Perception of negative earnings persistence and value relevance: Evidence from Zimbabwe

Sixpence, Atanas; Adeyeye, Olufemi Patrick

doi:10.1080/23322039.2018.1559711

Cited by 2 publications

(2 citation statements)

References 26 publications

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“…The results showed significant differences in the means of distressed and healthy companies. These studies largely use static models, missing out on the dynamics of share price movements noted by Sixpence and Adeyeye (2018). While the studies reviewed so far use regression analysis of one form or another, Obaidat (2016) adopted a different approach, using questionnaires to determine which accounting information attracts investors' attention on the Amman Stock Exchange.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of relative and absolute financial risks on share prices: a Zimbabwe Stock Exchange perspective

Sixpence

Adeyeye

Rajaram

2020

Investment Management and Financial Innovations

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The impact of financial risks on share prices concerns investors, company executives and accounting standards developers. Investors need this information in delineating their equity valuation models while company executives need the information to make appropriate capital structure decisions. Accounting standards developers use this information in their policy to make accounting standards contemporary. The authors examine the link between relative and absolute financial risks and share prices using a dynamic panel of non-financial listed companies on the Zimbabwe Stock Exchange after dollarization. Equity investors incurred losses before dollarization, which prompted this investigation into the sphere of financial risks in order to explain share price movements so that investors can use it to minimize losses in the future. Absolute financial risk is measured by the total debt, while debt/equity ratio measures relative financial risk. Market capitalization as a proxy for equity and debt is measured by total liabilities. An average debt/equity ratio greater or equal to one qualifies a firm into the high-risk category while ratios below one imply low-risk firms. Results from two-step System Generalised Method of Moments (GMM) show negative and significant connection between relative risk and share prices across risk categories. The impact of absolute risk on share prices differs by risk category. Firm managers are advised to keep total liabilities below market capitalization in order to enjoy the benefits of low-risk categorization. Debt ratio is a reasonable indicator of value and investors can use it in equity valuation. Mandatory reporting of debt ratios should be considered by accounting standards developers.

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Section: Literature Reviewmentioning

confidence: 99%

Impact of relative and absolute financial risks on share prices: a Zimbabwe Stock Exchange perspective

Sixpence

Adeyeye

Rajaram

2020

Investment Management and Financial Innovations

Self Cite

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“…Earnings persistence has always been under the spotlight for the finance report users, especially those expecting high earnings persistence (Fanani, 2010; Artikis and Papanastasopoulos, 2016; Jin, 2017; Sixpence and Adeyeye, 2018; Yao et al , 2018). Earnings persistence reflects the quality of the profit of a firm and shows that the firm can retain earnings over time instead of in the event of a particular activity.…”

Section: Introductionmentioning

confidence: 99%

Earnings persistence, earnings power, and equity valuation in consumer goods firms

Fatma

Hidayat

2019

AJAR

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Purpose The purpose of this paper is to examine the influence of earnings persistence and earnings power on equity valuation. Design/methodology/approach The purposive sampling method was applied to determine the samples of selected 100 firms. This study employed secondary data obtained from the annual reports and financial statements of consumer goods firms listed on the Indonesian Stock Exchange for the period 2010–2014. The analysis technique used a multiple regression analysis. Findings The study result shows that, partially, earnings persistence and earnings power affect equity valuation by investors. Earnings persistence has a negative influence, whereas earnings power has a positive influence on equity valuation. Originality/value This study throws additional lights on equity valuation specific to consumer goods industries.

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Perception of negative earnings persistence and value relevance: Evidence from Zimbabwe

Cited by 2 publications

References 26 publications

Impact of relative and absolute financial risks on share prices: a Zimbabwe Stock Exchange perspective

Impact of relative and absolute financial risks on share prices: a Zimbabwe Stock Exchange perspective

Earnings persistence, earnings power, and equity valuation in consumer goods firms

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