scholarly journals The impact of SFAS 157 on fair value accounting and future bank performance

2020 ◽  
Vol 28 (4) ◽  
pp. 739-757
Author(s):  
Dimu Ehalaiye ◽  
Mark Tippett ◽  
Tony van Zijl
Keyword(s):  
Financial Performance ◽  
Predictive Value ◽  
Financial Statements ◽  
Fair Value ◽  
Cash Flows ◽  
Content Type ◽  
Sfas 157 ◽  
Future Performance ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to investigate whether levels-classified fair values of US banks based on SFAS 157: Fair Value Measurements, as recognised in the quarterly financial statements of the banks over the period from 2008 until 2015, have predictive value in relation to the banks’ future financial performance measured by operating cash flows and earnings over a three-quarter horizon period. In addition, we consider whether the global financial crisis (GFC) impacted the relationship between SFAS 157–based levels‐classified fair values and bank future financial performance. Design/methodology/approach We develop hypotheses connecting the net levels-classified bank fair values based on SFAS 157 with banks’ future financial performance. We test the hypotheses by estimating three-period quarters’ ahead forecasting models. We also use these models to test for the impact of the GFC on the relationship between the fair values and future financial performance. Findings Our findings suggest that the levels-classified net fair values based on SFAS 157 have predictive value in relation to future cash flows for banks. There is significant variation, across the levels, in the predictive value of levels-classified net fair values for future performance. Our findings indicate that the GFC has limited impact on the predictive value for cash flows, but the GFC had a significant adverse impact on earnings, and, with allowance for the effect of the GFC, the Level 2 net fair values have predictive value for the future earnings. Originality/value The study provides the first direct empirical evidence on the relationship between the SFAS 157 levels-classified quarterly bank fair values recognised in publicly available financial statements and banks’ future performance. Our results are consistent with the findings from earlier research (Ehalaiye et al., 2017) using annual data disclosed in the supplementary notes to the financial statements of US banks based on SFAS 107. The study, makes a significant contribution to the question of frequency of reporting and to the disclosure vs recognition debate. The study has implications for policy makers, regulators and accounting standards setters such as the Securities and Exchange Commission and the Financial Accounting Standards Board in evaluating the use of fair value measurement in financial reporting.

The relationship between narcissism, managerial overconfidence and comparability of financial statements of listed companies

2021 ◽  
Vol 19 (5) ◽  
pp. 681-700
Author(s):  
Mohammad Almaleki ◽  
Mahdi Salehi ◽  
Mahdi Moradi
Keyword(s):  
Stock Exchange ◽  
Chief Executive ◽  
Financial Statements ◽  
Business Environment ◽  
Multiple Regression Model ◽  
Content Type ◽  
Institutional Settings ◽  
Managerial Overconfidence ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the impact of managerial narcissism and overconfidence on financial statements’ comparability. In other words, this paper seeks to answer the question of whether the personality characteristics of managers may affect the level of financial statements’ quality of commercial entities or not. Design/methodology/approach The research hypotheses are tested using a sample of 896 observations taken from the Tehran Stock Exchange and 245 observations from the Iraqi Stock Exchange during 2012 and 2018 using the multiple regression model based on the combined data technique. Findings The findings show that managerial narcissism is positively and significantly associated with Iran’s financial statement comparability. In contrast, Iraqi data articulate a negative association between these two variables. This paper finds that Chief Executive Officer overconfidence and financial statements’ comparability are negatively related in both countries. Following the market variation, the different findings suggest that institutional settings such as the general managerial style, adopting international accounting standards (now IFRS) leading to the extent of auditing market globally in Iraq and suffering from international sanctions in Iran, the governing business environment may play an allocative role in preparing financial statements. Originality/value The present research is the first research conducted in two emerging markets (Iran and Iraq) examining the relationship between managers’ narcissism and overconfidence and financial statements’ comparability. Therefore, the present research in this area can significantly contribute to the development of science and knowledge.

Currency risk impact on the financial performance of multilateral banks

2015 ◽  
Vol 13 (1) ◽  
pp. 91-118
Author(s):  
Philip Kamau ◽  
Eno L. Inanga ◽  
Kami Rwegasira
Keyword(s):  
Financial Performance ◽  
Design Methodology ◽  
Regression Coefficient ◽  
Policy Implications ◽  
Stock Exchanges ◽  
Currency Risk ◽  
Content Type ◽  
Regulatory Status ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to investigate the impact of currency risks on the financial performance of multilateral banks (MBs). Financial performance is measured here by after-tax accounting profitability or losses. Design/methodology/approach – Quantitative hypothesis regarding the impact of currency risks on the financial performance of MBs was tested by a two-tailed t test for significance of the b regression coefficient. Findings – A regression analysis was done on the total currency risk and financial performance of MBs after taking into account currency risk over eight years. The analysis of variance of the regression of the b coefficient led to non-rejection of the null hypothesis of no association, F(1, 6) = 0.77, p > 0.05. The results of the two-tailed t test on the b regression coefficient suggest that the relationship between currency risk and financial performance is statistically insignificant. Therefore, it was concluded that there is no significant impact of currency risk on the financial performance of MBs. Research limitations/implications – The results of the study can be generalized only for MBs given their peculiar characteristics as wholesale banks, which are owned mainly by governments and are generally not listed on stock exchanges. Originality/value – The study is of value to those interested in the multilateral banking industry. To the authors’ knowledge it is the first study providing empirical evidence on currency risk impact on MBs financial performance. The study finds that the currency risk impact on the financial performance of MBs is insignificant. The results are also useful to managers of MBs in terms of benchmarking their effectiveness in managing currency risk compared to their peers and learn from better performers. It has also policy implications in terms of justifying the current self-regulatory status, shareholder monitoring and governance of MBs as they are not significantly impacted by currency risk as it appears to be effectively managed.

Financial disclosure and performance of microfinance institutions

2014 ◽  
Vol 10 (3) ◽  
pp. 314-337 ◽  
Author(s):  
Shakil Quayes ◽  
Tanweer Hasan
Keyword(s):  
Financial Performance ◽  
Least Squares ◽  
Least Squares Method ◽  
Financial Disclosure ◽  
Microfinance Institutions ◽  
Content Type ◽  
Three Stage Least Squares ◽  
And Performance ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to analyze the relationship between financial disclosure and the financial performance of microfinance institutions (MFIs). Design/methodology/approach – The paper utilizes ordinary least squares method to analyze the impact of disclosure on financial performance, an ordered probit model to investigate the possible effect of financial performance on disclosure and utilizes a three-stage least squares method to delineate the endogenous relationship between disclosure and financial performance of MFIs. Findings – The paper finds that better disclosure has a statistically significant positive impact on operational performance of MFIs; second, it also shows that improved financial performance results in better financial disclosure. Keeping the endogenous nature of the relationship between disclosure and performance, the paper uses a three-stage least squares method to show that disclosure and financial performance positively affect each other simultaneously. Research limitations/implications – The paper attempts to delineate a positive association between better disclosure on financial performance of MFIs, which can be used for developing a better disclosure policy by management, formulating more effective guidelines for disclosure by the stakeholders and mandating more appropriate laws and uniform disclosure practice by regulators. Originality/value – This is the first study that uses a large number of MFIs from 75 countries; second, it uses a uniform scale of designating a disclosure rating (assigned by MIX Market) to show the relationship between disclosure and performance. Finally, it uses three-stage least squares method to address the possible endogeneity between disclosure and performance.

scholarly journals Impacto del gobierno corporativo en el valor de las empresas latinoamericanas: evidencia desde el MILA

2021 ◽  
Vol 12 (26) ◽  
pp. 73-82
Author(s):  
Sandra Milena Torres-Cano ◽  
Diego Andrés Correa-Mejía
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Financial Performance ◽  
Latin American ◽  
Data Model ◽  
Financial Statements ◽  
Panel Data Model ◽  
Performance Variables ◽  
The Impact ◽  
The Relationship

Corporate Governance is a mechanism that seeks to strengthen the control bodies and their efforts, by combining principles and techniques to invigorate the value of companies and generate confidence in investors and all Stakeholders. This research seeks to analyze the impact of corporate governance on the values of companies that belong to the Latin American Integrated Market (MILA). The financial statements of the 97 companies from the years 2012 to 2018 were analyzed using a statistical panel data model to establish the relationship between the corporate governance variables and the financial performance variables. Lastly, it is concluded that non-economic mechanisms such as the implementation of adequate control policies positively influence the value of companies and generate support for investors.

Corporate social responsibility and institutional investors: the intervening effect of financial performance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shafat Maqbool ◽  
Nasir Zamir
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Performance ◽  
Institutional Investors ◽  
Decision Process ◽  
Content Type ◽  
Corporate Social ◽  
The Impact ◽  
The Relationship

PurposeThe research on the role of corporate social responsibility in investors' decision process has proliferated over the past few decades. This paper aims to explore the mediating role of financial performance in the relationship between corporate social responsibility and institutional investors.Design/methodology/approachPanel regression was performed on a sample of 29 commercial banks nine years from 2009 to 2017.FindingsThe initial findings of the study show that that corporate social responsibility has a positive and significant impact on institutional investors. However, when the interaction term (financial performance) was incorporated, the relationship between CSR and institutional turns out to be neutral. The study concludes that financial performance plays a pivotal role in the selection of investment avenues.Originality/valueIn Indian context, there is a dearth of research work which studies the impact of sustainable practices on investors' decision process. This topic has received wider attention but lacks insights from developing countries, like India. This article presents a new approach to verify the relationship through the mediating variable (financial performance).

Financial performance following discontinued operations

2020 ◽  
Vol 19 (4) ◽  
pp. 429-447
Author(s):  
Binod Guragai ◽  
Paul D. Hutchison
Keyword(s):  
Financial Performance ◽  
Performance Improvement ◽  
Least Square ◽  
Regulatory Change ◽  
Content Type ◽  
Future Performance ◽  
Regulatory Rule ◽  
Prior Literature ◽  
The Impact ◽  
Discontinued Operations

Purpose Prior literature provides empirical evidence that financial performance improves for core remaining operations after a firm discontinues some of their operations. This study aims to examine whether the association between discontinued operations and future financial performance improvement is affected by a regulatory rule (i.e. Statement of Financial Accounting Standards 144 [SFAS 144]) that significantly altered the reporting requirements of discontinued operations. This study also examines whether the association is dependent on the profitability of the operations discontinued. Design/methodology/approach Ordinary least square regressions are used to test the association between discontinued operations and financial performance improvement, conditional on the profitability of operations discontinued in the pre-SFAS 144 and SFAS 144 regulatory regimes. Data on profitability of operations discontinued is hand-collected. Findings Results suggest that firms experience improvement in financial performance following the reporting of discontinued operations in the pre-SFAS 144 era. Using hand-collected data on the profitability of operations discontinued, this research study also shows that improvement in performance is stronger for firms that discontinue loss operations compared to those that discontinue profitable operations. Originality/value This study explores the impact of regulatory change on the association between discontinued operations and future performance. Furthermore, unique hand-collected data is used to understand whether financial performance improvement is conditional on the profitability of the operations discontinued. Results documented in this paper should be of interest to investors, regulators and analysts in understanding the long-term strategic implications of discontinued operations.

Analytical capacity of financial statements against the backdrop of the COVID-19 pandemic

2020 ◽  
Vol 19 (10) ◽  
pp. 1794-1821 ◽  
Author(s):  
O.V. Efimova ◽  
O.V. Rozhnova
Keyword(s):  
Decision Making ◽  
Financial Performance ◽  
Financial Reporting ◽  
Business Strategy ◽  
Investment Decision ◽  
Financial Statements ◽  
Cash Flows ◽  
Foreign Companies ◽  
Investment Decision Making ◽  
The Impact

Subject. The paper explores the analytical capabilities of information disclosed in financial statements in the context of the COVID-19 pandemic. Objectives. The purpose is to identify the impact of the pandemic on financial statements and their analytical capabilities for investment decision-making. Methods. The study draws on methods of logical, statistical, comparative, and linguistic analysis. We analyze financial statements of Russian and foreign companies, paying special attention to the completeness of disclosed information on the impact of the pandemic on business and financial performance. We review annual financial statements for 2019, and interim reports for 2020. Results. We unveil the areas of disclosures that are most critical for the investment community and investment decision making, and vital for the analysis of financial performance and cash flows, given the unprecedented impact of the COVID-19 pandemic. The findings may be applicable to financial reporting preparation by economic entities in terms of disclosure on various forms of transformation and adaptation of businesses to the new crisis conditions; modernization of accounting rules at the level of external and internal standards in the direction of coordinating financial and non-financial reporting information; enhancement of analytical capacity of disclosures. Conclusions. The study confirms the scientific hypothesis that investors require detailed disclosure in all areas of the pandemic impact. To evaluate the going concern assumption and to forecast cash flows, users need disclosures on business strategy, the business model and its adaptability to the conditions of the new normality, sources of cash flow generation, and their use areas.

Effect of digital banking-related customer experience on banks’ financial performance during Covid-19: a perspective from Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nhung Thi Hong Nguyen ◽  
Nguyen Kim-Duc ◽  
Teresa Lien Freiburghaus
Keyword(s):  
Customer Satisfaction ◽  
Financial Performance ◽  
Positive Impact ◽  
Financial Statements ◽  
Customer Experience ◽  
Moderator Variable ◽  
Content Type ◽  
Considerable Impact ◽  
Intermediate Variables ◽  
The Impact

Purpose This study aims to investigate customer experience (CE) and its relationship with intermediate variables to analyze the impact of digital banking (DB) on banks’ financial performance (FP) before Covid-19 and during the lockdown in Vietnam. Design/methodology/approach These research data are from a survey of Vietnamese customers. The survey was deployed to a sample of 238 and 218 customers of 20 Vietnamese commercial banks via email in 2018Q4 and 2020Q2, respectively. FP is measured using banks’ quarterly financial statements before Covid-19 and during the lockdown. Findings CE with DB had a significant and positive impact on FP via customer satisfaction before Covid-19, while the other two intermediate variables (word-of-mouth [WoM] and trust) had no considerable impact. During the lockdown, only WoM had a positive impact on FP. These findings indicate that before Covid-19, when customers could easily interact with their bank through many touchpoints, customer satisfaction with DB services created higher FP for the bank. However, during the lockdown, DB became the customer’s main touchpoint and WoM mediated the CE–FP relationship. Originality/value During the national lockdown from the beginning of the Covid-19 pandemic in January 2020, customers in Vietnam may have had different experiences with DB when no alternate modes of payment were available. The study uses Covid-19 as a moderator variable to offer different viewpoints and findings related to CE with DB and its impact on FP.

The impact of the brand management system on performance across service and product-oriented activities

2017 ◽  
Vol 26 (3) ◽  
pp. 294-311 ◽  
Author(s):  
Mathieu Dunes ◽  
Bernard Pras
Keyword(s):  
Financial Performance ◽  
Management System ◽  
Management Practices ◽  
Brand Management ◽  
Brand Performance ◽  
Content Type ◽  
Objective Performance ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to analyze the impact of brand management system (BMS) practices on subjective and objective performance in both service- and product-oriented sectors. Design/methodology/approach Based on a “grounded-in-practice” approach to BMS, a comprehensive formative BMS scale is developed and its validity is assessed. The impact of BMS on subjective brand performance (i.e. predictive validity) and on objective financial performance is assessed. Data are collected from a sample of 298 brand managers and marketing directors in five business sectors (cosmetics, convenience goods, industry, bank/insurance and media) and from a financial database. Path analysis and multigroup analysis are performed to test mediating and moderating effects. Findings The results reveal that subjective brand performance (perceived brand performance) mediates the relationship between the BMS and objective financial performance of the firm and on each of the three BMS dimensions; and product-oriented (vs service-oriented) sector positively moderates the relationship between the BMS and subjective brand performance. Research limitations/implications The paper offers insights into adapting brand management practices along all BMS dimensions to achieve better business performance and improve objective financial performance in product-oriented activities. It highlights the role of brand management implementation, as well as the role of brand management in hierarchical relationships, in improving performance in service activities. Practical implications The formative BMS scale offers a tool which can be used to improve strategic decisions and give practical guidance on product vs service sector specificities. The indirect impact of a BMS on financial objective performance reinforces the legitimacy of brand managers and marketing managers. Originality/value This paper shows the impact of the BMS on objective financial performance by using a “grounded-in-practice” BMS scale. It also affords explanation on sectoral effects of brand management practices and their consequences on subjective and objective performance.

The effect of carbon performance on corporate financial performance in a growing economy

2018 ◽  
Vol 14 (4) ◽  
pp. 895-916 ◽  
Author(s):  
Fortune Ganda
Keyword(s):  
South Africa ◽  
Growth Rate ◽  
Financial Performance ◽  
South African ◽  
Value Added ◽  
Content Type ◽  
Firm Financial Performance ◽  
Carbon Performance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to examine the impact of carbon performance on firm financial performance by using Republic of South Africa CDP company data from 2014 to 2015. Design/methodology/approach The study considered 63 companies on the Republic of South Africa CDP database. Content analysis was used to extract both carbon performance data and firm financial data. The data were analysed using panel data analysis and partial derivative approaches. Findings The findings indicate that carbon performance produces a positive relationship with return on equity (ROE) and return on sales (ROS). Conversely, it generates a negative relationship with return on investment (ROI) and market value added (MVA). Furthermore, the study highlights that carbon performance pays and that the relationship with financial performance (ROE, ROS, ROI and MVA) deepens as the corporate growth rate increases. Practical implications Companies that integrate carbon performance initiatives reap substantial financial gains, and this relationship is strengthened as the company’s growth rate increases. Originality/value The research questions and data collected from Republic of South African CDP firms are original and provide important evidence on the impact of carbon performance on firm financial indicators. Furthermore, many empirical studies focus on highly industrialised countries; this study examines this issue in the emerging South African economy which has experienced rapid growth of emissions in recent years. While most previous studies on the relationship between carbon performance and firm financial performance used a single class of corporate financial measures, this study used both accounting- and market-based indicators. It also investigated how firm growth moderates the association between carbon performance and diverse financial performance measures. Finally, pressure exerted by green stakeholders since the introduction of the Johannesburg Stock Exchange’s sustainability criteria in 2004, as well as government policies, has a profound impact on the South African business context; it is hence important to examine corporate environmental management activities in the context of the association between carbon performance and firm performance.

Sign in / Sign up

Export Citation Format

Share Document