Cash Flow Volatility Research Articles

모멘텀 이상 현상에 대한 합리적 기대와 차익거래 제한요인 관점에서의 재해석

This study examines whether the momentum phenomenon of the Korean stock market since the Asian financial crisis in the 90s can be explained by risk-based hypothesis or it is due to the delayed response induced by limit-to-arbitrage. The zero investment portfolios following Jegadeesh & Titman (1993) tradition do not enjoy the positive excess return after adjusting the risk factors from Fama-French (1993) methodologies. Furthermore there is no evidence that shows the momentum effect stems from the delayed response caused by market frictions. Limit-to-arbitrage proxy variables such as idiosyncratic volatilities, trading volume, illiquidity, recent price, number of zero daily returns, number of analysts following, cash flow volatility do not show any relationships with the momentum effect. Interestingly, the momentum effect is much more strongly pronounced for the stocks with high foreign investor ownership rate. If it is allowed to interpret the foreign investors are relatively more keen and rational to market information in the investment procedures compared to individual investors, this finding resonates with the previous rational expectation based explanations and the fact that the momentum strategies tend to show negative returns prior to 2000 when foreign investors ownership in the Korean stock market is institutionally-limited.

Analisis Volatilitas Arus Kas, Volatilitas Penjualan, Besaran Akrual dan Pengaruhnya Terhadap Persistensi Laba Dengan Book Tax Differences Sebagai Variabel Moderating Pada Perusahaan Industri Barang Konsumsi Yang Terdaftar di Bursa Efek Indonesia

The purpose of this study was to determine the effect of cash flow volatility, sales volatility and accruals on earnings persistence with book tax differences as moderating variables in consumer goods industry companies listed on the Indonesia Stock Exchange (IDX). The research time period used is 5 years, namely the 2016-2020 period. The population of this study includes all consumer goods industrial companies listed on the Indonesia Stock Exchange (IDX) for the 2016-2020 period. The sampling technique used purposive sampling technique. Based on the predetermined criteria obtained 25 companies. The type of data used is secondary data obtained from the Indonesia Stock Exchange website. The analytical method used is panel data regression analysis. The results show that cash flow volatility has an effect on earnings persistence, sales volatility has an effect on earnings persistence, the amount of accruals has no effect on earnings persistence, book tax differences moderate the relationship between cash flow volatility and earnings persistence and cash flow volatility, sales volatility and the amount of accruals on persistence. earnings with book tax differences as the moderating variable.

Customer concentration, leverage adjustments, and firm value

AbstractWe examine the relationship between customer concentration and capital structure adjustment speed using a sample of US listed firms from 1977 to 2020. We found that the customer‐concentrated firms have a lower speed of leverage adjustment. Customer concentration affects leverage adjustment speed mainly through increased cash flow volatility and asset specificity. The negative association is more pronounced in firms with high relationship‐specific investments and low switching costs for their customers. Stock market reacts to leverage deviation strongly for firms with concentrated customers. Our findings highlight the vital role of customers as key stakeholders in capital structure decisions.

Do dividends signal safety? Evidence from China

Our paper examines whether dividends convey information about future cash-flow volatility in the Chinese stock markets. We observe that dividend changes are followed by cash-flow-volatility changes in the opposite direction. Taking advantage of the unique context of China, we show, in both the two-way sorting analysis and the regression analysis, that the strong relation between changes in dividend and cash-flow volatility is robust after controlling for potential confounders, including firm-level financial market frictions, macroeconomic and market conditions, and government intervention in firms' decision-making, and holds after we control for endogeneity concerns. Furthermore, we perform the theoretic mechanism tests of the relation and present supporting evidence on the signaling theory under the setting of asymmetric information, instead of the free cash flow theory based on the assumption of agency conflict. This study enriches our understanding of the source and nature of cash-flow information contained in dividends.

CEO power and the likelihood of paying dividends: Effect of profitability and cash flow volatility

This study empirically investigates the relation between CEO power and the likelihood of dividend payouts. It argues that powerful CEOs pay dividends to establish reputation in capital markets to raise external financing at favorable terms. The net expected value of such reputation, however, depends on the likelihood of external financing, which is positively related to low profitability and high cash flow volatility. Empirical results show that powerful CEOs are more likely to pay and increase dividends when their firms face low profitability and high cash flow volatility.

The Effect Of Accrual Reliability, Debt Level And Cash Flow Volatility On Earnings Persistence

This research is entitled “The Effect of Accrual Reliability, Debt Level and Cash Flow Volatility on Earnings Persistence”. The research question is “Is the persistence of earnings is affected by accrual reliability, debt levels and cash flow volatility? The research objective is to examine empirically the effect of accrual reliability, debt levels and cash flow volatility on the earnings persistence. Accrual reliability, level of debt and cash flow volatility are independent variables in this study while earnings persistence is the dependent variable. This study used secondary data in the form of annual financial statements of sample companies, namely basic industry and chemicals sector companies listed on the Indonesia Stock Exchange for the period 2014-2018. The sample selection method used was purposive sampling method. In total, there were two 12 sample companies in this study. This study used multiple linear regression data analysis technique including classical assumption test, F-statistical test and hypothesis testing. The results showed the accrual reliability and cash flow volatility had no effect on earnings persistence, while the level of debt had a positive effect on earnings persistence, and therefore, the second hypothesis is acceptable.

Faktor-Faktor yang Mempengaruhi Cash Holding pada Perusahaan Manufaktur

The purpose of this study is to obtain empirical evidence whether firm size has positive impact on cash holding, whether liquidity has negative impact on cash holding, whether cash flow volatility has positive impact on cash holding, and growth opportunity has positive impact on cash holding for manufacturing companies in Indonesia. The sampling technique used was purposive sampling and Eviews 12 SV and Microsoft Excel 2010 was used for data processing. Research during the 2017-2019 period on 77 companies and then performed outliers on the data which reduces the number of companies to 63 companies. The results showed that firm size has no impact on cash holding, liquidity has no impact on cash holding, growth opportunity has no impact on cash holding, and cash flow volatility has positive impact on cash holding.

Major Customers and Corporate Payout Flexibility

Using a sample of 17,453 firm-year observations from 1993 to 2017, we find that firms with major customers maintain higher levels of payout flexibility. The positive impact of major customers on payout flexibility is contingent upon cash flow risk, stronger in firms with financial distress, higher cash flow volatility, lower customer switching costs, and greater R&D intensity. The results suggest that major customer-dependent firms tend to pursue more flexible payout policies to maintain or improve their financial flexibility. The results are robust to alternative measures of major customers, the inclusion of additional control variables, and various endogeneity tests.

The Effect of Completion Risk and Project Profitability on the Investment Decisions of the Private Sector in PPP Projects

Public-private partnership (PPP) is becoming increasingly popular around the world for the development of infrastructure. However, it is vital that the private sector knows how to make its investment decisions, especially when it bears the burden of completion risk, and the cash flow of PPP projects is hard to predict. In previous studies, completion risk and project profitability have been recognized as critical factors that influence the involvement of the private sector in PPP projects. This study further investigates how these two factors affect private sector investment decisions, including its involvement, withdrawal, and capital structure decisions. First, a continuous real option method is built to explore the investment boundary and default boundary of the private sector. The results show that an increase in completion risk does not necessarily increase the investment boundary; rather, the relationship between them depends on the degree of private sector risk tolerance. The results also indicate that the investment boundary decreases with the expected rate of return and increases with the tax rate, risk-free rate, and volatility of cash flow. The default boundary decreases with the expected rate of return and volatility of cash flow and increases with the risk-free rate. Second, by comparing two different financial arrangements, the results suggest that using debt capital can help lower the private sector’s investment boundary. Third, the results reveal the optimal debt level of private sector investment in PPP projects by showing that the optimal debt level increases with the tax rate and decreases with the default loss rate. These results can provide some managerial insights for the private sector as it makes decisions on PPP project investments. They can also provide some policy insights for governments to better promote private sector investment in PPP projects.

Impact of cash flow volatility and debt structure in context of COVID pandemic: A study in Vietnam

Impact of cash flow volatility and debt structure in context of COVID pandemic: A study in Vietnam

ANALISIS DETERMINAN KUALITAS PELAPORAN KEUANGAN PERUSAHAAN NON JASA KEUANGAN DI BURSA EFEK INDONESIA

This study aims to analyze the determinants that affect the quality of financial reporting, which constitutes leverage, company size, cash flow volatility, sales volatility, company operating cycle, loss proportion, intangible asset intensity, and capital intensity. We used the WarpPLS 7.0 program in analyzing the secondary data. The sample in this study were non-financial service companies selected through the purposive sampling technique in the period 2015-2019. The research method used is the descriptive quantitative method with regression analysis. The research results showed that leverage, company size, and capital intensity had a significant and positive effect on the quality of financial reporting. Meanwhile, the operating cycle, the proportion of losses, and the intensity of intangible assets had a significant and negative effect on financial reporting quality. However, cash flow volatility and sales volatility produced an insignificant effect on the quality of financial reporting.

U.S., Anglo-Saxon European, and non-Anglo-Saxon European cash holdings around the financial crisis

For the period 2003–2018, we show that U.S. firms have a higher cash-to-assets ratio than European firms have—in particular, among firms with high R&D expenditures and those in industries with high cash flow volatility, indicating the potential roles of precaution and uncertainty respectively in cash holding. We find evidence that industry cash flow volatility is relevant throughout the period, while R&D seems to matter only during the crisis years of 2008–2009. With respect to European cash holdings, there are slight differences between Anglo-Saxon European and non-Anglo-Saxon European firms.

The Effect of Earnings Volatility on Stock Price Delay

In this study, I examine the relation between earnings volatility and stock price response delay. I study the effect of the uncertainty of earnings and their components on the stock price response to value-relevant information. For more volatile earnings and earnings components, it is more complex for investors to reliably understand and impound information into stock prices. When earnings and components provide opaque and uncertain information about the future cash flows, I expect that investors are more divergent in their interpretations and delayed in arriving at their future cash flow estimates. To measure firms’ response to value-relevant information, I adopt a parsimonious measure of stock price response to information developed by Hou and Moskowitz (2005). I use five-year rolling standard deviations of earnings and components for earnings and components volatility measures. As an additional earnings volatility measure, I adopt the degree to which earnings volatility deviates from cash flow volatility. My study demonstrates that earnings volatility negatively affects stock price response to information. As I hypothesize, the more volatile earnings and components are, the more delayed the market reacts to value-relevant information. Among earnings and their components, the effect of cash flow volatility is the most influential.

Faktor-Faktor Yang Mempengaruhi Cash Holdings Pada Perusahaan Manufaktur Tahun 2017-2019

The purpose of this research is to determine the effect of cash flow volatility, liquidity, firm size, and leverage on cash holdings of manufacturing companies listed on the Indonesian Stock Exchange in 2017-2019. The samples used in this research were 87 manufacturing companies each year selected by purposive sampling technique. The instrument used to obtain secondary data was carried out by observing the financial statements of manufacturing companies listed on the Indonesian Stock Exchange in 2017-2019. The analytical method used is multiple regression analysis with EViews program. The results of this research indicate firm size has a positive effect on cash holdings and liquidity has a negative effect on cash holdings. While cash flow volatility and leverage have no effect on cash holdings.

The Determinant Factors of Earnings Persistence

The purpose of this research is to provide empirical evidence about the effect of operating cash flow, sales volatility, cash flow volatility, operating cycle, and book tax difference on earnings persistence. The company used in this research is manufacturing company listed in Indonesia Stock Exchange (IDX) from 2016 until 2020. Samples of this research were selected based on the purposive sampling method and resulted in 43 companies, therefore the data used for this research amounting to 215 data. The data obtained from these samples were analyzed using multiple regression method. The result of this research show that operating cycle have influence on earnings persistence. While operating cash flow, sales volatility, cash flow volatility, and book tax difference have no influence on earnings persistence.

Analisis Faktor Penentu Terjadinya Persistensi Laba pada Perusahaan Manufaktur di BEI

This study aims to analyze the factors that determine Earning Persistence. This study uses a sample of manufacturing companies listed on the Indonesia Stock Exchange for the 2016-2019 period. The sampling method used in this study is a purposive sampling method where according to the established criteria, 53 companies are obtained and the data used is secondary data. The analytical technique used in this study is multiple linear regression analysis using the Statistical Product and Service Solutions (SPSS) v.20.0 program. The results showed that Audit Fee and Cash Flow Volatility had a positive and significant effect on Earnings Persistence, Sales Volatility had a negative and significant effect on Earnings Persistence, Debt Level and Operating Cycle had no effect on Earning Persistence.

The Impact of Discretionary Measurement Criteria on Investors’ Judgement and Decisions

This study investigates the effect on nonprofessional investors’ judgements and decisions of discretionary measurement choices. Using a paper-and-pencil experience, we collect and analyze information regarding investment amounts as well as past and future financial performance judgements of firms’ earnings by manipulating fair value (mark-to-market and mark-to-model) criteria and benchmarking it with historical cost-based financial statements. We proxy nonprofessional investors with graduate students from a business school. Our results show evidence that nonprofessional investors view fair value changes as permanent. We argue for a cashflow volatility factor. Contrary to previous research, we do not find evidence of any effect on investors’ willingness to invest (average budget amounts invested) or performance judgments (past and future). We corroborate previous evidence that investors rank measurement concepts’ relevance differently for different classes, although, on average, mark-to-market fair values and historical cost are rated more relevant and reliable than mark-to-model fair values.

A matter of others' money: How cash holdings of other firms affect a firm’s cash holding?

PurposeThis study examines the effects of comparable companies, within the same industry, on cash-holding (CH) levels of a specific firm in the Stock Exchange of Thailand (SET). Peer effects are hypothesized to affect a firm's average CH levels.Design/methodology/approachThe authors use data of listed firms in the Thai stock markets from 1995 to 2018. The sample consists of 5,277 firm-year observations. The authors perform robustness tests by incorporating gross domestic product, economy and competitiveness.FindingsPeer firms' CH levels correspond positively to the specific firm's CH. This strengthens further for firms with high cash flow volatility during periods of high competition. Unfavorable economic periods also motivate the association between a firm's CH and peer firms' CH.Practical implicationsA policy on CH should account for cash held by peer firms. Firms can justify their CH policy as compatible with peers' cash flows, especially during periods of competitiveness and an unfavorable economy.Originality/valueThe authors provide novel evidence on how emerging markets' CH levels differ from those in developed markets and propose adjusted explanations for the rivalry- and information-based theories. The findings add substantial knowledge to corporate finance by arguing that CH policies are based on peer firms' strategic moves.

DETERMINAN PERSISTENSI LABA PADA PERUSAHAAN MANUFAKTUR DI BURSA EFEK INDONESIA

The purpose of this study is to analyze the effect of cash flow volatility, sales volatility, debt level and firm size on earnings persistence. The population of this study are manufacturing companies listed at Indonesia Stock Exchange for the 2017-2020 period. The sampling method used in this research is purposive sampling technique. The number of sample were 34 companies. The analysis technique used in this research is panel data regression with EViews 9 software. The results of the study using the random effects model show that cash flow volatility and sales volatility have no significant effect on earnings persistence. The level of debt has a significant negative effect on earnings persistence, while firm size has a significant positive effect on earnings persistence.

Innovation decisions through firm life cycle: A new evidence from emerging markets

This paper empirically evaluates how different firm life cycle stages influence managers while making firms' input and output innovation decisions under asset liquidity constraints, idiosyncratic risk, and cash flow risk. We find that firms make more investments in input innovation activities during the introduction, growth, and decline stages in the presence of more asset liquidity; in contrast, less investment is made during the mature stage. Concerning the output innovation, the introduction and decline (growth and mature) stages show a negative (positive) relationship for more asset liquidity in place. Our findings also predict that firms are more likely to invest in input innovation activities during the introduction, growth, and decline stages under more idiosyncratic and cash flow volatilities; however, such investment is less prospective during the mature stage. Both volatilities support reciprocal linkages for firm output innovation. Aside from moderating effects, the firms' asset liquidity positively affects output innovation opportunities during current and future periods, while idiosyncratic and cash flow volatilities negatively contribute to both firms' input and output innovation. These findings not only assist managers in making firms' innovation decisions but also enhance investors' understanding of making investment decisions through the different firm life cycle stages.