management through real activity manipulation and accrual manipulation across 7 Asia countries. The study proposes arguments that in economies with high investor protection, managers prefer to manage earnings through real activity manipulation rather than through accrual manipulation because accrual manipulation is more likely to draw auditors or regulators scrutiny than real decisions about pricing and production. The study findings are consistent with prediction. Despite being in economies with high investor protection, managers still have bigger discretion in managing earnings through real activities rather than accrual manipulation.     

Working capital management and corporate performance： Case of Malaysia

Working capital always being disregard in financial decision making since it involve investment and financing in short term period. However, it is an important component in firm financial management decision. An optimal working capital management is expected to contribute positively to the creation of firm value. To reach optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The intention of this study is to examine the relationship between working capital management and firm profitability. Cash conversion cycle is used as measure of working capital management. This study is used panel data of 1628 firm-year for the period of 1996-2006 that consist of six different economic sectors which are listed in Bursa Malaysia. The coefficient results of Pooled OLS regression analysis provide a strong negative significant relationship between cash conversion cycle and firm profitability. This reveals that reducing cash conversion period results to profitability increase. Thus, in purpose to create shareholder value, firm manager should concern on shorten of cash conversion cycle till optimal level is achieved.     

Accounting for goodwill under FRS 136： Case of Malaysian plantation companies

The introduction of FRS （financial reporting standards） 136 to Malaysian PLC＇s （public limited company） in 2006 indirectly formalized accounting for purchased goodwill for the first time. Based on a sample of 2006 annual reports of 10 Main Board companies from plantation sector, the study finds the level of desired disclosure has yet to be met. Whilst the intention of the standard is noble, actual practice for first time reporting entities indicate that Malaysian PLC＇s and their auditors have far to go before they can meet the expectation set by FRS 136 in particular and International Financial Reporting Standards in general.     

Value-relevance of accounting numbers for valuation

Recent empirical work suggested that the ability of accounting numbers to explain the relationship between accounting numbers and stock prices has deteriorated over the past four decades. The findings of this study suggest that the accounting earnings and book value are capturing most of the information that is relevant to assess the values of firms. At the same time, it also suggests that earnings and book value as well as non-accounting beta are more valued during the financial crisis as compared to after the financial crisis. Overall, the accounting estimate of the value of the firm is not deviating from the markets＇ estimate, which suggests that accounting numbers play an important role in the valuation of firms in Malaysia.     

Evaluation of the asset＇s value by using fuzzy two-stage discounted cash flow model

This paper establishes the fuzzy discounted cash flow model to settle the uncertainties of the cash flow and discount rate in two-stage DCF model, to take the imprecise of the time period of the supernormal growth phase with considering the investor＇s attitude to risk. Firstly, the discount rate and the growth rate are fuzzified as triangular fuzzy numbers in this fuzzy discounted cash flow model. Then the intrinsic value of an asset can be evaluated by the arithmetic operation on interval and λ- signed distance method under the framework of DCF approach. Finally, a listed company at Shanghai Stock Exchange is analyzed as the case to demonstrate the process of stock value calculation by the fuzzy discounted cash flow model.     

Dependencies between price duration,volatility, volume and return on the Warsaw Stock Exchange

The successive changes of asset prices are the most visible manifestation of financial markets dynamics. There exist different views about factors generating these changes, but many researchers and practitioners agree that the most important among them is the impact of information flow. According to the market microstructure theories, it depends mainly on the behavior of informed and uniformed traders. In the paper, we investigate dependencies between the possible proxies of information process： price duration and corresponding to it volume change and return. Our main objective is to answer the question about the most important factor in the process of discovering information by uniformed traders. We apply a set of models for volatility, volume and duration data. Our analysis is performed for selected equities listed on the Warsaw Stock Exchange and uses tick-by-tick data. The obtained results show that the stock liquidity on this leading stock market in Central and Eastern Europe is the most important factor influencing the process of discovering information by uninformed traders.     

Financial statements in less developed countries： What do preparers demand？

This study reports on an empirical investigation of the characteristics, attitudes, and beliefs of preparers of external financial reports in a less developed country. The basic research instrument consisted of a questionnaire in two parts： the first addressing attitudes of professional accountants toward annual financial reports generally; the second, more specifically measuring the importance of the information items to preparers. Our results suggest that the independent auditor is the most influential group in decision-making processes. As in many developed countries, the auditor＇s report and the regulatory framework are considered to have a major influence on financial reporting practices. Preparers believe that a lack of knowledge of external users＇ needs and lack of reporting standards and accepted accounting principles are the main concerns with corporate financial reports in Iran. The results showed that the balance sheet, auditors＇ report, and income statement in that order are the three most important parts of the annual reports.     

Controversies over fair value accounting： The case of SMEs

This study analyses IASB＇s stipulations on fair value usage in its standard designed for SMEs and the reactions of national standard setters, preparers and users of financial reporting in this respect. It tries to clarify fair value applications such as market value and value in use and the appropriateness of their usage for the case on hand. This research determines the inconsistencies within IASB ED IFRSfor SMEs （2007） related to the usage of fair value, underlined by the respondents＇ comment letters. The content analysis of all the above, conducted according to the type of economy and nature of respondent, along with the statistical techniques applied, indicates a partial approval of fair value usage under the following conditions： clarification of the concept, details on its usage in relation to market liquidity and the nature of the asset, additional guidance regarding the measurement methods. We advocate for the value in use, an application of the fair value based on internal valuations, which offers an adequate cost-benefit rate. The final version ofIFRSfor SMEs highlights both the preference of market information over the internal valuations and the insufficient information regarding solutions suited for non-liquid markets. It may be appropriate for the IASB, maybe in collaboration with the IVSC, to provide guidance and details regarding the implementation and disclosure of the valuation techniques applicable to this type of entities.     

Financial reporting of cash flow： Arbitrary items and management preferences

The international financial reporting standard for cash flow statement （IAS 7） provides options for the classification of certain cash flow items （arbitrary items）. Therefore, business firms may classify the arbitrary items using the option that would maximize their own interest. This reduces the comparability of financial statements amongst business firms. This study aims to investigate the factors explaining management preferences in the selection of financial reporting practices on the arbitrary cash flow items. It concludes that managers tend to magnify the CFO reported in order to maximize the shareholders＇ wealth, which in turn would maximize their compensation. Managers of business firms with a relatively smaller size of CFO tend to classify interest paid and dividends paid as non-CFO in order to magnify their CFO. They also tend to classify interest received as CFO in order to inflate their relatively smaller size of CFO up to expectation. Similarly, managers of business firms with a relative larger size of dividends paid would classify the dividends paid outside CFO.     

Control and its role in the process of ensuring knowledge continuity

With the commencement of the 21st century, the information age, knowledge economy and integration of information and knowledge among production factors, organizations show increasing interest in knowledge management. Managers are trying not only to preserve knowledge and transfer it efficiently within their organization, but also to ensure that it is not lost when a knowledge employee leaves the organization. Therefore, it is indispensable for organizations to monitor, record, transfer and preserve their knowledge. In order to ensure efficient preservation of knowledge by the organization, it is essential to integrate the area of the so-called knowledge continuity into the general management and ensure its maximum value. The goal of the article is to identify the role of control in the transformation process and its impact on ensuring knowledge continuity within the organization. A partial goal lies in identifying output quality control by means of productivity One of the conclusions of the article is that in today＇s economic situation, ignoring the existence of knowledge continuity could result in a crisis of management of knowledge and its loss.     

Research on environmental accounting information disclosure for thermal power enterprises in China： Current situation, countermeasure and implement way

Along with the unceasing expansion of the human society production and the economic activity scale, the influence and harm of the social economy to the global environment is more and more serious. As one of the high-polluting industries in China, the environment problems of the thermal power enterprises attract attention from the country and society. It is crucial for the country to improve the laws and regulations about the disclosure of environmental accounting information gradually, and the thermal power enterprises should also disclose more valuable environmental accounting information to the public. This paper analyzes and elaborates the current situation, countermeasure and implement way of the environmental accounting information disclosure systematically.     

The web-based financial reporting adopted by the listed companies in the Athens Stock Exchange

Web-based corporate reporting is the provision of financial information through the Internet. Other companies prefer to disclose their financial information in order to satisfy their investors and to attract new ones while others prefer to provide as less information as possible. The purpose of this paper is twofold： first it provides a critical examination of the main reporting criteria followed by the Greek listed companies, in order to point out how many of these companies present these criteria. Second, it considers how the industry sector of the listed companies or their capitalization category is related with their disclosure degree of financial reporting.     

Malmquist indices of productivity growth for Islamic and conventional banks in Malaysia

This paper studies the total factor productivity （TFP） of banks in Malaysia with the emphasis on comparing the relative productivities of Islamic and Conventional banks. The Malmquist index approach is used to decompose productivity growth into technical efficiency and technological change. The productivity growth is measured and decomposed into technical change and efficiency change. The efficiency change is further decomposed into pure efficiency change and scale efficiency. It is found that Islamic banks＇ productivity growth is limited by its lack of technological change compared to its conventional counterparts. Nonetheless, both types of banks are operating at the correct level in terms of scale or size.