The Effect of Cash based Interest Coverage Ratio on the Value Relevance of Accounting Information
0
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
This study empirically verified the effect of cash based interest coverage ratio on the value relevance of accounting information. The accrual based interest coverage ratio, which divides operating profit by interest expense, includes accruals. On the other hand, the cash based interest coverage ratio, which is the cash inflow from the actual business divided by the actual outflow of interest, can be a better useful financial ratio indicator because the managers discretionary accruals are removed. Investors in the capital market will be assessed as cash-strapped companies that fail to cover their interest payments with the cash generated by the business if the cash based interest coverage ratio is less than 1. In this case, we expect negative stock price reactions to the companys net profit and net asset book value. In this study, 2,991 companies that satisfy sample selection criterion of KOSPI and KOSDAQ listed companies from 2011 to 2014, to which International Financial Reporting Standards are obliged, were tested. The empirical results show that the value relevance of net asset value and earnings per share is lower when the cash based interest coverage ratio is less than 1. In other words, it is verified empirically that the cash based interest coverage ratio are useful financial ratios to judge the relationship between accounting information and stock price.
Abstract
This study empirically verified the effect of cash based interest coverage ratio on the value relevance of accounting information. The accrual based interest coverage ratio, which divides operating profit by interest expense, includes accruals. On the other hand, the cash based interest coverage ratio, which is the cash inflow from the actual business divided by the actual outflow of interest, can be a better useful financial ratio indicator because the managers discretionary accruals are removed. Investors in the capital market will be assessed as cash-strapped companies that fail to cover their interest payments with the cash generated by the business if the cash based interest coverage ratio is less than 1. In this case, we expect negative stock price reactions to the companys net profit and net asset book value. In this study, 2,991 companies that satisfy sample selection criterion of KOSPI and KOSDAQ listed companies from 2011 to 2014, to which International Financial Reporting Standards are obliged, were tested. The empirical results show that the value relevance of net asset value and earnings per share is lower when the cash based interest coverage ratio is less than 1. In other words, it is verified empirically that the cash based interest coverage ratio are useful financial ratios to judge the relationship between accounting information and stock price.
참고문헌 (22)
- Anh Do Nguyet, "The Impact of Earnings Volatility on Earnings Predictability", Global Business and Finance Review, 22(2), pp.82~89 (2017), 사람과세계경영학회
- Ball, R., "An empirical evaluation of accounting income numbers", Journal of Accounting Research, 6(2), pp.159~178 (1968)
- Barth, M., "Brand values and capital market valuation", Review of Accounting Studies, 3(1), pp.41~68 (1998)
- Beaver, W., "The information content of security prices", Journal of Accounting and Economics, 2(1), pp.3~28 (1980)
- Bradshaw, M. T., "Do analysts and auditors use Information in accruals", Journal of Accounting Research, 39(1), pp.45~74 (2001)
- Burgstahler, D., "Earning, adaptation and equity value", The Accounting Review, 72(2), pp.187~215 (1997)
- 최현섭, "기업수명주기별 회계이익과 현금흐름의 상대적 가치 관련성에 관한 연구", 경영학연구, 35(5), pp.1339~1360 (2006), 한국경영학회
- Collins, D. W., "An analysis of intertemporal and cross-sectional determinants of earnings response coefficients", Journal of Accounting and Economics, 11(2-3), pp.143~181 (1989)
- Collins, D., "Changes in the value-relevance of earnings and book values over the past forty years", Journal of Accounting and Economics, 24(1), pp.39~67 (1997)
- Collins, D., "Equity valuation and negative earnings : the role of book value of equity", The Accounting Review, 74(1), pp.29~61 (1999)
- Comiskey, E., "Assessing Financial Quality: An organizing theme for credit analysts", Journal of Commercial Bank Lending, pp.32~47 (1982)
- Dhaliwal, D. S., "The association between unexpected earnings and abnormal security returns in the presence of financial leverage", Contemporary Accounting Research, 8(1), pp.20~41 (1991)
- Easton, P. D., "Cross-sectional variation in the stock-market response the accounting earnings announcements", Journal of Accounting and Economics, 11(2-3), pp.117~141 (1989)
- Hayn, C., "The information content of losses", Journal of Accounting Economics, 20, pp.125~153 (1995)
- Imhoff, Jr., E., "The relation between perceived accounting quality and economic characteristics of the firm", Journal of Accounting and Public Policy, 11(2), pp.97~118 (1992)
- "Korean International Financial Reporting Standards No. 1007", Cash Flow Statement, ~
- Kriengkai Boonlert‐U‐Thai, "The Relative Value Relevance of U.S. GAAP and IFRS", Global Business and Finance Review, 20(1), pp.105~120 (2015), 사람과세계경영학회[DOI]
- 이춘의, "이익구성요소가 이익지속성에 미치는 영향", 회계정보연구, 26(4), pp.1~18 (2008), 한국회계정보학회
- Lee, J. T., "The Comparison of direct method with indirect method in predicting the operating cash flows", Korean Journal of Accounting Research, 7(1), pp.71~84 (2002)
- Ohlson, J., "Earnings, book values, and dividends in equity valuation", Contemporary Accounting Research, 11(2), pp.661~687 (1995)
- Setianingtyas H., "Value Relevance of Financial and Non-Financial Information to Investor Decision", Global Business and Finance Review, 20(2), pp.95~104 (2015), 사람과세계경영학회[DOI]
- The role of book value on equity valuation: Does the stock variable merely proxy for relevant past flow?, "Subramanyam, K.", Standford University, ~ (1998)