Binod Guragai and Paul D. Hutchison
Prior literature provides empirical evidence that financial performance improves for core remaining operations after a firm discontinues some of their operations. This study aims…
Abstract
Purpose
Prior literature provides empirical evidence that financial performance improves for core remaining operations after a firm discontinues some of their operations. This study aims to examine whether the association between discontinued operations and future financial performance improvement is affected by a regulatory rule (i.e. Statement of Financial Accounting Standards 144 [SFAS 144]) that significantly altered the reporting requirements of discontinued operations. This study also examines whether the association is dependent on the profitability of the operations discontinued.
Design/methodology/approach
Ordinary least square regressions are used to test the association between discontinued operations and financial performance improvement, conditional on the profitability of operations discontinued in the pre-SFAS 144 and SFAS 144 regulatory regimes. Data on profitability of operations discontinued is hand-collected.
Findings
Results suggest that firms experience improvement in financial performance following the reporting of discontinued operations in the pre-SFAS 144 era. Using hand-collected data on the profitability of operations discontinued, this research study also shows that improvement in performance is stronger for firms that discontinue loss operations compared to those that discontinue profitable operations.
Originality/value
This study explores the impact of regulatory change on the association between discontinued operations and future performance. Furthermore, unique hand-collected data is used to understand whether financial performance improvement is conditional on the profitability of the operations discontinued. Results documented in this paper should be of interest to investors, regulators and analysts in understanding the long-term strategic implications of discontinued operations.
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Binod Guragai and Paul D. Hutchison
The purpose of this study is to examine the value of auditor attestation in internal control over financial reporting (ICFR) disclosures. The authors argue that internal control…
Abstract
Purpose
The purpose of this study is to examine the value of auditor attestation in internal control over financial reporting (ICFR) disclosures. The authors argue that internal control material weakness (ICMW) disclosures issued without auditor attestation by non-accelerated filers provide weaker signal to the impaired financial reporting quality compared to those issued with auditor attestation by accelerated filers.
Design/methodology/approach
This study investigates the differences in the association between ICMW disclosures and impaired financial reporting quality, as proxied by financial statement restatements, for accelerated and non-accelerated filers. The authors use propensity score matching to find control groups for both accelerated and non-accelerated filers.
Findings
The authors find that ICMW disclosures signal impaired financial reporting quality for both accelerated and non-accelerated filers, but such signaling is weaker for non-accelerated filers compared to accelerated filers.
Research limitations/implications
Although propensity score matching was used to match firms with and without ICMW disclosures, any unobservable fundamental differences between these groups may affect the results of this study.
Originality/value
This study shows that auditors’ involvement in the assessment of internal control effectiveness improves the signaling effect of ICMW disclosures on impaired financial reporting quality. As approved by the House Financial Services (HFS) Committee on November 4, 2009, non-accelerated filers are permanently exempt from auditor attestation requirement. This study provides some evidence that the exemption of non-accelerated filers from auditor attestation may have unintended consequences, and these results should be of interest to regulators and investors.
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Binod Guragai, Paul D. Hutchison and M. Theodore Farris
The purpose of this research study is to use a large sample of the US companies and investigate the impact of cash-to-cash cycle’s (C2C) length on company profitability and…
Abstract
The purpose of this research study is to use a large sample of the US companies and investigate the impact of cash-to-cash cycle’s (C2C) length on company profitability and liquidity in present and future periods and also examine whether such impact is dependent upon firm size or industry type. The authors investigate the association between C2C length and return on equity (ROE), as well as liquidity ratios for current and future years using linear regression models. The authors further examine such association for separate industries and explore the effect of size on the primary associations investigated. Consistent with prior literature, this study documents that C2C length is negatively (positively) associated with current profitability (liquidity). The authors also find that there is a significant negative association between C2C length and future profitability extending up to three years, but only for firms in the manufacturing industry. This research study shows that C2C length affects a firm’s current financial performance and managers should view C2C management as an important strategic tool. However, the authors caution that C2C management is not a “one size fits all” strategy and managers in smaller firms should pay close attention to their C2C cycle. The authors also show that firms in manufacturing industry will specifically benefit financially over long-term from C2C management. This article complements existing literature that examines the impact of working capital management on a firm’s financial performance and extends the literature by examining such relationship for different industries and firm sizes. Although the authors include various factors (e.g., firm size, leverage, growth, industry, year, and past performance) in regressions to control for observable differences among firms, there might be other unobservable differences that may have an effect on the results documented.
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Paul D. Hutchison and Craig G. White
Productivity, participation, and trend analyses are used in this study to examine academic tax publications by accounting faculty. These analyses utilize a database of academic…
Abstract
Productivity, participation, and trend analyses are used in this study to examine academic tax publications by accounting faculty. These analyses utilize a database of academic tax articles from 1980 through 2000 derived from 13 academic research journals. Results suggest that, on average, 46 tax articles have been published annually during the most recent five-year period, sole or dual authorship is the primary publication strategy by authors of academic tax articles, and assistant professors authored the most tax articles on an annual basis in these journals. The results also find that schools of residence for those publishing are far more diverse than the schools of training. Comparisons with Kozub et al. (1990) show some limited similarities for school at publication and university of degree productivity listings. This study also identifies some of the overall context for tax accounting research by noting groups making a significant contribution to the literature.
M. Theodore Farris and Paul D. Hutchison
The cash‐to‐cash (C2C) metric has evolved as one of the first measurements bridging across the firm. Therefore, it is important for managers to understand how the C2C metric is…
Abstract
The cash‐to‐cash (C2C) metric has evolved as one of the first measurements bridging across the firm. Therefore, it is important for managers to understand how the C2C metric is calculated, as well as how a company should compare in its C2C performance. In this paper, we define C2C and how to calculate it. Then, we provide an analysis and summary of C2C in 2001 for 5,884 companies using median performance by industry. A typology is introduced to classify industry performance using a 2 x 2 x 2 matrix based on the three variables of the C2C metric: accounts payable, inventory, and accounts receivable. We also consider how performance has changed since 1986, identify the key drivers to this change, and describe which industries have experienced the greatest change in C2C performance. Finally, managerial implications and future research questions are offered.
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M. Theodore Farris and Paul D. Hutchison
Over recent years supply chain management has grown in importance because of the proliferation of improved information flows, outsourcing practices, strategic alliances and…
Abstract
Over recent years supply chain management has grown in importance because of the proliferation of improved information flows, outsourcing practices, strategic alliances and partnerships, and the reshaping of the organizational focus from functional silos toward integrated activities. Logistics and supply chain management emphasize achieving lowest total cost through synergistic interaction of all supply chain components. The cash‐to‐cash (C2C) metric is an important measure as it bridges across inbound material activities with suppliers, through manufacturing operations, and the outbound sales activities with customers. This paper first defines how to calculate C2C. It then overviews the importance of measuring C2C, using both accounting and supply chain management perspectives. Next, it identifies key leverage points that are necessary to manage C2C effectively. Finally, future research questions are developed that should prove useful in guiding the development of C2C as a usable metric.
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Tae-Ho Lee, Jung Ung Min and Jung-Soo Park
The main streams of the supply chain are defined as material, information and financial flow. There have been many studies and practical cases regarding the flow of material and…
Abstract
The main streams of the supply chain are defined as material, information and financial flow. There have been many studies and practical cases regarding the flow of material and information including information sharing. However, financial flow related studies have not been widely examined relatively, compared with their importance.
The information sharing is recognized as the method that can reduce the Bullwhip effect in supply chain management. The author intends to analyze the impact of financial information sharing on the results of the supply chain.
In the point of supply chain risk management view, the author examined the impact of financial flow among the various factors that can impede the stability of the supply chain.
In this study, the author embodied the simulation regarding the impact of financial information flow on supply chain performance and stability based on the system dynamics methodology and analyzed the performance.
Assuming the supply chain, composed of supplying company, manufacturing company and sales company , the author embodied the simulation model and assumed that working capital and cash information sharing were achieved. The author embodied the model to affect the settlement conditions according to the results of financial information sharing.