The Use of Strategic Performance Variables as Leading Indicators in Financial Analyst's Forecasts

Dempsey, Stephen J.; Gatti, James F.; Grinnell, D. Jacque; Cats-Baril, William L.

doi:10.2139/ssrn.2346

Cited by 53 publications

(54 citation statements)

References 3 publications

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“…Prior research, based on surveys and interviews of buy-and sell-side analysts, demonstrates that analysts consider non-financial ICI to be useful and important for their analysis of companies and investment decisions (Brown et al, 2014, Dempsey and Gatti, 1997, Orens and Lybaert, 2007, Sakakibara et al, 2010. The non-trivial role of ICI is also documented in studies which examine references to this information in analyst research reports (Previts et al, 1994, García-Meca and Martínez, 2007, Abhayawansa and Guthrie, 2014, and in verbal protocol studies which ask analysts to "think aloud" when analysing a company (Anderson, 1988, Coram et al, 2011.…”

Section: Intellectual Capital and Valuation: Backgroundmentioning

confidence: 99%

The use of intellectual capital information by sell-side analysts in company valuation

Abhayawansa

Aleksanyan

Bahtsevanoglou

2015

Accounting and Business Research

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This paper investigates the role of intellectual capital information (ICI) in sell-side analysts' fundamental analysis and valuation of companies. Using in-depth semi-structured interviews it penetrates the black-box of analysts' valuation decision making by identifying and conceptualising the mechanisms and rationales by which ICI is integrated within their valuation decision processes.We find that capital market participants are not ambivalent to ICI, and ICI is used: (1) to form analysts' perceptions of the overall quality, strengths and future prospects of companies; (2) in deriving valuation model inputs; (3) in setting price targets and making investment recommendations; and (4) as an important and integral element in analyst-client communications. We show that: there is a 'pecking order' of mechanisms for incorporating ICI in valuations, based on quantifiability; IC valuation is grounded in valuation theory; there are designated entry points in the valuation process for ICI; and a number of factors affect analysts' ICI use in valuation. We also identify a need to redefine 'value-relevant' ICI to include non-price sensitive information; acknowledge the boundedness and contextuality of analysts' rationality and motives of their ICI use; and the important role of analyst-client meetings for ICI communication.

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Section: Intellectual Capital and Valuation: Backgroundmentioning

confidence: 99%

The use of intellectual capital information by sell-side analysts in company valuation

Abhayawansa

Aleksanyan

Bahtsevanoglou

2015

Accounting and Business Research

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“…In addition, cash portrays the best measure of liquidity, is not contaminated by innumerable measurement problems, facilitates the prediction of future dividends and credit and loan payments, and is more easily understood by a wider cross-section of the investing public. Moreover, the importance of cashflows in assessing the long-term performance of the firm to financial analysts has been reiterated in a number of studies (Dempsey et al, 1997;Yap, 1997).…”

Section: The Relevance Of Cashflowsmentioning

confidence: 99%

Accounting Variables and Stock Returns: The Impact of Leverage

Hodgson

Stevenson-Clarke

2000

Pacific Accounting Review

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The fundamental relationship between accounting variables and firm valuation is a recurring theme in capital market research. This paper investigates this relationship within a balance sheet context and highlights the importance of controlling for relevant economic factors. We do this by conditioning explanatory power on the firm's relative financial leverage position, after controlling for cashflows and firm size, and using an arctan regression model to take account of temporary components in cash and earnings flows. Using data for 743 firm‐years for Australian Stock Exchange listed stocks, we find that for firms which are ‘above optimal leverage’: (i) earnings contain a greater level of transitory items, particularly when firm size is small; and (ii) cashflows provide higher incremental information. Our results are consistent with investors perceiving earnings as progressively less informative as the probability of failure increases, and the likelihood of earnings manipulation for the purpose of reducing proximity to debt covenants increases.

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“…The research instrument utilized in this study was designed based on the literature (Dempsey, Gatti, Grinnell, & Cats-Baril, 1997;Gomes et al, 2004Gomes et al, , 2008. The instrument development included the adaptation to the realities of the Portuguese service environment.…”

Section: Instrumentmentioning

confidence: 99%

“…The final version of the instrument was composed of 63 financial and non-financial measures, which were consistent with the literature. Based on the literature (Dempsey et al, 1997;Gomes et al, 2004Gomes et al, , 2008, these measures were classified into eight categories (Exhibit 1). It is to be noted that the measures utilized in this study are not organization specific, as different organizations might gage a particular construct, such as customer satisfaction utilizing different measurement tools.…”

Section: Instrumentmentioning

confidence: 99%

“…The differences were multiplied by their predictive values to provide scores that reflect the relative importance of the predictive value on the measure utilization (Dempsey et al, 1997;Foster & Gupta, 1994;Gomes et al, 2004Gomes et al, , 2008. As such, the larger this indicator is, the greater the disparity between the usefulness of the measure and its information availability.…”

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An assessment of performance-related practices in service operational settings: measures and utilization patterns

Gomes

Yasin

2013

The Service Industries Journal

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The objective of this study is to examine the current practices related to performance measurement in service operational settings. Several statistical procedures are utilized to analyse the data collected from Portuguese service organizations. These procedures include multiple regression analysis, cluster analysis, and gap analysis. Overall, the results of this study indicate that service organizations are beginning to view performance from a broad, organizational perspective. However, they are still, to a certain extent, emphasizing financial measures of performance. This study provides managers of service organizations with valuable insights into the organizational role of performance measures and measurement. This line of research is consistent with the significant growth of the service sector in recent years. IntroductionService organizations are unique operational open systems. These operational systems, dynamically, interact with their environments in order to satisfy the needs and wants of the increasingly sophisticated customers. In this context, measuring, tracking, and improving the performance of these systems require a systematic approach which takes into account the different aspects of performance. The effective management of the different dimensions of service performance is critical towards achieving and sustaining a competitive advantage in an increasingly competitive market place. However, due to the difficulties associated with the measurement of certain aspects of performance, some service organizations tend to emphasize certain performance dimensions at the expense of others. Such approach to service performance may compromise the effort to improve the overall organizational performance. This, in turn, may lead to difficulties in achieving a competitive advantage in the market place.Despite the difficulties associated with measuring certain aspects of service performance, managers of service organizations are becoming increasingly aware of the need to capture, monitor, and improve their organizational performance in order to create or sustain a competitive strategic advantage (Forslund, 2007;Tiernan, Rhoades, & Waguespack, 2008;Urban, 2009). However, due to their intense interaction with customers, the main concerns of the managers of organizations in service industries have been focused on measuring customer satisfaction and service quality (Chen, 2009;Deng, 2008).Although customer satisfaction and service quality are considered critical aspects of performance, other aspects of service performance, such as aspects related to efficiency of operations, competitive environment, and human resources utilization, among others, should not be overlooked. While studies dealing with these performance-related concerns in manufacturing operational settings have been forthcoming ), this has not been the case in most service operational settings (Jusoh & Parnell, 2008).A literature review which examined articles related to service performance measurement and measures utilized, between 1981 and 2008, call...

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The Use of Strategic Performance Variables as Leading Indicators in Financial Analyst's Forecasts

Cited by 53 publications

References 3 publications

The use of intellectual capital information by sell-side analysts in company valuation

The use of intellectual capital information by sell-side analysts in company valuation

Accounting Variables and Stock Returns: The Impact of Leverage

An assessment of performance-related practices in service operational settings: measures and utilization patterns

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