Earnings Patterns Research Articles

SHARIA BANKS AND THEIR BUSINESS EARNINGS: AN EMPIRICAL EXPLORATORY OF THE CASE OF INDONESIA

This research aims to identify the tendency of business earnings obtained by shariah banks and detect its patterns. The sample of this research was sharia commercial banks listed in Indonesia Bank and Financial Services Authority over the period of 2010-2017. The data of financial statements were utilized in this research. The result of this research pointed out that net income during eight periods of observation has shown fluctuative result. The further result found that the value of smoothness tends to go zero. It indicated that earnings pattern in sharia banks is highly smooth.

Behaviour Pattern of Dividend and Earnings: A Study on Selected PSUs in India

India is the world’s third largest energy consumer globally. The oil and gas sector is among eight core industries in India. It plays a major role in influencing decision making for all the other important sections of economy. This paper attempts to identify the dividend and earning patterns across the five selected companies from the oil and power sector in India. Through this paper researchers are also able to find out what kind of policy companies are following whether its dividends are paid according to its earnings or not. The study is conducted by collecting secondary sources from selected PSUs for five financial years. The conclusion has drawn from the study that among the five selected companies the BPCL has provided a good dividend pay-out ratio over the study period. Through the analysis it is found that companies have followed different dividend policies like constant, regular or irregular.

Reputation and Earnings Dynamics

Cyclical patterns in earnings can arise when contracts between firms and their workers are incomplete, and when workers cannot borrow or lend so as to smooth their consumption. Effort cycles generate occasional large changes in earnings. These large changes are transitory, consistent with recent empirical findings. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Financial Closing Time, IT Capability, And Quarterly Earnings Patterns

This study examines whether superior Informational Technology Capability (ITC) is associated with a shorter financial closing time for publicly traded companies. We also compare patterns of late-year adjustment of quarterly earnings between ITC and non-ITC companies. ITC firms appear to have shorter financial closing times and seem to have a reduced probability to exhibit late-year earnings reversals.

Modeling Lifetime Earnings Paths: Hypothetical versus Actual Workers

To assess the distributional effects of social security reform proposals, it is essential to have good information on real-world workers' lifetime earnings trajectories. Until recently, however, policymakers have relied on hypothetical earnings profiles for policy analysis. We use actual lifetime earnings data from the Health and Retirement Study (HRS) to compare actual workers' covered earnings profiles to these hypothetical profiles. We show that the hypothetical profiles do not track earnings patterns of current retirees; thus lifetime pay levels are much higher than for most HRS workers. Therefore, using hypothetical profiles could misrepresent benefits paid and taxes collected under such reforms.

Life-Cycle Earnings Curves and Safe Savings Rates

Analyses of savings rates needed for successful retirement rates (SSRs) typically assume constant real earnings growth throughout one’s career. However, data on the life-cycle earnings patterns of millions of U.S. workers suggest that earnings growth does not occur at a constant rate that matches inflation. Instead, earnings tend to increase at a decreasing rate during the early years of one’s career and decrease at an increasing rate in the later years. Utilizing simulations of saving and dissaving throughout the life cycle based on both historical market returns and forecasted returns, the authors examine the impact of assuming more realistic earnings growth relative to constant inflation-adjusted growth. Results indicate that failing to account for more realistic earnings curves throughout the life cycle may overstate SSRs for lower-income households while understating SSRs for higher-income households, and understate SSRs for younger households while overstating SSRs for older households. Furthermore, historical SSRs of 10% or less are found for all but the highest-income households after accounting for more realistic earnings curves and Social Security benefits—though variations in specific effects may exist based on the simulation methods utilized.

How Might Earnings Patterns and Interactions Among Certain Provisions in Oasdi Solvency Packages Affect Financing and Distributional Goals?

Analysts often compile packages of Social Security changes based on publicly available projections of the effects of individual provisions. Such analyses may neglect issues of whether and how the provisions might interact to alter intended outcomes, thwarting the proposal’s financing and distributional goals. To inform policymakers about the importance of such interactions in examining the cost and distributional implications, we catalog a range of possible interactions, including some that are subtle and not well understood. Using data on U.S. workers from the Survey of Income and Program Participation matched to administrative records, we document important patterns in work and benefit histories to show how several commonly discussed Social Security proposals would affect different population groups. We then use DYNASIM, the Urban Institute’s dynamic micro-simulation model, to measure how accounting for interactions among a few of these provisions changes projections of distributional effects. The study found that: -Interactions between Social Security parameters and between Social Security and personal income taxes can be significant. -Modelers may thus wish to display incremental analyses of combinations of provisions and the both gross and net Social Security benefits in their distributional analyses. The policy implications of the findings are: -Social Security packages are best evaluated holistically. The whole does not always equal the sum of its parts, either in terms of costs or distributional effects.

Life-Cycle Earnings Curves and Safe Savings Rates

Analyses of savings rates needed for succcessful retirement rates (SSRs) typically assume constant real earnings growth throughout one’s career. However, data on the life-cycle earnings patterns of millions of U.S. workers suggest that earnings growth does not occur at a constant rate that matches inflation. Instead, earnings tend to increase at a decreasing rate during the early years of one’s career and decrease at an increasing rate in the later years. Utilizing simulations of saving and dissaving throughout the life cycle based on both historical market returns and forecasted returns, the authors examine the impact of assuming more realistic earnings growth relative to constant inflation-adjusted growth. Results indicate that failing to account for more realistic earnings curves throughout the life cycle may overstate SSRs for lower-income households while understating SSRs for higher-income households, and understate SSRs for younger households while overstating SSRs for older households. Furthermore, historical SSRs of 10% or less are found for all but the highest-income households after accounting for more realistic earnings curves and Social Security benefits—though variations in specific effects may exist based on the simulation methods utilized.

Estimates of the Causal Effects of Education on Earnings over the Life Cycle with Cohort Effects and Endogenous Education

We estimate the wage premia associated with educational attainments focusing on the lifecycle pattern of earnings. We employ a model where educational attainment is discrete and ordered and log wages are determined by a simple function of work experience for each level of attainment. We distinguish between lifecycle and cohort effects by exploiting the fact that we have a short panel. We find that age earnings profiles lose the traditional bell shape and become flat when we allow for cohort differences. Females still have higher college premia compared to males. However, there are clear earnings inequalities between cohorts with smaller college premia for younger compared to older cohorts, for both males and females.

Market Reaction to Patterns of Earnings

Prior research shows that easily discernable patterns in earnings -- strings of earnings increases (decreases) and breaks in such strings -- affect investors’ long-term valuation of stocks. We examine short-term market reaction before, during, and after earnings announcements to formally test how investors process news of continuation or the end of strings relatively to non-patterned firms. Our results confirm differential reaction measured with cumulative abnormal returns (CARs) between patterned and non-patterned firms. However, we observe the strongest market response to announcements of breaks, than to strings or non-patterned firms. Post-announcement drift (PEAD) and pre-announcement “leakage” is mostly attributable to break firms as well. Our results hold after controlling for information released in earnings announcements and characteristics of firms, patterns and information environment. Breaks in earnings strings might be one of the driving forces behind previously documented market anomalies surrounding earnings announcements, as investors need to re-valuate the stocks when earnings patterns end.

The determinants of corporate profitability: an investigation of Indian manufacturing firms

PurposeThe purpose of this paper is to examine the firm-specific and macroeconomic determinants of profitability of Indian manufacturing firms. It assesses the main determinants of firm’s profitability in the pre-crisis and post-crisis period from 2000 to 2015.Design/methodology/approachThis methodology splits the factors that influence firm profitability in two groups: firm-specific (internal) factors and macroeconomic indicators. It further aims to look at the consistency of the factors in the pre-crisis and post-crisis period. The return on assets and the net profit margin are considered as proxy for corporate profits. The panel generalized least square and panel vector auto-regression model have been employed, and it is observed that the exchange rate seems to have played a major role in the crisis period by explaining the earning quotient for Indian firms.FindingsThis paper concludes that the firm-specific variables and exchange rate channels are quite relevant in explaining the profitability of Indian manufacturing firms. It accepts the hypotheses that size and liquidity enhances whereas leverage discourages the profitability. Few exceptions have been observed during the crisis period. The study also concludes that in the short run, the changes in exchange rate are not increasing profitability, but in the long run, it increases profitability as the volatility of nominal exchange rate is positively impacting profitability. Moreover, the study finds that the nominal exchange rate index is more informative and explains that profitability is better than real exchange rate index in the case of Indian manufacturing firms over the study period.Research limitations/implicationsThe managers and the policy makers should give utmost importance to the firm-specific determinants, especially after the crisis period, and consider the appropriate exchange rate to evaluate firm performance for making any change in the policy to make any business profitable.Originality/valueThis study has been conducted over a longer time by using advanced panel data analysis techniques on the recent data. The study period properly captures the crisis time and the research includes different selection of profitability that highlights corporate earnings pattern. Moreover, validation of the exchange rate sensitivity of profitability over nominal and real exchange rate increases the robustness of the study. Moreover, on Indian manufacturing firms, the study is very significant and unique.

Earnings over the Life Course: General versus Vocational Education

Two common hypotheses regarding the relative benefits of vocational versus general education are (1) that vocational skills enhance relative short-term earnings and (2) that general skills enhance relative long-term earnings. Empirical evidence for these hypotheses has remained limited. Based on Swedish registry data of individuals in short (2-year) upper secondary school programs, this study provides a first exploration of individuals’ earnings across nearly complete careers. The descriptive earnings patterns indicate support for both hypotheses 1 and 2. The support holds when grade point average and family fixed effects are controlled for and also when enrollment in further education and fertility decisions are taken into account.

Earnings Over the Life Course: General versus Vocational Education

Two common hypotheses regarding the relative benefits of vocational versus general education are (1) that vocational skills enhance relative short-term earnings and (2) that general skills enhance relative long-term earnings. Empirical evidence for these hypotheses has remained limited. Based on Swedish registry data of individuals in short (2-year) upper secondary school programs, this study provides a first exploration of individuals’ earnings across nearly complete careers. The descriptive earnings patterns indicate support for both hypotheses (1) and (2). The support holds when controlling for GPA and family fixed effects and also when taking into account enrollment in further education and fertility decisions.

Long-Term Employment and Earnings Patterns of Welfare Recipients: The Role of the Local Labor Market

AbstractMany Western countries have introduced welfare reforms that limit public assistance for the long-term unemployed and that spur rapid movement into the labor market. The work-first nature of these new policies means that the success of welfare recipients depends greatly on demand-side constraints, more particularly on local labor market conditions. Based on longitudinal administrative data of all single mothers who received cash benefits when the Israeli welfare reform was implemented (N = 45,000), this study focuses on the role of the local labor market in explaining single mothers’ long-term employment and earnings patterns. The results indicate notable diversity in employment and earnings patterns. Some mothers showed stable or improved attachment to the labor force, while others showed a much less stable pattern and about a quarter had a very weak attachment to paid employment. Local labor market conditions and their change over time play an important part in explaining these various patterns.

Does The Market See Through Seasonal Quarterly Earnings Patterns?

Evidence such as Das, Shroff, and Zhang (2009) suggests that firms routinely reverse their earnings pattern during their fourth quarter compared to that of last year, possibly leading to earnings management. Motivated by these findings, this study seeks to document whether the market sees through seasonal quarterly earnings patterns and reacts consistent with an earnings management hypothesis. Using an amended Easton and Harris (1991) model, I study whether the earnings variables are more informative based upon the seasonal differencing patterns by incorporating dummy variables, along with their respective interaction terms, to signify the first time the pattern occurs. My results show the market sees the seasonal quarterly earnings pattern; the earning levels and changes in earnings variables are more informative but the (managed) earnings tend to be transitory, not permanent in nature. All other tests performed support these general conclusions.

Being Surprised by the Unsurprising: Earnings Seasonality and Stock Returns

We present evidence consistent with markets failing to properly price information in seasonal earnings patterns. Firms with historically larger earnings in one quarter of the year (“positive seasonality quarters”) have higher returns when those earnings are usually announced. Analysts have more positive forecast errors in positive seasonality quarters, consistent with the returns being driven by mistaken earnings estimates. We show that investors appear to overweight recent lower earnings following positive seasonality quarters, leading to pessimistic forecasts in the subsequent positive seasonality quarter. The returns are not explained by risk-based explanations, firm-specific information, increased volume, or idiosyncratic volatility.Received June 19, 2014; accepted April 25, 2016, by Editor David Hirshleifer.

THE RIGHT AMOUNT OF TRUST

We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs. Heterogeneity of trust beliefs in the population, coupled with the tendency of individuals to extrapolate beliefs about others from their own levels of trustworthiness, could generate this non-monotonic relationship: highly trustworthy individuals tend to form overly optimistic beliefs, to assume too much social risk and to be cheated more often, ultimately performing less well than those with a belief close to the mean trustworthiness of the population. On the other hand, less trustworthy individuals form overly pessimistic beliefs and avoid being cheated, but give up profitable opportunities, therefore underperforming. The cost of either too much or too little trust is comparable to the income lost by foregoing college. Our findings in large-scale survey data are supported and extended with experimental findings. We show that in the trust game, own trustworthiness and beliefs about others' trustworthiness are strongly correlated and persistent and that patterns in earnings lost due to incorrect beliefs are comparable to those in the survey data.

Additional Information Increases Uncertainty in the Securities Market: Using both Laboratory and fMRI Experiments

The paper first tries to replicate experiments by Huber (J Econ Dyn Control 31:2536---2572, 2007) and Huber et al. (J Econ Behav Org 65:86---104, 2008), which show that in double auction markets with uneven information distribution that is common knowledge, returns are a J-shaped function of the information known by different investors. Huber proposed the pattern of future earnings as the reason of J-shaped function. But our paper secondly asserts the psychological state of personal investor as the reason. It also asserts that the psychological state of personal investor often destroys efficient market. Functional magnetic resonance imaging scans of subjects in a simple game indicate that subjects with medium amounts of information use different brain areas. The paper argues that these patterns are consistent with medium-informed investors using Matching Law strategy rather than the maximizing strategy of the least and best informed investors. The paper motivates an accounting connection by remarking that financial statement disclosure is mandated in most developed stock markets.

What about the non-completers? The labor market returns to progress in community college

Despite copious research on the labor market returns to college, very little has adequately modeled the pathways of non-completers or compared their outcomes with those of award-holders. In this paper, we present a novel method for linking non-completers with completers according to their program of study. We use this method to calculate the labor market returns to programs of study, accounting for those who obtain an award and those who do not. We use a large dataset of community college transcripts matched with earnings data. We find that different classification systems – by algorithm, intent or goal – yield very different enrollment patterns across programs. Importantly, these classifications make a substantial difference to earnings patterns. Returns vary by program completion and by program non-completion. Consequently, combining completers and non-completers yields a new pattern of returns. We find that the variance in returns by subject of study is reduced when we combine data on completers and non-completers. In particular, the large returns to nursing awards are substantially lower when we account for the probability of completing a nursing program and the returns to not completing a nursing program. In addition, progression per se does not lead to higher earnings for non-completers: progressing further in a nursing program is no different from accumulating general college credits. If validated, these findings have significant implications for policies on program choice and on student retention policies.

Changes in the spatial pattern of net earnings: Evidence from Serbia

Spatial autocorrelation analysis is an important method that can reveal the structure and patterns of economic spatial variables. It can be used to identify not only global spatial patterns in the country, but also characteristic locations at micro levels. In this research, we used spatial autocorrelation methodologies, including Global Moran’s I and Local Getis—Ord Gi statistics to identify the intensity of the spatial clustering of municipalities in Serbia by the level of average monthly net earnings from 2001 to 2010. We identified and mapped local clusters (hot and cold spots) by the level of average monthly net earnings for the same period. The results show that overall spatial segregation between municipalities with high and low average monthly net earnings was predominantly increasing during the investigated period. Local statistics illustrated that overall spatial segregation followed a broad north—south divide, with a concentration of municipalities with high net earnings in the north of Serbia, and low net earnings in the south. Closer inspection showed that at the beginning of the study period, there were three statistically significant hot spots in the north. As time passed, only one highly clustered hot spot remained — the Belgrade region. One cold spot retained a relatively stable position in the country’s southeast. This research shows that spatial changes of net earnings can be successfully studied with respect to statistically significant global and local spatial associations in the variables using spatial autocorrelation analysis.