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Future Profitability (future + profitability)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Implications of Components of Income Excluded from Pro Forma Earnings for Future Profitability and Equity Valuation

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2007
Wayne R. Landsman
Abstract:, This study addresses three research questions relating to total exclusions, special items, and other exclusions. Are each of these pro forma exclusion components forecasting irrelevant? Are each of the exclusion components value irrelevant? Are the valuation multiples on the exclusion components justified by their ability to forecast future profitability as predicted by the Ohlson (1999) model? Findings are generally consistent with the market-inefficiency results presented in Doyle et al. (2003). Total exclusions are valued negatively by the market despite the prediction that total exclusions will be valued positively. Valuation results also suggest that stocks with positive other exclusions are overpriced. [source]

Dividend Changes and Future Profitability

THE JOURNAL OF FINANCE, Issue 6 2001
Doron Nissim
We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting "the information content of dividends hypothesis," we find that dividend changes provide information about the level of profitability in subsequent years, incremental to market and accounting data. We also document that dividend changes are positively related to earnings changes in each of the two years after the dividend change. [source]

Market's perception of deferred tax accruals

ACCOUNTING & FINANCE, Issue 4 2009
Cheryl Chang
G14; M41 Abstract This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ,income statement method' (AASB 1020 Accounting for Income Taxes) over the period 2001,2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss-makers. [source]

Do Australian companies manage earnings to meet simple earnings benchmarks?

ACCOUNTING & FINANCE, Issue 1 2003
David Holland
Measurement error in unexpected accruals is an important problem for empirical earnings management research. Several recent studies avoid this problem by examining the pooled, cross,sectional distribution of reported earnings. Discontinuities in the distribution of reported earnings around key earnings thresholds may indicate the exercise of management discretion (i.e. earnings management). We apply this approach to the detection of earnings management by Australian firms. Our results generally indicate significantly more small earnings increases and small profits than expected and conversely, considerably fewer small earnings decreases and small losses than expected. These results are much stronger for larger Australian firms. We undertake an exploratory analysis of alternative explanations for our results and find some evidence consistent with management signalling its inside knowledge about the firm's expected future profitability to smooth earnings, as opposed to ,management intent to deceive' as an explanation for our results. [source]

Institutional Trading and Price Momentum

INTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2008
CHIH-HSIEN JERRY YU
ABSTRACT This paper aims to explore the effect of institutional trading on the two asymmetric phenomena found by Lee and Swaminathan: (1) asymmetric price momentum: price momentum is more pronounced among high-turnover stocks; (2) asymmetric return phenomenon: low-turnover stocks tend to outperform high-turnover stocks. Lee and Swaminathan use a ,momentum life cycle' to explain the asymmetric momentum effect while attributing the asymmetric return phenomenon to the analysts' overestimating (underestimating) the future profitability of high (low)-turnover firms. However, it essentially needs trading activity to induce both of the above asymmetric results. Because institutional investors exhibit a momentum trading pattern and the trading behavior of institutional investors may have a huge impact on the movement of stock prices, institutional trading may be one of the major driving forces leading to both of the above asymmetric patterns. The empirical results show that, first of all, after controlling for the turnover, the price momentum is still more pronounced among stocks with higher institutional ownership, while high-turnover stocks no longer exhibit a pronounced momentum effect after controlling for the institutional ownership. Furthermore, stocks with higher institutional ownership have better return performance in any of the turnover groups. While low-turnover stocks still outperform high-turnover stocks after controlling for the institutional ownership level, for some winner stocks this is no longer true. The results suggest that the asymmetric momentum effect is not induced by a stock's turnover, but rather it is driven by institutional trading. Turnover is only a proxy for institutional trading. That is, turnover per se has no economic significance in such a momentum phenomenon. [source]

Stock Market Valuation, Profitability and R&D Spending of the Firm: The Effect of Technology Mergers and Acquisitions

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2009
Juha-Pekka Kallunki
Abstract:, In this paper, we investigate whether a firm can enhance the effect of its R&D spending on its current market value and future profitability through technology-oriented M&As. On the basis of an analysis of 1,879 M&As, we find that when a technology firm acquires another technology firm, the magnitude of the stock price response to the R&D spending of an acquirer increases by 107% in the year of the M&A. In contrast, we find no such increase in the stock price response to the R&D spending of a non-technology acquirer. We also find that technology acquirers are more successful in converting their R&D spending into positive future profitability than non-technology acquirers. Our results are robust for different alternative specifications of our model and when various firm differences are controlled for. [source]

Implications of Components of Income Excluded from Pro Forma Earnings for Future Profitability and Equity Valuation

Dividend Changes and Future Profitability

Avoidance Powers and Incentives to File for Bankruptcy,

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2010
Jeong-Yoo Kim
G33 Abstract In this paper, we examine the incentives for a failing debtor and creditors to file for bankruptcy either under Chapter 7 or Chapter 11, and discuss whether avoidance powers can provide proper incentives to file. We show that if the future profitability of a failing firm is known, avoidance powers can eliminate an inefficient delay in bankruptcy filing. However, if profitability is uncertain, in particular, if a creditor is pessimistic, what might result is an inefficient rush to file under Chapter 7. We also demonstrate that the conditional avoidance powers can give creditors a stronger incentive to gather information pertinent to future profitability, thereby enhancing efficiency. [source]