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Annika Yu Wang - One of the best experts on this subject based on the ideXlab platform.
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the use of Financial Ratio models to help investors predict and interpret significant corporate events
Australian Journal of Management, 2013Co-Authors: Patricia M Dechow, Yuan Sun, Annika Yu WangAbstract:A firm in a steady state generates predictable income and investors can generally agree on its valuation. However, when a significant corporate event occurs this creates greater uncertainty and disagreement about firm valuation, and investors could prefer to avoid holding such a stock. We examine research that has developed Financial Ratio models to: (a) predict significant corporate events; and (b) predict future performance after significant corporate events. The events we analyze include Financial distress and bankruptcy, downsizing, raising equity capital, and material earnings misstatements. We find that Financial Ratio models generally help investors avoid stocks that are likely to have significant corporate events. We also find that, conditional on a significant event occurring, Financial Ratio models help investors distinguish good firms from bad. However, we find that research design choices often make it difficult to determine model predictive accuracy. We discuss the role of accounting rule cha...
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the use of Financial Ratio models to help investors predict and interpret significant corporate events
Social Science Research Network, 2013Co-Authors: Patricia M Dechow, Estelle Sun, Annika Yu WangAbstract:A firm in steady state generates predictable income and investors can generally agree on valuation. However, when a significant corporate event occurs this creates greater uncertainty and disagreement about firm valuation and investors could prefer to avoid holding such a stock. We examine research that has developed Financial Ratio models to (i) predict significant corporate events; and (ii) predict future performance after significant corporate events. The events we analyze include Financial distress and bankruptcy, downsizing, raising equity capital, and material earnings misstatements. We find that Financial Ratio models generally help investors avoid stocks that are likely to have significant corporate events. We also find that conditional on a significant event occurring, Financial Ratio models help investors distinguish good firms from bad. However, we find that research design choices often make it difficult to determine model predictive accuracy. We discuss the role of accounting rule changes and their impact overtime on the predictive power of models and provide suggestions for improving models based on our cross-event analysis.
Patricia M Dechow - One of the best experts on this subject based on the ideXlab platform.
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the use of Financial Ratio models to help investors predict and interpret significant corporate events
Australian Journal of Management, 2013Co-Authors: Patricia M Dechow, Yuan Sun, Annika Yu WangAbstract:A firm in a steady state generates predictable income and investors can generally agree on its valuation. However, when a significant corporate event occurs this creates greater uncertainty and disagreement about firm valuation, and investors could prefer to avoid holding such a stock. We examine research that has developed Financial Ratio models to: (a) predict significant corporate events; and (b) predict future performance after significant corporate events. The events we analyze include Financial distress and bankruptcy, downsizing, raising equity capital, and material earnings misstatements. We find that Financial Ratio models generally help investors avoid stocks that are likely to have significant corporate events. We also find that, conditional on a significant event occurring, Financial Ratio models help investors distinguish good firms from bad. However, we find that research design choices often make it difficult to determine model predictive accuracy. We discuss the role of accounting rule cha...
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the use of Financial Ratio models to help investors predict and interpret significant corporate events
Social Science Research Network, 2013Co-Authors: Patricia M Dechow, Estelle Sun, Annika Yu WangAbstract:A firm in steady state generates predictable income and investors can generally agree on valuation. However, when a significant corporate event occurs this creates greater uncertainty and disagreement about firm valuation and investors could prefer to avoid holding such a stock. We examine research that has developed Financial Ratio models to (i) predict significant corporate events; and (ii) predict future performance after significant corporate events. The events we analyze include Financial distress and bankruptcy, downsizing, raising equity capital, and material earnings misstatements. We find that Financial Ratio models generally help investors avoid stocks that are likely to have significant corporate events. We also find that conditional on a significant event occurring, Financial Ratio models help investors distinguish good firms from bad. However, we find that research design choices often make it difficult to determine model predictive accuracy. We discuss the role of accounting rule changes and their impact overtime on the predictive power of models and provide suggestions for improving models based on our cross-event analysis.
Peter R Demerjian - One of the best experts on this subject based on the ideXlab platform.
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Financial Ratios and credit risk the selection of Financial Ratio covenants in debt contracts
Social Science Research Network, 2007Co-Authors: Peter R DemerjianAbstract:This study examines the selection of Financial Ratio covenants in debt contracts. Expanding on existing theory and evidence, I predict that loan contracts will include covenants with Ratios that are informative of credit risk based on borrower or contract characteristics. The results support this prediction. I find that contracts of borrowers with positive earnings, high profitability, and low volatility earnings are likely to include covenants measured with earnings, such as coverage or debt to cash flow. Debt contracts of borrowers with losses, low profitability, and highly volatile earnings are likely to include covenants measured with shareholders' equity, such as net worth. Additionally, deals with revolving lines of credit include leverage covenants, and those for borrowers with high levels of working capital contain current Ratio covenants. In total, the evidence is consistent with contracts using Ratios in covenants that are most informative of borrower credit risk.
Ben Kwame Agyeimensah - One of the best experts on this subject based on the ideXlab platform.
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the determinants of Financial Ratio disclosures and quality evidence from an emerging market
International Journal of Accounting and Financial Reporting, 2015Co-Authors: Ben Kwame AgyeimensahAbstract:This study investigated the influence of firm-specific characteristics which include proportion of Non-Executive Directors, ownership concentRation, firm size, profitability, debt equity Ratio, liquidity and leverage on the extent and quality of Financial Ratios disclosed by firms listed on the Ghana Stock Exchange. The research was conducted through detailed analysis of the 2012 Financial statements of the listed firms. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis which forms the main data analysis. The results of the extent of Financial Ratio disclosure level, mean of 62.78%, indicate that most of the firms listed on the Ghana Stock Exchange did not overwhelmingly disclose such Ratios in their annual reports. The results of the low quality of Financial Ratio disclosure mean of 6.64% indicate that the disclosures failed woefully to meet the International Accounting Standards Board's qualitative characteristics of relevance, reliability, comparability and understandability. The results of the multiple regression analysis show that leverage and return on investment are associated on a statistically significant level as far as the extent of Financial Ratio disclosure is concerned. Board ownership concentRation and proportion of (independent) non-executive directors, on the other hand were found to be statistically associated with the quality of Financial Ratio disclosed. There is a significant negative relationship between ownership concentRation and the quality of Financial Ratio disclosure. This means that under a higher level of ownership concentRation less quality Financial Ratios are disclosed. The findings also show that there is a significant positive relationship between board composition (proportion of non-executive directors) and the quality of Financial Ratio disclosure. JEL CLASSIFICATION: G3, M1, M2, M4.
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the determinants of Financial Ratio disclosures and quality evidence from an emerging market
Social Science Research Network, 2015Co-Authors: Ben Kwame AgyeimensahAbstract:This study investigated the influence of firm-specific characteristics which include proportion of Non-Executive Directors, ownership concentRation, firm size, profitability, debt equity Ratio, liquidity and leverage on the extent and quality of Financial Ratios disclosed by firms listed on the Ghana Stock Exchange.The research was conducted through detailed analysis of the 2012 Financial statements of the listed firms. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis which forms the main data analysis. The results of the extent of Financial Ratio disclosure level, mean of 62.78%, indicate that most of the firms listed on the Ghana Stock Exchange did not overwhelmingly disclose such Ratios in their annual reports. The results of the low quality of Financial Ratio disclosure mean of 6.64% indicate that the disclosures failed woefully to meet the International Accounting Standards Board's qualitative characteristics of relevance, reliability, comparability and understandability.The results of the multiple regression analysis show that leverage (gearing Ratio) and return on investment (dividend per share) are associated on a statistically significant level as far as the extent of Financial Ratio disclosure is concerned. Board ownership concentRation and proportion of (independent) non-executive directors, on the other hand were found to be statistically associated with the quality of Financial Ratio disclosed. There is a significant negative relationship between ownership concentRation and the quality of Financial Ratio disclosure. This means that under a higher level of ownership concentRation less quality Financial Ratios are disclosed. The findings also show that there is a significant positive relationship between board composition (proportion of non-executive directors) and the quality of Financial Ratio disclosure.
Xianglei Yang - One of the best experts on this subject based on the ideXlab platform.
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Financial Ratio selection for business failure prediction using soft set theory
Knowledge Based Systems, 2014Co-Authors: Zhi Xiao, Xin Dang, Daoli Yang, Xianglei YangAbstract:This paper presents a novel parameter reduction method guided by soft set theory (NSS) to select Financial Ratios for business failure prediction (BFP). The proposed method integrates statistical logistic regression into soft set decision theory, hence takes advantages of two approaches. The procedure is applied to real data sets from Chinese listed firms. From the Financial analysis statement category set and the Financial Ratio set considered by the previous literatures, our proposed method selects nine significant Financial Ratios. Among them, four Ratios are newly recognized as important variables for BFP. For comparison, principal component analysis, traditional soft set theory, and rough set theory are reduction methods included in the study. The predictive ability of the selected Ratios by each reduction method along with the Ratios commonly used in the prior literature is evaluated by three forecasting tools support vector machine, neural network, and logistic regression. The results demonstrate superior forecasting performance of the proposed method in terms of accuracy and stability.