Disaggregating operating and financial activities: implications for forecasts of profitability

Esplin, Adam M.; Hewitt, Max; Plumlee, Marlene; Yohn, Teri Lombardi

doi:10.1007/s11142-013-9256-5

Cited by 39 publications

(17 citation statements)

References 21 publications

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“…It is argued that profitability driven by operating activities has a stronger association with stock returns than the profitability driven by financing activities [45]. In addition, the operating/financing disaggregation can improve the forecasts of profitability when the components forecasting approach is used, but this disaggregation yields less accurate forecasts than the unusual/infrequent disaggregation [46].…”

Section: Plos Onementioning

confidence: 99%

Leverage structure and stock price synchronicity: Evidence from China

Zhang

Zhou

2020

PLoS ONE

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This paper investigate the impact of leverage structure on stock price synchronicity. To better understand the mechanism of the impact of leverage, we break leverage into operating leverage and financing leverage. This breakdown reveals the impact of different component of leverage. Moreover, in this paper, we employ the quantile regression model to investigate the impact of leverage on different level of stock price synchronicity, which provides us a more comprehensive picture. Our empirical results show, operating and financing leverage have negative impact on stock price synchronicity. Moreover, the higher the stock price synchronicity becomes, the higher this impact is. Furthermore, the marginal effect of financing leverage will be attenuated as the profitability of firms becomes higher, but the interaction effect doesn't exist for operating leverage. On the contrary, the marginal effect of financing leverage will be enhanced as the market capitalization of firms becomes larger, again, it doesn't exist for operating leverage. Finally, as firms are state-owned, the marginal effect of both operating and financing leverage will be higher.

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Section: Plos Onementioning

confidence: 99%

Leverage structure and stock price synchronicity: Evidence from China

Zhang

Zhou

2020

PLoS ONE

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“…In addition to FirmEFF and ManagerEFF, another efficiency measure used in this paper is the industry-adjusted asset turnover (AssetEFF), computed as sales (SALE) to NOA to measure operating-asset efficiency. Deflating SALE by NOA instead of total assets (AT) helps us focus on the operating activities that mainly drive firm value, instead of the financing activities (Nissim and Penman, 2001;Esplin et al, 2014). The industry adjustment extracts firm-specific skills, which is critical because asset turnover is largely a function of industry membership (Soliman, 2004).…”

Section: Efficiency Measuresmentioning

confidence: 99%

Firm efficiency and the investment anomalies

Koh

Nawalkha

2020

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PurposeThe purpose of this paper is to investigate whether firm efficiency can explain the investment anomaly. The investment anomaly refers to the persistent negative relation between firm growth and future risk-adjusted returns. When firms grow by investing heavily, the market often takes the growth as positive news initially but will correct prices downward subsequently if the firms lack skills to materialize value from the investments.Design/methodology/approachThe author conducts portfolio sorting and Fama–Macbeth regression analyses with three different measures of efficiency and four variables for firm investment: net stock issuance (NSI), total asset growth (dAA), fixed asset and inventory growth (IA) and net operating assets (NOA).FindingsThe author finds that the NSI, dAA and IA anomalies are concentrated in firms with low overall efficiency. In addition, there is strong evidence that manager-driven efficiency is closely related to the NSI anomaly and limited evidence that NOA efficiency plays a role in the NSI, IA and NOA anomalies.Originality/valueThe research contributes to the literature by employing advanced efficiency measures developed by Demerjian et al. (2012) to resolve extant asset pricing puzzles. Also, the findings offer important implications for corporate managers and investors by demonstrating the effect of firm investments and efficiency on future profitability of stocks.

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“…Dichos valores extremos surgen por el efecto adverso ocasionado por denominadores reducidos (Esplin et al, 2014) dado que las empresas objeto de estudio se caracterizan por su reducida dimensión. Con respecto a las correlaciones existentes entre las variables empleadas en el análisis empírico, tras la eliminación de las observaciones extremas revelan una correlación positiva y débil entre las mismas (Tabla 4).…”

Section: Indicadores De Performance Financiera Y Variables Explicativasunclassified

<i>Performance</i> financiera de las empresas hoteleras españolas no integradas en grupos empresariales o cadenas hoteleras

2018

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Las empresas hoteleras, con uno o pocos establecimientos, presentan características propias respecto a las empresas pertenecientes a grupos empresariales o insertas en grandes cadenas hoteleras. En este estudio se aborda cómo ha sido la performance financiera de estas empresas en España y su relación con una serie de variables clave que pueden estar influyendo directamente sobre el desempeño hotelero. Estas variables son la tipología del hotel, la calidad en la prestación de los servicios y la presencia en redes sociales. Entre los resultados se evidencia que los hoteles de Sol y Playa presentan mejores resultados en los diferentes indicadores de perfomance financiera (rentabilidad financiera, rentabilidad económica, margen neto), mientras que el número de estrellas parece tener un cierto nivel de significación en el margen neto y la simple disposición de redes sociales no supone una mejora en la remuneración de los socios o en la capacidad productividad de estos hoteles.

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Disaggregating operating and financial activities: implications for forecasts of profitability

Cited by 39 publications

References 21 publications

Leverage structure and stock price synchronicity: Evidence from China

Leverage structure and stock price synchronicity: Evidence from China

Firm efficiency and the investment anomalies

<i>Performance</i> financiera de las empresas hoteleras españolas no integradas en grupos empresariales o cadenas hoteleras

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