• Journal of Distribution Science
• /
• v.20 no.12
• /
• pp.117-123
• /
• 2022

Purpose: This study investigates the relationship between earnings forecasts estimated from a cross-sectional earnings forecast model and firm characteristics such as firm size, sales volatility, and earnings volatility. Research design, data and methodology: The association between earnings forecasts and the aforementioned firm characteristics is examined using 214 firm-year observations with analyst following and 848 firm-year observations without analyst following for the period of 2011-2019. I estimate future earnings using a cross-sectional earnings forecast model, and then compare these model-based earnings forecasts with analysts' earnings forecasts in terms of forecast bias and forecast accuracy. The earnings forecast bias and accuracy are regressed on firm size, sales volatility, and earnings volatility. Results: For a sample with analyst following, I find that the model-based earnings forecasts are more accurate as the firm size is larger, whereas the analysts' earnings forecasts are less biased and more accurate as the firm size is larger. However, for a sample without analyst following, I find that the model-based earnings forecasts are more pessimistic and less accurate as firms' past earnings are more volatile. Conclusions: Although model-based earnings forecasts are useful for evaluating firms without analyst following, their accuracy depends on the firms' earnings volatility.

• Asia-Pacific Journal of Business
• /
• v.9 no.4
• /
• pp.137-155
• /
• 2018

It has been reported that there is a significant positive relationship between the unexpected earnings on the earnings announcement date and the cumulative abnormal returns following the earnings announcement date. This study investigates whether the results of prior studies are because the public announcement of shareholders' meeting date was selected as the event date instead of either the preliminary earnings disclosure date or the profit/loss change announcement date. The results of this study are as follows. First, post-earnings-announcement drift(PEAD) occurs when unexpected earnings were computed based on the prior period earnings and the public announcement of the shareholders' meeting date as the profit disclosure date. Second, when analyzing the PEAD with the unexpected earnings calculated using the financial analysts' forecasts, no PEAD has been found both on the date of the shareholders' meeting and the earlier date of the preliminary earnings disclosure, profit/loss change announcement, or the public announcement of the shareholders' meeting. Foster et al. (1984) analyze the PEAD using time series model and earnings forecasting model and suggest that the PEAD appears only in the time series model. In this study, too, in the case of using analysts' profit forecasts, the lack of the PEAD shows that the PEAD can be changed according to the method of measuring the unexpected earnings.

• Korean Business Review
• /
• v.20 no.2
• /
• pp.1-13
• /
• 2007

The purpose of this study is to investigate a simple present value model Involving earnings (i.e., the earnings discount model) that presumes a relationship between stock prices and earnings. The model suggests a simple linear equilibrium relationship between stock prices and earnings. The tests for cointegration render strong support for the cointegration hypothesis between stock prices (Pt) and earnings (Xt) even at the one-percent significance level. The tests are based on residuals from a cointegrating regression of Pt on Pt+l + Xt. This suggests that there is a stable long-nu equilibrium relationship between stock prices and earnings. The results of the tests lead to the acceptance of the present value model of stock prices involving earnings.

• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.3
• /
• pp.73-85
• /
• 2020

The study aims to provide better understanding of sustainable earnings by a comprehensive analysis of earnings persistence of business firms in Vietnam as an example of developing economies in South-East Asia. Dataset of 1,278 publicly listed firms (excluding banking and financial services firms) on Vietnam Stock Exchange for the period from 2008 to 2017 was collected. By applying fixed effect regression model, the empirical results provided the basis to measure the persistence index (Pers index) and find low level of their earnings persistence. The literature of earnings quality analysis in developed countries suggests earnings persistence as a noteworthy determinant of future earnings forecast and stock valuation. However, research of sustainable earnings in developing countries is still highly underdeveloped. For Vietnamese listed firms, the average Pers index was estimated for the period from 2008 to 2010, indicating low level of earnings persistence. We also incorporated earnings persistence level into future earnings forecast by running the quintile regression model divided the data into four equal levels and conducted each section independently to see the difference in each percentile, thence assessed the factors' influence on the specific model. The findings provide important information on the expected returns of firms, especially helping investors make sound decisions.

• Journal of Distribution Science
• /
• v.17 no.12
• /
• pp.5-12
• /
• 2019

Purpose - In this paper, we examine the effect of accrual earnings management and real earnings management on the corporate value of retail corporations. Research design, data, and Methodology - The sample cover firms whose settlement is December among retail companies listed on the Korea Stock Exchange's securities market and KOSDAQ market from 2001 to 2016. Of these, the targets were companies with operating profit and equity capital of zero or higher and with sales data. The secondary data was collected through KIS-VALUE data base. The Jones model and the modified Jones model were used for the calculating the accrual-based earnings management and the real earnings management. Result - According to the empirical results, the relationship between accrual earnings management, real earnings management and firm value is positively significant in the retail industry as in manufacturing industry. These results are also significant when controlling the size, profitability, investment, debt ratio, dividend, and growth potential of a company. Conclusions - The characteristics of the distribution business can be identified and the influence of the various kinds of earnings management, which is being researched around the manufacturing industry, can be studied in the distribution industry to give practical implications to investors.

• The Journal of Asian Finance, Economics and Business
• /
• v.9 no.4
• /
• pp.39-52
• /
• 2022

This study examines whether accounting conservatism can support real earnings management by reducing accrual earnings management techniques. The net impact of conservative reporting on earnings management is also analyzed. It is assumed that moderating the role of conservative financial reporting during uncertainty can mitigate earnings management practices. For our analysis, 5354 firm-year observations for the period 2007-2020 of nonfinancial companies listed on the Pakistan Stock Exchange are applied. To measure conservatism in the non-financial sector of Pakistan, Khan and Watts' (2009) model is used to provide evidence that conservatism is a way to restrict earnings management during uncertainty. "Prospector" and "Defender" Business strategy is applied for measuring firm-level uncertainty. To measure accrual earnings management Modified Jones (1995) model and Dechow and Dichev (2002) approach and Kasznik (1999) model are applied, and for real earnings management Roychowdhury model is applied which follows three approaches to measure real earnings management i.e. cash flow manipulation, Overproduction, and discretionary expenses. The estimations support our hypothesis by providing statistically significant proof that conservative financial reporting in a developing economy like Pakistan may be used to overcome the net impact of earnings management during uncertainty. Our results provide critical and practical implications for investors, researchers, and standard setters.

• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.10
• /
• pp.51-61
• /
• 2020

The study aims to compare whether using Earnings Response Coefficient (ERC) is better than using the new concept of Accounting Earnings Response Coefficient (AERC) in determining the earnings quality response coefficient value. Also, the study seeks to explain the effect of company characteristics and corporate governance on AERC through voluntary disclosure and information asymmetry. Research samples include 69 manufacturing companies listed on the Indonesian Stock Exchange over the period 2014-2017. The data come from annual reports, stock market prices, CSPI, EPS, stock returns and market returns. The research model is tested using the structural equation model (SEM) with partial least square (PLS). The results showed the value of the earnings response coefficient produced by AERC and ERC was different. Earnings quality resulting from AERC regression by adding CFO values better reflects the actual earnings quality. These results are consistent with the concept built from the proposition about earnings quality at AERC, that quality earnings are informative accounting earnings. The theoretical findings of this study provide an explanation that operational cash flow plays a role in evaluating earnings quality, while providing reinforcement that the ERC regression model fails to detect stock market reactions to information relevant to the aggregated values of accounting earnings.

• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.2
• /
• pp.903-909
• /
• 2021

The relationship between corporate social responsibility (CSR) and earnings management is still a debate. Several previous studies showed that CSR is a determinant of earnings management. Meanwhile, others revealed the reverse. Therefore, this study aims to investigate the effect of CSR disclosure on earnings management and the effect of earnings management on CSR disclosure. This study was conducted with mining companies listed on the Indonesia Stock Exchange (IDX) in the 2016-2019 period. The research data was analyzed using multiple linear regression analysis. The data is obtained from financial statements, annual reports, and sustainability reports. The results reveal that there is a positive relationship between CSR disclosure and earnings management. This study also shows that the relationship model of CSR disclosure and earnings management is recursive. This finding implies that CSR disclosure is a tool used by management to cover up unethical actions from stakeholders. These results verify the agency theory and opportunist hypothesis regarding the relationship between CSR and earnings management. The novelty of this study lies in highlighting the recursive model of the relationship between CSR and earnings management.

• Journal of the Korea Society of Computer and Information
• /
• v.5 no.3
• /
• pp.151-158
• /
• 2000

This dissertation measures transitory items using earnings change scaled by beginning-of-period price(FreemanㆍTse 1992) and the earnings-to-price ratio(AliㆍZarowin 1992). Contextual regression model results confirm the incremental explanatory power for predominantly permanent earnings, and suggest that cash flows also have incremental explanatory power in the presence of predominantly permanent earnings. But contextual regression results represent that while earnings are consistent with a smaller marginal impact from extreme (transitory) earnings on abnormal returns, cash flows have no greater impact on abnormal returns in the presence of large transitory components in earnings.

• The Journal of Industrial Distribution & Business
• /
• v.4 no.1
• /
• pp.15-21
• /
• 2013

Purpose - Our goal was to determine whether there is a relationship between actual profits' deviation from the profits expected in earnings per share's adjustment announcements and the degree of apparent earnings management in annual financial statements. Research design, data, and methodology - The samples consisted of 133 companies from ten industries. The companies were selected among those listed in the stock exchange, and their data were examined covering the two-year period from 2008 to 2010. Tests were conducted using a regression model and SPSS statistical software. Results - The findings indicate the following. There is no significantly positive relationship among the last earnings per share's adjustment forecast, the first earnings forecast per share, and earnings management. Moreover, the amount of the latest earnings per share's adjustment forecast relative to its first forecast is not associated with the companies' discretionary accruals items. Finally, the hypothesis that a relationship exists between companies' latest adjustments of their earnings per share and earnings management was tested the results indicate that there is no such relationship. Conclusions - The study's results suggest that the amount of earnings per share's adjustment is not a motivation for earnings management.