Valuations of electricity distribution and retail companies in an emerging market

2017 ◽  
Vol 11 (2) ◽  
pp. 329-349
Author(s):  
Hasan Alma ◽  
Mehmet Baha Karan
Keyword(s):  
Emerging Market ◽  
Empirical Studies ◽  
Cash Flows ◽  
Electricity Distribution ◽  
Main Hypothesis ◽  
Market Prices ◽  
Content Type ◽  
Distribution Company ◽  
Energy Companies ◽  
Extreme Scenario

Purpose This paper is aimed to evaluate recently privatized 18 electricity distribution and retail companies, using the data and conditions at the time they were privatized. The main hypothesis of the study is that most of the privatized companies in this research are underpriced similar to previous experiences in developed and emerging economies. Design/methodology/approach Values of the companies are calculated considering the formal procedures of Turkish energy authorities. These companies are valued under the base, moderate and extreme scenarios created from different sets of assumptions considering conditions and existing data at the time they were privatized. Discounted cash flows (DCF) methodology is used in the estimations. The market prices obtained in their privatization tenders are compared with those theoretically calculated values (intrinsic prices). Findings The findings reject the hypothesis and indicate an overpricing in general in the privatizations of Turkey. Even the extreme scenario which gives the highest intrinsic values supports the findings. Research limitations/implications Research is limited with 18 regional electricity distribution company in Turkey. Originality/value The paper is one of the initial empirical studies on the valuation of energy companies using DCF methodology in an emerging market.

Earnings persistence and stock prices: empirical evidence from an emerging market

2014 ◽  
Vol 12 (2) ◽  
pp. 117-134 ◽  
Author(s):  
Varun Dawar
Keyword(s):  
Stock Prices ◽  
Value Relevance ◽  
Emerging Market ◽  
Cash Flows ◽  
Earnings Persistence ◽  
Market Prices ◽  
Content Type ◽  
Book Value ◽  
Panel Data Regression ◽  
Data Regression

Purpose – This study aims to investigate the persistence ability of accounting variables, namely, abnormal earnings, book value, accruals and cash flows over a period of time and their valuation relevance in Indian scenario. Design/methodology/approach – The study utilizes the generalized version of the Ohlson model which links market prices with abnormal earnings, book value and earning components (accruals and cash flows). Fixed-effect panel data regression is used to analyze six years of data on the sample units to determine the persistence and valuation relevance. Findings – The findings provide evidence on the construct of persistence and value relevance of earnings and book value of equity in the Indian context. The findings further confirm that investors in India are fixated on earnings and fail to attend separately to the cash flow and accrual components of earnings while undertaking their investment decisions. Practical implications – The empirical findings of the study will enable the analysts and investors to understand the relevance and persistence of accounting variables in case of an emerging market like India. Originality/value – The study extends the extant literature on value relevance studies in developed markets to an emerging market like India and enriches it in several ways.

The Relative and Incremental Valuation Effects of Embedded Value Disclosure by Life Insurers: Evidence from Cross-Listed Firms in the U.S.

2014 ◽  
Vol 29 (2) ◽  
pp. 327-339 ◽  
Author(s):  
Samir M. El-Gazzar ◽  
Rudolph A. Jacob ◽  
Scott P. McGregor
Keyword(s):  
Empirical Studies ◽  
Explanatory Power ◽  
Accounting Standards ◽  
Cash Flows ◽  
Market Prices ◽  
Joint Project ◽  
Listed Firms ◽  
Valuation Effects ◽  
Life Insurers ◽  
Embedded Value

SYNOPSIS European life insurers began disclosing embedded value information (EV) over a decade ago due to concerns with traditional local accounting standards. EV is an estimate of the present value of future net cash flows from in-force life insurance business. However, U.S.-based life insurers have yet to adopt this disclosure, although several surveys and empirical studies suggest that EV disclosure provides valuable information in assessing life insurers' performance. This paper examines the incremental valuation effects of EV disclosure in the presence of U.S. GAAP. We utilize a sample of cross-listed life insurers as surrogates to assess the valuation effects of EV disclosures for U.S. life insurers. Our empirical results show a higher association between EV and stock market prices than those of traditional accounting metrics such as earnings or book value. The results also show that EV has incremental explanatory power beyond those of traditional U.S. GAAP accounting measures. Our findings provide vital input to FASB and IASB as they currently engage in a joint project to develop uniform globally acceptable, comparable accounting standards for life insurers.

Exploring the nonlinear effect of size on profitability: evidence from an insurance brokerage industry in an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Richard Angelous Kotey ◽  
Richard Akomatey ◽  
Baah Aye Kusi
Keyword(s):  
Nonlinear Effect ◽  
Emerging Market ◽  
Empirical Studies ◽  
Random Effect ◽  
Generalized Method Of Moments ◽  
Ordinary Least Squares ◽  
Growth Strategies ◽  
Content Type ◽  
And Performance ◽  
Brokerage Firms

PurposeThis study examines the possible nonlinear effect of size on stakeholder and shareholder profitability in the Ghanaian insurance brokerage industry.Design/methodology/approachThis study employs a panel dataset of 64 Ghanaian insurance brokerage firms spanning 2011–2015. Static [ordinary least squares (OLS), fixed effect and random effect and dynamic (two-step generalized method of moments (GMM))] estimation techniques are employed to analyze the data.FindingsThe study finds the existence of both economies and diseconomies of scale and scope theories in the Ghanaian insurance brokerage industry confirming the existence of nonlinear nexus between size and performance. This finding is consistent for both stakeholder and shareholder profit performance. Thus, the results show that size improves profitability of insurance brokerage firms, but beyond a certain threshold, the relationship turns negative as size negatively affects profitability.Practical implicationsThe research findings have implications for both policy and research; the study recommends that Ghanaian brokerage managers should understand that not all growth is good and exercise a duty of care when applying growth strategies by monitoring size effect on performance so as not to go beyond the inflection point. Further research can be done to examine this effect in other contexts, timeframes and jurisdictions.Originality/valueThis research is unique in that it employs a panel dataset consisting of 96% of insurance brokerage firms in Ghana whilst employing both static and nonstatic regression models to examine the effect of size. The research analysis adopted is robust, and the findings are significant. Also, the lack of empirical studies on the operations and dealings of auxiliary institutions such as the insurance brokerage firms adds value to this research.

A comparative analysis of the implications of the Islamic religion on corporate capital structures of firms in emerging market countries

2014 ◽  
Vol 7 (3) ◽  
pp. 277-287 ◽  
Author(s):  
Theresa Gunn ◽  
Joshua Shackman
Keyword(s):  
Emerging Market ◽  
Empirical Studies ◽  
Short Term ◽  
Content Type ◽  
Corporate Capital ◽  
Muslim Countries ◽  
Total Debt ◽  
Islamic Religion ◽  
The Impact

Purpose – The purpose of this study is to examine the impact of the Muslim religion on firm capital structure. Design/methodology/approach – The authors compare financing patterns in Muslim versus non-Muslim countries using 658 firms in 16 countries covering a period of seven years. Findings – No significant differences between Muslim and non-Muslim countries were found in terms of total debt ratios. However, significant differences were found in the choice of short-term versus long-term debt, with firms in Muslim countries showing a strong preference for short-term debt. Research limitations/implications – The findings confirm existing theories on the impact of the Islamic religion on short-term versus long-term debt preferences. However, the findings concerning the lack of an impact of the Islamic religion on total debt preferences are surprising and contrary to existing theories. Practical implications – Firms in Muslim countries appear to have the flexibility to adopt overall leverage ratios comparable to those in non-Muslim countries. However, firms in Muslim countries may be disadvantaged in that there appear to be impediments to the use of long-term debt. Originality/value – This paper presents one of the first empirical studies of the impact of the Muslim religion on corporate financing choices across a large cross-section of firms in Muslim and non-Muslim countries.

CFOs’ views on corporate financing decisions

2016 ◽  
Vol 8 (4) ◽  
pp. 331-358
Author(s):  
Weerakoon Banda Yatiwelle Koralalage
Keyword(s):  
Sri Lanka ◽  
Interest Rates ◽  
Firm Value ◽  
Emerging Market ◽  
Foreign Debt ◽  
Cash Flows ◽  
Chief Financial Officers ◽  
Corporate Financing ◽  
Content Type ◽  
Developed Markets

Purpose The purpose of this paper is to examine the managerial views on the corporate financing practices of firms in the emerging market of Sri Lanka. Design/methodology/approach A survey approach was employed using chief financial officers (CFOs) from the top non-financial firms listed on the Colombo Stock Exchange. Findings CFOs’ views on corporate financing practices are not fully consistent with the theory: financial hierarchy appears to be more important and firms are less leveraged. Most Sri Lankan CFOs perceive some policy factors as important and theoretically support: volatility of earnings and cash flows, tax advantages of interest deductibility, transaction costs, timing of interest rates, low foreign interest rates and debt equity targets. These factors are high priority in emerging markets but either not important at all or less important in developed markets. Matching debt maturity with the life of assets is equally important in both markets. Most CFOs adhere their financing to the local debt market, while a few firms use foreign debt. CFOs are concerned about earnings per share (EPS) dilution, providing a natural hedge in foreign debt issues, credit ratings, under/overvaluation of stocks and corporate control, whereas they are significantly important in developed markets. Age and education mostly explain the differences. Research limitations/implications The study is restricted to large companies in a relatively smaller market. Hence, sample size is relatively small, even though it shows a higher response rate. Practical implications The study offers insights for corporate financing decision-makers that could impact on firm value through a shift in emphasis toward capital structure theories. Originality/value The paper focuses on corporate financing practices in Sri Lanka in search of emerging market features that could mitigate the gap in the emerging market literature through survey evidence.

Does good corporate governance constrain cash flow manipulation? Evidence from India

2016 ◽  
Vol 42 (11) ◽  
pp. 1034-1053 ◽  
Author(s):  
Neerav Nagar ◽  
Mehul Raithatha
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Performance Indicator ◽  
Emerging Market ◽  
Cash Flows ◽  
Indian Government ◽  
Firm Level ◽  
Content Type ◽  
Good Corporate Governance ◽  
Flow Manipulation

Purpose The purpose of this paper is to examine whether firm-level corporate governance measures and regulatory reforms constrain manipulation of operating cash flows, an important firm performance indicator. Design/methodology/approach The sample comprises firms from an emerging market, India, with data from 2005 to 2011. The authors use the methodology given in the paper by Lee (2012) and multiple regressions. Findings The authors find that cash flow manipulation is likely to increase with an increase in the controlling ownership. Furthermore, board diligence and better audit fail to curb such manipulation. However, the authors do find that such manipulation has gone down in the recent years, and diligent boards constrain it, possibly due to the recent steps taken by the Indian Government for improving the corporate governance environment in India. Practical implications The findings can act as feedback for the regulators and policy makers. Potential investors and analysts may also benefit from the study, since they can be more vigilant about the firms’ cash flow manipulation practices and can demand better governance. Originality/value The findings suggest that good corporate governance makes managers substitute earnings management with cash flow manipulation.

scholarly journals The unfolding rationales surrounding management accounting innovations: a balanced scorecard case

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Claudio de Araujo Wanderley ◽  
John Cullen ◽  
Mathew Tsamenyi
Keyword(s):  
Balanced Scorecard ◽  
Structural Changes ◽  
Management Accounting ◽  
Empirical Support ◽  
Boundary Object ◽  
Electricity Distribution ◽  
Content Type ◽  
The Balanced Scorecard ◽  
Focal Firm ◽  
Distribution Company

PurposeThe Balanced Scorecard (BSC) possesses an inherent duality, as it has been described as a carrier of institutions (i.e. the BSC is a “management ideology” or “mode of thinking”) and a flexibly interpretive boundary object at the same time. This study examines how this inherent duality of the BSC may influence the unfolding rationales surrounding its implementation and use.Design/methodology/approachEmpirical support for this investigation is gathered from an in-depth field study. The focal firm is a Brazilian electricity distribution company that transitioned from state to private ownership under hyper-regulation, and whose holding company experienced strategic and structural changes.FindingsThe study identified a misalignment between the characteristics of the firm (e.g. organizational logics) and the perceived BSC features. This misalignment initially produced tensions and institutional logics complexity for the organization forcing the BSC implementers to rationalize it to provide meaning regarding its implementation in the firm. The findings also show why and how the promoters of the BSC conducted its “strategy of translation” in order to disentangle and reassemble both the material and symbolic components of the BSC to facilitate its implementation and use. It was found that promoters of the BSC engaged in contextualization work, which featured two main actions: a combination of coupling and selective decoupling and a change of meaning.Originality/valueThis paper advances current understanding of the process of the unfolding rationales surrounding management accounting innovations (e.g. the BSC). The study shows that the BSC unfolds in more complex, time-related and simultaneous ways than has previously been reported in the literature. Moreover, the paper contributes by explaining how the management's rationales, relating to their historical understanding, perception of legitimation needs and social skills, contributed to the continuous unfolding of the BSC. In addition, four potentially interesting areas for further research were identified.

Driving the internet and e-business technologies to generate a competitive advantage in emerging markets

2019 ◽  
Vol 33 (2) ◽  
pp. 389-423
Author(s):  
Gamal Mohamed Shehata ◽  
Mohammed A. Montash
Keyword(s):  
Emerging Markets ◽  
Competitive Advantage ◽  
Quantitative Research ◽  
Emerging Market ◽  
Empirical Studies ◽  
The Internet ◽  
Competitive Advantages ◽  
Mena Region ◽  
Content Type ◽  
Major Market

Purpose The purpose of this paper is to develop and empirically examine a comprehensive model that attempts to identify the factors that explain competitive advantage of implementing electronic business (e-business) in an emerging market. It seeks to fulfill an inevitable lack of conducting rigorous and intensive empirical studies on the Middle East and North Africa (MENA) region in which the internet use and e-business applications are on the rise. Design/methodology/approach This research is descriptive in nature where a quantitative research methodology is deployed. Data are collected using both interviews and e-survey for a sample of 302 Egyptian companies serving in diverse industries. A multivariate partial least squares technique is employed to analyze the collected data. Findings This study explores various e-business modes and applications widely employed in the MENA region. It also addresses a set of e-business-driven competitive advantages that are mainly generated from supportive ICT environment, major market forces and strategic opportunities, and at last, from electronically driven customers’ relationship initiatives. A number of e-business barriers are claimed to moderate the relationship between those forces and the resulting competitive advantages. Research limitations/implications Although this research main framework incorporates important variables based on theoretical and empirical foundations, integrating other factors may extend understanding of how these factors, independently and/or interactively, explain the adoption of e-business and its merit to create distinctive competitive advantage. Practical implications This work helps managers and e-business experts alike to comprehend the ways through which firms target the applications of e-business technologies to realize a competitive edge in MENA region. It also helps practitioners and professionals comprehend the interrelationship between the type of forces drive e-business based competitive position and key barriers that deteriorate such a connection in emerging markets. Originality/value A model that enables scholars to better understanding the e-business phenomenon in MENA market is developed and validated. This model rests on e-business experts’ perspectives, reflections and it is evidently substantiated by past works in the areas.

scholarly journals Foreign currency borrowing and firm financing constraints in emerging markets: evidence from India

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sanket Mohapatra ◽  
Jay Prakash Nagar
Keyword(s):  
Foreign Currency ◽  
Emerging Market ◽  
Detailed Balance ◽  
Balance Sheet ◽  
Cash Flows ◽  
Foreign Banks ◽  
Financing Constraints ◽  
Content Type ◽  
Foreign Currency Debt ◽  
The Relationship

PurposeFirst, the purpose of this study is to examine the relationship between foreign-currency debt and firms' financing constraints for India, the second-largest emerging market economy after China. Second, this study provides insights into how firms' financing constraints evolve prior to, during and after foreign currency borrowing. Third, it demonstrates the extent to which banks' ownership status and firms' characteristics influence the relationship between foreign currency borrowing and firms' financing constraints.Design/methodology/approachThis study uses detailed balance sheet data for 2,512 nonfinancial listed firms in India for the 1996–2016 period to provide new evidence on the relationship between foreign currency borrowing and firms' financing constraints. This study uses a well-known measure of firms' financing constraints, the sensitivity of investment to internal cash flows (Fazzari et al., 1988, 2000; Hubbard, 1999; Love, 2003).FindingsFinancing constraints tend to be higher for firms with foreign currency debt exposure compared to other firms. Financing constraints are higher prior to new foreign currency borrowing (FCB), but decrease subsequently. Firms that have relationships with privately owned banks or foreign banks have higher financing constraints when undertaking new FCB than those with exclusive relationships with government-owned banks. Financing constraints for firms with FCB are higher during domestic credit booms than other periods. Nonmanufacturing firms and those with lower than median export revenues and higher than median tangible assets experience greater financing constraints compared to other firms when they undertake FCB.Originality/valueThe findings of this study suggest that although firms which borrow in foreign currencies are initially more financially constrained than other firms, the foreign currency borrowing reduces their financing constraints. The findings on how global and domestic macroeconomic conditions and firm-specific characteristics influence the relationship between financing constraints and foreign currency borrowing can provide directions for policy to better leverage the benefits of international financial integration.

Ownership concentration, family control, and auditor choice

2016 ◽  
Vol 24 (1) ◽  
pp. 19-42 ◽  
Author(s):  
Salim Darmadi
Keyword(s):  
Stock Exchange ◽  
Emerging Market ◽  
Empirical Studies ◽  
Ownership Concentration ◽  
High Quality ◽  
Content Type ◽  
Family Control ◽  
Public Firms ◽  
Auditor Choice ◽  
Big 4

Purpose – The purpose of this paper is to extend the existing, yet limited, literature on the influence of ownership concentration and family control on the demands for high-quality audits. This study focusses on an emerging market, namely, Indonesia, where ownership concentration and family control are relatively higher than those in developed markets. Design/methodology/approach – The sample consists of 787 firm-year observations of public firms listed on the Indonesia Stock Exchange. Following prior studies, a firm is considered using a higher quality audit when its external auditor is one of the Big 4 audit firms. Logistic regressions are employed to test research hypotheses. Findings – Empirical evidence obtained reveals that firms with higher ownership concentration are more likely to hire a Big 4 auditor. Hence, in such firms, high-quality audits are employed to mitigate agency issues. However, when the controlling shareholder is a family, the association between ownership concentration and the demands for high-quality auditors turns negative, implying that family-controlled firms tend to sustain opaqueness gains by hiring lower quality auditors. Originality/value – Previous empirical studies examining the influence of ownership concentration and family control on auditor choice are relatively limited in the literature and are heavily focussed on developed economies. In addition, the present study is one of the first to investigate the association between family control and auditor choice in the context of a developing economy.

Sign in / Sign up

Export Citation Format

Share Document