scholarly journals The influence that Spanish Labour Reform represents on Madrid Stock Market: An empirical analysis

PLoS ONE ◽  
2021 ◽  
Vol 16 (10) ◽  
pp. e0258004
Author(s):  
Ana M. Sabater Marcos ◽  
Teresa Duarte Atoche ◽  
Joaquina Laffarga Briones
Keyword(s):  
Stock Market ◽  
Cash Flows ◽  
Collective Agreement ◽  
Positive Information ◽  
Firm Level ◽  
Financial Variables ◽  
Informative Content ◽  
The Cost ◽  
Future Cash Flows

Empirical evidence for Spanish Stock Market shows that labour events, like a firm level collective agreement, have informative content for the market due to the loss of wealth that it implies for the investor. Labour Reforms which Spain experienced between the years 2010 and 2012 have allowed the jeopardising of employment and the destruction of jobs, substituting one well paid by another of lower cost for the firm, the cost of dismissal, or the proposals of substituting payoffs by the so-called Austrian backpack, and the elimination of the distinction between temporary and permanent contracts. These Labour Reforms affect many of the accounting and financial variables, which are the subject of analysis and follow-up by investors and analysts, next to the idiosyncrasy of the Open Shop System that is followed in Spain, the present article means to explore the effect on Madrid Stock Market. Our results, applying analysis techniques with decision trees where we control the effect of the economic crisis on the market reaction, show that the Labour Reforms of 2010 to 2012 are incorporated as negative, or positive, information when the investor perceives a possible decrease, or increase, in its future cash flows.

Turning Around Distressed Project Finance Assets in India: What More Needs to Be Done?

2018 ◽  
Keyword(s):  
Cash Flows ◽  
Project Finance ◽  
Cost Of Debt ◽  
Risk Allocation ◽  
Debt Overhang ◽  
Balance Sheets ◽  
Infrastructure Project ◽  
Bankruptcy Code ◽  
The Cost ◽  
Future Cash Flows

With the Insolvency and Bankruptcy Code firmly in place, India’s distressed project finance assets are turning out to be attractive to institutional investors. Project finance assets need asset-and deal-specific financing solutions in order to achieve successful turnarounds. The turnaround solution must ensure optimum risk allocation and mitigation leading to the buildup of future cash flows. This will, in turn, lead to deleveraging of stressed balance sheets. The authors present a conceptual model and argue that even now the political and regulatory risks for infrastructure project loans in India have not been completely mitigated. This has resulted in a situation of a debt overhang, wherein even economically viable projects may not attract fresh funding. To address this, the article suggests the possible use of priority funding structures, where existing lenders cede charge of the assets in favor of a new lender as a way to reduce the cost of debt and unlock shareholder value. This solution will also ensure that the restructuring package is properly priced (from the project finance lender’s perspective), resulting in the efficiency and viability of the restructured asset.

scholarly journals Investor Sentiment in the Stock Market

2007 ◽  
Vol 21 (2) ◽  
pp. 129-151 ◽  
Author(s):  
Malcolm Baker ◽  
Jeffrey Wurgler
Keyword(s):  
Stock Market ◽  
Behavioral Finance ◽  
Stock Prices ◽  
Investor Sentiment ◽  
Cash Flows ◽  
Individual Investors ◽  
Individual Investor ◽  
Top Down ◽  
Limits To Arbitrage ◽  
Future Cash Flows

Investor sentiment, defined broadly, is a belief about future cash flows and investment risks that is not justified by the facts at hand. The question is no longer whether investor sentiment affects stock prices, but how to measure investor sentiment and quantify its effects. One approach is “bottom up,” using biases in individual investor psychology, such as overconfidence, representativeness, and conservatism, to explain how individual investors underreact or overreact to past returns or fundamentals The investor sentiment approach that we develop in this paper is, by contrast, distinctly “top down” and macroeconomic: we take the origin of investor sentiment as exogenous and focus on its empirical effects. We show that it is quite possible to measure investor sentiment and that waves of sentiment have clearly discernible, important, and regular effects on individual firms and on the stock market as a whole. The top-down approach builds on the two broader and more irrefutable assumptions of behavioral finance—sentiment and the limits to arbitrage—to explain which stocks are likely to be most affected by sentiment. In particular, stocks that are difficult to arbitrage or to value are most affected by sentiment.

Evaluation of Non-marginal Projects

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Social Welfare ◽  
Social Welfare Function ◽  
Cost Benefit Analysis ◽  
Investment Project ◽  
Cost Benefit ◽  
Cash Flows ◽  
The Social ◽  
Macroeconomic Effects ◽  
The Cost ◽  
Future Cash Flows

This chapter shows that the cost-benefit analysis can be used only if the actions under scrutiny are marginal, that is, if implementing them has no macroeconomic effects. Otherwise, one needs to go back to the basics of public economics to evaluate these actions. The chapter examines the error that one makes by following the classical discounting approach when evaluating non-marginal projects. The evaluation of non-marginal projects must be done by measuring their impact on the social welfare function. A non-marginal investment project with positive future cash flows will have an impact on welfare that is smaller than when estimated by using the standard discounting method.

scholarly journals Predictive ability of accruals before and after IFRS in the Brazilian stock market

2018 ◽  
Vol 29 (78) ◽  
pp. 375-389
Author(s):  
Terence Machado Boina ◽  
Marcelo Alvaro da Silva Macedo
Keyword(s):  
Stock Market ◽  
Financial Reporting ◽  
Predictive Ability ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Accounting Quality ◽  
Convenience Sample ◽  
Accounting Choices ◽  
Before And After ◽  
Future Cash Flows

ABSTRACT This study aimed to analyze and assess the predictive ability of discretionary accruals (DAs) and non-discretionary accruals (NDAs) for forecasting future cash flows before and after the convergence with International Financial Reporting Standards (IFRS) in Brazil. The study is warranted due to the scarcity of research in Brazil on the subject and is relevant because it aims to shed light on whether the changes occurring due to convergence with IFRS in Brazil have improved accounting quality. The accounting choices of managers and accountants in the Brazilian stock market, enabled by IFRS, contribute to an apparent improvement in accounting quality in terms of reliability, the faithful representation of entities’ equity and financial positions, and in particular, the predictive ability for forecasting future cash flows. The population was composed of publicly traded companies listed on the Bovespa and São Paulo Stock, Commodities, and Futures Exchange (BM&FBovespa) in 2004 to 2007 and 2010 to 2015. The non-probability convenience sample is composed of 715 enterprises, once companies from the “finance and insurance” and “funds” sectors and even those considered as “holding” were excluded. The data were pooled by year, as they contain different companies over the time series (unbalanced panel data). The DAs and NDAs produced prior to full convergence with IFRS are negative and statistically significant for predicting future cash flows in the Brazilian stock market, which indicated opportunistic/contractual earnings management. One of the possible explanations for this would be the influence of government tax authorities on Brazilian accounting norms, which could induce managers to manipulate accounting results with the aim of reducing earnings in order to pay fewer taxes, for example. The DAs and NDAs produced after IFRS are positive and statistically significant for predicting future cash flows in the Brazilian stock market, signaling the motivation of discretionary accounting choices under the informational aspect. Current DAs and NDAs add informational power compared to current aggregate accruals. It has also been observed that the current DAs and NDAs originating after IFRS in Brazil, compared to current aggregate accruals, have an informational gain in relation to those produced before.

scholarly journals The Cost to Firms of Cooking the Books

2008 ◽  
Vol 43 (3) ◽  
pp. 581-611 ◽  
Author(s):  
Jonathan M. Karpoff ◽  
D. Scott Lee ◽  
Gerald S. Martin
Keyword(s):  
Regulatory System ◽  
Cash Flows ◽  
Point Estimate ◽  
Present Value ◽  
Implicit Contracts ◽  
Financing Costs ◽  
Widespread Belief ◽  
The Cost ◽  
Future Cash Flows ◽  
Additional Loss

AbstractWe examine the penalties imposed on the 585 firms targeted by SEC enforcement actions for financial misrepresentation from 1978–2002, which we track through November 15, 2005. The penalties imposed on firms through the legal system average only $23.5 million per firm. The penalties imposed by the market, in contrast, are huge. Our point estimate of the reputational penalty—which we define as the expected loss in the present value of future cash flows due to lower sales and higher contracting and financing costs—is over 7.5 times the sum of all penalties imposed through the legal and regulatory system. For each dollar that a firm misleadingly inflates its market value, on average, it loses this dollar when its misconduct is revealed, plus an additional $3.08. Of this additional loss, $0.36 is due to expected legal penalties and $2.71 is due to lost reputation. In firms that survive the enforcement process, lost reputation is even greater at $3.83. In the cross section, the reputation loss is positively related to measures of the firm's reliance on implicit contracts. This evidence belies a widespread belief that financial misrepresentation is disciplined lightly. To the contrary, reputation losses impose substantial penalties for cooking the books.

scholarly journals The Linkage between ESG Performance and Credit Ratings: A Firm-Level Perspective Analysis

2017 ◽  
Vol 12 (9) ◽  
pp. 53 ◽  
Author(s):  
Alain Devalle ◽  
Simona Fiandrino ◽  
Valter Cantino
Keyword(s):  
Credit Rating ◽  
Credit Ratings ◽  
Cash Flows ◽  
Cost Of Debt ◽  
Firm Level ◽  
Public Firms ◽  
Clear Cut ◽  
Final Sample ◽  
Decision Making Processes ◽  
The Cost

This paper investigates the effect of environmental, social, and governance (ESG) performance on credit ratings. We argue that ESG factors should be considered in the credit analysis and the creditworthiness evaluation of borrowers because they affect borrowers’ cash flows and the likelihood of default on their debt obligations. Consequently, we develop our research by firstly reviewing the literature regarding ESG commitments within financial decision-making processes and then addressing the relation between ESG performance and the cost of debt financing. We reveal no unanimous results and no clear-cut boundaries on this matter yet. Secondly, to disentangle this relationship, which is not well defined by scholars, we empirically investigate the nexus between ESG performance and credit rating issues on a sample of 56 Italian and Spanish public firms for which ESG performance in 2015 was achieved. Our final sample includes 15 variables for 56 observations: 840 items are under analysis. Our findings suggest that ESG performance, especially concerning social and governance metrics, meaningfully affects credit ratings. We do not sort out significant results referring to environmental scores, so further research is needed to investigate this ever-growing matter and strengthen this considerable nexus.

Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries

1988 ◽  
Vol 2 (2) ◽  
pp. 161-174 ◽  
Author(s):  
Richard H Thaler ◽  
William T Ziemba
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Empirical Research ◽  
Stock Markets ◽  
Cash Flows ◽  
Present Value ◽  
Betting Markets ◽  
Future Cash Flows ◽  
Termination Point ◽  
Parimutuel Betting

Economists have given great attention to stock markets in their efforts to test the concepts of market efficiency and rationality. Yet wagering markets are, in one key respect, better suited for testing market efficiency and rationality. The advantage of wagering markets is that each asset (bet) has a well-defined termination point at which its value becomes certain. The absence of this property is one of the factors that has made it so difficult to test for rationality in the stock market. Since a stock is infinitely lived, its value today depends both on the present value of future cash flows and on the price someone will pay for the security tomorrow. Indeed, one can argue that wagering markets have a better chance of being efficient because the conditions (quick, repeated feedback) are those which usually facilitate learning. However, empirical research has uncovered several interesting anomalies. While there are numerous types of wagering markets, legal and otherwise, this column will concentrate on racetrack betting and lotto-type lottery games.

Brain Activity Follow Up of Stock Market Financial Variables

2013 ◽  
Author(s):  
Armando Freitas da Rocha ◽  
Jooo Paulo Vieito ◽  
FFbio T. Rocha
Keyword(s):  
Stock Market ◽  
Brain Activity ◽  
Financial Variables

A Comparison of Excess Stock Market Return to Standard Marketing Metrics

2018 ◽  
pp. 20-37
Author(s):  
Vicki Lane ◽  
Madhavan Parthasarathy
Keyword(s):  
Stock Market ◽  
Firm Value ◽  
Cash Flows ◽  
Marketing Metrics ◽  
Time Value Of Money ◽  
Market Return ◽  
Stock Market Return ◽  
Study Techniques ◽  
The Impact ◽  
Future Cash Flows

Marketing metrics provide measures of the impact of various marketing strategies. This paper examines excess stock market return as a potential measure to include in the metric arsenal. Excess stock return reflects investors' views of the likely impact of a particular strategy. Investors form expectations about how the strategy will affect future cash flows. Consequently, a stock's price changes to reflect investor “votes” about the strategy's impact on firm value. By tapping into event study techniques for measuring the impact of an announcement, firms can better understand the value of a particular marketing strategy. An assessment of various marketing measures indicates that excess stock market return compares favorably to other metrics. Excess return yields unbiased estimates, allows direct causal inference, is future oriented, includes all cash flows, accounts for opportunity costs, factors in risk, and takes into account the time value of money.

Does earnings quality affect the cost of debt in a banking system? Evidence from French listed companies

2020 ◽  
Vol 45 (4) ◽  
pp. 183-191
Author(s):  
Asma Houcine ◽  
Walid Houcine
Keyword(s):  
Earnings Quality ◽  
Estimation Error ◽  
Banking System ◽  
Cash Flows ◽  
Economic Consequences ◽  
Cost Of Debt ◽  
Financial Reports ◽  
The Cost ◽  
Future Cash Flows

This study examines the effect of earnings quality on the cost of debt, for a sample of French listed firms from 2005 to 2015. Using accruals quality (AQ) as a proxy for the quality of financial reports, the results obtained confirm the research hypothesis formulated, showing that the quality of financial reports is negatively related to firms’ interest cost. The results also support that the innate component of AQ has a greater impact on the cost of debt than the discretionary component. The findings of this study may be of interest to managers by providing evidence on the economic consequences of improved earnings on the cost of debt and the factors that determine debt pricing in making decisions to minimize it. The results of this article are also important for creditors, that is, banks, showing that earnings are important in predicting firms’ reimbursement capacity (i.e. future cash flows) and that less estimation error in accruals improves the ability of earnings to predict future cash flows.

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