Operating Cash Flow Research Articles

Earnings Management and Tax Minimization: Comprehensive Analysis of Book-Tax Differences in Indonesia

The research aims to investigate the relationship between earnings management strategies, specifically Accrual Earnings Management (AEM) and Real Earnings Management (REM), and abnormal book-tax differences (ABTD). A quantitative approach was employed, utilizing multiple regression models, descriptive statistics, model testing, classical assumption testing, and hypothesis testing through Eviews 12 software on a sample of 671 observations from 61 companies listed on the IDX from 2011 to 2021. The results reveal a significant positive relationship between ABTD and both AEM and REM through overproduction. However, no significant relationship was found between REM and abnormal operating cash flow. Interestingly, a strong negative correlation was discovered between tax avoidance and earnings management through discretionary spending. These findings suggest that accrual management practices are associated with higher levels of tax avoidance, while discretionary spending for earnings management tends to decrease it. The implications of this study provide insights into potential earnings management techniques that can enhance corporate efforts to reduce tax payments and maximize profits while serving as a warning for potential tax avoidance activities.

The Impact of Operating Cash Flow on Corporate Profitability: Amman Stock Exchange case study

The problem of the study is the challenges faced by the growth of different sectors, which requires the identification of an appropriate operating cash flow policy to increase corporate Profitability. Unbalanced policies followed in operating cash flows can negatively affect companies' Profitability. The study's objective is to investigate the impact of operating cash flow on the Profitability of companies in different sectors listed on the Oman Stock Exchange. For five years (2017–2021) for 71 companies. In these sectors, Profitability and metrics have been used carefully. To show how these elements affect the success of each of these sectors? It is because investors can use this information to make sound investment decisions using different operating cash flow methods to evaluate company profitability. The researchers created a checklist to test the research hypothesis, in which each operating cash flow (OCF) was used as an independent variable. (Return on Assets (ROA) and Return on Equity (ROE)) was determined as the type of firm Profitability, which is the dependent variable. The results are shown through two models. Data using descriptive statistical analysis. Regression Approaches Using EViews 12, Given that the data included both time series and cross-sectional characteristics, fixed least squares (PLS) regression effects models were used to estimate the study models. The results reveal that operating cash flow has an impact of 57.9% on ROA, a measure of corporate Profitability, and other variables have an impact of 42.1% that is not mentioned. Meanwhile, the independent variable affects ROE by 57.7% and other variables by 42.3%.   Paper type: Research paper.

Analisis Laporan dan Kinerja Keuangan Pemerintah Daerah Kabupaten Sambas

This research aims to analyze the financial performance of the Sambas Regency Regional Government for 5 years from 2017 to 2021 and test whether there are differences in the performance of the degree of decentralization, performance of regional financial independence, performance of operating expenditures, and performance of capital expenditures. The analytical tools used are financial ratios, namely liquidity ratios, leverage ratios, debt ratios, productivity ratios and operating ratios. The research uses quantitative descriptive data analysis methods. The research results show that the liquidity ratio which consists of the average current ratio is 0.82, meaning that every Rp. 1,- of current debt is guaranteed by Rp. 0.82,- of current assets; The average cash ratio is 0.35, meaning that for every Rp. 1,- of current assets, Rp. 0.35 is cash and cash equivalents; the average cash to current liabilities is 0.29, meaning the regional government's ability to immediately pay every Rp. 1.- of current debt using cash and cash equivalents is Rp. 0.29,-; The average Quick Ratio is 0.60, meaning that the local government's ability to fulfill its short-term obligations for every Rp. 1,- using cash, cash equivalents and receivables is Rp. 0.60,-; The average cash flow ratio is 2.31, meaning the ability of a Regional Government's operating cash flow to pay for every Rp. 1,- of current debt owned using operating cash of Rp. 2.31,-. The leverage ratio measured is the Short Term Debt to Long Term Debt Ratio of 1.00. The debt ratio measured is the Total Liabilities to Current Assets Ratio. The average is 1.24 and the average Current Liabilities to Total Asset Ratio is 0.05, meaning that for every R.1,- debt is guaranteed by total assets of Rp.0.05,- The productivity ratio measured is Current Assets to Total Assets Ratio . The average is 0.04, meaning that for every Rp. 1,- current assets used for operational activities is Rp. 0.04,- Quick Asset to Inventory Ratio, the average is 2.67. The operating ratios measured include the average Earning Power of Total Investment of 0.10. The average financial independence ratio is 0.11 or 11%. From the aspect of relationship patterns and level of capability, the region is in the very low category with an instructive relationship pattern. The Public Participation Level Ratio is 0.07. This ratio shows the level of public participation in paying taxes, in this case all regional tax revenues, tax revenue sharing, both central and provincial. The higher the ratio value of the level of public participation of a Regional Government, the better it will be. From the calculation results it can be seen that for every Rp. 1,- Revenue, which comes from taxes is Rp. 0.07,- Debt Service Coverage Ratio (DSCR) for the Regional Government of Sambas Regency, the average for 2017-2021 is 2.79 or still above the minimum requirement of 2.5 as regulated in PP No. 107 of 2000 concerning Regional Loans article 6 letter b. However, in 2020 the DSCR was 2.35 and in 2021 it was 1.79, which is below the minimum requirements as regulated in PP 107/2000. This condition is caused by the relatively increasing number of regional loans from year to year. So the regional government for the coming year must ensure that the DSCR is still at the minimum limit outlined by the central government because if loans continue to increase there will be concerns that the Sambas Regency Regional Government will not be able to meet mandatory spending as regulated by PP 30/2011 concerning regional loans explanation of article 15 paragraph (1) letter b.

PREDIKSI LABA MASA DEPAN MELALUI PERSISTENSI LABA DENGAN ARUS KAS OPERASI DAN AKRUAL

The purpose of this study was to determine the effect of operating cash flow and accruals on earning predictability in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2017-2018. This research used 150 samples from selected manufacturing companies with purposive sampling method. The analysis technique used in this research is multiple linear regression, which performed classical assumption in advance, before testing the hypothesis. The data in this research were inputted and calculated using Microsoft Excel program and processed using the EViews 12.0 program. The results of this study indicate that the operating cash flow had a positive and significant effect on earning predictability, and accruals had a positive and significant effect on earning predictability.

Pengaruh Profitabilitas, Sales Growth, dan Operating Cash Flow terhadap Financial Distress (Studi Empiris pada Perusahaan Manufaktur Subsektor Food & Beverage yang Terdaftar di Bursa Efek Indonesia Periode 2019-2021)

This study aims to analyze the impact of profitability (X1), sales growth (X2), and operating cash flow (X3) on financial distress in food & beverage manufacturing companies listed on the Indonesia Stock Exchange during the period 2019 to 2021. The research adopts a quantitative approach. The total population consists of 810 companies listed on the IDX during the period 2019 to 2021. The sample comprises 18 companies selected through purposive sampling technique. Data analysis method employs logistic regression. The results demonstrate that profitability and sales growth have a negative effect, while operating cash flow has a positive effect on financial distress.

Efeitos das Diferenças na Política Contábil de Leasings entre o FASB e o IASB

Objective: This research investigates the effects of the 2019 US lease standards for US lessee companies, comparing with the potential effects of IFRS 16 to explore the economic reasons that would have led the FASB and the IASB to diverge from their joint lease standard project. Method: We hand-collected detailed data on leases for 500 US lessees firms’ 2019 financial statements to first analyze Topic 842’s effects on financial ratios and to simulate these effects had the FASB adopted the same earnings recognition criteria in IFRS 16. Next, we investigate the value relevance of these observed and simulated effects on the stock market. Results: Topic 842 generated significant variations in companies' financial indicators, but it was not possible to identify the value relevance of these variations due to model limitations. The IFRS 16 simulation shows a significant increase in EBIT and operating cash flows, but a drop in net income, which seems to have been incorporated into stock prices. This suggests the FASB’s decision to diverge from the IASB could include the desire to avoid lower earnings and their negative impacts on the stock market. Contributions: This research adds to the literature first by focusing on the US when most of the recent studies investigated the IFRS world and, second, by exploring economic reasons rather than the hierarchy of power between the FASB and the IASB. Finally, we add a novelty derived from the detailed manual work which allowed us to estimate the effects had the US firms been under IASB’s jurisdiction.

Examining the bonus mechanisms’ role in real earnings management dynamics in an Indonesian manufacturing company

Real Earnings Management (REM) and financial success may have different relationships depending on how managers act. Bonus mechanisms are a significant factor that influences management behavior. The study seeks to examine the impact of bonus systems on the correlation between financial performance and REM practices in manufacturing companies in Indonesia. Moderated Regression Analysis (MRA) is employed to evaluate the influence of bonus mechanisms in moderating the association of financial performance on REM. The technique of purposive sampling was used to pick the sample. The study utilized data from manufacturing firms listed on the Indonesian Stock Exchange from 2017 to 2021, including a total of 400 observed data points. The research findings demonstrate that sales growth is the sole factor that significantly influences REM in manufacturing organizations, as indicated by a p-value below 10%. Other financial performance factors, on the other hand, with p-values for each variable above 10%, have not been shown to have a significant impact on REM. These factors include ROA, leverage, operating cash flow, and cash. The findings also demonstrate that, with a p-value for each variable above 10%, the bonus mechanism is a variable that modifies the effect of all financial performance variables on REM.

Divergences among ESG rating systems: Evidence from financial indexes

<p style="text-align: justify;"><span lang="EN-US" style="font-size: 12pt; font-family: verdana, geneva, sans-serif; color: black;">This paper specifically underscores the disparities among various ESG rating systems in China, highlighting their varied interpretations and emphasis on corporate financial factors. Analyzing data on Chinese listed firms from 2009-2022, we observe that while company size and leverage ratio uniformly correlate with ESG scores across rating agencies such as Bloomberg, Huazheng, Wind, and Hexun, the influence of factors like return on assets, cash flow, company age, and Tobin's Q is markedly inconsistent among these agencies. For instance, while operational cash flow and company age are positively associated with ESG ratings from Bloomberg, Huazheng, and Wind, they hold an inverse relationship with Hexun's ratings. This divergence underscores the unique data collection, weighting, and evaluation methodologies employed by each rating system. The study emphasizes the criticality of comprehending the nuances of each rating agency's approach when interpreting ESG scores and crafting ESG strategies. Moreover, it advocates for integrating insights from multiple rating systems to cater to the diverse expectations of stakeholders.</span></p>

VAT credit refunds and firm productivity: Evidence from China's VAT reform

This study exploits the implementation of the value-added tax (VAT) credit refund policy in China as an exogenous shock to examine the policy's impact on firm productivity. We find that pilot firms' total factor productivity increases significantly following the implementation of the tax reform due to higher operating cash flow, increased innovation incentives, and improved human capital investment in highly educated labor. Further tests show that the effect of the VAT credit refund policy is more pronounced among large firms, manufacturing firms, firms with strong financing constraints, and those located in regions with low levels of marketization and financial development. Our results provide novel evidence regarding the economic benefits of the VAT credit refund policy, and highlight its role in fostering firm productivity and economic growth.

THE INFLUENCE OF OPERATIONAL CASH FLOW, LEVELS OF DEBT, AND FIRM SIZE ON EARNINGS PERSISTENCE (EMPIRICAL STUDY OF PROPERTY AND REAL ESTATE COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE, 2019-2021)

This study aims to examine the effect of Operational Cash Flow, Debt Level and Firm Size on Earnings Persistence. The population used in this research is all Property and Real Estate Companies on the Indonesia Stock Exchange (IDX) in 2019-2021. The sample in this study was 36 units using purposive sampling method. Testing the hypothesis in this study using multiple linear regression analysis using SPSS version 26. The results of this study indicate that Operational Cash Flow and Firm Size have a significant positive effect on earnings persistence, while the level of debt has no significant effect on earnings persistence and. Operational Cash Flow, Debt Level and Firm S simultaneously have a significant effect on earnings persistence.
 
 Keywords: Earning Persistence, Operating Cash Flow, Debt Level and Firm Size

Enterprise innovation and audit pricing: An evidence study from China's A-share listed companies.

Driven by innovation strategy, Chinese enterprises' innovation investment, and research and development capability have been continuously improved, and the audit risk caused by this has attracted widespread attention from the academic community. This study takes China's A-share listed companies from 2013 to 2021 as samples to empirically test the relationship between innovation input and audit pricing of Chinese enterprises. Research shows that the higher the innovation investment, the higher the audit cost. High-quality corporate governance, sufficient research and development personnel, research and development subsidies, and operating cash flow can all play a negative moderating role. A good innovation environment will weaken the positive influence between innovation input and audit fees. This study theoretically confirms the risk-oriented audit pricing mechanism, which is of great significance for optimizing enterprise innovation risk management and improving audit service levels.

Manajemen arus kas, ukuran perusahaan, leverage, tahun anomali covid-19 serta kinerja keuangan perusahaan sektor kesehatan di bursa efek indonesia

This research aims to analyze the impact of Cash Flow Management (CFO), Firm Size, Leverage, and the Anomalous Year of COVID-19 on the financial performance (ROE) of health sector companies listed on the Indonesia Stock Exchange during the period 2017-2022. Panel regression method is employed to test hypotheses and analyze these variables. The results reveal that Leverage has a significant negative influence, while Size has a significant positive effect on financial performance. The Anomalous Year of COVID-19 also demonstrates a positive impact on ROE, indicating adaptation and growth within the health sector during the pandemic. Cash flow management (CFO), though not statistically significant, highlights the complexity of the relationship between operational cash flow and financial performance. These findings provide valuable insights for health sector companies in crafting adaptive and sustainable strategies amidst economic dynamics and specific situations such as a pandemic.

Cash Flow Ratios and Business Failure of Healthcare Firms in Nigeria

The study examined cash flow ratios as predictors of business failure of healthcare firms in Nigeria. The objectives of the study were to ascertain the effect of operating cash flow ratio, cash flow to debt ratio, and price to cash flow ratio on Altman’s zeta score of healthcare firms in Nigeria. The study adopted ex-post-facto research design, covering a period of 10 years (from 2013 to 2022). Secondary data used for the study were extracted from annual reports and accounts of selected healthcare firms listed on the Nigeria Exchange Group (NGX) from 2013 to 2022. Multiple regression technique was used to test the hypotheses. The result of the test of hypotheses revealed that the operating cash flow ratio has a statistically non-significant negative effect on the Altman z-score of healthcare firms in Nigeria (p-value = 0.3397). The finding also indicates that the cash flow to debt ratio has a statistically non-significant negative effect on the Altman z-score of healthcare firms in Nigeria (p-value = 0.2937). Lastly, the finding reveals that the price to cash flow ratio has a non-significant positive effect on the Altman z-score of healthcare firms in Nigeria (p-value = 0.5281). The policy implications of these findings suggest that when assessing the financial health and bankruptcy risk of healthcare firms in Nigeria, policymakers and regulators should consider factors beyond cash flow ratios. It was recommended therefore that healthcare firms in Nigeria should diversify their sources of cash flow beyond operating cash flow to improve financial stability and mitigate bankruptcy risk. Healthcare firms should have a careful evaluation of debt management practices is necessary to maintain a healthy balance between cash flow generation and debt obligations in healthcare firms. Market sentiment reflected in the price to cash flow ratio should not be relied upon as the sole indicator of financial stability. Healthcare firms should prioritize fundamental financial and operational indicators to assess their financial health and mitigate bankruptcy risk.

Cash flow management, performance and risk: evidence from Greece

PurposeI seek to identify whether cash flow management can affect the performance and risk of the Greek listed companies.Design/methodology/approachThis study examines the relationship of cash flow management with performance and risk, using a sample of 80 non-financial companies listed in the Athens Exchange. The study covers the period 2018–2022, and panel data analysis is applied. Both financial performance and stock return are taken into consideration, while risk concerns the volatility of the companies’ share prices. The various explanatory variables used include the net cash flow, free cash flow, cash conversion cycle days, cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, inventory days, customer days and supplier days.FindingsThe empirical results provide evidence of a positive relationship between financial performance and net cash flow and free cash flow. In addition, operating cash flow is positively related to financial performance. The opposite is the case for investing and financing cash flow. Finally, some evidence of a negative relationship between financial performance and inventory and customer days is provided too. On the other hand, stock return and risk are not related to the cash flow management variables at all.Originality/valueTo the best of my knowledge, this is one of the few studies to examine the relationship of cash flow management with performance and risk, using data from the Greek stock market. The results can form an effective selection tool for investors seeking Greek companies with the highest financial performance potential, which may reward them with higher dividends.

Risk management through financial hedging in inventory systems with stochastic price processes

We consider the financial hedging problem of a firm whose operational cash flow from its inventory operation is affected by both price and demand uncertainties. We assume that selling prices and demand arrival process are governed by an exogenous continuous stochastic price process which is assumed to be correlated with prices of various products in financial markets. During the selling horizon, the firm dynamically invests in a financial portfolio of these products to manage its exposure to price and demand risks by observing the current inventory and price levels. We explore the problem in a minimum-variance framework where we look for the variance-minimizing financial hedge for a given operational policy and a martingale price process. The framework leads to explicit results for the optimal static and dynamic financial hedges in single-period problems with complicated within-period dynamics. We also obtain characterizations of optimal dynamic hedges for multi-period problems using dynamic programming. We explore the risk reduction effects of minimum-variance financial hedges through numerical examples and show that significant risk reductions may be possible by using the right hedge.

Pengaruh Arus Kas Operasi, Profitabilitas, Likuiditas, dan Solvabilitas Terhadap Financial Distress

The Effect of Operating Cash Flow, Profitability, Liquidity, and Solvency on Financial Distress in Transportation and Logistics Sector Companies Listed on the Indonesia Stock Exchange (BEI) for the 2019-2022 period. This research was conducted to determine the effect of operating cash flow, profitability, liquidity and solvency on financial distress. This research uses transportation and logistics sector companies listed on the Indonesia Stock Exchange (BEI) for the 2019-2022 period as the population. This research method uses quantitative methods with data in the form of financial reports available IDX website. The sample was selected using purposive sampling and produced 76 observation data. The data were processed using the SPSS application and analyzed using logistic regression analysis. Based on the results of the analysis conducted, it can be concluded that operating cash flow and liquidity does not have a significant effect on financial distress. Meanwhile, profitability have a negative and significant effect on financial distress and solvency has a positive and significant effect on financial distress.

Pengaruh Operating Cash Flow, Profitabilitas, dan Leverage terhadap Financial Distress pada Perusahaan Properti dan Real Estate yang Terdaftar di Bursa Efek Indonesia (BEI) Tahun 2018-2022

The objective of this study is to investigate the impact of operating cash flow, profitability, also leverage on financial difficulties among property also real estate firms listed on the Indonesian stock exchange (IDX) from 2018 to 2022. This research employs quantitative methods, utilizing secondary data sources such as annual also financial reports obtained from 47 property also real estate companies during the specified period. The sampling procedure involved purposive sampling, yielding a total of 235 data samples. The research framework adopts multiple linear regression analysis. Findings from this investigation reveal that, individually, operating cash flow also profitability do not significantly influence financial distress, whereas leverage exhibits a detrimental effect. Moreover, collectively, operating cash flow, profitability, also leverage jointly impact financial distress within the realm of property also real estate enterprises listed on the Indonesian stock exchange (IDX) during the 2018-2022 period.

The Effect of Operating Cash Flow, Company Size on Tax Avoidance in Consumer Goods Companies Listed on the IDX for the 2019-2021 Period

Tujuan penelitian ini adalah untuk menguji arus kas operasi serta ukuran perusahaan terhadap praktik tax avoidance di perusahaan sektor barang konsumsi sub sektor makanan dan minuman yang terdaftar di Bursa Efek Indonesia Periode 2019-2021. Penelitian ini menggunakan metode kuantitatif dengan data sekunder berupa laporan keuangan perusahaan. Adapun jenis penelitian ini yaitu dengan causal explanatory. Populasi penelitian ini terdiri dari 83 perusahaan. Dalam sektor tersebut dipilih melalui teknik purposive sampling sehingga menghasilkan 32 perusahaan. Analisis data dilakukan dengan menggunakan uji regresi berganda. Hasil penelitian menunjukan bahwa arus kas operasi secara signifikan berpengaruh negatif terhadap praktik tax avoidance. Sedangkan, ukuran perusahaan tidak memiliki pengaruh signifikan terhadap praktik tax avoidance.

Do Cash-Flow Performance Metrics in CEOs’ Compensation Contracts Enhance Firm Innovation?

ABSTRACT Building on prior research showing a positive link between internally generated cash flows and innovation output, we hypothesize and find that the inclusion of cash-flow performance metrics in CEOs’ compensation contracts positively impacts firm innovation. Our findings are consistent with the theory that cash-flow metrics incentivize CEOs to make prudent investment decisions, thereby addressing both the overinvestment and the underinvestment challenges for firm innovation. As a result, firms utilizing cash-flow metrics exhibit lower innovation input and higher innovation output compared to firms not employing such metrics. Furthermore, our research indicates that the incentive effect of cash-flow metrics on firm innovation is more pronounced when cash flows convey unique information not reflected in earnings and when CEOs have longer expected employment horizons. This study underscores the effectiveness of cash-flow metrics in motivating management to promote firm innovation. Data Availability: Subscription-based data are obtained from Wharton Research Data Services; public data are obtained from public sources specified in the paper. JEL Classifications: D81, G30, J33, M52.

Financial Distress: Identifying Influencing Factors and Moderating Dynamics in Manufacturing Companies

In order to adapt to changes in the economy and reduce possible losses, financial distress plays a critical strategic role. Therefore, the purpose of this study is to determine the characteristics that reduce financial distress as well as the factors that moderate it. All manufacturing companies listed on the Indonesia Stock Exchange between 2017 and 2021 are included in this quantitative study. A total of 79 companies were chosen for observation during a five-year period using the purposive sample method, yielding 395 observations. Using Stata software, linear regression and moderated regression analysis (MRA) were used to analyze the data. This study demonstrates that the factors of leverage and ROA each have a significant impact on financial distress. It wasn't demonstrated that operating cash flow significantly affects financial distress, nevertheless. Additional findings revealed that size significantly moderates the association of leverage on financial distress. This study makes a significant contribution to our understanding of the variables that lead to financial distress, particularly in light of the manufacturing sector's poor performance during the COVID-19 pandemic. Furthermore, revealing this moderating influence might benefit investors significantly by enabling them to take business size into consideration when assessing corporate investments.