Showing papers on "Cash flow forecasting published in 2019"

Cash use across countries and the demand for central bank digital currency

Abstract: The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card—not better. Demand for digital currency will thus be weak in countries where cash use is already very low, due to a preference for cash substitutes (cards, electronic money, mobile phone payments). Where cash use is very high, demand should be stronger, due to a lack of cash substitutes. As the demand for CBDC is tied to the current level of cash use, we estimate the level and trend in cash use for 11 countries using four different measures. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, we tie the level of cash use to the likely demand for CBDC in different countries. In this process, we suggest that one measure of cash use is more useful than the others. If cash is important for monetary policy, payment instrument competition, or as an alternative payment instrument in the event of operational problems with privately supplied payment methods, the introduction of CBDC may best be introduced before cash substitutes become so ubiquitous that the viability of CBDC could be in doubt.

Contractors’ perceptions of the effects of cash flow on construction projects

Abstract: This paper aims to evaluate Nigerian contractors’ perceptions regarding the effects of positive and negative cash flow during construction projects, with a view to establishing effective strategies for cash flow management.,A desktop-based literature review is used to develop a cross-sectional questionnaire survey which uses Likert items to elicit responses from construction professionals on: the reasons for cash flow problems; the impacts of negative and positive cash flow; and the potential solutions for improving cash flow on construction projects.,The study finds that delay in payments, difficulty in obtaining financial aid and inadequate budgetary control are the causes of cash flow problems during construction projects. Cumulatively, these issues result in project delays, reduced profit margins and in the worst scenarios, abandoned projects.,There has been limited research into the effects of positive and negative cash flows on construction projects in Nigeria and indeed, the wider geographical location of West Africa. This study addresses this observed dearth and consequently advances methods and solutions to deal with the problem of poor cash flow management in the Nigerian construction industry.

Do Local Protestant Values Affect Corporate Cash Holdings

Abstract: This study examines how local Protestant belief, as one type of social norms, affects corporate cash policies. We find that firms located in areas with more Protestants hold less cash reserves. The influence of local Protestant belief on cash holdings is more profound for firms with weak corporate governance and firms with one geographic segment. In addition, we find that the difference in cash deployment is reflected in the difference in firms’ investment and payout policies. Overall, our study shows that local Protestant belief is an important factor in determining corporate cash policies and helps to mitigate the potential free cash flow problem.

Valuation of enterprise risk management in the manufacturing industry

Abstract: The paper examines the valuation of enterprise risk management (ERM) through its effects on firm cost and efficiency. Consistent with the empirical evidence, ERM is found to benefit larger firms by reducing earning variability and providing higher returns on equity. The results suggest significant evidence of a value premium attached to effective ERM programmes. It is found that an effective ERM programme adds value to manufacturing firms by mitigating firm cost and enhancing firm efficiency. The results also suggest that the strong valuation effects of ERM are associated with cost management, inventory management, asset management, and cash flow management in China.

Developing an inverse range directional measure model to deal with positive and negative values

Abstract: To manage cash flow in supply chains, the purpose of this paper is to propose inverse data envelopment analysis (DEA) model.,This paper develops an inverse range directional measure (RDM) model to deal with positive and negative values. The proposed model is developed to estimate input and output variations such that not only efficiency score of decision making unit (DMU) remains unchanged, but also efficiency score of other DMUs do not change.,Given that auto making industry deals with huge variety and volumes of parts, cash flow management is so important. In this paper, inverse RDM models are developed to manage cash flow in supply chains. For the first time, the authors propose inverse DEA models to deal with negative data. By applying the inverse DEA models, managers distinguish efficient DMUs from inefficient ones and devise appropriate strategies to increase efficiency score. Given results of inverse integrated RDM model, other combinations of cash flow strategies are proposed. The suggested strategies can be taken into account as novel strategies in cash flow management. Interesting point is that such strategies do not lead to changes in efficiency scores.,In this paper, inverse input and output-oriented RDM model is developed in presence of negative data. These models are applied in resource allocation and investment analysis problems. Also, inverse integrated RDM model is developed.

Evaluation of financial stability of Russian companies

Abstract: The article considers the modern approaches to the analysis and evaluation of financial stability of Russian companies to study the effectiveness of cash flow management. A comparative analysis of the financial stability of organizations of the Russian Federation and the Republic of Bashkortostan is conducted using a system of indicators based on the coefficient method. Identified trends show a decrease in the deficit of financial stability and its own funds, which hinders the development of investment activity and the expansion of the productive capacity of Russian companies.

A Study on the Relationship between Analysts’ Cash Flow Forecasts Issuance and Accounting Information: Evidence from Korea

Abstract: This study analyzes the relationship between the future cash flow forecast information provided by financial analysts and accounting information. We examine whether the joint issuance of financial analyst earnings forecasts and cash flow forecasts from 2011 to 2015 contributes to the information usefulness of Korean listed firms. The empirical results of this study are as follows. First, the issuance of analysts’ cash flow forecasts and earnings forecast accuracy were significant positive values. Cash flow forecast accuracy and earnings forecast accuracy were significant positive values. Second, the issuance of analysts’ cash flow forecasts and buy–sell bid spread are significant negative values. These results show that the information asymmetry between the manager and the investor can be reduced based on the rich information environment. This study suggests that cash flow forecasting information of financial analysts provides important evidence for capital market participants because it provides evidence that capital market participants’ information can be used as useful information for economic decision-making. These results show the sustainability of a firm from the viewpoint of a financial analyst who acts as an intermediary and external supervisor in the capital market. In addition, the analysts’ cash flow forecasting information is expected to reduce the information asymmetry between the company and the investor, thereby increasing the transparency and sustainability of the firm.

The Impact of Cash Flow Management on the Profitability and Sustainability of Small to Medium Sized Enterprises

Abstract: Small to medium sized enterprises (SMEs) are important in Zimbabwe because they contribute much towards creation of jobs. Sound cash management practices must be implemented to guarantee success of SMEs through profitability and sustainability. The purpose of this study was to classify the cash flow management practices that are currently practiced by Zimbabwean SMEs and try to figure out the effects of these practices on the profitability and sustainability of SMEs. Both qualitative and quantitative research approaches were adopted in this study. The target population was 14 small businesses in Harare and Gweru giving a total of 55 targeted participants. The sample was calculated using the Yamane formula which gave a result of 50 respondents. The data collection methods used includes questionnaires and interviews and the results from the data collection methods were presented in tables, graphs and pie charts. These results were analysed and tested using the chi square test method which revealed that most cash management practices that are being exercised by SMEs are significantly affecting the profitability and sustainability of these businesses. The results also revealed that most SMEs are reluctant to effectively apply cash management practices causing them to fail.

Goodwill Accounting Under the IFRS Impairment-only Approach? An Asia-Pacific Study

Abstract: .................................................................................................................................................................. ii List of Figures ....................................................................................................................................................... viii List of Tables ............................................................................................................................................................ ix List of Appendices ................................................................................................................................................. xi List of Abbreviations ........................................................................................................................................... xii Attestation of Authorship ................................................................................................................................. xv Acknowledgements ............................................................................................................................................xvi Dedication............................................................................................................................................................. xviii CHAPTER

Influence of financial leverage and liquidity on financial performance of manufacturing firms listed at the nairobi securities exchange

Abstract: This study sought to investigate the influence of financial leverage and liquidity on financial performance of manufacturing firms listed at the Nairobi Securities Exchange. To accomplish this objective, the study adopted a descriptive research design and targeted 10 manufacturing firms listed at the Nairobi Securities Exchanges as at 31st December 2016 from where the study used a census method to randomly pick all the 95 respondents to participate in the study. The study used structured questionnaires to collect primary data; content validity was used to check validity while Cronbach alpha was used to check reliability of research instruments. Data analysis was computed by SPSS 24, where descriptive statistics (frequencies, percentages, means, standard deviations) and inferential statistics (correlations, linear and multiple regressions) were generated. A total of 87 out 95 respondents returned completely filled questionnaires representing a response rate of 91.6% which is good for generalizability of study findings to a wider population. The study findings revealed that all predictor variables (financial leverage and liquidity) significantly influenced financial performance of manufacturing firms listed on NSE. The study concluded that one; financial leveraging positively influences financial performance of manufacturing firms, thus, manufacturing firms with effective financial leveraging mechanisms can realize an increase in their profitability and two; liquidity is a significant predictor of financial performance of manufacturing firms, thus, a manufacturing firm with efficient cash flow management can sustain profitability in subsequent years. The study recommended that one; financial managers of manufacturing firms should embrace feasible financial leveraging strategies that can boost firm profitability; and,there should be effective and timely monitoring of manufacturing firm’s liquidity position to avoid insolvency risks. A longitudinal study can be done using time series data of manufacturing firm’s profitability so as to compare results. Key Words: Financial Leverage, Liquidity, Financial Performance, NSE CITATION: Shimenga, M. A., & Miroga, J. (2019). Influence of financial leverage and liquidity on financial performance of manufacturing firms listed at the Nairobi Securities Exchange. The Strategic Journal of Business & Change Management, 6 (2), 799 –814.

Graphical Pinch Analysis Approach to Cash Flow Management in Engineering Project

Abstract: Pinch Analysis (PA) methodology was originally developed for determining feasible Heat Integration targets in process plants, and for designing optimal Heat Exchanger Networks to achieve the previously determined energy budget. This powerful methodology has since been extended to a wide range of applications, such as Mass Integration, Carbon Management and Financial PA. All these extensions have the common feature of utilizing a stream quality index that defines direction of flow, in the same way that temperature differences determine heat transfer. In this paper, a graphical PA approach to cash flow analysis and management in engineering projects is proposed in ensuring project sustainability. This method considers the positive and negative cash flows that occur over time in an engineering project. A case study is used to illustrate how this approach can provide insights for managers to synchronize the operations of a single project to stay within the firm’s cash flow limits. Such strategies can potentially affect the sustainability of construction projects. There were three solutions considered in the case study. Based on the results, it was found that from the hypothetical example, the ideal solution is to allot 50 % or 75 % of the total inflow assigned to labour outflow with a pinch period of 1 month. It resulted in a minimum loan value 61.2 %-months for materials outflow.

Adoption of international public sector accounting standards in financial reporting by account officers in tertiary institutions in south-east, nigeria

Abstract: This study assessed the adoption of International Public Sector Accounting Standards (IPSASs) in financial reporting by account officers in tertiary institutions in South-East, Nigeria. Two purposes and corresponding research questions guided the study and four null hypotheses were tested at 0.05 level of significance. Related literature pertinent to the study was reviewed. Descriptive survey research design was adopted for the study. The population consisted of 849 account officers working in tertiary institutions. A sample of 272 account officers was used for the study. A structured questionnaire developed by the researchers was used for data collection. Cronbach Alpha Method was used to establish the reliability of the instrument. The reliability index obtained was r = 0.82. Data were analyzed using mean, standard deviation and ANOVA. Mean was used to analyze data related to the research questions and standard deviation was used to explain how the responses of the respondents varied. ANOVA was used to test the hypotheses at 0.05 level of significant. Statistical Package for Social Sciences (SPSS) version 23 was used to analyze the data. The results showed that account officers adopted International Public Sector Accounting Standards (IPSASs) in presenting separately current and non-current assets and liabilities in its financial statement position, presents liability in order of maturity and stating balances carried over from one accounting period to the next accounting period in tertiary institutions in South East. Majority of the account officers did not adopt IPSAS in the presentation of current assets in order of liquidity, disclosure of amount expected to be recovered for each asset and liability, receivables and payables from exchange transactions in reporting assets and liabilities in tertiary institutions in South-East, Nigeria. The results also showed that there was no significant difference in their adoption of IPSASs in reporting assets and liabilities and cash flow management in tertiary institutions in South-East based on type of institution and years of experience. Based on the findings, the researchers recommended, among others, that there should be manpower development by various tertiary institutions to train highly qualified and professional accountants as well as build and develop accounting information system together with information technology. This will help in reporting all statutory income and other internally generated revenue reported for the accounting period. Article visualizations:

Distortion or Cash Flow Management? Understanding Credit Facilities in Private Equity Funds

Abstract: Credit facilities in private equity, often referred to as “subscription lines” (SL), have become a topic of interest, sparking debates not only among researchers but also among practitioners. In this paper, we are the first to analyze their potential thoroughly by quantifying the impact on both final fund performance and fund rankings. In addition, we are the first to academically describe and explain the key terms of SL in detail. Based on our simulations, we find that standard SL have moderate effects on final fund performance as well as fund rankings and constitute mainly a cash flow management tool. However, if used more extensively, SL have the potential to increase time-sensitive return measures substantially and can thereby also alter fund rankings. Consequently, if not properly understood by investors, extended SL could distort future fundraising outcomes. In addition, the higher reported performance may mislead investors with regard to the BO industry’s true skill and return opportunities.

Effect of Liquidity and Dividend Pay-out on Financial Performance of Deposit Taking SACCOs in Kenya

Abstract: Capital structure is one of the fundamental aspects to the success of Deposit Taking Savings (DPS) and Credit Cooperative Societies (CCS) as it influences the realization of its objectives and goals. The study intended to determine the effect of two capital structure determinants; liquidity and dividend payout, on financial performance as measured by Return on Assets of DPS and CCS, in Kenya. The study was grounded on the Pecking order and Free cash flow capital structure theories. The study utilized a mixed research design using primary and secondary data for the period 2013 to 2017. The population of the study was 174 DPS and CCS. Stratified and purposive sampling technique was employed. Descriptive statistics and a regression model were used to analyze the data. Results revealed that liquidity and dividend pay-out had a significant and positive effect on the financial performance of DPS and CCS in Kenya. The study concluded that liquidity and dividend pay-out play a significant role in the financial performance of DPS and CCS. The study recommends having in place an Assets and Liabilities Committee in each DPS and CCS that would help manage the assets and liabilities of the institution, ensuring adequate liquidity and cash flow management. Having in place a robust dividend policy that addresses; the basis of the rate of payments and activities that would require funding of which internally generated funds by way of dividend retention, is also critical.

Post-shipment financial flows in supply chains: A study of small- to medium-sized enterprise importers

Abstract: Background: Global sourcing has impacted inventory levels, lead times and the availability of working capital, affecting the standard financial flow of a supply chain. Poorly managing the link between the financial and physical supply chains could therefore lead to unnecessarily high inventory investments or to a short supply of inventory, affecting cash flow, working capital, sales and, subsequently, a firm’s profitability. Objectives: The aim of this generic qualitative study was to explore how firms manage their financial supply chain alongside their physical supply chain. Method: Data were collected from 12 semi-structured interviews with senior managers across six small- to medium-sized enterprise (SME) importing firms in various industries. Results: The research finds that the buyer is the driver of both upstream and downstream financial supply chain management (FSCM) as SME importers in Gauteng are proactively managing their financial alongside their physical supply chains. Through the continuous evaluation of sourcing strategies, exchange rate risk management strategies and inventory investment management strategies, firms can align their physical and financial supply chains. Conclusion: This study highlights the lead time and disruption risks and costs of global sourcing and identifies FSCM tools that can be used to alleviate the financial burden associated with long lead times.

Cash flow forecasting by using simple and sophisticated models in Iranian companies

Abstract: Cash flow is one of the critical resources in the economic unit and the balance between available cash and cash needs is the most important factor in economic health. Since judgments of many stakeholders such as investors and shareholders about the position of the economic unit are based on liquidity situation, so predicting future cash flow is crucial. In this research, the impact of cash and accrual items on cash flow forecasts has been studied. Providing a proper model to predict operating cash flows and review some important characteristics of cash flow forecasting regression models, using a multilayer perceptron and determining the best model by using accrual regression model variables for predicting cash flows. For this purpose, 287 firms listed in Tehran Stock Exchange during 2008 to 2017 were studied; Linear and nonlinear regression, correlation coefficient and artificial neural network statistical methods have been used for data analysis and predictive power of powers was compared by using the sum of squared prediction error and coefficient of determination. Results showed that the accrual regression model can predict future cash flows better than other tested models and among corporate characteristics, the highest correlation belongs to sales volatility and firm size with accrual regression models. On the other hand, results of fitting different neural network models indicate that two structures with 8 and 11 hidden nodes are the best models to predict cash flows.

Examining Financial Management Practices in the Context of Smart ICT Use: Recent Evidence from Croatian Entrepreneurs

Abstract: Recent research demonstrates that entrepreneurs who learn contribute to lower failure rates of their startups. Nowhere is this more evident than in the area of financial management, where the entrepreneurs’ lack of skills and competencies – and their willingness to acquire them - can be a critical factor to the success of the business venture. The purpose of this paper is to examine the financial management practices among Croatian entrepreneurs in relation to budgeting, raising capital, cash flow management, and the use of ICT tools for enhanced efficiency of their businesses. The survey was conducted on a sample of 58 entrepreneurs whose answers provide valuable insight into their grasp of financial concepts in the context of smart ICT use. The ensuing analysis of the level of proficiency in combining smart tools with financial management reveals increased adoption of ICT practices for budgeting and purchasing among Croatian entrepreneurs. Additionally, the findings indicate that the entrepreneurs’ acquisition of skills and competencies for smart financial management presents a sound basis for increased overall financial sustainability of the startups.

The linkages between financial literacy and its application in financial decision-making among academicians in indonesia

Abstract: Purpose of the study: Financial literacy has become one of the important policies of the Indonesia government. The improvement of financial literacy is crucial for a more stable financial system and reduces financial fragility. Our research is to examine levels of financial literacy, to identify determinants of financial literacy and to investigate whether knowledge is followed by financial practices. Methodology: This study employs the survey method, which includes questionnaires sent to academicians in Indonesia. Multiple regression analysis (MRA)is used to empirically analyze the relationship between financial literacy and its application in financial decision-making. Main findings: The respondents are financially literate with the same level of financial literacy. Socio-demographic characteristics influence significantly the financial literacy and the capability in cash flow management of the respondents. Further, there is a linkage between the knowledge of financial products (financial literacy) and its application in financial decision-making. Application: It implies that the knowledge about the financial product is very important for creating a high financial literacy society. The Indonesia government needs to run more seriously one of the pillars in the National Strategy for Financial Inclusion through the Ministry of Education. Novelty: Most of the previous studies focused on conventional products, while this study includes both conventional and Islamic financial products. Further, we also consider the application of Islamic (shari’ah) financial practices. We investigate the impact of financial literacy with socio-demographic characteristics on its application in financial decision-making.

The development of government cash forecasting model : a case study for the Indonesian government

Abstract: The ability to predict the future cash required to fulfil government responsibilities and public services deliveries is crucial not only for the domestic economy but also for a potential spread to other communities. Discussions on the interconnection between government spending and economic development has been a prominent research area in the field of economic studies. However, the 2010 Greek crisis taught world a lesson that, regardless of existing causality, sustainable economic growth relies on the ways in which government manages expenditure. Moreover, public expenditure management (PEM) sees the national budget as an instrument to influence the economy through several features. One of them is cash management which focuses on ensuring the availability of government money to deliver public services in the most effective way. An effective government cash management (GCM) facilitates the requirements for the government to fulfil its responsibilities and public services deliveries while maintaining economic stability. Furthermore, a reliable government cash forecasting model is essential for an effective GCM. In this thesis, the researcher has developed a government cash forecasting model that meets an acceptable level of accuracy and materiality for use by government cash managers. In doing so, the most appropriate variables were identified for use in the model and a number of statistical methods were evaluated and tested to be used to construct the model. The methodology undertaken by this study was as follow. The government cash forecasting model developed utilised historical daily data of Indonesian government expenditure following three steps: (1) attribute selection, (2) modelling, and (3) performance evaluation processes. Several techniques based on statistical, machine learning, and hybrid methods were tested independently and then each was compared with the other to assist in developing the most accurate forecasting model based on performance evaluation measurements. In the modelling phase, the following methods were used. The Autoregressive Integration Moving Average with Exogenous Variables (ARIMAX) technique was chosen to represent the statistical modelling method. The machine learning methods tested utilised multiple artificial neural network techniques including Feed-forward Neural Networks (FFNN), Cascade-forward Neural Networks (CFNN), Radial Basis Function Neural Network (RBFN), Generalised Regression Neural Network (GRNN), Extreme Learning Machine (ELM), Long Short-Term Memory (LSTM), and Gated Recurrent Unit (GRU). For the hybrid method, a combination of ARIMAX and Nonlinear Autoregressive Neural Network (NARNN) techniques was used. The results show that an accurate government cash forecasting model that meets an acceptable level of materiality for the cash manager can be achieved by identifying and including the most significant variables which influence government expenditure through an attribute selection process and the application of an artificial neural network machine learning-based method. In this study, it was found that the most appropriate variables to build a government cash forecasting model are the total daily available fund for intermittent expenditure, the week of the month, the month of the year, and policy implementation, while the GRU was the most accurate technique. This study contributes to the existing literature and practice in its development of a statistically robust and accurate method to forecast government expenditure. Notwithstanding that Indonesian data only was used in this research, the procedures used in this study and the forecasting model developed are applicable to other governments and public sectors.

Cash Flow Forecasting Model for Electricity Sale Based on Deep Recurrent Neural Network

Abstract: Daily cash flow forecasting plays a very important role in enterprise development planning and strategic deployment. This paper makes use of a deep recurrent neural network model and applies it to the forecast of daily sales cash flow. This model adopts GRU unit structure. Through analyzing and mining historical payment flow data, the neural network model is used to automatically learn and extract the internal characteristics of information, and finally the daily cash flow prediction results are obtained. This method is the first successful application of artificial intelligence algorithm in the daily cash flow prediction of power grid. Experimental results show that the model is more accurate than ARIMA method.

The collateral liquidity problem in contemporary finance and the resurrection of quantity theory

Abstract: Since the 2008 crisis, the liquidity of collateral has become a serious concern for financial market institutions and regulators due to its increased importance in risk and cash flow management. Su...

CEO Overconfidence and Cash Flow Management

Abstract: This paper examines the relation between CEO overconfidence and the management of Cash Flow from Operations (CFO). More specifically, author analyzed whether the firms with an overconfident CEO are more likely to engage in cash flows management. I found that even after controlling for industry and year fixed effect, and other determinants, firms with an overconfident CEO are more likely to inflate CFO. The research also found that overconfident CEOs are more likely to manage CFO by shifting items. These findings suggest that overconfident CEOs could have an incentive to inflate cash flows from operations to signal to meet the requirements of shareholders and attract the attention of market investors. This study provides a direct evidence for the relation between CEO overconfidence and cash flow management as a way of earnings management.

Effect of leverage and firm size on financial performance of deposit taking savings and credit cooperatives in Kenya

Abstract: Critical to the success of financial institutions' performance is there Capital Structure. The study aimed to, investigate the effect of two capital structure determinants, leverage, and firm size on financial performance as measured by Return on Assets of Deposit Taking Savings and Credit Cooperative Societies in Kenya. The study was grounded on Tradeoff, Pecking order, and Mogdiliani and Miller capital structure theories. A positivist approach was adopted utilizing a mixed-method research design. The population of the research study was 174 Deposit Taking Savings and Credit Cooperative Societies from whom primary and secondary data was collected. A stratified and purposive sampling technique was employed. Descriptive statistics and a regression model were used to analyze the data. The results revealed that firm size had a significant and positive effect on financial performance, whereas Leverage, had a significant but negative effect on financial performance. The study recommends having in place an Assets and Liabilities committee in each Deposit Taking Savings and Credit Cooperative Society that would help manage the assets and liabilities of the institution, ensuring sound liquidity and cash flow management. Critical factors that contribute to a firm size such as increased membership, deposits mobilization amongst others need to be addressed.

Correction of originality in cash flow forecasting to assess financial risk

Abstract: Cash flow is featured by originality and, therefore, it is difficult in forecasting. The paper substantiates the significance, on the one hand, but also the difficulty in cash flow forecasting, on the other hand. The hypothesis was formulated that correction of originality in cash flow forecasting is possible with transition from absolute to relative forecast parameters. The cash flow forecast was made based on a linear least squares approximation. The hypothesis was proved using the second-rank polynomial function and moving average and exponential smoothing methods. It is concluded that the modification of forecasting by the polynomial function does not allow obtaining a reliable forecast. The required level of forecasting accuracy that is levelling of cash flow originality can be achieved using the methods of time-series analysis.

Pre-IPO cash flow volatility and aftermarket valuation

Abstract: The purpose of this paper is to examine how pre-IPO cash flow and earnings volatility influence both post-IPO pricing and valuation. This paper provides an empirical extension of Pastor and Veronesi’s (2003, 2005) argument that uncertainty surrounding a private firm’s expected profitability can impact how the firm is valued in the IPO aftermarket.,This paper includes a sample of 695 IPOs between 1996 and 2011. Pre-IPO financial statement data are hand collected from the EDGAR database. Pre-IPO cash flow and earnings volatility is computed using the standard deviation of the firm’s three years of cash flows and earnings prior to the IPO. Tobin’s Q serves as a measure of post-IPO firm valuation. This paper includes two subsamples to account for the “hot” IPO market of the late 1990s.,Firms with higher pre-IPO cash flow volatility are associated with higher post-IPO aftermarket valuations. This result holds for both the “hot” IPO and the later sub-sample. Pre-IPO earnings volatility does not influence aftermarket valuations, suggesting that only the uncertainty surrounding cash flows serves as a salient measure to IPO investors. Finally, IPO underpricing is associated with pre-IPO cash flow volatility, suggesting another channel in which IPO pricing is influenced.,The hand collection for this paper is laborious and is limited to yearly cash flow and earnings numbers. The paper documents that quarterly and yearly cash flow and earnings volatility measures are highly correlated for the select stocks that allow for such testing. Further, a broader sample that accounts for more international IPO issues might corroborate the findings in this paper.,This study shows that investors both initially price and value IPO firms base on their pre-IPO cash flow volatility.,This is the first paper to examine the direct link between pre-IPO cash flow and earnings volatility on IPO aftermarket valuation and IPO pricing.

Effect of Liquidity Management on Performance of Commercial Banks in Kenya

Abstract: The purpose of the study was to analyze the effect of Liquidity management on performance of commercial banks in Kenya. The study was based on Portfolio theory of Cash Management, Cash Management theory, Transaction Cost theory, Free Cash Flow theory and pecking order theory. The study used mixed research design which involves collecting and analyzing both qualitative and quantitative data. The target population of the study comprised the 6913 employees in management and supervisory cadres in commercial banks in Kenya. Stratified sampling technique was used to identify the sample size in every stratum. Data collection instruments were both structured and unstructured questionnaires. Data collection methods were both primary and secondary. The data was analyzed using Statistical Program for Social Sciences (SPSS) windows version 21.Multiple linear regression analysis was carried out to analyze the determinants of cash flow management on performance of commercial banks in Nairobi City County, Kenya. Pilot test was carried out for validity and reliability of research instruments. Regression analysis was carried out to test the significant levels of one variable to the other in the study. ANOVA was carried out to test the hypotheses of the study. The study is significant to the banking sector and the government of Kenya in formulation of different financial decisions and in policy making. The results of the study indicate that all the independent variable have a significant positive effect on performance of Commercial banks Kenya. The findings revealed that commercial banks in Kenya carry out liquidity management practice and that inflation rates influence interest rates in commercial banks in Kenya. Liquidity management practice was found to be positively related to performance of commercial banks in Kenya. The study recommends that the management of commercial banks in Kenya should be enhanced through frequent audits to be able to curb interest rates especially the unanticipated inflation which adversely affects the functions of money by undermining wealth holders’ confidence in its ability to be used as medium of exchange and store of value. They should also maintain the minimum liquidity requirement as stated by the Central Bank of Kenya as both illiquidity and excess liquidity are financial diseases that can easily erode the profit base of a bank as they affect bank's attempt to attain high profitability-level. They should also put into consideration liquidity levels in pursuit of high profit for it can cause great illiquidity, which reduces the customers' patronage and loyalty. Keywords: Liquidity, Financial Performance DOI : 10.7176/EJBM/11-17-04 Publication date :June 30 th 2019

The Financial Conglomerate Discount: Insights from Stock Return Skewness

Abstract: Empirical evidence shows that diversified banks (i.e. financial conglomerates) trade at a discount compared to a matched portfolio of specialized stand-alone banks. While one strand of research explains this puzzle primarily with inefficiencies in the cash flow management, we analyze whether this evidence is due to expected returns which compensate investors for skewness exposure. Our empirical findings support this hypothesis. We implement different (co-)skewness measures proposed by the previous literature. We illustrate that diversified banks have asset returns with lower skewness, and, as a consequence of lower upside potential, investors demand for these stocks a higher discount or, vice versa, higher expected returns. Different robustness checks corroborate our main result.