Topic
Earnings before interest and taxes
About: Earnings before interest and taxes is a research topic. Over the lifetime, 1488 publications have been published within this topic receiving 28403 citations. The topic is also known as: EBIT & operating income.
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TL;DR: In this article, the authors present evidence on changes in operating results for a sample of 76 large management buyouts of public companies completed between 1980 and 1986, and they suggest the operating changes are due to improved incentives rather than layoffs or managerial exploitation of shareholders through inside information.
1,255 citations
TL;DR: In this article, the role of corporate governance mechanisms during top executive turnover in Japanese corporations was examined and the sensitivity of non-routine turnover to earnings performance was higher for firms with ties to a main bank than for firms without such ties.
983 citations
TL;DR: In this article, the authors explore the patterns of profitability, loan repayment, and cost reduction for micro-banks in 49 countries using a data set with unusually high quality financial information on 124 institutions.
Abstract: Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.
957 citations
TL;DR: In this article, the authors explore the hypotheses that implementing effective total quality management TQM programs improves the operating performance of firms and find strong evidence that firms that have won quality awards outperform the control firms on operating income-based measures.
Abstract: This study explores the hypotheses that implementing effective total quality management TQM programs improves the operating performance of firms. The winning of quality awards is used as a proxy for the effective implementation of TQM programs. Changes in various performance measures for a test sample of quality-award winners are compared against a sample of control firms. Our statistical tests provide strong evidence that firms that have won quality awards outperform the control firms on operating income-based measures. Over a 10-year period, from 6 years before to 3 years after the year of winning the first quality award, the mean median change in the operating income for the test sample is 107% 48% higher than that of the control sample. There is reasonably strong evidence that firms that have won quality awards do better on sales growth than the control firms. Over the 10-year period, the mean median change in sales for the test sample is 64% 24% higher than that of the control sample. We also find weak evidence that firms in our test sample are more successful in controlling costs when compared with the firms in the control sample. In addition, the results indicate that firms in our test sample increased their capital expenditures more than the control sample over the time period prior to winning quality awards. Compared with the control sample, the test sample shows higher growth in both employment and total assets.
934 citations
TL;DR: It is found that it does not matter who caused the glitch, what the reason was for the glitches, or what industry a firm belongs to--glitches are associated with negative operating performance across the board.
Abstract: This paper empirically documents the association between supply chain glitches and operating performance. The results are based on a sample of 885 glitches announced by publicly traded firms. Changes in various operating performance metrics for the sample firms are compared against a sample of control firms of similar size and from similar industries. In the year leading up to the announcement, the control-adjusted mean percent changes in operating income, return on sales, and return on assets for the sample firms are -107%, -114%, and -92%, respectively. During this same period, the control-adjusted changes in the level of return on sales and return on assets are -13.78% and -2.32%, respectively. Relative to controls, firms that experience glitches report on average 6.92% lower sales growth, 10.66% higher growth in cost, and 13.88% higher growth in inventories. More importantly, firms do not quickly recover from the negative economic consequences of glitches. During the two-year time period after the glitch announcement, operating income, sales, total costs, and inventories do not improve. We also find that it does not matter who caused the glitch, what the reason was for the glitch, or what industry a firm belongs to--glitches are associated with negative operating performance across the board.
688 citations