scholarly journals The Effect of Investment, Free Cash Flow, Earnings Management, and Interest Coverage Ratio on Financial Distress

2021 ◽  
Vol 2 (1) ◽  
pp. 67-73
Author(s):  
Meryana ◽  
Erna Setiany
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Financial Distress ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Coverage Ratio ◽  
Financial Difficulties ◽  
Score Method ◽  
Free Cash Flows ◽  
Retained Earnings

The purpose of this research is to test investments, free cash flow, earnings management, and interest coverage ratio are affecting the risk of financial distress in healthy enterprises.. Healthy companies can be seen from how large the value of working capital, retained earnings, income before tax, market value and sales implemented in the measurement of the financial difficulties model with the Altman Z-score method. Collection of data by purposive sampling and number of samples as many as 33 companies in the category of healthy companies. The results show that free cash flows and interest coverage ratio significant effect on the financial difficulties of healthy companies whereas investment and earnings management had no significant effect on the financial difficulties of healthy companies

scholarly journals PENGARUH FREE CASH FLOW, FINANCIAL DISTRESS, DAN INVESTMENT OPPORTUNITY SET TERHADAP MANAJEMEN LABA

2021 ◽  
Vol 14 (1) ◽  
Author(s):  
Sally Irawan ◽  
Prima Apriwenni
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Financial Distress ◽  
Stock Exchange ◽  
Total Sample ◽  
Free Cash Flow ◽  
Investment Opportunity ◽  
Purposive Sampling ◽  
Investment Opportunity Set ◽  
Positive Effect

<p><strong><em>ABSTRACT :  </em></strong><em>Stakeholders pay attention to the earnings report, thus encouraging company managers to plan strategies to produce reports expected by stakeholders. Earnings management is one way that can be done. Managers can intervene the earnings management by increasing or decreasing profit in order to achieve a certain level of profit which benefits himself or the company. This study aims to determine the influence of free cash flow, financial distress, and investment opportunity set on earnings management. </em><em>The research sample consisted of 11 infrastructure, utility, and transportation companies listed on the Indonesia Stock Exchange in 2014-2018 with the total sample of 55 data. This study used a purposive sampling method and was tested with SPSS 22.0 Software. The results show that the data have met the pooling test, classical assumptions and established criteria. The results of the F test show that the earnings management variable is affected simultaneously by free cash flow, financial distress, and investment opportunity set variables. The t test results show that the free cash flow and investment opportunity set have a significant positive effect on earnings management, whereas financial distress does not. In sum, there is enough evidence that free cash flow and investment opportunity set positively affect earnings management, but financial distress does not have enough evidence to influence earnings management.</em></p><p><strong><em>Keywords: </em></strong><em> Earnings Management, Free Cash Flow, Investment Opportunity Set, Financial Distress.</em></p><p><em> </em></p><p><strong>ABSTRAK:</strong> Laporan laba menjadi perhatian para <em>stakeholders</em> sehingga mendorong manajer perusahaan melakukan perencanaan strategi untuk menghasilkan laporan yang diharapkan <em>stakeholder</em>. Manajemen laba adalah salah satu cara yang dapat dilakukan. Intervensi manajer untuk melakukan manajemen laba dengan cara menaikkan atau menurunkan laba guna mencapai tingkat laba tertentu untuk menguntungkan dirinya sendiri atau perusahaan. Penelitian ini bertujuan untuk mengetahui pengaruh <em>free cash flow, financial distress, </em>dan <em>investment opportunity set </em>terhadap manajemen laba. Sampel penelitian ini adalah perusahaan infrastruktur, utilitas, dan transportasi yang terdaftar di Bursa Efek Indonesia periode 2014-2018. Total sampel yang digunakan adalah 11 perusahaan dengan data observasi yang diperoleh sebanyak 55. Teknik pengambilan sampel yang digunakan adalah <em>non-probability sampling</em> dengan menggunakan metode <em>purposive sampling</em> dan pengujian yang dilakukan dengan bantuan <em>software</em> SPSS 22.0. Hasil penelitian dari data yang digunakan,  untuk uji pooling dan asumsi klasik telah lulus uji dan sudah memenuhi kriteria yang ditetapkan. Hasil uji F menunjukkan bahwa variable manajemen laba dipengaruhi secara simultan oleh variable <em>free cash flow, financial distress, </em>dan <em>investment opportunity set. </em>Dari hasil uji t memperlihatkan hasil bahwa <em>free cash flow </em>dan<em> investment opportunity set </em>mempunyai nilai signifikan positif terhadap manajemen laba, tapi untuk <em>financial distress </em>tidak mempunyai nilai signifikan terhadap manajemen laba. Kesimpulan dari penelitian ini adalah<em> free cash flow </em>dan <em>investment opportunity set </em>berpengaruh positif terhadap manajemen laba, sedangkan <em>financial distress </em>tidak berpengaruh terhadap manajemen laba.</p><p><strong>Kata Kunci:</strong> Manajemen Laba,<em> Free Cash Flow,  Investment Opportunity Set, Financial Distress</em></p><p> </p>

Analysis the Effect of Financial Distress, Leverage and Free Cash Flow on Earnings Management

2021 ◽  
Vol 6 (3) ◽  
pp. 111-119
Author(s):  
Rifka Aulia Inayah ◽  
Amiruddin Amiruddin ◽  
Grace T. Pontoh
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Financial Distress ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Total Sample ◽  
Multiple Linear Regression Analysis ◽  
Jel Classification ◽  
Free Cash Flow ◽  
Company Value

Objective - This study aims to determine and analyze the effect of financial distress, leverage, free cash flow on earnings management. Methodology/Technique – The object of this research is all companies listed on the Indonesia Stock Exchange with an observation period of 2019. The sample determination uses the purposive sampling method and a total sample of 124 companies is obtained. The analysis technique used is multiple linear regression analysis. Findings - The results show that financial distress has no significant effect on earnings management. Leverage and free cash flow have a negative and significant effect on earnings management. Novelty - This research contributes to signalling theory, which is used by company managers who have better information about their company will be encouraged to convey this information to potential investors where this is intended so that companies can increase company value by sending signals through financial statements of companies listed on the IDX. Type of Paper: Empirical. JEL Classification: G32, M21, M41, M42. Keywords: Financial Distress; Leverage; Free Cash Flow and earnings Management

scholarly journals Targeting fixed reinvestment rate with nonlinear mechanism: a “strange” path to financial distress

2009 ◽  
Vol 7 (2) ◽  
pp. 311-318
Author(s):  
Safieddine Bouali
Keyword(s):  
Cash Flow ◽  
Financial Distress ◽  
Cash Flows ◽  
Share Repurchases ◽  
Governance Arrangement ◽  
Dynamical Mechanism ◽  
Nonlinear Adjustment ◽  
Adjustment Speed ◽  
Nonlinear Mechanism ◽  
Free Cash Flows

Governance arrangement between shareholders, debtholders and managers fix the reinvestment ratio of profits. Residual earnings will appear as excess cash flow to disgorge in dividend disbursements or share repurchases. However, financial crisis stimulates corporation to express highest aversion both to overinvestment or underinvestment, probably in an identical degree. Besides, dissuasion to commit fraud pushes ownership to select a strong dynamical mechanism adjusting held earnings to the preferred reinvestment rate. Focus? Immediate disbursement of free cash flows. This paper shows that self-imposed discipline targeting fixed reinvestment rate under nonlinear adjustment speed can inject itself a “strange” dynamics to the firm, leading to critical losses and a bankruptcy threat. However, one way to reduce this instability is determining carefully the “normal” cash flow which does not trigger the payout.

scholarly journals Interactions between free cash flow, debt policy and structure of governance: Three stage least square simultaneous model approach: evidence from the Tunisian stock exchange

2012 ◽  
Vol 9 (2) ◽  
pp. 21-40 ◽  
Author(s):  
Ben Moussa Fatma ◽  
Jameleddine Chichti
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Least Square ◽  
Agency Conflicts ◽  
Governance Mechanism ◽  
Free Cash Flows ◽  
Debt Policy ◽  
Simultaneous Model

This research tests the efficiency of the ownership structure and the debt policy as mechanism of resolution of agency conflicts between shareholders and managers due to the problem of overinvestment, in the limitation of the problem of the free cash flow, by estimating three stage least square simultaneous model and on the basis of a sample of 35 non-financial Tunisian listed companies selected for the period 1999–2008. Our results are in favour of the theory of free cash flows of Jensen (1986) that stipulates that the debt policy represents the principal governance mechanism that can limit the risk of free cash flow. However, the ownership concentration and managerial ownership increase the risk of the free cash flow.

scholarly journals ANALISIS RASIO ARUS KAS UNTUK MENGUKUR KINERJA KEUANGAN PADA PT KALBE FARMA Tbk.

2018 ◽  
Author(s):  
Meldawati ◽  
Febryandhie Ananda
Keyword(s):  
Cash Flow ◽  
Capital Expenditure ◽  
Secondary Data ◽  
Analytical Techniques ◽  
Cash Flows ◽  
Position Statement ◽  
Free Cash Flow ◽  
Coverage Ratio ◽  
Income Statement ◽  
Statement Of Cash Flows

This study aims to determine how the use of analytical techniques in the current ratios measure the financial performance of PT Kalbe Farma Tbk. In this study the authors use secondary data from financial statements of PT Kalbe Farma Tbk for 5 years (2008-2012). The analytical method used is a form where the ratio of the value in the statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows into the simplified ratios. Data were analyzed using 8 cash flow ratio is the ratio of operating cash flow, cash flow coverage ratio, interest coverage ratio of the cash, the cash coverage ratio of current liabilities, capital expenditure ratio, the ratio of total debt, the ratio of net cash flow and free cash flow adequacy ratio. The results of this study indicate each cash flow ratios from 2008 to 2012 average ratio produced tends to be low and has decreased every year

scholarly journals Corporate Governance and Firm Free Cash Flows: Evidence from Malaysia

2013 ◽  
Vol 5 (11) ◽  
pp. 531-537
Author(s):  
Razieh Adinehzadeh
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Audit Committee ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Governance Mechanism ◽  
Data Set ◽  
Corporate Governance Mechanism ◽  
Free Cash Flows ◽  
The Relationship

This study provides view of free cash flow and corporate governance (CG) by addressing the relationship between audit committee characteristics with free cash flow. Specifically, this study explores whether audit committee characteristics are substitutes to control agency problem regarding to free cash flow within Malaysian firms. The data set comprise of 200 firm observations Malaysian companies for four consecutive years, which comprise of 2005 to 2008. The results show that size of audit committee, frequency of audit committee meeting, proportion of audit committee independence is positively associated with level of free cash flow (FCF). The results of study highlight the importance of corporate governance mechanism, in the form of audit committee characteristics, in the management of cash flow.

scholarly journals Concealing Financial Distress With Earnings Management: A Perspective on Malaysian Public Listed Companies

2021 ◽  
Vol 12 (2) ◽  
pp. 341
Author(s):  
Mohamad Ezrien Bin Mohamad Kamal ◽  
Siti Sarah Binti Khazalle
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Firm Size ◽  
Financial Distress ◽  
Negative Relationship ◽  
Free Cash Flow ◽  
Share Price ◽  
Industrial Product ◽  
Financial Leverage ◽  
Financial Condition

Earnings Management is prevalent among corporations, resulting to misleading information disclosed on financial statements. By adopting agency theory argument, in line with fulfilling shareholders expectations on financial performance while securing their position and interest within the company, management may be influenced to engage earnings management when the actual financial outcome is in financial distress. Hence, this study attempts to identify whether companies listed on Industrial Product sector of Malaysian Bourse experienced financial distress condition and embark on earnings management. It also examines potential relationship between financial distress conditions and earnings management within the context of companies listed within Industrial Product sector of Malaysian Bourse in 2016 and 2017. Industrial Product sector was chosen as focus of this study due to its critical position in nation’s transformation to become developed country and as the main contributor to the nation’s GDP with largest market capitalization value in local bourse. Financial distress was proxied by Altman Z score and earnings management by discretionary accruals as per Kothari (2005). The study was conducted using the quantitative statistical method by running multiple regressions in SPSS version 23. The study also included three control variables, such as firm size, financial leverage and free cash flow from operation. The sample of this study comprised of 454 firms of Industrial Products Sector, listed on Malaysian Bourse from 2016 to 2017. The result revealed significant negative relationship between financial distress and earnings management by companies within Industrial Product sector. Financial leverage and free cash flow from operation have inverse relationship with earnings management, while firm size has a positive relationship with earnings management. This also means management of Industrial Product Sector companies engage earnings management when their financial condition is not in distress, hence they are not using earnings management to conceal financial distress condition. Instead they may use earnings management to leverage on their non-distress financial condition to attain better share price performance and financing arrangement.

An Evaluation of Chinese Firms' Profitability: 2005–2013

2015 ◽  
Vol 29 (4) ◽  
pp. 799-828 ◽  
Author(s):  
Jing Liu ◽  
James A. Ohlson ◽  
Weining Zhang
Keyword(s):  
Cash Flow ◽  
Balance Sheet ◽  
High Growth ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Sample Period ◽  
Chinese Firms ◽  
Capital Growth ◽  
Free Cash Flows ◽  
The U.S

SYNOPSIS We empirically examine the profitability of leading Chinese firms, benchmarked against comparable U.S. firms, for the period 2005–2013. Return on invested capital (ROIC), which excludes leverage effects on performance, provides the primary metric. Averaged over firms and years, the two sets of firms have similar profitability, about 11 percent annually. Decomposing ROIC into free cash flow yield and invested capital growth, we show that the same ROIC has very different compositions: while the Chinese firms have high growth and negative free cash flows, the U.S. firms have low growth and positive free cash flows. Due to balance sheet conservatism, we infer that Chinese (U.S.) firms' free cash flow yields and the resulting ROICs have been biased downward (upward). After correcting for the bias, we show that Chinese firms have much higher profitability than their U.S. counterparts: 15.1 percent versus 8.1 percent. This result is driven by the abundance of growth opportunities in China in our sample period. When we control for the growth rates, we find U.S. firms have been more “efficient” in generating more free cash flows than Chinese firms.

Free Cash Flow, Kinerja Internal, Dan Pengaruhnya Terhadap Nilai Perusahaan

Liquidity ◽  
2018 ◽  
Vol 7 (1) ◽  
pp. 63-69
Author(s):  
Irma Sari Permata ◽  
Nana Nawasiah ◽  
Trisnani Indriati
Keyword(s):  
Cash Flow ◽  
Firm Value ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Corporate Value ◽  
Manufacturing Companies ◽  
Flow Problems ◽  
Internal Conflicts ◽  
Company Value ◽  
Free Cash Flows

The purpose of this study is to answer the phenomena that occur both theoretical phenomena and the empirical phenomenon of potential internal conflicts to the free cash flow of the company and its use for the benefit of increasing corporate value. Such internal conflicts require an appropriate settlement so as not to affect the company's failure. This study examines the role of dividend policy and ownership structure in moderating the relationship between free cash flow and firm value on manufacturing companies listed on BEI as many as 236 companies using randon sampling method. Free cash flows, profitability, firm size have a significant effect on company value while company growth has no significant effect. Dividends and majority ownership and managerial moderate free cash flow against corporate value. The results of this study are expected to generate alternative solutions to free cash flow problems and increase the value of the company.  

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