Academic literature on the topic 'Enterprise value to earnings before interest and taxes ratio'

Corporate social responsibility (CSR) is one of the main drivers of corporate reputation. Many studies show that CSR can positively affect financial performance (FP) and vice versa. However, the relationship between FP and CSR depends on the type of industry in which the company operates, and there is little research regarding the energy sector in this area. The basis of empirical research in this study is slack resource theory which argues that financial performance is the cause of corporate social performance. This paper aims to analyze if financial performance affects corporate social responsibility adoption in energy sector companies. In order to achieve this goal, the study specifically examines the relationship between selected financial performance indicators and CSR adoption. Analyzing an international sample of 219 companies from thirty-two countries for 2020, we observed the statistically significant relations between financial performance and the implementing of the CSR strategy of the energy industry companies. The Return on Assets measure (ROA) and the Earnings Before Interest and Taxes measure (EBIT) were significantly higher among companies implementing the CSR strategy. The Enterprise Value to earnings before interest, taxes, depreciation, and amortization ratio (EV EBITDA) was lower among companies that adopted CSR. We did not confirm that the Return on Equity measure (ROE), Beta coefficient, and EBITDA per Share correlated with CSR adoption. Our research had implications for firms’ investment policies in social initiatives and highlighted the relation between the financial performance and CSR initiatives of the energy sector companies.

Research background:Legal earnings manipulation is current hot topic, which is evidenced by a significant number of academic articles from the countries of developed markets. But this issue has been still the research gap for the emerging countries. Slovakia and Bulgaria are emerging counties with the similar economic and political history. The existence of the purposeful earnings management is confirmed in both countries. Therefore, the enterprises from these countries are selected to the common comparison.Purpose of the article:The main purpose and the set target of delivered examination is to disclose significant conformity or discrepancy in the dimension of the legal managers’ earnings modification in the Slovakian and Bulgarian enterprises.Methods:The provided financial modelling used 1,089 Slovak enterprises and 1,421 Bulgarian enterprises. Two parametric tests were computed for this study. Fisher’s F-test to detect the ratio between the variances of the populations, and t-test for two independent samples to test provided hypothesis of the article.Findings & Value added:The paper aimed at the earnings before interest, taxes (EBIT) in two emerging countries under a global magnifier. It was detected that the dimension of financial managers’ earnings manipulations in the Slovakian and Bulgarian enterprises is not significantly different. The similar nature of the approach of the management to the earnings manipulation was identified.

This study aims to predict the possibility of Financial distress in the textile and garment industry using the Altman Z-score prediction model and analyze the impact of Financial distress on the company's stock performance as measured by stock returns. This research used descriptive analysis and verification methods. Applying a purposive sampling method, the research sample consisted of 15 issuers from the textile and garment industry during the observation period of 2012-2016. This research used panel data regression to analyze research data. The results showed that one company did not experience financial problems, one company had potential financial problems, and the 13 other companies experienced Financial distress. The results of model testing showed that Altman Z-score can be used to predict Financial distress conditions in the textile and garment industry for the 2012-2016 period. The results of hypothesis testing showed that only one ratio of the Altman Z-score model has a significant effect on stock returns, i.e., market value of equity to book value of debt, while other ratios of working capital to total assets, retained earnings to total assets, earnings before interest and taxes to total assets, and sales to total assets have no significant effect on stock returns. These findings imply that the investors in the textile and garment industry attentively observe the company's market value in making any investment decisions. Keywords: Altman Z-score, Financial distress, stock returns, textile and garment industry

This paper provides empirical evidence on the significance of financial risk factors in predicting default companies. Traditionally, credit decision process is built on accounting ratios derived from financial statements of the borrower. Combining various ratios through application of multivariate statistical techniques and testing their predictive power has been popular in credit risk quantification. Altman's Z-score model is the most acceptable model in this category. In this paper, three forms of Z-score models are applied: The first equation is developed by surveying the internal credit rating models of the Indian banks and the ratios selected are: current ratio, debt-equity ratio, and operating margin. The second equation is similar to that of Altman's (1968) original equation with a slight modification: instead of debt-to-market value of equity, debt-to-book value of equity is considered. The other three ratios of the second equation are working capital to total assets, retained earnings to total assets, and earnings before interest and taxes to total assets. The third equation is called as Altman, Hartzell and Peck's ‘Emerging Market Score Model.’ Except the asset turnover ratio, all the ratios of the second equation are considered. In all the three equations, the coefficients are estimated by using the development sample of 112 companies. The dominant variables discriminating the default companies from non-default ones are: current ratio, debt-equity ratio, operating margin, working capital to total assets, earnings before interest and tax to total assets, net worth to debt, and asset-turnover ratio. The classification accuracy of the second and the third equations is 82 per cent while that of the first equation is only 57 per cent. It implies that the most widely used two ratios — current ratio and debt-equity ratio — are relatively poor in predicting the default companies. Similarly, the ROC accuracy ratio is the highest for Altman's equation whereas the variables considered in internal credit rating models of banks is having a relatively low accuracy ratio. To test the ability of the model in identifying the defaulting companies correctly, an unbiased diagnostic test of the model is conducted on two separate sets of defaulted firms. The results reveal the following : The Altman's model is capable of predicting default in most of the sample companies. The hold-out sample accuracy results show that the selected variables are capable of predicting default. The analysis shows that the financial risk factors being considered by banks in their internal rating models are not very effective in comparison to other two models in discriminating the firms into default and non-default categories. Banks can map the internal ratings with the Z-scores and scale this up to assign various credit ratings. By arriving at the coefficients on the basis of their own database, banks can develop Z-score calculators for various segments of borrowers.

Abstract This study examines the role of firm-level financial and operational characteristics in explaining the market valuation of oil and gas-based energy companies. Using panel data based on 82 major oil companies, the study explores the value drivers involved in value creation of integrated and independent oil companies. In other words, the study explores the impact of investment, financing, and dividend decisions on value creation in energy firms. The results suggest that stock market is skeptical about the risky capital expenditures undertaken by oil and gas firms. The study finds some evidence for signaling theory of debt financing, which suggests that the use of higher debt by energy companies is viewed positively by markets. Higher dividend payment is viewed negatively by markets. The enterprise value variable EVEBITA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is positively related to share price with statistical significance. Higher profitability of oil firms leads to greater value creation for oil and gas-based firms. The higher the liquidity position, the greater the value enhancement of oil and gas firms would be. The study finds some evidence for the positive association of operating characteristics with market valuation of oil-based energy firms. Higher reserve replacement leads to higher valuation and is viewed positively by market analysts. This study aims to provide new insights into how financial and operational information relates to the market valuation of both independent and integrated oil companies. The identification of factors for value creation in stock market is critical for the design of effective policies for wealth creation. JEL classifications: G30, G31 Keywords: Market Valuation, Profitability, Reserve Replacement, Integrated Oil Companies

The purpose of this research is to examine the accuracy of the Altman Model and the Ohlson Model in Bankruptcy Prediction.The research population is all companies who are listed on the Indonesian Stock Exchange. The sample of the research is 40 manufacturing companies listed on the Indonesian Stock Exchange in the period of 2010-2014 that are divided into companies with financial distress and those without financial distress.The data analysis technique is the Multiple Discriminant Analysis and Logit Analysis. The Multiple Discriminant Analysis is derived from the Altman Model while the Logit Analysis is derived from theOhlson Model. The results show that the Ohlson Model and the Logit Analysis are more accurate than the Altman Model and the Multiple Discriminant Analysis in predicting bankruptcy of manufacturing firms in the Indonesian Stock Exchange (BEI) in 2010-2014. Also, the results of the study reveal that the ratio of retained earnings to total assets; earning before interest and taxes to total assets; market value of equity to total liabilities; sales to total assets; and debt ratio, return on assets, working capital to total assets and net income were negative in the last two years. Hence constitutes the benchmark for consideration in determining the financial distress of a company.

<span><em>Bankcruptcy is a very important problem, in which every </em><span><em>company should be aware of. It is very important to detect the signs of the </em><span><em>coming bankruptcy of the company as soon as possible in order to take </em><span><em>effective action to avoid it. One popular model to do so is Z-score, a </em><span><em>statistical model to predict bankruptcy based on company financial </em><span><em>performance. This paper deals with the analysis of the financial performance </em><span><em>of property companies listed on the Indonesia Stock Exchange. However, in </em><span><em>previous research it was found that there is no strong correlation between the </em><span><em>companies financial performance with their stock prices, thus encouraging </em><span><em>further research. In this research, the analysis focused on the influence of the </em><span><em>financial ratio-ratio (X1) Ratio net working capital / total assets, (X2) Ratio of </em><span><em>retained earnings / total assets, (X3) Ratio of earnings before interest and </em><span><em>taxes / total assets, (X4) Ratio of market value equity / book value of total </em><span><em>debt, and (X5) Total sales / Total assets) to the stock price. Apparently based </em><span><em>on classical assumption test, multiple regression analysis, coefficient of </em><span><em>determination, and F-Test , it was found that there is no significant effect </em><span><em>between the financial value of ratio-ratio simultaneously with their stock </em><span><em>prices, and the ratio of total sales / total assets is the most dominant variable </em><span><em>influence.</em></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span><br /></span>

Purpose – The purpose of this paper is to highlight the differences in terms of economic and financial performance, between family firms (FFs) and non-family firms (NFFs) in the wine sector in Italy and France, where this sector is one of the most representative national economic activities. Design/methodology/approach – This study is based on a sample of Italian and France companies operating in the wine sector. The sample, including medium and large firms, includes 288 FFs and 302 NFFs, for a total of 590 firms. Amadeus database represents the data source. According to Astrachan and Kolenko (1994), a firm is classified as a FF if family had to own over 50 per cent of the business in a private company or more than 10 per cent of a public company. Findings – This study confirms that the family variable is relevant to achieve good economic and financial performance, and endow firms with different features. In terms of economic performance, FFs both in Italy and France outperform in. terms of return on equity and return on assets, though only Italian NFFs outperform in earnings before interest and taxes. In terms of financial performance, both in Italy and France NFFs outperform FFs in current ratio and liquidity ratio, while FFs outperform in solvency ratio. Research limitations/implications – Limitations of the study concern the method adopted, as it could be integrated with some econometrical models. The implications of the paper are relevant for families and regulatory bodies because it helps them to better understand the effects of governance on economic and financial performance. Moreover, the findings of the study can influence the decision-making process of investors in order to identify the long-term outperformers listed on a stock exchange. Originality/value – This study contributes to the literature on family businesses phenomenon on wine sector, which represents one of the most representative of the economy of several countries and in which family businesses are widespread.

It is a great pleasure and at the same time a challenge to introduce a new journal into the global community, especially when the objective is to publish high quality impactful manuscripts or papers. Although, accounting and finance studies constituted a primary focus for most of the scholars because of our understanding of their values. However, only a few of us spend much time to explore emerging areas. Notwithstanding the challenges, this journal seeks to provide readers throughout the world with technology backed quality peer reviewed scholarly articles on a broad range of established and emergent areas to accounting and finance in particular, and business, economics and social sciences in general. A one on one discussions with distinguished scholars attests to the fact that there is a dire necessity for such a journal in the Indian-Pacific axis. In order to create a niche for IPJAF as the most authoritative journal on accounting and finance, a team of highly valuable or distinguished scholars has agreed to serve on the editorial board. I am privileged and opportune to have Associate Editor-in-Chief, Aidi Ahmi (Universiti Utara Malaysia), and Associate Editors: Muhammad Ali Abdul Hamid (University of Sharjah, UAE), Bamidele Adepoju (Bayero University), Abayomi Ambali Alaka (Institute of Chartered Accountants of Nigeria), and Dorcas Adebola Babatunde (Afe Babalola University of Ado-Ekiti). Our editorial board members are scholars from several countries worldwide that are actively engaged in academic and professional committees, supervising doctoral thesis and doctoral teaching level courses. The Editorial Board is supported by a group of competent and experienced international review panel members from different continents of the world. With this synergy, the journal brings a significant representation of the field of accounting and finance both in established and developing areas. Our existence is anchored on the service and dedication of IPJAF editorial board and the editorial team. This inaugural volume consists of five manuscripts. Shitu and Popoola’s article, An investigation of Socially Sustainable Behaviour of Local Players in the Supply Chain of Shea Butter: A Role Theory Perspective, explores the roles, practices, and behaviour of local supply chain stakeholders (women entrepreneurs) in Shea nut picking and Shea butter processing in Rural Borgu, Nigeria. Also, the research examines the local buying agents (LBA) who serve as the middlemen between the rural women and the exporters of Shea butter. The findings indicate that the present active engagement and practices of these local stakeholders do not align with the principles of the sustainable supply chain. The paper exposes factors such as gender disparity, weak access to financial support, and information asymmetry as major contributors to the present roles, practices, and behaviour of the local actors. Lina and Jingga's article, Factors influencing Tax Avoidance activity: An empirical study from Indonesia Stock Exchange, examines the influence of the firm characteristics to tax avoidance activity in the listed companies in Indonesia. The paper adopts the proxies of firm size, leverage, capital intensity, inventory intensity as the business characteristics and return on asset and market-to-book ratio as control variables. The result of this research reveals that leverage has a positive influence towards tax avoidance activity, while the rest variables have no influence towards tax avoidance activity. Adedeji, Popoola and Ong Tse San's article, National Culture and Sustainability Disclosure Practices: A Literature Review, investigates the extent to which national culture is an explanatory variable for firm’s disclosure choices for sustainable development in the advanced, emerging and developing nations of the world, especially that entities interact in globally knowledge-based economies. The paper identifies that not much work had been done in the area of traits and characteristics in specific national cultural environments and their effects on sustainability disclosures, in particular, social and environmental disclosures. The paper concludes with the recognition of the need to gear up researchers and policy making bodies to encourage advancement of studies on the intellectual capital concept and resource-based value theory to enhance sustainability development globally. Imelda and Alodia's article, The analysis of Altman Model and Ohlson Model in Predicting Financial Distress of Manufacturing companies in the Indonesia Stock Exchange, examines the accuracy of the Altman Model and the Ohlson Model in Bankruptcy Prediction. The results of the paper show that the Ohlson Model and the Logit Analysis are more accurate than the Altman Model and the Multiple Discriminant Analysis in predicting bankruptcy of manufacturing firms in the Indonesian Stock Exchange (BEI) in 2010-2014. The paper reveals benchmark for consideration in determining the financial distress of a company such as the ratio of retained earnings to total assets, earnings before interest and taxes to total assets, market value of equity to total liabilities, sales to total assets, debt ratio, and return on assets, working capital to total assets and net income. Arowolo and Ahmad's article, Quality-differentiated Auditors, Block-holders and Monitoring Mechanisms, seeks to investigate how monitoring mechanisms influence the block-holders in 111 Nigerian non-financial listed companies to resolve the problem of business failures as a result of information asymmetry existing in the relationship of the managements with the shareholders. The study also investigates the mediating effect of the quality-differentiated auditors on the relationship between block-holders and monitoring mechanisms. The findings indicate that the block-holders significantly influence monitoring mechanisms. Also, the results reveal that quality-differentiated auditors positively affect monitoring mechanisms and that it significantly explains the relationship between block-holders and monitoring mechanisms. It is my conviction that in the coming year, the vision of IPJAF to publish high quality manuscripts in the established and emergent areas of accounting and finance from academic and professional researchers will be attained, maintained and appreciated. As you read throughout this inaugural volume of IPJAF, I would like to remind you that the success of our journal depends on your active participation and those of your colleagues and friends through submission of high quality articles for review and publication. I assure our prospective authors, regardless of the acceptance of your manuscripts or not, to enjoy the benefits IPJAF provides about mentoring nature of our review process, which provides high quality, helpful reviews tailored to assist authors in improving their manuscripts. I acknowledge your support as we strive to make IPJAF the most authoritative journal on accounting and finance for the community of academic, professional, industry, society and government. Oluwatoyin Muse Johnson PopoolaEditor-in-Chiefpopoola@omjpalpha.com

How to manage financial performance through the utilization of intellectual capital (IC) is an important issue in the knowledge economy. The objective of this study is to investigate the impact of IC on financial performance for manufacturing listed companies in the Chinese context. Financial performance is measured from two distinct aspects: (1) firm profitability, measured through earnings before interest, taxes, depreciation and amortization (EBITDA), net profit margin (NPM), and gross profit margin (GPM), and (2) corporate return, measured through return on investment (ROI), return on assets (ROA), and return on equity (ROE). The results show a positive relationship between NPM, GPM, ROI, ROA, ROE, and IC (measured through the market-to-book ratio). In addition, the more intangible-intensive manufacturing listed companies exhibit better financial performance. The study provides evidence that higher investment in IC can improve value creation in the emerging economies.

In the field of sustainable finance, Environmental-, Social- and Governance-ratings (ESG) have become an acknowledged measurement of a firm's sustainability performance. The increased awareness of sustainability issues in today's society is undeniable. However, based upon contradicting results from previous research, it was uncertain if investors were rewarding a firm’s sustainability efforts in the form of a lower cost of equity. The purpose of this thesis has therefore been to examine the relationship between sustainability, risk and valuation as well as stock-price behavior in times of crisis regarding large firms publicly listed in the Nordic countries. In order to fulfil the purpose, various multiple regression models have been conducted on quarterly data from the period between 2011 to 2020. The approach chosen to examine if ESG has a relation to the cost of equity has been to calculate the implied cost of equity inferred from consensus forecasts of future financial development and stock price at each point in time, also known as the ex-ante cost of equity. Since the independent variable ESG-score was not likely to be the sole variable to affect the independent variables in our multivariate regression models, we have followed previous studies in the choice of control variables. The empirical results of this study showed a significantly negative relationship between a firm’s ESG-score and the cost of equity. In addition, our results showed a significantly positive relationship between a firm’s ESG-score and both the price-to-earnings ratio as well as the price-to-book ratio while no significant relationship between a firm’s ESG-score and the enterprise value to earnings before interest and taxes ratio could be established. Finally, the results of this thesis showed that firms with a greater ESG-score generated excess returns during the latest market turmoil of 2020 caused by the Covid-19 outbreak. This thesis challenges the value-destruction view of ESG-efforts since our results indicate that investors are pricing sustainability risk with a negative risk premium in line with the value creation approach. No causality test has been performed during this study, however several possible mechanisms by which ESG impacts the valuation and crisis resistance have been discussed based upon previous research and the theoretical framework. We argue for the reduced cost of equity to reflect diminished information asymmetry, a larger investor base, improved growth and cash-flow opportunities as well as reduced risk for litigations as aconsequence of a more sustainable business conduct. To the best of our knowledge, no previous study on the topic has been conducted on the Nordic markets. This study fills thus a research gap on the relation between sustainability, risk andequity market valuation and we sincerely hope to have contributed to academia with new approaches.

The chapter investigates the degree to which stock market prices were influenced by company financial performance during the period March 2007–September 2020, which included both the beginning of the global financial crisis and the ongoing COVID-19 pandemic crisis. Using quarterly financial data retrieved from the first 34 companies listed on the New York Stock Exchange according to their transaction volumes, empirical results show that, in the period between the two crises, stock market metrics including price to earnings, price to sales, price to book value, and price to free cash flow were shaped by financial performance indicators such as gross margin ratio, operating margin ratio, earnings before interest, taxes, depreciation and amortization margin, pretax margin, and net profit margin.