Issue #3 (Volume 13 2016)

The purpose of this study is to investigate the relative, incremental and the systematic changes in value relevance of the accounting information. This study also attempts to investigate the effect of earnings management on the value relevance of accounting information. It basically uses Ohlson’s (1995) valuation model to test the conceptual framework.
The findings of this paper reveal that book value is more value relevant and incremental followed by earnings and, then, cash flow. Cash flow, however, performs a lesser valuation role. The results also show that combined book value and earnings are more value relevant than combined book value and cash flow. As a third contribution, the paper also finds that the value relevance of some accounting variables has increased over time, while others showed no evidence of their inclined or declined patterns in the value relevance of accounting information. Finally, the paper finds that earnings management has no effect on the value relevance of accounting information. Further analyses suggest that earnings management is opportunistic in the short run, but efficient in the long run, when firms are small or have high asset turnover

This study examines the trends in external debt in developing countries across different regions. The variables considered were gross external debt, public and public guaranteed external debt, short-term external debt, and variable rate external debt. The data were collected from the joint BIS-IMF-OECD-World Bank statistics on external debt, pertaining to the period 1995-2014.
The results of the study highlight significant regional imbalances in external debt, which may contribute to the risk of sovereign-debt default. East Asia & Pacific region had high level of gross external debt and high percentage of short-term external debt. Europe & Central Asia region had high level of gross external debt, high gross external debt growth rate, high percentage of variable rate external debt, high ratio of short-term external debt relative to GDP, and high ratio of variable rate external debt relative to GDP; perhaps reflecting the ongoing European Sovereign Debt Crisis. Latin America & Caribbean region had high level of gross external debt and high percentage of variable rate external debt. Middle East & North Africa region had high percentage of public and public guaranteed external debt. South Asia had high gross external debt growth rate, high public and public guaranteed external debt growth rate, high short-term external debt growth rate, and high variable rate external debt growth rate in the post-crisis period. Sub-Saharan Africa region had high percentage of public and public guaranteed external debt and high variable rate external debt growth rate in the post-crisis period. Thus, each of the regions had specific types of risk. The individual developing economies in the regions need to be examined carefully to isolate their contribution to regional sovereign-debt default risk

Following the calls from literature on bankruptcy, a parsimonious hybrid bankruptcy model is developed in this paper by combining parametric and non-parametric approaches.To this end, the variables with the highest predictive power to detect bankruptcy are selected using logistic regression (LR). Subsequently, alternative non-parametric methods (Multilayer Perceptron, Rough Set, and Classification-Regression Trees) are applied, in turn, to firms classified as either “bankrupt” or “not bankrupt”. Our findings show that hybrid models, particularly those combining LR and Multilayer Perceptron, offer better accuracy performance and interpretability and converge faster than each method implemented in isolation. Moreover, the authors demonstrate that the introduction of non-financial and macroeconomic variables complement financial ratios for bankruptcy prediction

Corporate valuation forms as one of the most significant pillars in the field of finance. With refinements in academic theories surrounding asset-pricing models and advancements in computing technology, studies in this field have generated an enormous amount of interest among academics and practitioners alike.
In this paper, the author seeks to investigate the above research phenomenon by resorting to an empirical examination carried out on a sample comprising of the firms forming part of India’s benchmark market index – SENSEX. As a prelude to the scientific procedure outlining the above, the author discusses all the significant theoretical postulates surrounding the corporate valuation led by the Discounted Cash Flow (DCF) analysis.
Upon the empirical investigation surrounding the corroboration of intrinsic measure of corporate values with the market-determined counterparts, the author finds statistically significant evidence refuting the null hypothesis underlying the indifference between intrinsically-determined enterprise values and market-determined enterprise values. Such an observation throws up interesting research possibilities. One, the author might wish to decipher arguments against the phenomenon underlying ‘market efficiency’, as the same would obliterate any attempt made by a discerning investor to earn ‘abnormal return’ on her investment. Second, the author might wish to substantiate the arguments forwarded by the iconic breed of investors subscribing to the ‘value investing’ philosophy by reasoning out the need to identify prospective investment opportunities available against a vast expanse of securities founded on a calibrated notion of ‘fundamental approach towards investments’

In an effort to increase the liquidity and accessibility to the investors, National Stock Exchange of India (NSE) had reduced contract size of its Nifty index futures two times from 200 to 100 and, subsequently, to 50 units. How does this change in contract size of index futures impact the informed and hedge based trading, thereby contributing to the twin objectives of price discovery and risk management, respectively? VAR model is applied to daily return volatility, volume and open interest to study the impact. Significant feedback relationship between volume and volatility following the reduction in contract size establishes the informational trading and price discovery. However, no causality from volatility to open interest implies contract size is not a determinant of hedging. But significant causality from open interest to volatility is establishing the non-informational and liquidity trading. So stock exchanges should consider the appropriate lot size before going for introducing new futures contract

This paper tests the weak-form of the efficient market hypothesis (EMH) of the Nairobi Securities Exchange (NSE) using daily and weekly index data from the NSE 20 share index over the period, January 2001 to January 2015 and the NSE All Share Index (ASI) from its initiation, in February 2008 to January 2015. To test weak-form efficiency in this market, this study uses the serial correlation test, unit root tests (ADF and Phillips-Perron) and runs test. Results indicate that we cannot accept the EMH for the NSE using the serial correlation test, unit root tests and the runs test. Overall, the Kenyan market is found to not be weak-form efficient

The purpose of this paper is to investigate the market timing behavior of issuers of Indian Initial Public Offerings (IPOs). It was found that investor’s expectation that earnings growth will continue after IPO were not even sustained in post IPO period. The constant decline in P/E and M/B suggested that firms took advantage of over-optimism of investors. The deterioration in post IPO performance show that issuer took benefit of pre IPO profit margin knowing that the level would not be continued in the future. Considering that the issuers took advantage of favorable market condition, a multivariate analysis was carried out to examine whether issuers tried to maximize their proceeds through IPO or not. The idea is that any market timing aspect should get reflected in the effort to maximize proceeds in the favorable market condition. The result based on multivariate regression suggest that market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot issue market effect was remarkably robust; it was significant for both firm and industry-level characteristics

According to Zinkhan and Karande (1990), risk is encountered when an individual’s action produces social and economic consequences that cannot be projected with certainty. Zinkhan and Karande (1990) also see risk averseness as the propensity to avoid taking risks and are generally conceived as a personality variable. Levitt (1990) argues that the ways in which business managers handle risk can markedly affect economic performance and the standard of living in various societies. It was, thus, imperative that this study coupled risk-taking ability with economic performance amongst male entrepreneurs in Centurion. The entrepreneurial phenomenon remains a widely researched topic. Extensive research with regards to the attributes of entrepreneurs has been done in the recent past. It has, thus, become important to better understand South African entrepreneurial behavior, as not many local studies has been done on the topic. The purpose of this study is to establish whether the identified factors affect the risk taking behavior of male entrepreneurs within the Centurion CBD. The risk-taking behavior of male entrepreneurs versus their economic performance was also investigated. By gaining an understanding of the risk taking behavior of the population, recommendations for future studies could be made. This study is based on a deductive approach to establish possible factors which might affect the risk-taking behavior of male entrepreneurs within the Centurion central business district. It also investigates the relationship between their risk-taking behavior and their economic performance. The researcher established possible factors from the literature and adopted and modified the DOSPERT scale developed by Weber, Blais and Betz (2002). Quantitative data were obtained within the population of 161 respondents. The results indicate a strong correlation between the factors identified and the risk-taking behavior of the entrepreneurs, except for the factor ethnic background. It was also found that a strong relationship exists between risk-taking behavior and economic performance

This study examines the extent to which announcements of stock splits and unseasoned equity offerings (capital increase without consideration) affect firm values in the Korean stock market. The authors find that, based on analyses of the cumulative abnormal return (CAR) around the announcement dates, CARs are significantly positive for both corporate events. This result suggests that both events are positive in relation to the firm’s value. The authors also examine whether the performance of firms that execute stock splits and/or unseasoned equity offerings differs from that of firms that do not, before and after their announcement dates; we do so by using the difference-in-difference test. The results indicate that a stock split is unrelated to improved firm performance following the announcement, and that an unseasoned equity offering can even have a negative impact on performance. Hence, the presence of stock splits and unseasoned equity offerings does not seem to support the signaling hypothesis, which predicts firms’ positive performance following an announcement

In the aftermath of the credit crisis of 2007-2009, there was considerable public frustration with regard to executive remuneration, particularly in the banking industry. Consequently, the need for regulated remuneration practices became essential. For this purpose, the Prudential Regulation Authority (PRA) aims to align risk and reward by encouraging good risk management and discouraging excessive risk-taking. This paper aims to demonstrate the correlation between the health of the banking industry and economic activity, as well as the change in executive remuneration pre and post the credit crisis. In addition, the paper aims to measure the correlation between executive remuneration in the form of cash and equity, and risk-taking. The unique features of banking emphasized the interconnectedness to the broader economy. The statistical package for social sciences (SPSS) was used to perform these analyses. It was found that as executive remuneration in the form of cash increased, risk-taking decreased. In addition, as executive remuneration in the form of equity decreased, risk-taking increased. In summary, the research points to the fact that executives have in fact been remunerated in terms of equity. However, the results indicate that this may not have enticed the executives to take on more risks

This study explores the marketing in a multinational professional services organization and attempts to identify marketing factors relevant to the organization. The main objective is to identify critical factors that influence the successful marketing of professional services.
To accomplish this objective, research is undertaken as a case study with a quantitative survey of employees from the professional services organization.
The main finding was that the 7P framework (product/service, price, place, promotion, physical evidence, people, process) was applicable and that place, physical evidence and product components were seen as most critical, with promotion and price appearing to be least critical, maybe because conservative attitudes to marketing still exist within professional service organizations.
The study added to the literature on professional services marketing, giving insight into the marketing of professional services in today’s dynamic and changing economic environment. Our findings will, therefore, assist professional service organizations to utilize their marketing resources more effectively and efficiently

South Africa is one of the most important countries in the status goods market. In addition, it has the biggest share from the status consumption market in Africa and it is amongst fastest growing countries worldwide in status consumption. The growth in status consumption in South Africa is attributed to the growth of the high-income and middle-income groups. As the demand for status increases and status goods become more available, the concept of status has become an important research area for academics and marketers. The aim of this study is to explore the concept of status consumption and provide an overview of status consumption. In this study, the literature has been reviewed for the studies on the same subject to make a compilation