Search results

The purpose of this paper is to examine whether cash flow volatility (CFV) has a negative impact on future stock returns, and whether the CFV-return relation is different among financially constrained and unconstrained firms, by using a broad sample of 21 developed markets.

The study conducts portfolio analysis to test the CFV effect on returns. Risk-adjusted returns (alphas) are computed with respect to country-specific factors based on market, size, book-to-market, and momentum.

The strategy of buying stocks with low CFV while shorting stocks with high CFV delivers significant alphas in more than three-fourths of the markets. The alphas for the long-short portfolio based on CFV are positive and statistically significant in more than 70 percent of the countries among financially constrained firms, largely driven by the underperformance of high-CFV stocks. In comparison, the CFV effect is observed in less than 45 percent of the countries among financially unconstrained firms, and is largely driven by the outperformance of low-CFV stocks.

This study extends prior findings by providing evidence of a negative relation between CFV and stock returns in a majority of global equity markets. The evidence also suggests an important role of financial constraints in explaining this relation.

The paper aims to investigate the value-relevance of changes in fair values of investment property reported under International Accounting Standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13.

Multivariate regression models are used to regress cumulative market-adjusted stock returns of real estate firms on changes in fair values, along with control variables and corporate governance variables, in order to examine the research question.

Using hand-collected data from the Australian Real Estate Industry (AREI), the authors find that changes in fair values of investment property are value-relevant for equity investors. The authors further find that using unobservable inputs in an active market (Level 3 inputs) does not diminish the information content of fair values. The authors document that properties valued exclusively by directors have a significantly reduced value-relevance, whereas property valuations made collectively by both directors and independent valuers have superior value-relevance, possibly owing to the combination of inside knowledge and externally imposed monitoring. Collectively, the findings suggest that in the real estate industry, where unobservable inputs are commonly used to determine fair values of properties, the fair values determined subjectively are perceived to be sufficiently informative and relevant.

The authors' findings have important implications for accounting standard-setters in considering whether an external valuation should be required and whether the extensive measurement-related fair value disclosure requirements are useful.

The study extends previous archival evidence and complements prior commentaries on experimental and analytical work in the Australian regulatory environment.

This paper aims to describe how successfully a particular restrictor delivers its best in increasing the conical journal bearing performance. The restrictors are used in the hole-entry conical journal bearing subjected to hybrid mode. Thus, the restrictors, like constant flow valve (CFV), orifice and capillary, are studied comparatively.

Numerical simulation for the bearing results with the three restrictors are obtained by using finite element method (FEM) under the well-known modified Reynolds equation.

When the hole-entry conical journal bearings, with the restrictor design parameter range C¯_s2 = 0.03 – 0.09, are operated, the results obtained are quite distinctive and significant. It indicates that the CFV restrictor-based conical bearing gives enhanced performance in comparison to orifice and capillary restrictors. Moreover, it suggests the performance-wise sequence of the restrictors in hybrid bearings as CFV > Orifice > Capillary.

The outcome of the research paper will give insight to help the bearing designer to choose the particular restrictor in hybrid conical bearing depending on the industrial need.

This study delves into the determinants and praxis of derivative hedging instruments (DHIs) usage of Malta, a small island state. Empirical evidence is also provided in relation to the impact of DHI usage and the adoption of a hedge accounting (HA) model in entities’ financial statements. A mixed methodology design is deployed involving: (1) a series of statistical models and tests and (2) seven semi-structured interviews with senior professionals.

The data collected comprise proxy variable values collected from the financial statements of 568 firm-years from 107 Maltese entities between the years 2009 and 2014. Greater likelihood of financial distress, decreasing investment efficiency and increased levels of gearing, are identified as being significant determinants for the use of DHIs. Although DHI usage is low in comparison to larger states, it has been increasing over the period under study.

HA is evidenced to be less popular in Malta, but the study evidences correlation between certain DHIs and HA usage. The quantitative statistical model results in evidence with no significant earnings volatility (EV) or cash flow volatility (CFV) reduction effects through the application of HA. Albeit, the study finds a significant CFV reduction effect emanating from DHI usage, but no corresponding EV reduction effect.

Better education and dissemination of the HA treatment by auditors and regulatory bodies could help propagate the HA treatment, potentially enhancing the EV reduction effectiveness of DHI use. This research provides empirical evidence to substantiate the rationale behind utilising DHIs in smaller island states, especially when coupled with a sound risk management culture.

This paper aims to examine the information content of changes in fair values of investment property reported under international accounting standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13 to debtholders. This study further examines the effect of fair value hierarchy inputs, valuer types and the quality of fair value measurement-related disclosure on the information usefulness of changes in fair value.

This paper performs a panel regression on the cost of debt capital and changes in fair value of investment properties, and fair value measurement features using data covering periods 2007–2015 from Australian real estate companies.

The findings suggest that changes in fair value of investment property are informative about the real estate firm’s future cash flow to debtholders. Also, the findings show that the use of unobservable inputs in an active market (Level 3 inputs) and Level 2 has no different impacts on the cost of debts. Also, this paper documents that employing the directors solely in valuation may lead to a higher cost of debts. Furthermore, this paper reports that an extensive fair value disclosure appears no additional value in the debt decision.

Collectively, the findings indicate that although the use of unobservable inputs is common in the real estate sector, information on the changes of the fair value of investment properties are informative to debtholders. The findings have important implications for accounting standard setters to consider revisiting the IAS 40 and IFRS 13 on whether the independent valuation should be required and whether the extensive disclosure requirement is worthwhile.

Service quality is a critical factor leading to firm returns. However, its benefit on the firm risk side metric is not clear. The purpose of this paper is to link firm service quality and firm cash flow volatility (CFV) and further investigates this relationship by incorporating the moderating effects from three environmental variables: munificence, dynamism, and complexity.

This study is based on a secondary data approach. The data are collected from multiple sources such as AMAC and COMPUSTAT. Robust regressions with a panel data approach are adopted to analyze the data.

Corporate service quality level has a strong effect in reducing firm CFV. Its impact is found to have a varied strength when the relationship is moderated by the environmental factors. In particular, it functions more strongly in high dynamism and high complexity environments.

Service quality has effects beyond the previous thinking that is mainly concentrated on firm profits. Managers now should know that it is also effective in smoothing cash flow and thus yields benefits for future corporate planning. This is particularly meaningful for companies that operate in a turbulent industry as well as in a highly competitive market.

This study is the first attempt that links firm service quality and firm risk factor represented by the volatility of income flow. It extends the role of service quality to an area that is increasingly emphasized by marketing researchers, e.g. the risk aspect of firm market-based assets.

Constant flow valves have been presented in industrial applications or academic studies, which compensate pressures of bearing recesses as load fluctuates. The flow rate of constant-flow valves (CFVs) can be constant in spite of the pressure changes in recesses. However, specific condition of design parameters must be satisfied. The paper aims to discuss these issues.

This paper utilizes analytical method to study the static characteristics of CFVs, three types belong to traditional design of CFV are reviewed afresh. Moreover, an innovative design for constant flow is presented and studied.

The review and study results reveal that appropriate relationships among design parameters for these types of CFVs.

The numerical simulation is used to investigate the influence of design parameters on the change of flow rate when pressure ratio of recess is changed.

Motivated by transformations in global food systems and increasing demand for multidimensional credence attributes, the authors analyze cacao value chains in Ecuador – the main producer of fine and flavor cacao worldwide. The authors identify opportunities and discuss how private and public sector initiatives can help meet emerging challenges.

Primary information was collected through interviews of actors in the Ecuadorian industry during spring/summer 2020, including cacao producer associations, exporter associations, chocolate processing firms, public institutions and local universities. Two focus groups were also conducted with producers from associations in the Ecuadorian Amazon.

Findings suggest new opportunities for cacao producers and chocolate processors have emerged from the global market transformation. To exploit these, firms need to personalize and differentiate their products, for example, by using quality certifications such as organic and fair trade. Market developments, such as European cadmium regulations and the necessity of worldwide traceability systems, are driving exporters to enhance Ecuador’s cacao value chains. The sector still requires coordination to reap the benefits associated with demands for credence attributes.

Findings are supported by two case studies. The first focuses on how associativity can help those producing high-quality beans to differentiate themselves in modern agri-food markets. The second describes the success of a local chocolate firm and its links with local farmers.

An electrorheological (ER) fluid comprises dielectric particles suspended in an insulating viscous medium. ER lubricants are considered smart lubricants. They have been applied in hydraulic valves, power transmission devices and damping systems. The purpose of this study is to investigate the performance of hydrostatic thrust bearing operating with ER lubricant.

Reynold’s equation was used to model the flow of the ER lubricant in the bearing. The continuous Bingham model was used to express the viscosity of the ER lubricant as a function of yielding stress, applied electric field and shear strain rate. The Reynolds equation is solved using the finite element method (weighted residual approach) to compute the film pressure as a primary variable and the lubricant flow rate, load-carrying capacity, stiffness and damping parameters as associated performance indices.

The effects of the pocket shape, compensating elements and ER lubricant on the bearing performance were investigated. The application of ER lubricant significantly enhanced the load-carrying capacity (48.2%), stiffness (49.8%) and damping (4.95%) of the bearings. Circular and triangular pocket bearings with constant-flow valves have been reported to provide better steady-state and rotor-dynamic performances, respectively.

This study presents the effect of an ER lubricant on the rotor-dynamic performance of hydrostatic thrust bearings with different pocket shapes.