Incremental Information Content Research Articles

Wealth Creation in Firms: EVA, MVA and Conventional Measures In Selected Indian Companies

The purpose of this study is to examine the superiority of Economic value added (EVA) over conventional accounting measures as a performance measure and to study which of these modern or conventional measures rightly captures its influence on a firm’s market value. The present research analysis is performed on a sample of five companies selected from FMCG sector listed on NSE for a period of Nine years between the time periods 2003-2014. The present study is done using Panel Data Regression technique with EVA, MVA and other Accounting measures to gauge both relative and incremental information content of these measures. The study reveals that the relative information content tests prove that conventional accounting measures are more closely associated with market value of the firm than EVA measure reflected in stock price. However, incremental information content tests suggest that EVA adds more explanatory power to its influence on market value of the firm than other conventional accounting measures.

The Effect of Fair Value Accounting on Jordanian Investment Properties

The financial reporting in Jordan has witnessed significant improvements in the past twenty years; these improvements were a result from the adoption of the International Financial Reporting Standards (IFRS). The main objective of this study was to examine whether developments in financial reporting environment following the adoption of IFRS resulted in more relevant financial information over time. This study uses a quantitative methodology in addressing the research questions. The relevance of fair value has been tested by studying the effect of fair value measurement applications for investment properties on the financial performance of Jordanian firms, its share prices and market values, the study also examined the effect of unrealized gains and losses on financial statements. Ohlson (1995) theoretical frameworks have been used to examine this relationship. A sample of Jordanian firms (consisting of 41 real estate companies) listed in the Amman stock exchange during the 2008–2011 time period has been used. Our study findings, based on the results of multiple regression analysis showed that financial performance of Jordanian real estate companies is significantly positively related to investment properties valued at fair values. Furthermore, the book value incremental information content is greater than information content of the net income and the unrealized gain & losses inclusion in owners' equity increases the explanatory power of the firm's market value model of real estate companies. This study concludes that fair value accounting measurements for Jordanian real estate companies have been value relevant during all the period of the study.

Forecasting National Recessions Using State Level Data

A large literature studies the information contained in national-level economic indicators, such as financial and aggregate economic activity variables, for forecasting and nowcasting U.S. business cycle phases (expansions and recessions.) In this paper, we investigate whether there is additional information useful for identifying business cycle phases contained in subnational measures of economic activity. Using a probit model to forecast the NBER expansion and recession classification, we assess the incremental information content of state-level employment growth over a commonly used set of national-level predictors. As state-level data adds a large number of predictors to the model, we employ a Bayesian model averaging procedure to construct forecasts. Based on a variety of forecast evaluation metrics, we find that including state-level employment growth substantially improves nowcasts and very short-horizon forecasts of the business cycle phase. The gains in forecast accuracy are concentrated during months of national recession.

Forecasting National Recessions Using State‐Level Data

We investigate whether there is information useful for identifying U.S. business cycle phases contained in subnational measures of economic activity. Using a probit model to forecast the National Bureau of Economic Research expansion and recession classification, we assess the incremental information content of state‐level employment growth over a commonly used set of national‐level predictors. As state‐level data adds a large number of predictors to the model, we employ a Bayesian model averaging procedure to construct forecasts. Based on a variety of forecast evaluation metrics, we find that including state‐level employment growth substantially improves nowcasts and very short‐horizon forecasts of the business cycle phase. The gains in forecast accuracy are concentrated during months of national recession.

Is the Expanded Model of Audit Reporting Informative to Investors? Evidence from the UK

In an effort to make audit reports more informative to investors, the U.K. recently passed a standard that requires auditors to disclose the risks of material misstatement (RMMs) that had the greatest effect on the audit. Using short-window market reactions to measure investors’ responses to the new risk disclosures, our results indicate that investors do not find these disclosures incrementally informative. Using long-window tests, our results indicate that the disclosures reliably capture the uncertainty in accounting measurements but lack incremental information content. In additional analysis, we find that most of the risks had already been disclosed by management in the previous year’s annual report suggesting that investors were already informed about the risks before the risks were disclosed by the auditor.

Investigation of Information Content of Accrual and Cash Accounting Measures: Evidence from Tehran Stock Exchange (TSE)

Regarding the role accounting earnings (accruals) and operating cash flow as a basis for decision making and forecasting stakeholders, in this study, on the one hand the relevance of accounting earnings and operating cash flows and the other hand aims to examine the content of incremental and relative in accrual and cash items have been studied. In this research, the statistical populations are the accepted firms in the Tehran Stock Exchange (TSE), which are selected based on considered preconditions (76 firms are selected over 2004 to 2013). Regression method of analysis and Eviews was employed to analyze the data. The results indicate that accruals and cash significant relationship with stock return. Also the incremental and relative information content of accruals relative to cash items and has the most

Application of Panel Data Approach to Comparing the Relevant and Incremental Information Content of Accounting Variables before and After Implementing the National Accounting Standards

Abstract. The main purpose of financial reporting is representing useful information for users to help them make the conscious economic decisions and finally do the best resource allocation. This goal is achieved through representing relevant and reliable information. This information is realized by the observance of accounting standards requirements and regulations. In Iran this matter has begun by setting national accounting standards since 1999 and binding in 2001. The present study is comparing the relevant and incremental information content of accounting variables before and after implementing the national accounting standards in a period covering eight years (1997-2004) which includes four years before and four years after binding the standards). The research sample contains 123 firms and the dependent variable is the stock market value and the independent variables include net income, stock book value and operational cash flows (as a proxy of financial statements). The multivariate regression is used to analyze the data. Using panel data and measuring the changing effect of operational cash along with net income and stock book value and applying Z voung test has made this study different with other domestic researches. The results show that after implementing the national accounting standards the relevant information content of accounting variables and the incremental information content of book value has been developed.

The influence of recent hotel amenities and green practices on guests’ price premium and revisit intention

This study examines the influence of hotels’ green practices, recent amenities, and traditionally salient attributes on customers’ overall online evaluation, revisit intention and hotel performance. The researchers acquired data from more than one hundred US hotels located across different states with the assistance of an international hotel chain. In order to demonstrate the incremental information content of recently-adopted hotel amenities and levels of green initiatives, the study compared two extended models with the basic model, which incorporates only salient attributes such as cleanliness, location, room, service and value. The findings indicate that the availability of recently-added amenities such as free Wi-Fi, pet boarding, free self-parking, multilingual staff, and airport transportation, as well as green practice initiatives, have a strong, incremental predictive power in explaining guests’ overall online review ratings, price premium and revisit intention.

The incremental information content of earnings, working capital from operations, and cash flows

Article history: Received March 25, 2015 Received in revised format June 1 2015 Accepted June 12 2015 Available online June 14 2015 This paper presents an empirical study to determine the effects of different factors including present profit, depreciation, working capital, operating cash flow and other accruals on future earnings stability. The study selects the information of 124 selected firms from Tehran Stock Exchange over the period 2006-2012. Using two regression analysis, the study has determined that as the fluctuation of profit increases, the profitability increases too. In addition, the study has concluded that firms with minimum fluctuations preserve more stable profitability. Moreover, firms with higher fluctuation in profitability maintain more volatile profitability for the next consecutive period. Growing Science Ltd. All rights reserved. 5 © 201

Market Reaction to Quantitative and Qualitative Order Backlog Disclosures

Findings in the prior literature on the implications of Order Backlog (OB) for stock returns are both sparse and inconclusive. For example, Rajgopal et al. (2003) show that firms with larger ratios of OB to total assets earn lower subsequent returns than firms with smaller ratios; while Lev and Thiagarajan (1993) find that increases in OB beyond sales increases are positively associated with returns. We provide evidence that quantitative information on increases in OB, coupled with positive qualitative indications by management about the direction of OB, are associated with higher returns; and that there is incremental information content to OB related disclosures over and above earnings surprises. We find this to be the case for annual and quarterly OB disclosures, regardless of whether they are provided in the preliminary earnings releases or in the SEC Form 10-Q (K) filings.

Is Earnings Information Superior to Net Income as a Measure of Future Earnings? A Study on Accruals and Real Earnings Management

This study examines the incremental information content of components of earnings by regressing future net income of earnings’ components in a series of multivariate models. We find that the components of operating cash flow and accruals provide more information to effectively predict future profitability, particularly when we dismantles financial measurements into various combinations of operating cash flow and accrual-based components. However, the components of real earnings management provide less information of future profitability. We observe that the more informative the information content of earnings is, the more precise the prediction of future profitability can be.

The value relevance of unrealized gains and losses recognized under IAS 39

Purpose – The study aims to examine the role of unrealized gains and losses recognized under international accounting standards (IAS) 39 in explaining stock prices for investment companies listed on the Kuwait Stock Exchange (KSE), and how the inclusion of unrealized gains and losses in income numbers affect the incremental explanatory power of earnings. Design/methodology/approach – The study utilizes Ohlson’s (1995) valuation model combined with a technique developed by Theil (1971) that has been applied in several prior studies. Findings – The results of the cross-sectional regression indicate that net income and book values jointly and individually are positively and significantly related to stock prices; the incremental information content of net income is greater than that of book values; the inclusion of unrealized gain in income numbers increases the explanatory power of the model; and the incremental information content of net income before unrealized gains and losses is lower than that of book v...

Comprehensive Review of Predictability Power and Informational Content of Income Statement and Balance Sheet Variables for Future Cash Flow

In this paper predictability power of four variables (accrual, cash flow, earning, and net operating assets) is tested.. The study is at firm level in Tehran Stock Exchange using the data of 153 firms for 7 years ( 1382- 1389). In addition to, we run multivariate regression to test incremental information content of the four variables. We found evidence of accrual reversal phenomena in our sample. Also, we observed that predictability power of operating power is bigger than other variables. At last, we documented that among the variables, only operating earning has incremental information content.

The Impact of News Articles and Corporate Disclosure on Credit Risk Valuation

This paper elucidates the importance of the information content of text information from public sources, including newspapers and corporate filings, has for credit market investors. We adopted news coverage and news tone to quantify text information from news articles. We captured the qualitative risk disclosure of individual firms by quantifying textual information in the risk factor disclosures of corporate filings (i.e., Form 10-K and 10-Q). Our empirical study yielded three main findings. First, net news tone reduces credit risk. Second, more news coverage leads to a higher credit risk, after correcting for the selection problem caused by firm size, industry, past stock returns and volatilities, a result suggesting that while positive news has a positive impact on credit risk, information from the news media can increase volatility, worsening credit risk. Finally, more risk factor disclosure leads to lower credit risk for debt issuers, but systematic risk and tax risk disclosure are positively associated with credit risk. Overall, our results suggest that text information from newspapers and corporate filings contain incremental information content for firms’ credit risk evaluations. Moreover, these two information sources play distinctive roles in signaling firms’ future credit conditions.

The Incremental Information Content of the Cash Flow Statement: An Australian Empirical Investigation

The general objective of the present study is to investigate and assess the incremental information content of cash flow disclosures as required by the AASB 1026 “Statement of Cash Flows”. This test addresses the issue of whether a change in cash flow components has the same relationship with security prices as that in earnings. Several previous studies indicate both income and cash flow statements may be mutually exclusive or mutually inclusive statements.The data to test three hypotheses came from companies listed on the Australian Stock Exchange for the period of 1992 to 1997, a subsequent period of the requirement to apply AASB 1026. General results from hypothesis tests indicate that cash flows have information content more than that provided by earnings alone and that cash flows have relative information content, given earnings alone. This finding suggests that the cash flow statement and the income statement provide mutually exclusive information. This finding refutes results of previous studies from the USA and UK that indicated cash flow data had less information value than that conveyed by earnings. Other implications and suggestion for further study are also discussed in the paper.

The Importance of English Language Competency in the Academic Success of International Accounting Students

The authors investigate the information content of two commonly used admission tests, namely the Graduate Management Admission Test and the Test of English as a Foreign Language (TOEFL). The analysis extends prior research by investigating the incremental information content of individual components from one admission test conditional on the information contained in the other admission test and undergraduate grade point average. The results suggest that for international applicants in master of accountancy programs, the TOEFL test is the only one that yields statistically significant incremental information content about academic success. If admissions officers were to eliminate one of the tests, it should not be the TOEFL.

Incremental Information Content of Cash Flow and Earnings in the Iranian Capital Market

Purpose - This study aims to examine the incremental information content of cash flw from operations and earnings in the Iranian capital market. Design, methodology, and approach - Based on market-based accounting research, this study uses statistical associations between accounting data (earnings and cash flw) and stock returns to assess/measure the incremental information content (value relevance) of cash flw and earnings. A multivariate regression model based on panel data is used to examine the incremental information content of earnings and cash flow from operations. Results - The results show that both earnings and cash flow from operations have incremental information content beyond each other. These results are consistent with the findings of recent studies. Overall, the fidings of this study support the usefulness of cash flw information in addition to earnings, in fim valuation by investors in the Iranian market. Conclusions - The study makes the following contributions to the Iranian literature on incremental information content of cash flw and earnings. First, this study employs actual cash flw data derived from cash flw statements. Second, this study employs a large sample size for a more recent period.

Corporate failure diagnosis in SMEs

Purpose – The main purposes of this paper are to provide evidence about corporate failure diagnosis in SMEs, identify the predictor variables that enhance the accuracy of the corporate failure diagnosis models, and perform comparative analysis of the proposed models with the existing literature. The paper supports the proposition that the majority of the proposed corporate failure diagnosis models in the literature exhibit an endogenous drawback since their construction is based on large entities or listed corporations' samples. Design/methodology/approach – The present study employs multiple discriminant analysis, logit analysis, and probit analysis to construct corporate failure diagnosis models based on SMEs longitudinal data from Greece. Findings – The paper provides evidence that the contribution of human capital is immensely more important to the viability of SMEs than to the viability of large corporations. Moreover, this study identifies interactions among seemingly insignificant variables that exhibit incremental information content and attribute massive discriminant power to the proposed corporate failure diagnosis models. Practical implications – The results of this study encourage regulatory authorities to adopt enhancements to the Basel II framework and financial institutions as regards to constructing their corporate failure diagnosis models. The models is based upon internal default experience and mapping to external data incorporating both quantitative and qualitative variables. Originality/value – The contribution of this paper is the proposition of new value-relevant variables that enhance the accuracy of existing corporate failure diagnosis models for SMEs.

Capital Market Effects of the IFRS Adoption for Separate Financial Statements: Evidence from the Italian Stock Market

Based on a sample of Italian firms, this paper investigates whether separate financial statements are useful to capital market investors and whether IFRS are more value-relevant than domestic GAAP. This issue is key in evaluating the decision made by some states in the European Union to extend the use of IFRS to separate financial statements.Findings provide evidence that separate financial statements are value-relevant, regardless of the accounting standard set. However, contrary to expectations, separate financial statements under IFRS do not have incremental information content beyond domestic GAAP. There is even some evidence that domestic GAAP are more value-relevant than IFRS.Finally, this paper documents the important role of model specification in value-relevance studies.

المضمون المعلوماتي الإضافي لمؤشرات القوائم المالية للشركات الصناعية المساهمة الأردنية = The Incremental Information Content of Financial Statements' Signals of Jordanian Industrial Shareholding Companies

المؤشرات الأساسية | التحليل الأساسي | العائد السوقي للسهم | التحليل القريني | المضمون المعلوماتي | ربحية السهم | Fundamental Signals | Fundamental Analysis | Stock Market Return | Contextual Analysis | Information Content | Earnings per Share