Correlation Analysis between Stock Price and Accounting Profit Based on a Vector Autoregressive Model

The study of accounting profitability was initiated by the famous American scholars Ball and Brown in the 1960s. In recent years, with the continuous development of market economy, the continuous improvement of the accounting legal system and accounting standards for enterprises has promoted the research on accounting profit in capital market in China. Due to the restriction of some objective conditions, there are not many valuable research results on the relationship between accounting earnings and stock price changes, and the research methods suitable for the study of accounting earnings still need to be explored and summarized. The China Securities Regulatory Commission (CSRC) has required listed companies to publish quarterly financial and accounting reports since 2002, and the condition of using the regression analysis method to study the accounting profit of listed companies is available. In this context, this paper designs a vector autoregressive model to study the correlation between stock price and accounting profit. First, combining the literature and the research results of accounting profit at home and abroad, this paper expounds the statistical analysis of accounting profit. Then, this paper analyzes the accounting profitability of listed companies in China from static and dynamic perspectives. Finally, according to the accounting profit status and profitability statistical analysis of accounting information, accounting profit and growth relationship, and accounting profit information and the relationship between stock prices, this paper is concluded. Also, this paper shows how to improve the profitability of listed companies and how can investors effectively use the accounting earnings information of listed companies for stock investment and put forward corresponding policy suggestions.

COMPARISON OF THE TERMS CREATIVE ACCOUNTING, EARNINGS MANAGEMENT AND FRAUDULENT ACCOUNTING THROUGH BIBLIOGRAPHIC ANALYSIS

Research background: The article focuses on the issues of creative accounting, earnings management, and fraudulent accounting, which are global phenomena. These concepts are well known globally, as they are dealt with by many world-renowned authors. In this study, we applied bibliometric analysis to these concepts to reveal their interconnectedness. The research was conducted on a sample of more than 19,000 articles. Purpose of the article: The main goal of the study is to use the VosViewer design and visualisation program to capture and record the most common terms associated with the terms, ‘creative accounting’, ‘revenue management’, and ‘fraudulent accounting’, and to show a biometric network of the most commonly used terms. Methods: To capture and illustrate important words associated with the above terms, the VosViewer program was used, which drew mind maps that represented the words and expressions that were closest to the topic. Scientific articles from the Web of Science database, which contains many world-class articles related to the topic, were used as input data. Findings & Value added: The results of the study provided an interesting insight into the keywords associated with the issues of creative accounting, revenue management, and fraudulent accounting. The results show that the keywords and phrases are related, as several of them are repeated in each of the terms mentioned. This means that, although these terms are different in nature, they are nevertheless connected by many words and phrases. However, it remains necessary to observe that each of the given terms appears on a different colour of fraud (white, grey, or black fraud).

PENGARUH LABA AKUNTANSI & ARUS KAS OPERASI TERHADAP KEPUTUSAN INVESTASI (RETURN SAHAM)

This study aimed to examine the market reaction to the publication of accounting information in the form of profits and operating cash flows associated with investment decisions. As a proxy of investment decisions is stock returns in banking companies at the time of publication of financial statements. The technique applied in this research is purposive sampling, obtained as many as 114 data (from 38 companies for 3 years). Using the SPSS tool. The method used in this research is non-linear regression test. The results of the study show that accounting earnings have an effect on investment decisions (stock returns), meanwhile operating cash flows doesn’t have any effect on investment decisions (stock returns). Therefore, it is recommended for investors to pay more attention to accounting income statements than operating cash flows to sort out stocks itself. keywords: accounting income, operating cash flow, stock returns, investment decisions.

Governance role of media coverage: from the view of accounting information value relevance and market value about share pledge firms in China

Purpose Share pledge is a popular way to raise funds in China, but it aggravates information asymmetry. As an indispensable information intermediary in the financial market, media coverage affects asset price and pricing efficiency and impacts information asymmetry. This study aims to explore the governance role of media coverage as an information intermediary in the share pledge context in China. Design/methodology/approach Moderating effect and mediating effect analyses are the primary methods used to test the governance role of media coverage. The ordinary least squares model was used to test the relationship between share pledge and market performance and then proved the moderating effect of media coverage toward the corporate market value of pledge firms. Accounting earnings value relevance models were explored to test the path of media coverage on firm market value by mediating effect analysis. At last, subgroup tests were used to verify the heterogeneity of the moderating effect of media coverage. Findings In the context of share pledge in China, the higher the share pledge ratio, the higher is the market value of listed firms, which verifies the motivation of controlling shareholders to avoid the transfer of control right and the motivation to tunneling. Media coverage has a significant negative moderating effect on the relationship between share pledge rate and corporate value and has a significant impact on the accounting earnings value relevance of share pledge firms. From the perspective of long-term earnings, media coverage reduces the market performance of share pledge firms by reducing the value correlation of accounting earnings information. From the short-term price point of view, media coverage reduces the market performance of share pledge firms by improving the value correlation of accounting earnings information. Furthermore, media coverage has a more significant moderating effect in state-owned share pledge firms and low information transparency and low information disclosure quality firms. Research limitations/implications This paper does not distinguish the mode difference of spreading news and the impact of non-pledge media coverage. Also, this paper does not consider factors other than accounting information value relevance when exploring how media coverage affects the corporate market value. Share pledge firms should use media for publicity and play a role in media governance and should actively improve their information disclosure quality, strengthen communication with investors and reduce information asymmetry fundamentally. Practical implications This paper diversify the governance choices for share pledge firms and has important implications for firms, investors, information intermediaries and regulators. Media reports play an increasingly important role today, and any reports and predictions of major events may profoundly affect investors’ decisions. Although media reports can make up for the weakness of accounting information disclosure of equity pledge companies in some sense, it is still not a long-term strategy. Equity pledge companies should not only make use of media for publicity and play a role of media governance but also actively improve their information disclosure quality. Originality/value This paper focuses on share pledge firms to carry out in-depth research. Based on exploring the influence mechanism of share pledges, the authors find the importance of media governance. This paper expands the literature about the economic consequences of share pledges and provides empirical data for media governance of share pledge firms. This paper innovatively proves the governance role of media coverage from the view of accounting information value relevance. The main innovation point is the long and short-term perspective analysis of the influence of media coverage on the correlation of accounting earnings value. The heterogeneity effect analysis of media coverage also reflects the depth and strong practical guiding significance of this study.

Determints of CEO Bonus Compensation

The primary purpose of this study is to explore the determinants of CEO bonus compensation: to examine CEO bonuses and to explore whether or not the independent variables are associated with CEO bonus compensation. For the purposes of this study, a sample of 2,448 CEO bonus compensations across 1,622 firms from 1997 to 2002 was used to test several hypotheses. The dependent variable in this model is the CEO bonus compensation. Bonus is the dollar value of the bonus (cash and non-cash) earned by the named executive officer during the fiscal year. Corporate diversification was divided into two categories; international diversification and industry diversification. Firm performance is measured by both Market-based, Performance (RET) and Accounting-based, Performance (ACE). The results show that the higher the degree of international diversification, and the higher accounting earnings performance, the more CEOs receive in bonuses. In addition, this study found that international diversification is associated with a greater use of bonuses and with a greater reliance on accounting-based, rather than market-based measures of firm performance. The results also demonstrated that CEOs in firms with more investment opportunities will receive higher bonuses than CEOs in firms with fewer investment opportunities and CEOs in larger firms will receive higher bonuses than CEOs in smaller firms.

What Information in Financial Statements Could Be Used to Predict the Risk of Equity Investment?

Theoretically, accounting earnings could be used to estimate the intrinsic value of equity. If accounting earnings could be predicted accurately, then, so could be the value of equity, thereby, creating much less risk in equity investment. However, earnings surprises are common, and therefore so is the risk in equity investment. To quantify the risk in the investment implied from accounting earnings, I propose to use financial statements to construct abnormal sales growth rates (ABG) and abnormal changes in profit margins (ABPM) to measure the uncertainty embedded in the accounting earnings. I measure ABG (ABPM) as the difference between the current value of sales growth rate (profit margin) and its benchmark, a weighted value of the three preceding years’ sales growth rate (profit margin). Then, I quantify whether and to what extent the news of ABG and ABPM are material enough to change the expected earnings (proxied by analysts’ forecasted earnings revisions [FREV] and predicted unexpected earnings [UE], and future stock returns [SAR]). Fama–MacBeth regression results show that, together, solely ABPM and ABG could explain 8.2% (2.3%) (5.4%) of the variation of FREV (UE) (SAR). The risk-predictability of ABPM and ABG is robust to the presence of abnormal growth in net operating assets and accruals quality, which, suggested by previous literature, might influence unexpected earnings. Further contingent analyses indicate that the capital market reacts more strongly to the bad news embedded in the ABPM/ABG (with negative signs) than the good news in ABPM/ABG (with positive signs).

THE EFFECTS OF CORPORATE GOVERNANCE, FIRM SIZE, PROFITABILITY, AND GROWTH OPPORTUNITIES ON THE VALUE RELEVANCE OF ACCOUNTING EARNINGS – A STUDY OF THE INDONESIA STOCK EXCHANGE

Capital market serves as an alternative financing-wise and as a means investment-wise. Relevance of accounting information comes out as profound to investors as can be observed within the financial statements of a company. The aim of this study was to figure out the effects of corporate governance, firm size, profitability, and growth opportunities on the value relevance of accounting earnings. The present research used a quantitative method and secondary data in the form of annual reports, and the objects hired were 22 companies listed on the LQ45 index (August of 2018–January of 2019) of the Idonesia Stock Exchange for the period 2015–2017. Analysis was conducted by a descriptive statistical method. The results obtained showed that the variable profitability, which was measured on return on asset, affected the value relevance of accounting earnings, while the variables good corporate governance, firm size, and growth opportunities did not affect the value relevance of accounting earnings. Companies’ management is advocated to optimize the management of the assets in place as it was found in this research that return on asset had an effect on earnings response coefficient. This is necessary so that the companies are able to generate earnings response coefficients to which investors can respond positively. Keywords: Earnings Response Coefficient, Firm Size, Good Corporate Governance, Growth Opportunities, Indonesia, Return On Asset

Pengaruh Struktur Kepemilikan Perusahaan Dan Karakteristik Komite Audit Terhadap Keinformatifan Laba Akuntansi

Informativeness of accounting earnings is the ability of earnings in the level of decision making or return. This study aims to examine the effect of firm ownership structure , audit committee independence, financial expertise audit committee on earning informativeness. This research is a type of causal associative research with a quantitative approach. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2014-2018. The Sample was selected using a purposve sampling method with a total sample of 34 samples. The data used is secondary data from the company's annual report. The analytical method used is multiple linear regression analysis. The results showed that there was no influence of ownership structure and audit committee characteristics on earnings informativeness