Earnings Before Interest, Taxes, Depreciation And Amortization Research Articles

Changes in the economics of coffee production between 2008 and 2019: a tale of two Central American countries

Increasing costs of coffee production relative to coffee prices has led to concern across the industry of lack of profitability of coffee production especially for smallholders who comprise a large majority of producers. This study compares coffee production costs and income over a decadal interval of 2008 versus 2019 for coffee farmers in some of the main coffee growing regions of Costa Rica and Guatemala. Costs and income were collected by farmer recall using a standard questionnaire with trained research surveyors. Net income as assessed by EBITDA (earnings before interest, taxes, depreciation and amortization) increased by about 30% in Costa Rica, but declined to a third of its 2008 level in Guatemala. Agronomic costs of production per hectare increased by 31% in Costa Rica and 62% in Guatemala, mostly due to increased labor costs (higher daily wage rates), while fertilizer usage increased but unit costs remained stable. Gross income was stable in Guatemala but increased in Costa Rica due to receiving significantly higher prices for their coffee in 2019 compared to 2008, while in Guatemala prices declined. Nevertheless, the response was not uniform between farms in Costa Rica while high and medium productivity groupings of farms had higher EBITDA, low and very low productivity farms experienced a decline similar to Guatemala. The difference in performance of farm groups in Costa Rica was due to a decline in production per hectare of the lower productivity group; while the difference between Guatemala and Costa Rica was firstly due to price differences, and secondarily due to lower productivity of some farm groups. The investment of Costa Rican farmers was undoubtedly supported by the substantially increased price received by farmers (as compared to Guatemala), reflected in the increase in export price of coffee from Costa Rica relative to Guatemala. This shows the importance of farmers receiving higher prices for their produce in enabling them to cover increasing production costs, invest in increasing productivity and maintain profitability.

Is TCR effective in reducing tax avoidance in Indonesia?

Thin capitalization is a tax avoidance technique using funding sources that prioritize debt over capital. Thin capitalization can be used as a technique to avoid taxes because there is a difference in treatment between debt and capital as a source of funding in tax regulations. Thin capitalization rule (TCR) is domestic tax system to reduce thin capitalization. This study aims to examine the effect of implementing thin capitalization rules on reducing tax avoidance in Indonesia. This study is a quantitative study. The data used are secondary data obtained from multinational companies listed on the IDX from 2013 to 2020 by excluding companies that are excluded from PMK-169: bank companies, financing institutions, insurance, reinsurance, operating in the oil and gas mining sector, companies whose entire income is subject to final tax, and infrastructure. The data analysis method used in this study is regression using the eviews 12.0 program. The results show that the implementation of thin capitalization rule (TCR) does not reduce tax avoidance. These results provide empirical evidence that the government need to consider using thin capitalization rule with the interest to Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) rule mechanism rather than the Debt-to-Equity Ratio (DER) rule mechanism and arm’s length rule mechanism.

Increasing the EBITDA of private equity portfolio company through digital enablement

The study of the role of digital implementation in increasing earnings before interest, taxes, depreciation and amortization (EBITDA) in portfolio companies of private equity funds is a topical issue for the development of strategies and competitiveness. Thus, the main purpose of the study was to determine how private equities increase EBITDA in the portfolio companies via digital enablement. For the purpose of understanding the role of digital enablement strategies in value creation, the critical realism research paradigm was identified as the best-fit philosophy. The critical realism approach was chosen because it advances research methodologies through the development of a qualitative theory of causality. A sample of 26 respondents was used with semi-structured interviews being conducted. The data analysis process involved the identification of 3 themes through thematic analysis. Three themes were identified, namely new digital capabilities to improve top-line growth, driven by the Head of Strategy/Head of Department, and transformative initiatives. The results from all three themes indicate that digital enablement is useful in improving private equity firm revenue and EBITDA levels through digital transformation, improved customer engagement, and identification of market opportunities towards digital data capabilities. The findings show that redefinition is critical to improving EBITDA, as it challenges the existing model and provides a forward-looking approach to strategy formulation. Digital enablement strategies are an unexplored area in the context of private equity firms. The strategies are momentous in improving revenue levels and competitiveness while accentuating the EBITDA rates by cost reduction. The results of this study will be of practical use to both businesses and other economic entities

Impact of ICT Sector Research and De velopment Expenditure on the Market Capitalization in the US, the EU and China

Purpose: Due to the growing global role of enterprises from the information and communication technology sector from the leading regions of the USA, EU and China in the industry, the author’s research goal was to try to identify factors influencing the value of listed enterprises understood as its stock exchange capitalization. For the purpose, research was carried out on the impact of a group of twenty-six variables on the company’s market capitalization, among which the most important conclusions concern the impact of seven variables, i.e. revenues, research and development expenses, earnings before interest, taxes, depreciation and amortization (EBITDA), earnings before interest and taxes (EBIT), total equity, total assets, total revenues and dividend rate. Design/Methodology/Approach: The study used research methods in the form of a random effects model and a fixed effects model, and then used the Hausmann test to verify which of the models is better suited to establishing the relationship between the selected independent variables and the dependent variable in the form of the stock market capitalization of companies from the ICT sector. Findings: It was found that the impact of equity or the level of revenues on market capitalization is much smaller than in the case of research and development expenses and that the issue of depreciation of assets is an important factor in the market valuation of enterprises from the ICT sector. Additionally, the level of assets and equity has, although limited, impact on the market valuation of the company, regardless of the region in which an entity operates. Revenues are important from a regionalization perspective – company’s market capitalization is the largest in the case of the ICT services subsector in China. There is no similar relationship among manufacturers of ICT devices operating in all three regions. Research limitations/Implications: Due to the fact that the COVID-19 pandemic and the global economic slowdown are important factors affecting the ICT sector, further research on the value of ICT enterprises should take the aspects into account.

Artificial intelligence-driven scalability and its impact on the sustainability and valuation of traditional firms

The objective of this study is to determine the impact of artificial intelligence (AI) on the earnings before interest, taxes, depreciation, and amortization (EBITDA) of firms as a proxy of their financial and economic margins by improving revenues and minimizing expenses. This impact is positive on the market value and scalability by improving the economic and financial sustainability of companies. The methodology is based on a business plan that considers the savings obtained by a traditional firm implementing AI. Specifically, a sensitivity analysis will demonstrate that AI savings impact key parameters, leading to economic and financial sustainability. Additionally, a mathematical interpretation, based on network theory, will be produced to provide and compare the added value of two ecosystems (without and with AI that adds up new nodes and strengthens the existing ones). The main contribution of this paper is the combination of two unrelated approaches, showing the potential of AI in scalable ecosystems. In future research, this innovative methodology could be extended to other technological applications.

The effect of financial leverage on financial performance: evidence from non-financial institutions listed on the Tokyo stock market

PurposeThe study seeks to find the effect of financial leverage on the firm performance of non-financial companies listed in the Tokyo stock market.Design/methodology/approachThe study collected data from 263 companies in the automobile and industrial producer sectors listed on the Tokyo stock exchange between 2001 and 2021. The generalized method of moments was used to estimate the effect of leverage on financial performance due to its ability to overcome the problems of endogeneity and autocorrelation.FindingsThe study found that the equity multiplier has a positive and statistically significant effect on return on assets (ROA), return on equity (ROE) and earning per share (EPS). The study discovered that the interest coverage ratio has a positive and statistically significant effect on ROA, ROE, EPS and Tobin’s Q. The results revealed that the degree of financial leverage and debt to earnings before interest, taxes, depreciation and amortization (EBITDA) have a negative and statistically significant effect on ROE, EPS and Tobin’s Q. The study also found that the capitalization ratios of the firms have a negative and statistically significant effect on ROA, ROE, EPS and Tobin’s Q.Practical implicationsThe use of debt financing, which presents financial leverage, indicates that the companies can make enough earnings to pay off the interest and principal (debt service obligations), which were shown by the interest coverage ratio, as well as to pay all the long-term fixed expenses, which were shown by the fixed charge coverage ratio. Interest and fixed charge coverage have a positive statistically significant effect on the financial performance of automobile and industrial producer companies.Originality/valueThe study focused on the effect of financial leverage on financial performance by relying on pecking and trade-off theories to contribute to the existing body of literature in finance.

Determinants of goodwill: Empirical study from emerging economies

Goodwill is increasingly receiving the interest of investors, auditors and other users of financial statements, therefore the need for comprehensive information on this topic has grown over time. The aim of this article is to analyze the determinants of goodwill in companies from emerging economy countries. The research is structured in two stages. The first stage of the research consists of a bibliometric analysis of the literature that is focused on the goodwill topic. The second part of the research consists in building an econometric model in order to assess the determinants of goodwill based on data reported by firms in emerging economy countries in 2021, namely the data reported by 21,977 companies from 100 emerging economy countries, structured into 94 industries. The obtained results are represented by the development of an econometric model that shows the implications of net profit, Economic Value Added (EVA), Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and of research and development (R&D) expenses on goodwill fluctuations and vice versa. The results of our research highlight the fact that goodwill fluctuation is generated by the fluctuation of net profit, EVA, EBITDA and less by the R&D expenses. This study adds value to the literature by treating the subject differently, analyzing and evaluating the relationship between net profit, EVA, EBITDA, R&D expenses and goodwill.

Human Capital Development and Industrial Sector Performance in Pre And Post Covid-19 Era: The Australian Experience

The importance of the ravaging pandemic on human development and industrial sector performance cannot be overemphasized. This is because an improved and quality industrial output is a function of quality human resources. This study explicitly examined the effects of the ravaging pandemic on human development and industrial sector performance in Australia during pre and post COVID-19 era. Human development was measured with the Human Development Index (HDI), Inequality Adjusted HDI (IHDI), Multi-dimensional Poverty Index (MPI) and the Gender Development Index (GDI) while the Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) and the Industry Value Added (IVA) were used to capture the trend in Australia’s industrial sector performance during pre and post COVID-19 era. Data were sourced from Australian Bureau of Statistics (ABS), the United Nations Development (UNDP) Report and World Bank indicators. The study findings revealed, amongst others, that human quality was better off before the pandemic than after it and this was explicitly reflected in the country’s industrial output, as a better performance was recorded before the pandemic than after it. Australia, like China, needs more aggressive net zero CO2 emission policies including those relating human development to industrial output. Aggressive export diversification would help her economy recover faster from the adverse effects of the ravaging pandemic through effective and efficient utilization of her renewable energy sources.

Building renovation business: the effects of specialization on profitability

The importance of renovations is widely recognized, for example, due to renovation backlogs in the developed countries. The urbanization megatrend, among many other factors, is still increasing the need for renovations in the long run. One approach to review the renovation issue is the profitability of the companies that will tackle the increasing demand in the sector. By applying mainly quantitative methods, using the 15-year timeframe (2005–2019) and earnings before interest, taxes, depreciation, and amortization (EBITDA) and return on assets (ROA) as measures, this study reviewed the profitability of the building renovation (BR) companies from two perspectives: how does focusing on certain special services (specialized BR) fare compared to focusing on a wide range of services (wide BR) and what are the profitability differences among specialized BR companies? The results show that, when reviewing the research timeframe in total, there are no differences in profitability between wide BR and specialized BR companies. However, an annual review reveals that specialized BR companies are profitability-wise more vulnerable to economic cycles. Among the specialized BR companies, there are several differences in profitability; classically, specialization in a niche market with a deliberate customer base and low competition level is gainful. The research provides new information about an unresearched area encouraging companies to re-think their strategic choices considering service specialization and performance.

Biogas and biomethane production routes in the sugar-energy sector: Economic efficiency and carbon footprint

Efforts to fulfill the goals of mitigating climate change by replacing fossil fuels with renewable sources are increasing worldwide. In Brazil, the sugar-energy sector is one of the main responsible for decarbonizing the energy matrix, through ethanol and cogenerated electricity. However, new products have emerged using by-products of ethanol distillation, such as vinasse, which can be a source for biogas and biomethane. This study compared two routes for using biogas vinasse: bioelectricity cogeneration and biomethane production through economic and greenhouse gas (GHG) mitigation analyses and develop a model able to estimate the financial gains from their use, commercialization, considering the carbon footprint variation. The considered routes were identified to increase the earnings before interest, taxes, depreciation, and amortization (EBITDA) of producers based on projected prices and operational expenses (OPEX). They combined complementarily bioelectricity-biomethane mixes, taking into consideration the carbon mitigation from each route. The scenario with maximum biomethane production can generate a 38 % higher EBITDA than the maximum generation of bioelectricity, in the first year. Yet, the estimated performance up to 2031 would be better in the scenario of maximum biomethane production, 54 % growth compared to 46 % for bioelectricity.

Análise setorial do impacto da IFRS 16 e covid-19 nos indicadores das arrendatárias brasileiras

ABSTRACT The objective of this article was to analyze the impact of International Financial Reporting Standard 16 (IFRS 16) and the coronavirus disease 2019 (COVID-19) pandemic on the indicators of Brazilian lessee companies, segregated by economic sector. The effects of IFRS 16 after its entry into force and of COVID-19 simultaneously with the concession of the International Accounting Standards Board (IASB) on the indicators of lessee companies, segregated by Brazilian economic sectors, were not yet known. The study contributes to the literature by providing evidence on the consequences of the accounting standard setters’ decisions, as well as the COVID-19 pandemic, on the indicators of different economic sectors. The study helps both preparers and regulators to understand the impact of the accounting standardization and COVID-19 on the indicators of lessee companies according to economic activity. For investors, it shows the importance of anticipating the impact of the standards on their decision making. A comparative analysis of the indicators before and after the adoption of the new standard and the pandemic was carried out, as well as a statistical relevance analysis for the indicators of public companies, by economic sector and using the difference in differences method and multiple linear regression with panel data, for the period from 2010 to 2020. The study showed that the impact of IFRS 16 on the indicators was differentiated by sector, with healthcare, oil, gas, and biofuels, and cyclical consumption being the most affected. The standard was not relevant to the value of most sectors, with the exception of healthcare and non-cyclical consumption, showing that investors were positively surprised by the adoption of IFRS 16 by these sectors. The effect of COVID-19, combined with the IASB’s concession to lessees, was positive for profitability and earnings before interest, taxes, depreciation, and amortization (EBITDA) in the healthcare sector, but did not reverse the deterioration in leverage and profitability of the industrial goods sector and the lessees as a whole and the profitability of the cyclical consumption sector, highlighting the partial effectiveness of the measure.

Non-GAAP reporting and capital markets: contrasting France and Canada

PurposeThis study aims to assess if the voluntary reporting of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a widely used non-generally accepted accounting principles (GAAP) measure, has effects on information asymmetry and value relevance and how the adjustments to GAAP earnings made to derive it contribute to these effects. This study focuses on firms from two countries with contrasting institutional settings, Canada and France.Design/methodology/approachRelying on multivariate analyses and using Heckman’s procedure to address the sample self-selection issue, this study first estimates the likelihood of a firm to report adjusted EBITDA. Then, this study examines if adjusted EBITDA, as well as the adjustments made to GAAP earnings to derive adjusted EBITDA (adjustments), affect a firm’s information asymmetry and its value. These adjustments are essentially GAAP-grounded items that are discarded by management to derive non-GAAP adjusted EBITDA. The dependent variables are share price volatility, as a proxy for information asymmetry, alongside market-to-book and stock market return as indicators of value.FindingsIn terms of the used sample, results suggest that Canadian firms are much more likely to report adjusted EBITDA than French firms. Chief executive officer (CEO) attributes (CEO power) appears to increase such likelihood. Moreover, for both Canadian and French firms, adjusted EBITDA is associated with reduced stock market volatility, an indication of lower information asymmetry, as well as higher market-to-book and returns, suggesting value relevance. The results also indicate that investors view the adjustments to GAAP earnings made by management to derive adjusted EBITDA as not value relevant (similar to noise). The GAAP-grounded elements that management discard to derive adjusted EBITDA actually increase information asymmetry.Originality/valueThis study adds to prior research on the interface between a CEO attributes and governance and non-GAAP reporting. This study also provides evidence that, despite very different institutional settings, non-GAAP reporting conveys relevant information to capital markets’ participants in both France and Canada. Hence, a country’s institutional setting may have a differential impact on the disclosure choice but not on the resulting value relevance of such disclosure. Finally, this study extends the non-GAAP literature by examining the value relevance of a widely used yet under-researched measure, adjusted EBITDA.

The evolution of the mechanically agitated hopper in Anglo American Platinum

For Anglo American Platinum (AAP) to reach their burning ambition goal of doubling the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 2023, sites are required to adopt an alternative approach to improve representativeness of metal accounting samples given the increase in grind and throughput demand. The success of optimization projects will rely heavily on metal accounting data being accurate so that improvements declared are based on sound samples and assay measurements. The 60 litre mechanically agitated hopper (MAH) was initially developed and ratified in order to overcome particle segregation evident in the 20-litre conventional, compressed air-agitated hoppers of vezin type sampling systems. A sustained plant accountability performance within the range of 95-105% was realized due to the correction of the previously overstated feed grade by means of a more representative sample. Pierre Gy’s rule of thumb of 30 increments per sampling campaign has not been proven and documented for the Platinum Group Metals (PGM) industry. The MAH however with additional volume capacity allows for flexibility to increase the primary sampling increments per shift from ± 32 to ± 96 to cater for process variability (thereby reducing distributional heterogeneity) without increasing the overall resulting final sample mass. Additional technology and larger 110/220 litre capacity hoppers have been deployed. Enhancements include a wash water and drainage system, an improved trash screen design and high/low hopper level sensors. The MAH principle of operation has also been expanded to cater for a double (3-drive) stage sampling system as well as a triple (5-drive) stage sampling system. It is believed that the latest MAH design will satisfy the Theory of Sampling principles and therefore a motivation for an industrial roll out of the innovation within AAP is underway.

An empirical investigation of performance assessment of Indian healthcare industry

PurposeThe purpose of the study is to measure the performance of Indian hospitals, both operationally and financially, by using hospital KPI's. The assessment is predominantly done by linking it to the existing Lean practices in Indian hospitals.Design/methodology/approachAn empirical study based on cross-sectional survey of hospital managers and specialists in various private healthcare facilities across India was conducted to validate the proposed Lean framework. From an extensive literature survey, the authors identified quality, delivery, efficiency, accessibility and patient centeredness to be the main operational performance (OP) indicators for hospitals. Business or financial performance was measured based on parameters which are average revenue per occupied bed (ARPOB), earnings before interest, tax, depreciation and amortization (EBITDA) and operating revenue. Confirmatory Factor Analysis (CFA) was carried out using a specialized technique, called Structural Equation Modelling(SEM) and an explicit factor structure was hypothesized.FindingsManagement commitment towards Lean in hospitals is statistically proven to have impacted operational and financial performance. However, leanness in technology and business processes showed no statistical significance on either operational or financial performance parameters. Hospital stakeholders showed statistical significance on though it had no impact on the financial performance. Results obtained from the statistical analysis indicate a positive impact of hospital Lean practices on timely delivery of services and improved service quality. Efficiency, accessibility of services and patient centered behavior in hospital operations could not be statistically proven to have impacted the financial performance.Social implicationsEffectiveness of Lean management (LM) principles in improving hospital operations is largely dependent on patient centered behavior. Empowered employees who are trained to add value from a customer view point, make hospital operations safe and improved. Properly trained and communicated employees who are committed to quality improvements can make a positive impact on patients' quality of life and thus positively impact the society. The study lists ways to attain the required outcomes.Originality/valueThis paper is among the very few that has attempted to suggest ways to link implementation of Lean practices more effectively in Indian hospitals to improve hospital performance at operational and financial levels.

Relação entre o EBITDA e a estrutura de capital: um estudo com as empresas listadas no IBrX 50

The capital structure of organizations and their influencing factors have been a topic of interest and discussion in organizational and academic scope in recent years. In the academic world the composition of the capital structure has been explored under various theoretical lenses whose main scope is to identify what companies do to define their capital structure. Thus, the present study aimed to analyze the relationship between EBITDA (Earnings before interest, taxes, depreciation and amortization) and capital structure of the companies listed on Brazil 50 Index (IBrX 50). The sample analyzed was formed by 28 companies, corresponding to the periods from 2014 to 2017. From descriptive and multivariate statistics, the results showed that there is a negative and significant relationship between EBITDA and capital structure, showing that the larger the capital structure the lower the EBITDA. This result is in keeping with the Pecking Order Theory, because according to it, high-profit companies contract less debt by using the profit generated as a source of financing, unlike less profitable companies that need to seek third-party capital as sources of financing.

Toward Global Food Security: Transforming OCP Through Analytics

Humanity relies on cultivated lands to feed itself and thrive. Fertilizers are responsible for 30%–50% of food production, and phosphate, the naturally occurring form of phosphorus, which does not have a substitute, is an essential component of fertilizers. OCP, based in Morocco, is the world’s largest phosphate mining and processing company and therefore plays a critical role in global food security. Over the past decade, OCP, in collaboration with Dynamic Ideas, an analytics consulting company, developed a mixed-integer optimization model to holistically optimize its entire sales and supply chain—from the mines to physical treatments, to chemical facilities, to inventory facilities, and to the port for global distribution. The optimization model brings clarity to a complex supply chain, informs management decisions throughout OCP, and has consistently resulted in an improvement of over 20% in earnings before interest, taxes, depreciation, and amortization (EBITDA) annually. This amounted to over $2.3 billion in the period 2015–2020 (23.6% of the cumulative EBITDA of $9.9 billion over this period). This incremental profitability has fueled OCP’s financing capacity; as a result, OCP is implementing a $20 billion capital expenditures (CAPEX) program. The first phase of the CAPEX program led to the doubling of OCP’s mining capacity and the tripling of its fertilizer production capacity. As a result, OCP increased its fertilizer production capacity by eight million tons in the past decade. The model enabled OCP to produce customized fertilizers that helped improve agricultural yields, which in turn led to increased food production, especially in Africa. The increased production of fertilizers and the availability of customized fertilizers have contributed toward global food security. By demonstrating the interconnectedness of all OCP businesses, the model contributed to creating a culture of collaboration, innovation, and entrepreneurship across the company while breaking the existing silos among departments. This transformation led to the establishment of an analytics-based problem-solving approach throughout OCP and a successful executive education class at the Massachusetts Institute of Technology, thus enriching the university.

Evaluation of Enterprise Value of Securities Firms Listed on the Vietnam’s Stock Market

Enterprise value is the total value of all assets under the current ownership of the enterprise. Earnings before Interest and Taxes (EBIT) is the profits from business activities. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a financial ratio that illustrates the business’s profits before deducting interests, depreciation and income taxes. The main purpose of this study is to empirically test financial indicators of securities firms listed on the Vietnam’s stock market. For this purpose, in this study we evaluate two (2) financial indicators of securities firms listed on the Vietnam’s stock market, including (i) Enterprise value to Earnings before interests and taxes (EV/EBIT); and (ii) Enterprise value to Earnings before interest, taxes, depreciation and amortization (EV/EBITDA). The results of the research show that financial indicators of securities firms listed on the Vietnam’s stock market have many significant differences. Therefore, managers may enhance the firm performance of their firms by specific measures and securities firms need to focus on measures to improve profit to raise enterprise value. This study will benefit the securities firms listed on the Vietnam’s stock market in the improvement of their firm performance.

Volatility of Financial Metrics: Important Data for Contingent Consideration Valuations

This article presents the first detailed statistical analysis of the volatilities of various commonly encountered financial metrics used in contingent consideration (and earn-out) agreements. The valuation of contingent consideration using an option-based methodology and non-equity volatilities is becoming more common in business valuation. We provide clear evidence that the volatility of five financial metrics—revenue; earnings before interest, taxes, depreciation, and amortization (EBITDA); EBIT, net income, and total assets—is strongly, negatively related to firm size and profitability. However, contrary to common belief, the volatility of these metrics is not related to a firm's financial leverage. We also calculated the volatilities using four different methodologies that are employed in practice. Although no theory guides the selection of methodologies, based upon our work, we have found that the year-over-year growth rate, using a quarterly frequency, provides the most reasonable results.

EBITDA Index Prediction Using Exponential Smoothing and ARIMA Model

Forecasting has become essential in different economic sectors for decision making in local and regional policies. Therefore, the aim of this paper is to use and compare performance of two linear models to predict future values of a measure of real profit for a group of companies in the fashion sector, as a financial strategy to determine the economic behavior of this industry. With forecasting purposes, Exponential Smoothing (ES) and autoregressive integrated moving averages (ARIMA) models were used for yearly data. ES and ARIMA models are widely used in statistical methods for time series forecasting. Accuracy metrics were used to select the model with best performance and ES parameters. For the real profit measure of the financial performance of the fashion sector in Colombia EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was used and was calculated using multiple SQL queries.

IPO Valuation and IPO Inter-Industry Effects

This study examines the valuation effects of initial public offerings (IPOs) and intra-industry effects of IPOs in Turkey between 2010 and 2018. The purpose of this study is to find out whether initial public offerings are overvalued and whether they impact the pricing of industry peers. First, the valuation of IPOs is investigated. Price-to-value ratios of Turkish IPOs are compared with sector average ratios to determine whether IPOs are overvalued. Turkish IPOs are not overvalued against industry rivals’ price-to-value ratios based on sales and earnings-before-interest-taxes-depreciation-and-amortization (EBITDA) and earnings. Similarly, valuation based on price-to-value ratios is not related to initial pricing of IPOs. Second, the intra-industry effects of IPOs are investigated. Sector-adjusted abnormal returns of IPOs are compared to market-adjusted abnormal returns. The results are not affirmative: There is no statistically significant difference between the two abnormal returns. Turkish IPOs do trigger significant price declines on rival companies’ stocks. Altogether, the findings indicate that there is neither overvaluation of IPOs nor intra-industry effects over rival companies. Companies do not time the market based on industrial overvaluation. This may indicate market efficiency or lack of competition in the IPO market.