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).     

Financial Statement Comparability and Idiosyncratic Return Volatility

This study examines the association between financial statement comparability and idiosyncratic return volatility (IRV). A greater degree of comparability lowers information acquisition costs, reduces the uncertainties associated with performance evaluation, and increases the overall quantity and quality of information available to corporate outsiders, which, in turn, helps investors to understand and evaluate the cash flow and performance of firms more accurately. Therefore, we hypothesize a negative association between financial statement comparability and IRV. Using a large US sample from 1981 to 2013, we show that financial statement comparability is associated with lower level of IRV significantly. We also find this association to be more pronounced in a poor information environment. This study contributes to the emerging research that stresses the benefits of financial statement comparability.     

Economic Complexity and Inflation: An Empirical Analysis

Atlantic Economic Journal - This study examines the relationship between inflation and economic complexity, the set of productive capabilities and know-how embedded in the structure of an economy....     

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

Review of Quantitative Finance and Accounting - We examine the impact of audit committee (AC) characteristics (e.g. AC foreign members, AC female members, AC members with multiple directorships, AC...     

Motives for foreign direct investment in Oman

This paper empirically examines the factors that influence foreign investors to engage in foreign direct investment (FDI) in Oman. One hundred and six foreign equity ventures participated in the study. The analysis of the data reveals that political and economic stability are the two most important motives for investing in Oman. Contrary to expectations, purchasing power of customers, market size, and availability of low‐cost inputs are the least desirable factors, respectively. The statistical analysis indicates that all motives do not equally appeal to all foreign investors from different countries. © 2003 Wiley Periodicals, Inc.     

Racial Differences in the Returns to Financial Literacy Education

We examine financial literacy and the returns to financial literacy education, specifically focusing on the racial financial literacy gap. We confirm evidence that whites have higher financial literacy scores relative to minorities and that financial literacy increases with participation in financial literacy education. However, we find the benefit of participation in financial literacy education is higher for whites than that for minorities. Thus, the impact of being white alone persists, indicating a racial financial literacy and/or behavioral difference despite financial literacy education. Our findings have implications for policymakers interested in narrowing the racial wealth gap via financial literacy education.     

Political and Interlocking Connections in the Boardroom on Private Equity Placements

This study examines the influence of directors who are politically connected and/or have boardroom interlocking on private equity placements (PEPs) in Chinese listed firms. We document that interlocked directors can significantly influence the propensity to apply for PEPs and approval of PEPs and reduce the cost of PEPs while providing greater access to proceeds from PEPs through lowering information asymmetry and information cost. Although politically connected directors have a significant role in the approval of PEPs, they are more likely to reduce the monitoring effects and increase agency problems, which lead to increased cost of PEPs and reduced proceeds from PEPs. The results also reveal that political connection diminishes the benefits of interlocking directors for firms having directors with both interlocking and political ties.     

Office Channeling and Its Impact on the Growth of Indonesian Islamic Banking Industry

The purpose of this paper is to analyze that the office channeling policy that based on Bank Indonesia＇s rule No. 8/3/PBI/2006 had an impact on the growth of Islamic banking industry in Indonesia. This research used ordinary least square regression to analyze the impact of office channeling policy on the growth of Indonesian Islamic banking industry. The variable used in this paper is office channeling which is used as a dummy variable, and margin deposit and non-performing financing （NPF） are also used as control variables. The indicators of the growth of Indonesian Islamic banking industry are asset and third-party funds. The result shows that office channeling does not have an impact on the growth of Islamic banking industry which is measured by asset growth and third-party funds growth. According to this result, Bank Indonesia should have an innovative policy to stimulate the Islamic banking industry growth in Indonesia.     

The GCC’s Fixed Exchange Rate: A Major Anomaly for OCA Analysis

From the standpoint of traditional optimal currency area (OCA) analysis, the Gulf Cooperation Council (GCC) countries are a major anomaly. They successfully maintained pegged exchange rates among themselves for two decades while failing to meet a number of major OCA criteria. Contrary to the optimistic predictions of some of the most enthusiastic advocates of endogenous OCA analysis, intra‐regional trade has remained low and there is little synchronisation of their business cycles or harmonisation of their fiscal positions. We argue that their success in operating a fixed rate regime has been due to a combination of high oil revenue, the heavy use of foreign workers and the limited extent to which their economies rely on market forces. These are conditions that are not met by most other countries.