Changes In Cash Flows Research Articles

Operational Cash Flow and Return on Asset of Listed Manufacturing Firms in Kenya: A Panel Analysis

The contribution of the manufacturing sector to the Kenyan economy has, over time, portrayed a declining trend when compared to the growth of other economies and the volume of exports. The average growth in value of manufacturing exports to other countries in Africa shows Kenya ranked the last below 10%. Rwanda ranked the highest at 35%, Nigeria secured 30%, while in East Africa, Tanzania topped the list with 23%. Cash flow has posed a challenge to the listed firms in this sector. The trend analysis across the firms in the sector shows that none has a consistent cash flow raising doubt if cash is properly managed among the firms. These companies reported negative operational cash flows, reduced sales volume, extreme losses, and complications in paying suppliers. These firms reported circles of increase and decrease in cash inflows and cash outflows which later had an impact on their Return on Asset. The reviewed studies revealed mixed results and adopted different methodologies. Some revealed positive relationships, while others showed negative relationships. Locally, the majority of the studies were carried out in different sectors like Sacco and Small and Medium Enterprises using either time series data or cross-section data. In contrast, the studies on listed manufacturing companies were done in other countries. Furthermore, none of the studies reviewed has attempted to incorporate operational cash flow management and return on an asset using panel data to study listed manufacturing firms within the same study period. The study employed a correlational research design. The target population was all the 9 companies listed, out of which 8 companies were purposively sampled. The study period was seven years: 2013-2019, yielding 56 data points. The collection of secondary data was aided by data collection sheets. The test for unit root indicated order zero (p=.000) after integrating the variables. Pooled regression analysis revealed that the panel model shows a good fit with an R squared of above 85.4%. Operational cash flow is a significant predictor of performance (β=341.508), (p=0.000) meaning a unit change in operational cash flow leads to an increase in ROA of 341.508. The study concludes that operational cash flow positively affects Return on assets.

How do Islamic banks manage earnings? Application of various measurement models in the Iranian Islamic banking system

PurposeThis study aims to identify and compare the measurement models of earnings management (EM) appropriate to the Iranian Islamic banking system. The importance of reported profit figures has motivated business executives, who also perform financial reporting, to manipulate these figures. These measures are referred to as “earnings management,” which negatively influence the quality of reported earnings and financial statements' reliability.Design/methodology/approachIn this study, four methods, namely, Jones (1991), modified Jones (Dechow et al., 1995), Kasznik (1999) and Kothari et al. (2005), were used to measure the EM index in 25 Iranian Islamic banks (IBs) registered with the Tehran Stock Exchange and/or the Central Bank of Iran. The study covered the period 2005–2020. Following the aforementioned methods, this research implemented templates that were repeatedly tested in subsequent studies using accruals to discover EM.FindingsThe results show that the Kasznik (1999) model is the preferred and compatible model with the Iranian Islamic banking system's accrual behaviour due to the consistency of the measurement coefficients with theoretical and previous research findings. Therefore, total accruals, including discretionary accruals and non-discretionary accruals, have the most correspondence with (1) property, machinery and equipment; (2) the change in cash flow from operating activities; and (3) the difference of change in revenue (ΔREV) and change in net receivable accounts (ΔREC).Originality/valueThis is the first investigation in the Iranian Islamic banking system. The research contributes to the Iranian Islamic banking system literature on the implements of EM, which could be appealed to in the context of developing countries like Iran. Finally, this study highlights the different EM capabilities in Islamic banking systems similar to the Iranian banking arrangement.

Pengaruh Perubahan Arus Kas dan Profitabilitas Terhadap Return Saham Sebelum dan Selama Pandemi Covid-19 (Studi Pada Sektor Transportasi dan Logistik Yang Terdaftar Di Bei Periode 2017-2020)

This study intend to determine the effect of changes in cash flow and profitability on stock returns in transportation and logistics sector companies listed on the Indonesia Stock Exchange for the 2017-2020 period. This research method is a quantitative method with the data source used is a documentary in the form of the company's financial statements. The data analysis method used descriptive statistical analysis, classical assumption test, multiple regression analysis, and hypothesis testing. Based on the test results, operating cash flow, investment cash flow, funding cash flow, return on assets, return on equity, and earnings per share simultaneously have an effect on stock returns. Investment cash flow partially has a negative and significant effect on stock returns. Return on equity has a positive and significant effect on stock returns, while operating cash flow, funding cash flow, return on assets, and earnings per share have no partial effect on stock returns.

Hedge fund activism and trade credit

This study shows that trade creditors extend a negative response to hedge fund activism. Relative to control firms, target firms' accounts payable decrease by 28%, post activist intervention by hedge funds. This reduction is due to supply-side factors, highlighting suppliers' expropriation concerns. The study provides novel evidence that the repercussions of hedge fund activism extend beyond the formal debtholders, and informal debtholders such as trade creditors are not an exception. Further, target firms also offer lower trade credit to their customers after hedge fund activism. Trade receivables decrease by 12% relative to control firms. Activism-induced changes in cash flows potentially account for this reduction in trade receivables.

The effect of ownership structure on investment decisions under exogenous shocks

AbstractResearch Question/IssueWe assess how ownership concentration influences the sensitivities of expansion investments and maintenance investments to changes in a firm's cash flow. We find the causal effect by exploiting the exogenous variation in the price of a firm's product. We also evaluate whether state versus private ownership affects the impact of ownership concentration on investment–cash flow sensitivities.Research Findings/InsightsUsing detailed data from 134 major copper mines operating in 29 countries over a 17‐year period, we show that a more concentrated ownership increases the sensitivity of expansion investments to changes in a firm's cash flow, while we do not detect a significant effect for maintenance investments. We also find that state ownership negatively moderates the effects of ownership concentration on the expansion investment–cash flow sensitivity.Theoretical/Academic ImplicationsThe findings improve our understanding of ownership structures and show the nuances of these structures when different ownership features are combined in the assessment of investment sensitivities.Practitioner/Policy ImplicationsThe asymmetric effects of ownership structures on different investment sensitivities call for a more fine‐grained analysis of incentives, benchmarking, and information disclosure policies. This issue is especially relevant in state‐owned enterprises (SOEs) and in firms with a low ownership concentration.

An Online Tool for Estimating Return-on-investment for Water Recycling at Nurseries

Water availability, quality, and management, particularly under climate change constraints and fierce competition for water resources, are challenging the sustainability of intensively irrigated nursery crops. We created an online tool to estimate costs and benefits of a water recycling investment at a commercial nursery, given data on the operation input by the user. The online tool returns a “regulatory risk score” based on the user’s drought and pollution risk. Then, using a partial budget approach, it returns net present value of the investment, upfront capital cost, and expected change in annual cash flow. The present article seeks to cross-validate this computer model with results reported in the case study literature. We aggregated data on 38 nurseries and greenhouses profiled in five published studies into a meta study dataset. These data validated the computer tool’s assumptions about the relationship of operation size to total capital cost. Separate simulations on the profitability effects of varying public water rates and price premia due to green marketing corroborated the findings of earlier studies. A major finding of the simulation analysis not previously emphasized in the literature is that capital cost and profit vary significantly with the precise method that is used to size the recapture pond. A “minimalist” approach to this decision is likely to be the most cost-effective, but growers should also keep stormwater runoff and other issues of environmental best practices in mind.

Fuzzy modelling and control of project cash flows

An analysis of the scientific literature on project cash flow control and fuzzy modelling shows that project cash flows are modelled using only basic approaches drawn from fuzzy theory, which may distort the credibility of the model. In this paper, we therefore propose to use the whole spectrum of fuzzy arithmetic, and to select operations that suit the nature of the cash flows in question, their dependencies and the preferences of the project manager. An analysis of the literature also shows that in practically all existing models of project costs and cash flow management, project costs and cash flows are treated at a very high level of generality (without considering the various types of project, factors influencing their variability and signals warning of imminent cash-related problems), and estimations are not updated on an ongoing basis throughout the duration of the project. The results of a survey performed with the participation of 100 project managers show that this simplistic view of project cash flows may be distorting, and cannot guarantee the development of an efficient project cost and cash flow control system. We propose an approach that at least partially compensates for these drawbacks: it differentiates between types of project cash flows and the factors and triggers affecting changes in cash flows. Two case studies are used for a an initial verification of the approach. The paper concludes with suggestions for further research perspectives.

Pengaruh Perubahan Arus Kas dan Profitabilitas Terhadap Return Saham Pada PT Mayora Indah Tbk

The increase and decrease in cash flow each year shows that the performance of a company is not stable. This is accompanied by the industry average return on investment ratio below 30%, which means that the return on investment is not good. This is because the profit bars obtained decreased drastically in 2014. This study aims to analyze the effect of changes in cash flow and profitability on stock returns at PT Mayora Indah Tbk either partially or simultaneously. This study uses an associative approach. The population of this research is the financial statement data of PT Mayora Indah Tbk for 43 years from 1977 - 2020. The sample of this research is for 12 years from 2009 - 2020. The sampling technique in this study used purposive sampling. The type of data is quantitative research with secondary data sources. The data analysis technique uses the classical assumption test, multiple linear regression analysis, multiple correlation, the coefficient of determination, the T test and the F test using the Statistical Product and Service Solution (SPSS) version 16 program. In this study, operating cash flow, investment cash flow, funding cash flow and return on investment have an effect on stock returns with the magnitude of the effect of 67.1% and the remaining 32.9% is influenced by other factors. Partially, only the investment cash flow variable has a significant effect on stock returns, while the operating cash flow, funding cash flow and return on investment variables have no effect on stock returns. Simultaneously, there is no significant influence on the independent variable operating cash flow, investment cash flow, funding cash flow and return on investment on the dependent variable of stock returns.

Optimal investment with time-varying transition probabilities for regime switching

Abstract This study aims to generalize the following result of McDonald and Siegel (1986) on optimal investment: it is optimal for an investor to invest when project cash flows exceed a certain threshold. This study presents other results that refine or extend this one by integrating timing flexibility and changes in cash flows with time-varying transition probabilities for regime switching. This study emphasizes that optimal thresholds are either overvalued or undervalued in the absence of time-varying transition probabilities. Accordingly, the stochastic nature of transition probabilities has important implications to the search for optimal timing of investment.

Trading Volume and Time Varying Betas

Abstract I show that increased turnover accompanies changes in stocks’ risk exposures. A one standard deviation decrease in a stock’s market beta increases turnover as much as 25%. The sensitivity of turnover to beta changes has grown over time. Market beta changes explain as much as 5% of the monthly cross-sectional variation in turnover. VAR decompositions of returns show turnover is more strongly associated with discount rate news than cash flow news. This mechanism provides a new channel for turnover combined with realized returns to predict long horizon returns and cash flow changes. Further, this mechanism can amplify many prior explored motives for trade.

PENGARUH RASIO-RASIO MODAL KERJA DAN ARUS KAS OPERASI TERHADAP PROFITABILITAS

This study aimed is find an empirical evidence about the influence of working capital ratios and cash flow on profitability. Working capital ratios is proxied by the cash conversion cycle, current ratio, quick ratio, inventory turnover, accounts receivable turnover, turnover of debt and working capital turnover. Meanwhile cash flows dan profitability measured by change in cash flows and return on investment (ROI) respectively.Based on purposive sampling, 67 manufacturing companies were selected as a sample of this study for three years observation.This study found that the cash conversion cycle and quick ratio negatively influence on profitability. Incontrast, this study also found that current ratio positively influence on profitability. This study could not find the influence of inventory turnover, accounts receivable turnover, turnover of debt, working capital turnover, and operating cash flow on profitability.

Determining the influence of transformation changes in the life cycle on the assessment of effectiveness of an ecologistic system project

The issue of assessing the effectiveness of a project of an ecologistic system using the criterion of «a discounted payback period», which takes into consideration the transformational changes in the project life cycle, was considered. The specific features of the life cycle of a project of an ecologistic system, in the structure of which it is proposed to include environmentally-oriented regeneration and revitalization phases, were explored. The phases of a life cycle were divided into stages, between which consecutive and parallel relations were established. The project life cycle consists of time intervals, during which from one to three stages of the project phases can run in parallel. A model of the life cycle of an ecologistic system, which shows the relations between time intervals and cash flows that correspond to the stages of the project life cycle phases, was developed. A mathematical formula for calculating the discounted payback period of a project, which takes into consideration the specific features of the formation of cash flows of separate phases of the life cycle of an ecologistic system, was proposed. The application of the formula is possible when assuming the constancy of cash flows of the stages of operational and the regeneration phases, which corresponds to the conditions of uncertainty of their forecasting at the beginning of the project. The functional dependences between the discounted payback period and cash flows during the phases of a project life cycle were studied. Depending on a phase of the life cycle, the dependence is expressed by a linear, polynomial, or power function. The identification of functional dependences makes it possible to study the dynamics of changes in the discounted payback period with changes in project cash flows, which can be used in forecasting the effectiveness of an ecologistic system project.

Accounting Information, Corporate Governance and Debt Covenants: Egyptian Evidence

Purpose – The purpose of this paper is to develop a new model for the effect of accounting information and corporate governance mechanisms on public and private debt covenants of firms listed on the Egyptian stock exchange. Design/methodology/approach – The paper uses the multiple regression model. This model includes three main variables of accounting information: change in net cash flows from operating activities, change in earnings before extraordinary items, and accounting disclosure levels. In addition, the model incorporates ten corporate governance mechanisms. The sample used in the current study consists of 66 observations of Egyptian firms that issued bonds or were granted bank loans in the period from 2003 through 2013. Findings – The paper concludes that the new model is useful in explaining the changes in the design of debt covenants. It finds that there is a significant negative relationship between accounting information and corporate governance mechanism on one side and price terms in the private debt contracts on the other side. There is a significant negative relationship between accounting information and corporate governance mechanism on one side and the non-price terms in the private debt contracts on the other side. There is a significant negative relationship between accounting information and corporate governance mechanism on one side and the price and non-price terms in private debt contracts on the other side. Practical implications – The findings have implications for lenders (banks and bondholders); through helping them in making credit decisions, as they rely on accounting information and corporate governance mechanisms when designing debt covenants that are imposed on public and private debt contracts. Originality/value – To the best of the authors’ knowledge, there are no Egyptian studies to date examining the effect of accounting information and corporate governance mechanisms on public and private debt covenants of firms listed on the Egyptian stock exchange. Consequently, this paper contributes to the limited literature by suggesting a new model for the effect of accounting information and corporate governance mechanisms on public and private debt covenants. Furthermore, this paper develops a new measure for non-price terms in debt contracts by creating a new index containing 109 terms of public and private debt covenants.

The Cross-Sectional Variation of Stock Prices

In this paper, I decompose prices over a set of 21 variables across seven categories. I test a firm-specific version of the Campbell and Shiller (1988b) model against these categories and show expected returns and change in cash-flows explain 5% or less of modeled price variation while an often-ignored time-series constant explains over 70%. Approximately 50% to 70% of modeled cross-sectional variation is explained by efficient market variables, with the remainder explained by market frictions. I find institutional ownership and share repurchases show a significant ability in the cross-section to explain next-period prices, while transaction costs and some traditional market risk-factors fail to translate well to a price setting.

Share Repurchases, Risk, and Underpricing

This paper analyzes changes in firms' cash flows and discount rates around share repurchase announcements. Both cash flow and discount rate volatility decrease significantly after repurchase announcements. The decrease in volatility is smallest for firms that are likely to be underpriced and that experience the highest initial market reactions and long-term returns after the announcement. Firms with the largest decrease in volatility do not experience significantly positive long-term returns. Moreover, the level of the discount rate decreases from one quarter before until up to three years after the repurchase announcement for firms that are likely to be underpriced. The findings suggest that financial market participants learn about firms' systematic risk when firms announce share repurchases.

PENGARUH POSISI KEUANGAN, LABA RUGI, PERUBAHAN EKUITAS DAN ARUS KAS TERHADAP RETURN SAHAM PADA PERUSAHAAN SEKTOR AGRICULTURE YANG TERCATAT DI BEI PERIODE 2017 – 2019

This study aims to determine: (1) Effect of Financial Position on Stock Returns for 2017-2019 period, (2) Effect of Profit and Loss on Stock Returns for 2017-2019 period, (3) Effect of Changes in Equity on Stock Returns for 2017-2019 period, (4) Effect of Cash Flow on Stock Returns for 2017-2019 period, (5) Effect of Financial Position, Profit and Loss, Changes in Equity and Cash Flow simultaneously on Stock Returns for 2017-2019 period. The data in this study are secondary data obtained from the annual financial statements of agriculture sector companies in the Indonesian Stock Exchange (IDX). This type of research is quantitative research. This research was conducted using a sample of 16 companies listed on the Indonesia Stock Exchange for the 2017-2019 period. Data analysis techniques used are descriptive statistics, classic assumption tests, multiple linear regression analysis, hypothesis testing and coefficient of determination tests. Based on hypothesis testing using the t test, it was concluded that the Financial Position, Profit and Loss, Changes in Equity and Cash Flow did not have a significant effect on Stock Return partially. Based on the F test it was concluded that the Financial Position, Profit and Loss, Changes in Equity and Cash Flow did not significantly influence the Stock Return simultaneously.

Methods Of Economic Evaluation Of Concession Project Effectiveness

This article deals with public-private partnerships as a mechanism for financing of infrastructure projects. The purpose of the study is to offer a toolkit to substantiate the efficiency of the concession project for the construction of motor road using the model of its life cycle. The hypothesis is that the best method of modeling of the life cycle of a project is to use the indicator economic acceleration, the essence of which is that it determines the intensity of changes in cash or value flow, which are the basic elements for calculating the efficiency of an investment project.

Pengaruh Perubahan Arus Kas Yang Dimoderasi Oleh Korelasi Serial Dalam Perubahan Arus Kas Dalam Memprediksi Akrual

The purpose of this study was to examine the effect of cash flow change serial correlation in moderating the relationship of cash flow change and accruals. This study is classified as causative research. The population in study are manufacturing companies listed on the Indonesia Stock Exchange of period 2016 to 2018. By using purposive sampling method, there were 43 companies as the research’s sampel. The type of data used is secondary data obtained from the official site of the Indonesia Stock Exchange and company’s official website. Used is panel regression analysis. The result indicate that cash flow changes has negative and siginificant effect on accrual, but cash flow changes serial correlation is not able to strengthen or weaken the relationship between cash flow changes and accrual.

ROLE OF AUDIT IN MANAGING PUBLIC INTEREST ENTITIES

Abstract. The article discusses current issues of interaction between external auditors and management of public interest entities with the aim of making managerial decisions aimed at ensuring the continuity of an entity, ensuring balance between resources and their sources, eliminating distortions in financial statements. Based on the study, it has been found that the definition of «public interest» is inextricably linked with the economic benefits of interested financial statements users. Internal control (audit) is aimed at prompt response to negative effects of economic activity. Considering financial performance generally, external audit provides users with reliable information on financial and property status of the audited entity, its financial results, and changes in cash flow and equity. Management team of a public interest entity has to create an audit committee to interact with an external auditor. At the same time, an external auditor creates an additional report and informs the audit committee on the applied principles of independence, on the key partner, on the auditors involved, on the scope and timing of the statutory audit, on the audit methodology, the materiality level chosen for the audit, on business continuity of the audited entity, on the shortcomings of its quality control system, on identified violations of the law, and on the interaction of auditors and management during the audit. A letter from the auditor to those with the highest managerial authority also contains information about the internal control system and its ability to identify deviations from legislative norms. A final document informing report users on financial and property status, operating activity, cash flow and equity statements of the audited entity is an audit report, which may include the following opinions of an auditor: unqualified opinion, qualified opinion, adverse opinion, and disclaimer of opinion.The management of the audited entity makes decisions on adjusting internal control system, financial statements, and revealed deviations from legislative norms based on audit documents preceding the report and the audit report itself. The procedure for adjusting the customer’s internal control system of the audit, its financial statements identified during the inspection of deviations from existing legislative standards on the basis of audit documents preceding the audit report and an additional report for the audit committee of the enterprise is considered. Keywords: public interest entities, audit, financial statements, audit committee, audit report, management. Formulas: 0; fig.: 0; tabl.: 4; bibl.: 10.

The effect of auditor industry specialization and board independence on the cash flow reporting classification choices under IFRS: evidence from Taiwan

PurposeThis study aims to explore the relationship between audit partner and firm industry specialization and board of director independence on the decision by Taiwanese firms to use International Financial Reporting Standards (IFRS) flexibility concerning reporting interest income and expense and dividends received in different sections of the statement of cash flows. This flexibility existed in Taiwan for the first time in 2013, the year that Taiwan switched from its own generally accepted accounting principle to IFRS.Design/methodology/approachUsing 2013 data for a sample of 1,227 firms, 354 of whom changed their reporting classification, this study examined the interaction effect of board independence and partner-level and firm-level auditor industry specialization on the cash flow reporting decision using logistic regression.FindingsThe results show there is a substitute relationship between board independence and partner-level industry specialization on the change in cash flow reporting classification, but a complementary relationship between board independence and firm-level auditor specialization. Further, both partner-level and firm-level auditor industry specializations have a complementary (but negative) relationship with board independence as to whether the firm is likely to report interest expense paid in the operating or financing activities sections.Practical implicationsAn important implication is that knowing the levels of audit firm and partner specialization and how independent the board is, is useful for researchers and regulators in investigating auditor-client relationships and understanding the influences of variables investigated here on the outcome(s) of accounting policy and regulatory changes.Originality/valueThis study improved the field’s understanding of the impacts of audit partner and firm specialization, board independence and relevant interactions on cash flow reporting choices.