Showing papers on "Cash flow forecasting published in 2018"
TL;DR: In this article, the authors examine the extent to which CFOs affect corporate cash holding policies and find that firms with strong CFO hold substantially less cash than firms with weak CFO, ceteris paribus.
50 citations
TL;DR: In this paper, the authors examined whether the motivation of institutional investors in monitoring a firm is positively related to the relative importance of the firm's stock in their portfolios and found that greater motivated monitoring institutional ownership is associated with a higher marginal value of corporate cash holdings, which cannot explain by other corporate governance measures and institution types.
44 citations
TL;DR: Although a few studies have considered the financing cost in the construction project, no research has been conducted to select the optimal financing alternatives out of those offered by financ... as mentioned in this paper.
Abstract: Although a few studies have considered financing cost in the construction project, no research has been conducted to select the optimal financing alternatives out of those offered by financ...
42 citations
TL;DR: Two neural network models for cash forecasting for a bank branch are presented – one is daily model – taking the parameter values for a day as input to forecast cash requirement for the next day and the other is weekly model, which takes the withdrawal affecting input patterns of a week to pred ict cash requirement in the next week.
Abstract: Artificial Neural Networks are universal and highly flexible function approximators first used in the fields of cognitive science and engineering. In recent years, Neural Networks have become increasingly popular in finance for tasks such as pattern recognition, classification and time series forecasting. The ability to predict cash requirement within reasonable accuracy of actual demand provides target for supply optimization well in time. Every financial institution (large or small) faces the same daily challenge. While it would be devastating to run out of cash, it is important to keep cash at the right levels to meet customer demand. In such case, it becomes very necessary to have a forecasting system in order to get a clear picture of demand well in advance. This paper presents two neural network models for cash forecasting for a bank branch. One is daily model – taking the parameter values for a day as input to forecast cash requirement for the next day and the other is weekly model, which takes the withdrawal affecting input patterns of a week to pred ict cash requirement for the next week. The system performs better than other cash forecasting systems. This system can be scaled for all branches of a bank in an area by incorporating historical data from these branches.
38 citations
TL;DR: In this paper, the authors introduce a model of optimal cash holdings and payments that exploits survey payment diaries from Austria, Canada, France, Germany, the Netherlands and the United States, and show that once obtained, cash goes first because it ”burns” in consumers' wallets.
33 citations
TL;DR: A multi-objective cash management model based on compromise programming that allows cash managers to select the best policies, in terms of cost and risk, according to their risk preferences is proposed.
Abstract: Work partially funded by projects Collectiveware TIN2015-66863-C2-1-R (MINECO/FEDER) and 2014 SGR 118.
32 citations
TL;DR: In this paper, the authors examined the link between foreign ownership and corporate cash holdings and found that higher foreign ownership is associated with more corporate cash ownership, which suggests that foreign investors in the Vietnam stock market are subject to precautionary motive and agency motive forcing firms to hold more cash.
Abstract: This article examines the link between foreign ownership and corporate cash holdings. We utilize a data sample of firms listed on the Ho Chi Minh City stock exchange covering the period 2007–2015. Employing different econometric techniques for panel data, we find that higher foreign ownership is associated with more corporate cash holdings. This finding suggests that foreign investors in the Vietnam stock market are subject to precautionary motive and agency motive forcing firms to hold more cash. However, the outcome suggests potential agency problems because managers might subsequently use this cash reserve for their own advantages. These problems are even more pronounced in emerging markets where investor protection mechanism is weak. Accordingly, this highlights the importance of a monitoring mechanism to refrain corporate managers from investing in value-destroying projects.
29 citations
TL;DR: In this paper, the authors examined the effect of bank-appointed directors on corporate cash holdings for Indian firms and found that firms with bank-appointed directors hold less cash compared to firms without bank-recommended directors.
27 citations
TL;DR: In this paper, the authors reveal, through a series of experiments, how to forecast, monitor, and control practices of the cash inflow and outflow and arrangement of deficits over a project's duration.
Abstract: Cash flow management entails forecasting, monitoring, and controlling practices of the cash inflow and outflow and arrangement of deficits over a project’s duration. This article reveals, through a...
21 citations
TL;DR: In this paper, the authors examine three competing hypotheses: (1) agency cost hypothesis that cash giving reflects agency cost and destroys value for shareholders, (2) investment hypothesis that stock giving is an investment by management that aims for better future return, and (3) information hypothesis that giving has informational value to shareholders as cash is a critical resource at a firm and giving is a decision by managers who are insiders.
Abstract: In this article, we propose that giving in cash and non-cash (in-kind) differ in their relation with the giving firm’s future corporate financial performance (CFP) and only cash giving is associated with future CFP. Using a novel dataset from ASSET4 that differentiates corporate giving over a sample period of 2002–2012, we examine three competing hypotheses: (1) agency cost hypothesis that cash giving reflects agency cost and destroys value for shareholders, (2) investment hypothesis that cash giving is an investment by management that aims for better future return, and (3) information hypothesis that cash giving has informational value to shareholders as cash is a critical resource at a firm and giving is a decision by managers who are insiders. We find that indeed, only cash giving is positively associated with future CFP and firm value, measured by Fama–French five-factor abnormal risk-adjusted stock returns, future return on assets, and Tobin’s Q. In addition, we find that the positive association exists only between excess, i.e., unexpected, but not expected cash giving and future CFP. Our empirical findings support the information hypothesis, but neither the agency hypothesis nor the investment hypothesis, and are robust to a number of endogeneity tests, including orthogonalized cash giving, instrumental variable regression using geography-based instruments, and propensity score matching. Furthermore, we show that the positive association between future CFP and unexpected cash giving is only pronounced at firms with good governance and relatively higher sales growth where agency problems are less likely, and at firms with no alternative mechanisms to demonstrate the strength of cash flow. Additionally, we do not find evidence that suggests in-kind giving to possess any informational value.
20 citations
TL;DR: In this paper, the authors developed a new stochastic simulation-based framework for forecasting the cash flow of the construction projects considering the owners' payment history in previous projects and intertemporal correlation between successive progress payments.
Abstract: Delays in progress payments have always been one of the most aggravating difficulties, threatening the desired profit margin and should be considered based on the owners’ financial records at the bidding stage. However, previous models have often ignored the probabilistic nature of cash inflow. The conducted research endeavours to develop a new stochastic simulation-based framework for forecasting the cash flow of the construction projects considering the owners’ payment history in previous projects and intertemporal correlation between successive progress payments. This process involves introducing the Budget Realization Index, with probabilistic nature, whose underlying distribution is determined based on the owners’ behaviour. The model was applied to four real projects in Iran. The financing costs inflicted on the contractors stood in the range of the simulation results in the uncertainty level of 50–80%. Therefore, the proposed systematic framework would appropriately perform for forecasting ...
Book•
10 Feb 2018
TL;DR: In this article, the authors consider the problem of managing two assets, cash and an earning asset, when net cash flows are stochastic and when there are transfer costs for transferring assets from one form to the other.
Abstract: We consider the problem of managing two assets, cash and an earning asset, when net cash flows are stochastic and when there are transfer costs for transferring assets from one form to the other. Previous work on the stochastic cash-balance problem has assumed holding costs for holding excess cash and penalty costs for holding insufficient cash, with these costs assessed per period (the same period in which there is a single decision or transfer opportunity and a single random cash flow). This formulation is appropriate when a firm faces minimum (or zero) compensating-balance requirements, but not when the compensating-balance requirement involves an average deposit balance over a number of decision periods. A dynamic programming model is presented which appropriately represents the relevant cost function for a firm facing an average compensating-balance requirement. The dynamic programming solution to a numerical example is compared to that of a static two-sided (s, S) policy; the optimal dynamic program...
TL;DR: In this paper, the authors examine the corporate cash holdings of listed shipping companies and show that shipping firms hold more cash than similar firms in other asset-heavy industries, and this valuation effect is most pronounced in bad times of the business cycle when external capital supply tends to becomes carce.
Abstract: We examine the corporate cash holdings of listed shipping companies and show that shipping firms hold more cash than similar firms in other asset-heavy industries. Higher cash holdings in the shipping industry are not attributable to firm- or country-level characteristics, but rather to the higher marginal value of cash. Shipping firms value an additional dollar of cash higher than matched manufacturing firms, regardless of their financial constraints status, but depending on their cultural background and the cyclicality of their expansion opportunities. Less procyclical shipping firms have a higher marginal value of cash, and this valuation effect is most pronounced in bad times of the business cycle when external capital supply tends to becomescarce.Overall, it appears that shipping companies are more conservative than their peers in managing their cash positions.
TL;DR: In this paper, the authors find evidence that acquirers that use stock payment are overvalued, especially when they have excess cash that they could have used instead, and suggest that investors interpret announcements of stock acquisitions as a signal that the acquirers' equity is overvalued and that high cash holdings intensify this signal.
Abstract: We find that acquirers’ announcement returns decline with their cash holdings, but only when at least part of the payment is in the form of stock. We further find evidence that acquirers that use stock payment are overvalued, especially when they have excess cash that they could have used instead. Collectively, our results suggest that investors interpret announcements of stock acquisitions as a signal that the acquirers’ equity is overvalued and that high cash holdings intensify this signal. However, our results are inconsistent with the common belief that cash holdings induce value-destroying acquisitions.
Posted Content•
TL;DR: In this paper, a multi-period approach to the valuation of streams of risky cash flows is proposed, which is based on the expected value of the output's or input's magnitude and the risk of output cash flow, as captured by a risk measure.
Abstract: Based on risk-value models we introduce a multi-period approach to the valuation of streams of risky cash flows. The valuation is based on the (expected) value of the output’s or input’s magnitude and the risk of the output cash flow, as captured by a risk measure. We derive three formulae for valuing single cash flows and utilize the principles of separate valuation and of cumulating the cash flows to derive a multi-period valuation method. In an axiomatic way, the article sets the foundations for a new approach and suggests several directions for its further development.
TL;DR: In this paper, the authors find very strong and consistent evidence that investments in strong-governance firms (managers not entrenched) are strongly sensitive to availability of internal cash flows while such sensitivity is not different from zero for entrenched management.
Abstract: We find very strong and consistent evidence that investments in Strong-Governance firms (managers not entrenched) are strongly sensitive to availability of internal cash flows while such sensitivity is not different from zero for Weak-Governance firms (entrenched management). We interpret this as evidence in support of Kaplan and Zingales' (1997) contention that sensitivity of investments to cash flows is not an adequate measure of financing constraints. More importantly, our findings are consistent with Kaplan and Zingales’ conjecture that the observed sensitivity of investments to cash flows in firms that do not face financing constraints may be driven by excessive risk aversion of managers.
TL;DR: In this article, the authors proposed a model that calculates the expected financing cost based on the cash flow forecast, which is more realistic than assuming an approximate percentage of the total cost.
TL;DR: In this article, the authors developed an empirical analysis of the relevance of accounting information when biological assets are measured at fair value, and they found that when they were measured at FV, the prediction accuracy of future cash flows improved as the ratio of biological assets to total assets increases.
Abstract: This study develops an empirical analysis of the relevance of accounting information when biological assets are measured at fair value. We use an international sample of firms with biological assets. We find that biological assets influence unpredictability when they are measured at historical cost (HC). In this case, the ability of accounting data to predict future cash flows diminishes as the proportion of biological assets on total assets increases. The valuation at fair value (FV) switches this negative influence of biological assets to a positive one. We find that when they are measured at FV, the prediction accuracy of future cash flows improves as the ratio of biological assets to total assets increases. This evidence is robust to different measures of prediction accuracy, as well as to the improvement of accounting standards, regardless of FV, over time. The evidence is weaker for bearer plants.
TL;DR: In this paper, the authors examine the effect of analyst's cash flow forecasts on target prices and find that when analysts issue cash flow forecast, their target price accuracy increases, and also find that this accuracy increases with the accuracy of their forecast.
Abstract: The literature on the usefulness of analysts’ cash flow forecasts is unsettled, with Call et al. (2009), Mohanram (2014), and Radhakrishnan and Wu (2014) providing evidence in favor of their usefulness, and Givoly et al. (2009), Bilinski (2014), and Ecker and Schipper (2014) questioning this. Target prices provide a good setting to test the usefulness of cash flow forecasts because they are an ultimate output of an analyst's valuation process to which cash flow forecasts are an input. Moreover, studying the effect of cash flow forecasts on target prices is more relevant for assessing their usefulness than is studying their effect on earnings forecast accuracy, as the accuracy of target prices requires a comparison with market prices, which are less subject to management influence than reported earnings. By improving an analyst's understanding of unexpected accruals and permanent earnings, a cash flow forecast can increase an analyst's target price accuracy and signal an analyst's superior forecasting ability. We examine whether, conditional on their earnings forecasts, analysts’ cash flow forecasts improve their target price accuracy. We find that when analysts issue cash flow forecasts, their target price accuracy increases. We also find that this accuracy increases with the accuracy of their cash flow forecasts. Finally, we find that this increased target price accuracy is greater for more challenging-to-value firms. Our study provides confirmatory evidence of the usefulness of analysts’ cash flow forecasts.
TL;DR: In this paper, the authors examined whether firms with rating-based performance-priced loan contracts (PPrating firms) manage cash flow from operations (CFO) and accruals to obtain better firm credit rati...
Abstract: SYNOPSIS This paper examines whether firms with rating-based performance-priced loan contracts (PPrating firms) manage cash flow from operations (CFO) and accruals to obtain better firm credit rati...
01 Jan 2018
TL;DR: Cash-Flow Management Strategies in Small and Medium-Sized Occupational Health Enterprises by Sibongiseni Selby Myeni MBA.
Abstract: Cash-Flow Management Strategies in Small and Medium-Sized Occupational Health Enterprises by Sibongiseni Selby Myeni MBA, Nelson Mandela Metropolitan University, 2015 MMed Sci. University of KwaZulu-Natal, 1998 BSc Honours, University of Zululand, 1994 BSc, University of Zululand, 1992 Doctoral Study Submitted in Partial Fulfilment of the Requirements for the Degree of Doctor of Business Administration
03 Jan 2018
TL;DR: It is found that direction and magnitude of the final revision in aggregated forecasts can be related to suggested targets in earnings management, providing the means of improving the accuracy of longer-term cash flow forecasts.
Abstract: Financial services within corporations usually are part of an information system on which many business functions depend As of the importance of forecast quality for financial services, means of forecast accuracy improvement, such as data-driven statistical prediction techniques and/or forecast support systems, have been subject to IS research since decades In this paper we consider means of forecast improvement due to regular patterns in forecast revisioning We analyze how business forecasts are adjusted to exploit possible improvements for the accuracy of forecasts with lower lead time The empirical part bases on an unique dataset of experts' cash flow forecasts and accountants' actuals realizations of companies in a global corporation We find that direction and magnitude of the final revision in aggregated forecasts can be related to suggested targets in earnings management, providing the means of improving the accuracy of longer-term cash flow forecasts
01 Jun 2018
TL;DR: This paper considers cash flow forecasting as a data-driven procedure to be used as a key input to multiobjective cash management problem in which both cost and risk are goals to minimize, and provides a general methodology to improve decision-making in cash management through the use of data and machine learning techniques.
Abstract: The volume and availability of business and finance data may continue to increase in the near future. However, the utility of such data is by no means straightforward due to a lack of integration between data-driven techniques and usual decision-making processes. This paper aims to integrate data with multiobjective decision-making in cash management by means of machine learning. To this end, we first consider cash flow forecasting as a data-driven procedure to be used as a key input to multiobjective cash management problem in which both cost and risk are goals to minimize. Next, we compute the forecasting premium, namely, how much value can be achieved in exchange of predictive accuracy. Finally, we provide cash managers with a general methodology to improve decision-making in cash management through the use of data and machine learning techniques. This methodology is based on a novel closed-loop procedure in which the estimated forecasting premium (if any) is used as a critical feedback information to find better forecasting models and, ultimately, better cost-risk results in cash management.
TL;DR: In this paper, the authors examined the relationship between the spread between a country's enacted statutory rate for the year and the cash effective tax rate, and two uses of cash (investment and dividend payout) for an international sample of firms.
Abstract: Cash tax avoidance activities can serves as a significant source of additional cash flows for firms; how managers utilize this additional cash source and the resulting consequences is an empirical question To answer our research question, we examine the association between the spread between a country’s enacted statutory rate for the year and the cash effective tax rate, and two uses of cash – investment and dividend payout – for an international sample of firms In the cross-section, we find the firms are more likely to invest cash tax savings rather than distribute them in the form of dividends and find that this results in inefficient over investment for firms When partitioning on country-level governance, we find that firms located in weak-governance countries actually under invest and pay out larger amounts of tax savings in the form of dividends Our results suggest that firms’ cash tax avoidance activities have a real effect on firm decisions, namely investment and payout policies, and this effect varies based on the country in which the firm operates
TL;DR: The results show that the best method to build a government cash forecasting model is subject to forecasting performance measurement tool and the data used, and that the data from one government only as its sample may limit the ability to generalise the results to a wider population.
Abstract: Government cash forecasting is central to achieving effective government cash management but research in this area is scarce. The purpose of this paper is to address this shortcoming by developing a government cash forecasting model with an accuracy acceptable to the cash manager in emerging economies.,The paper follows “top-down” approach to develop a government cash forecasting model. It uses the Indonesian Government expenditure data from 2008 to 2015 as an illustration. The study utilises ARIMA, neural network and hybrid models to investigate the best procedure for predicting government expenditure.,The results show that the best method to build a government cash forecasting model is subject to forecasting performance measurement tool and the data used.,The study uses the data from one government only as its sample, which may limit the ability to generalise the results to a wider population.,This paper is novel in developing a government cash forecasting model in the context of emerging economies.
TL;DR: The integrated model dramatically decreased the idle cash levels at both branches and ATMs without degrading the availability of cash and hence customer satisfaction and the integrated cash optimization models can be used to estimate the cash requirements of recycling ATMs.
Abstract: In this study, an integrated cash requirement forecasting and cash inventory optimization model is implemented in both the branch and automated teller machine (ATM) networks of a mid-sized bank in Turkey to optimize the bank’s cash supply chain. The implemented model’s objective is to minimize the idle cash levels at both branches and ATMs without decreasing the customer service level (CSL) by providing the correct amount of cash at the correct location and time. To the best of our knowledge, the model is the first integrated model in the literature to be applied to both ATMs and branches simultaneously. The results demonstrated that the integrated model dramatically decreased the idle cash levels at both branches and ATMs without degrading the availability of cash and hence customer satisfaction. An in-depth analysis of the results also indicated that the results were more remarkable for branches. The results also demonstrated that the utilization of various seasonal indices plays a very critical role in the forecasting of cash requirements for a bank. Another unique feature of the study is that the model is the first to include the recycling feature of ATM s. The results demonstrated that as a result of the inclusion of the deliberate seasonal indices in the forecasting model, the integrated cash optimization models can be used to estimate the cash requirements of recycling ATMs.
Patent•
07 Jun 2018
TL;DR: In this paper, a platform is disclosed for autonomous or semi-autonomous generation of financial reports, where financial data is received from a plurality of data sources, the data sources each being connected with the computer processor, including one or more of a financial institution, an enterprise resource planning (ERP) system, external market data, user-generated content, and external global market news and events.
Abstract: A platform is disclosed for autonomous or semi-autonomous generation of financial reports. Financial data is received from a plurality of data sources, the data sources each being connected with the computer processor, the data sources comprising one or more of a financial institution, an enterprise resource planning (ERP) system, external market data, user-generated content, and external global market news and events. The financial data is then aggregated in a cloud based server platform, and then processed to automatically generate one or more financial reports, the one or more financial reports including cash positions, a cash flow forecast, a treasury management report, financial performance, and/or operational performance metrics. The one or more financial reports are delivered to a client computing device based on a selection received from a user of the client computing device.
14 Dec 2018
TL;DR: In this article, the authors show the importance of efficient cash flow management in insurance companies from the aspect of their planning, and to this effect, the simulation of the internal report on cash flows that is done monthly for domestic insurance companies in the function of efficient liquidity management of the insurance company.
Abstract: The activity of insurance and operation of insurance companies is very important in the context of development of financial organizations that operate in the territory of many countries, including the Republic of Serbia. A report that is of crucial importance for insurance companies in the context of an adequate cash flow management is a cash flow statement. Bearing in mind the specificity of the insurance industry, as well as the risks associated with it, cash flow is the basic focus of financial management. For insurance companies, it presents an overview of cash flows that occurred during the previous accounting period. The aim of the paper is to show the importance of efficient cash flow management in insurance companies from the aspect of their planning, and to this effect, the paper provides the simulation of the internal report on cash flows that is done monthly for domestic insurance companies in the function of efficient liquidity management of the insurance company.
TL;DR: In this article, the authors explain how cash flow forecasting is organized at Bayer, a large multinational company headquartered in Germany, and which factors influence the accuracy of its forecasts, and analyze whether forecasting processes are affected by characteristics such as business area, size, region, or specific local conditions, and ultimately whether forecasting practices and entity characteristics affect forecast accuracy.
Abstract: Despite its pivotal importance in enterprise management, cash flow forecasting gets little attention from academics perhaps because few of them have access to internal processes and data. In this article, however, the authors explain how cash flow forecasting is organized at Bayer, a large multinational company headquartered in Germany, and which factors influence the accuracy of its forecasts. The research focuses on cash flow forecasts based on the direct method, prepared three times a yearat Bayer, involving about 62,000 individual forecasting items each time. These forecasts form the basis of the company's liquidity and financial risk management, in particular, its foreign exchange risk hedging. The authors explain how local managers in Bayer's entities across the world derive the forecasts, i.e., what information they use as input, how they validate it, and how they deal with potential bias caused by managerial incentive systems. They also analyze whether forecasting processes are affected by characteristics such as business area, size, region, or specific local conditions, and ultimately whether forecasting practices and entity characteristics affect forecast accuracy. The findings show that cash flow forecasting procedures vary substantially across Bayer. While the central finance department gives general guidance on the required cash flow forecasting output and provides direction on the input to be used, there are no detailed instructions on how forecasts are to be prepared. Instead, local managers are free to determine their own forecasting practices. They use different forecasting inputs and validate forecasting inputs and output with different intensities, and they also differ in how they treat possible biases in input data. These findings document the limits of standardization and central control in large multinational corporations resulting from local managers’ need for flexibility to cope with the heterogeneity and dynamism of their environments. At the same time, however, local differentiation increases complexity and may increase errors. Quantitative analysis of forecasting errors shows that forecasts of receipts from customers (cash inflows) are more accurate than forecasts of payments to suppliers (cash outflows). Moreover, forecasting practices affect forecast accuracy. Outflow forecasts are more accurate if managers intensively validate forecasting input; inflow forecasts, if they eliminate input biases that may result from internal target setting or from other managerial incentives, and if they carefully validate their forecasting output. The study provides several insights. Cash flow forecasting in a large multinational corporation is a complex system of interlaced processes, taking place in many organizational sub‐ units and located in different environments with different backgrounds. Forecasting processes depend on entity characteristics. Managers at smaller, less complex entities tend to communicate closely with local counterparts and to verify forecasting output, while managers at entities whose liquidity is managed by the central finance department often use only rough assumptions about payment terms of cash inflows and outflows. Quantitative analysis supports the contention that invoices issued to customers can be forecasted more accurately than invoices received from suppliers. Forecasting practices affect forecast accuracy. Forecasts of invoices from suppliers are more accurate if managers intensively validate the forecasting input and prepare their own calculations rather than simply accept at face value input data provided by other departments.
TL;DR: This article examined whether investors are able to fully anticipate the pricing implications of cash flow hedges in the banking industry and found that mark-to-market adjustments on cash flow hedge are inversely related to future cash flows and that investors underestimate the extent of this inverse relation.
Abstract: We examine whether investors are able to fully anticipate the pricing implications of cash flow hedges in the banking industry. We show that mark-to-market adjustments on cash flow hedges are inversely related to future cash flows and that investors underestimate the extent of this inverse relation. Our evidence supports the notion that incomplete information on value relevant parameters makes it difficult for investors to accurately predict the effects of current cash flow hedge adjustments on future cash flows. Our results are also consistent with the evidence that investors have limited attention such that information, particularly information that is difficult to discern, is not fully reflected in stock prices. Thus, the additional disclosures mandated by regulatory agencies in the banking industry are not sufficient to overcome the challenges associated with incomplete information and investors’ limited attention.