Earnings Information Research Articles

Timely “Gain Recognition” in Debt Contracting – Evidence from Cost Savings and Synergy Add-backs

In this paper, I study the inclusion of cost savings and synergy add-backs (cost-synergy add-backs hereafter) in loan contracts. Such add-backs allow borrowers to add unrealized cost savings and synergy gains into contractual earnings calculations and thus reflect timely gain recognition in debt contracting. I find that the implications of cost-synergy add-backs depend on lender incentives, which vary with loan market segments. In the non-leveraged loan market where banks perform monitoring, lenders include cost-synergy add-backs to enhance earnings informativeness. By contrast, in the leveraged loan market where non-bank lenders tend to reach for yield and banks may lack monitoring incentives, lenders take on hidden risks through cost-synergy add-backs in an overheated market. Taken together, my results suggest that timely gain recognition in the form of cost-synergy add-backs enhances contract efficiency in non-leveraged loans and distorts contract efficiency in leveraged loans.

Does environmental, social and governance (ESG) performance increase earnings informativeness Evidence from ASEAN countries

Does environmental, social and governance (ESG) performance increase earnings informativeness Evidence from ASEAN countries

Related-party transactions and post-earnings announcement drift: Evidence from the Korean stock market

Post-earnings announcement drift (PEAD) is a market anomaly that contradicts the efficient market hypothesis, which assumes that all publicly available information is reflected in security prices. This study uses multivariate regression analysis to examine the effect of disclosing related-party transactions on PEAD. The empirical results show that greater related-party transactions increase the magnitude of PEAD. This positive association is more pronounced in Korean chaebol firms than in non-chaebol firms. The results suggest that investors have difficulty understanding earnings news of chaebol firms involved in related-party transactions due to their unique and complex corporate governance structure. This study contributes to the literature by showing that there is high information asymmetry between firms and outside investors regarding related-party transactions in chaebol firms; as a result, investors underreact to firms’ earnings information.

Information on Income, Dividend Policy and the Impact of Inflation on Stock Prices

This lookup ambitions to determine the have an impact on of income information, dividend coverage and inflation on inventory prices via the ride of organizations on the LQ45 index of the Indonesian Stock Exchange from 2017 to 2019. Several previous studies on stock fees have proven extraordinary results. Therefore, every other learn about is needed to re-evaluate the stock fee theory. The populace of this study is the LQ45 index of 45 companies. In order to obtain the 3-year commentary period (2017 to 2019) and 57 remark effects of 19 pattern companies, the sampling approach used is a purposeful sampling method. Research facts comes from sample businesses that can be downloaded from the Indonesian Stock Exchange website, and inflation information can be downloaded from the internet site of the Central Bureau of Statistics. The facts analysis techniques used are descriptive statistical analysis and more than one regression analysis. The first facts analysis technique completed is descriptive facts and classical speculation testing. The a couple of regression evaluation continues with speculation testing. The consequences of this study partly show that, as shown via the t-test of zero <0.05, data about profits and dividend coverage will affect the stock price, while the t-test of 0.726 <0.05 indicates that inflation will now not affect the inventory price. The end result of this study is that, at the identical time, earnings information, dividend coverage and inflation will all have an effect on the inventory price, while trying out zero <0.05 (5%).

Pengaruh Struktur Kepemilikan Perusahaan Dan Karakteristik Komite Audit Terhadap Keinformatifan Laba Akuntansi

Informativeness of accounting earnings is the ability of earnings in the level of decision making or return. This study aims to examine the effect of firm ownership structure , audit committee independence, financial expertise audit committee on earning informativeness. This research is a type of causal associative research with a quantitative approach. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2014-2018. The Sample was selected using a purposve sampling method with a total sample of 34 samples. The data used is secondary data from the company's annual report. The analytical method used is multiple linear regression analysis. The results showed that there was no influence of ownership structure and audit committee characteristics on earnings informativeness

The effect of Earnings Co-movement on Quarterly Earnings Response Coefficient

The effect of Earnings Co-movement on Quarterly Earnings Response Coefficient

Does corporate online interaction activeness affect investors’ perceptions of earnings information? Evidence from China

ABSTRACT This study investigates the effect of corporate online interaction activeness on investors’ perceptions of earnings information. Using a large sample of Chinese listed firms for the period 2010–2019, we find that investors’ perceptions of earnings information, measured by earnings response coefficients (ERCs), increase with the level of corporate online interaction activeness, and the effect is more pronounced in firms with a larger retail investor base and higher stock illiquidity. Our results suggest that social media interaction helps to improve stock price efficiency.

Tax Avoidance and Tax Risk Management Impacts on Earnings Response Coefficient

This research aims to analyse tax risk management role as a moderating variable in tax avoidance relationships with the earnings response coefficient. The research usesall samples of the non financial multinational companies on Indonesian and Malaysian stock exchanges. The outcome is tax risk management can strengthen the positive effect of tax avoidance on Earnings Response Coefficient. This proves that the tax risk management can be the control from the multinational corporations in handling tax avoidance. Companies that accomplish improved tax risk management can increase pre-tax income transparency that they present, thereby increasing earnings informativeness (ERC).

Accounting information in innovative small cap firms: evidence from London’s Alternative Investment Market

We posit that investors and social media users place more weight on cash flows than on earnings for innovative small cap firms and that, in turn, innovative small cap firms (i) manage cash flows more than earnings, and (ii) disclose more cash flow than earnings information on social media. Using a matched sample of innovative and non-innovative small cap firms listed on the London’s Alternative Investment Market (AIM), we document that the value relevance of cash flows (earnings) is higher (lower) for innovative compared to non-innovative small cap firms. Using Twitter to examine the demand of accounting performance measures, we find that Twitter users more frequently retweet and include as ‘Favorite’ information about cash flows, than information about earnings for innovative small cap firms. We then show that innovative small cap firms engage less intensively in earnings management and exhibit higher abnormal cash flows compared to non-innovative small cap firms. Innovative small cap firms emphasise more information in their tweets about cash flows and less about earnings compared to non-innovative small cap firms. Cross-sectional tests demonstrate that seasoned equity offerings provide additional incentives to engage in increasing abnormal cash flow management activities.

The Effects of Blockholder Dispersion on the Informativeness of Earnings: Evidence from Korea

This paper studies the relationship between blockholder dispersion and the informativeness of earnings using a sample of Korean companies. Investors prefer less volatile and more sustainable earnings and managers have incentives to manage earnings to meet investor demand. We show evidence that firms with dispersed ownership, which are likely to suffer from high levels of information asymmetry, smooth earnings in order to relieve investors’ concerns regarding information asymmetry. Furthermore, our regression analyses on the relation between returns and future earnings reveal that earnings smoothing conducted by firms with dispersed ownership leads to higher informativeness of earnings. This study provides important implications for various financial statement users in interpreting firms’ earnings sustainability, especially in the East Asian countries where a wide spectrum of ownership concentration structure exists.

Investor Attention and Corporate Disclosure Timing: Evidence from Korea

This paper investigates the association between investor attention and the timing of the release of corporate information in the Korean stock market. The association provides the evidence on whether the investor demand for earnings information affects the managerial disclosure decision. Similar to a previous study that uses the Google Search Volume Index to measure investor attention, this paper re-measures investor attention using the Search Volume Index provided by Naver, which has the largest market share of all internet search portals in Korea. Using 9,526 firm-quarter observations, the paper regresses disclosure timing on investor attention. Empirical results show that managers facing greater investor attention announce quarterly earnings information on an earlier date than in the previous year, and they release earnings information during trading hours rather than non-trading hours. The findings indicate that managers consider timely disclosure to be an important factor in meeting investor interests. In addition, this paper sheds light on the role of individual/retail investors in managerial disclosure decisions, considering that the measure of investor attention primarily captures individual/retail investor interest.

과거기간 법인세의 당기조정처리가 이익정보 유용성에 미치는 영향

본 연구의 목적은 (1) 법인세비용의 주요 구성항목가운데 하나인 ‘과거기간의 당기법인세에 대하여 당기에 인식한 조정’에 관한 공시사항을 기술적으로 분석하고, (2) 당기에 조정된 과거기간 법인세가 이익정보의 유용성에 어떤 영향을 미치는지를 연관분석 프레임웍(association study framework)에 기초하여 실증 분석하는 것이다. 법인세비용에 관한 기존 연구들이 주로 이연법인세와 관련된 이슈에 집중해온 관계로, 당기에 조정되는 과거기간 법인세는 비교적 많은 관심을 받아오지 못했다. 전기법인세에 대하여 당기에 이루어지는 조정사항은 법인세비용을 결정하는 주요 요인가운데 하나이다. 따라서 해당 항목의 공시실무와 회계이슈를 논의하는 것은 법인세회계에 대한 이해의 폭을 넓히는데 도움이 될 것이다. 본 연구의 분석결과는 다음과 같다. 첫째, 전기법인세 당기조정금액의 분포는 넓었으며 금액의 수준은 대체로 높았다. 전기법인세 당기조정사항은 다수의 기업들에 의해 공시되고 있었으며, 관련 정보는 비교적 덜 명확한 형식으로 공시되고 있었다. 둘째, 전기법인세 당기조정금액은 초과수익률과 초과이익 사이의 관련성(즉, 이익반응계수)에 유의한 음(-)의 영향을 미치는 것으로 나타났다. 추가적으로, 조정사항의 기업부정연계가능성과 공시의 명확성은 이익반응계수와 전기법인세 당기조정금액 간의 관계에 유의한 영향을 미치는 요인으로 확인되었다. 공시빈도에 관한 추가분석은 기업별로 측정된 법인세조정 공시빈도가 이익반응계수에 유의한 음(-)의 영향을 미친다는 것을 보여주었다.

Insiders’ Foreknowledge of Earnings Results and Rule 10b5-1 Sales Trades

This article investigates the source of 10b5-1 plan insiders’ superior trade performance. Specifically, this article examines whether insiders trade on their private information about the firm’s future earnings performance through 10b5-1 sell trades and the features of 10b5-1 plan trades that are exploited to achieve superior trade performance. I find strong evidence that insiders use 10b5-1 plans to sell stock before disappointing earnings results. However, there is no evidence of earnings management around 10b5-1 sales, consistent with insiders’ good trade timing deriving from their foreknowledge about unfavorable earnings news rather than their ability to influence the timing and recognition of earnings performance. Restricting the sample to insiders who trade both before and after the implementation of Rule 10b5-1, I find that these insiders traded aggressively on earnings information even in the pre-10b5-1 era, but then shifted aggressive trading into 10b5-1 plans after the availability of planned trading, implying an unintended consequence of Rule 10b5-1. Finally, I document that strategic 10b5-1 trades tend to be infrequent, irregularly timed, close to the plan initiation date, and executed during traditional earnings blackout periods, revealing problematic features within 10b5-1 plans.

Does Private Country-by-Country Reporting Improve the Tax and Earnings Information Environment for Investors?

To combat tax avoidance, 58 countries have fully mandated multinational enterprises to disclose their income and economic activities to tax authorities on a country-by-country reporting (CbCR) basis from 2016 onwards. We examine whether this policy shock results in more informative tax expenses for capital market participants. Drawing on analyst tax forecasting, we develop a novel approach to capture the extent of misalignment perceived by capital markets and find that this misalignment declines after CbCR adoptions. Further, we demonstrate that CbCR improves tax information quality by increasing the value-relevance of tax surprise for investors and the accuracy of analysts’ effective tax rate forecasts. To better inform investors of firms’ tax positions, financial regulators are considering proposals requiring firms to publicly disclose country-level tax information. Contributing to the policy discussion, we suggest that the private CbCR disclosure already has materialized some of the information benefits for investors sought by these regulators.

Analisis Kemampuan Informasi Laba dan Arus Kas dalam Memprediksi Arus Kas Masa Depan

The purpose of this study is to examine whether earnings information or cash flow information can predict future cash flows in service companies in Indonesia. The sample determined in this study, using the purposive sampling method, produced 145 companies listed on the Indonesian Stock Exchange in 2015-2017, with a total of 435 observations. In this study, multiple regression analysis techniques are used. The results shown by the t-test are partially significant net income. In this case, net income is a predictor of future cash flows. Whereas cash flow information namely operating cash flow, investing cash flow, and funding cash flow do not affect the future cash flow

Segment disclosure quality and relevance under IFRS Vs. U.S. GAAP

Both IFRS (IFRS 8) and the United States (U.S.) GAAP (SFAS 131) use similar approach for reporting segment information as a part of annual financial statements. Large and multinational firms that operate in more than one operating segment are required by IFRS and the U.S. GAAP to provide financial information about their operating segments in the notes to the annual financial statements using the “management approach.” However, the primary difference between these two pronouncements is how the management approach is implemented. Using a sample of foreign companies cross listed on the U.S. stock exchanges, we test for differences in segment financial reporting under the two sets of financial standards and how this information is valued by the market. We find significant differences in the quality and quantity of segment disclosure made by our sample firms during the fiscal year 2017 under the two sets of accounting standards. We also find that market values the choice of accounting standards as well as the overall quality/quantity of the segment disclosures. Specifically, we find that the decrease in the informativeness of earnings with IFRS as the choice of accounting standards for our sample firms. Additionally, we also find that the predictability and informativeness of earnings is increasing in the quality/quantity of the segment disclosure of the sample firm.

The impact of innate accruals quality on the future market value moderated by dividend policy

PurposeThe purpose of this study is to test and prove how the quality of innate accruals can make a significant contribution to the prospect of future market value for manufacturing industries.Design/methodology/approachThis research used multiple regression method by gathering all observation data on a go public company in the industrial manufacturing sector.FindingsThe results of this test can show that the dividend policy helps reduce the use of accruals to increase investor perceptions about the prospects of the company's future period, especially the value of earnings informativeness, including valid information about the actual fundamental conditions. These results reflect high innate accruals quality, so the use of low accruals, especially in reporting earnings.Research limitations/implicationsThis test uses a measurement of a constant growth rate with the calculation of the indicator g in the next five-year period, and the proof has secondary data abnormalities reflecting a very high level of variation in the use of accruals. As an implication of the data that is not normal, it causes a large amount of data pruning through outlier tests. Samples that qualify for processing are 180 from 384 data.Originality/valueBy calculating the value of the dividend payout with the growth rate, the estimated future market price can be done with reasonable accuracy.

Pengaruh Ukuran Perusahaan, DER, ROA, dan Pajak Penghasilan terhadap Praktik Income Smoothing

Income smoothing is one of the ways the company management manipulates earnings information. This research uses panel data from manufacturing companies listed in Indonesian Stock Exchange (BEI) in the period from 2013 to 2017 to analyze the effect between cash holding, firm size, growth, dividend payout ratio, and leverage to income smoothing. This results of this study are that companies size has a significant negative effect, debt to equity ratio doesn’t have a significant effect to income smoothing, return on asset and income tax have a positive and significant effect to income smoothing.
 Keywords: Income Smoothing; Company Size; Debt To Equity Ratio; Return On Asset; Income.

Financial Stability, Leverage, Ineffective Monitoring, Independent Audit Committee, and the Fraudulent Financial Statement

This study aims to develop prior empirical model research of factors influence toward fraudulent financial statement and determine some element of fraud triangle that are financial stability, Leverage , ineffective monitoring and one element of Good Corporate Governance that is independent audit committee influence to fraudulent financial statement. This research topic is important because investors need earnings information as a basic for making investment decision and fraudulent financial statement may affect quality of earnings information received by investors. Data obtained from financial statement of mining company period 2011-2015, data were analyzed with multiple linier regressions with 150 samples collected by purposive sampling technique. Then the authors used Micro soft Excel and SPSS version 24 for processing and analyzing samples. The results showed only financial stability that has a significant influence on fraudulent financial statement, while Leverage, ineffective monitoring and independent audit committee partially has not significant influence toward fraudulent financial statement.

Earnings Co‐movements and the Informativeness of Earnings

We examine the informativeness of earnings in the presence of earnings co‐movements. Many theoretical studies infer that the more a firm's earnings move with the market the less weight investors need to place on those earnings, thus rendering them less informative. On the other hand, managers have less opportunity to bias the earnings signal the more earnings co‐move, making them more reliable. We measure earnings co‐movement using an industry–firm pairing correlational technique. Overall our results show both the degree of co‐movement and the ordering of earnings announcements impacts on the informativeness of earnings as indicated by earnings response coefficients. Earnings responses are larger for firms that report earnings before their most highly correlated industry peer, but the responses are reduced as earnings co‐movement increases. We interpret our results to indicate that the more earnings co‐move with an industry peer the less informative earnings become, but only when the peer firm is able to obtain information at a later date.