Robustness of Cash Flow Value: Investment in ASEAN

Lau, Wei Theng; Mahat, Fauziah

doi:10.13106/jafeb.2019.vol6.no2.247

Cited by 6 publications

(6 citation statements)

References 39 publications

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“…Log of ME and the last 11-month returns indicate negative correlations, which are expected with size effect and long-term reversal effect (Jegadeesh and Titman, 2001). Among the profitability measures, free cash flow possesses the highest correlation with stock returns, which is consistent with the theoretical valuation principle that the present firm value depends on the future cash flows (Lau and Mahat, 2019). All three profitability measures are highly correlated to each other with significance.…”

Section: Yosuke Kakinumasupporting

confidence: 79%

Empirical evidence of profitability anomaly in the Thai stock market

Kakinuma¹

2020

Journal of International Studies

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This study presents empirical evidence of profitability anomaly in the Stock Exchange of Thailand. The effects of gross profitability, operating profitability, and cash flow-to-price (C/P) on the subsequent stock returns are examined using the data from 2002 to 2019. The results of Fama-Macbeth (1973) regression and Carhart (1997) four-factor model indicate that gross profitability and C/P have significant explanatory power for future returns but not operating profitability. Further analysis confirms that gross profitability-sorted portfolio generates the largest risk-adjusted return and C/P-sorted portfolio presents the best consistency to outperform the market. Investing in the portfolios consisted of stocks with high gross profitability and C/P provides protection from the market downside.

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Section: Yosuke Kakinumasupporting

confidence: 79%

Empirical evidence of profitability anomaly in the Thai stock market

Kakinuma¹

2020

Journal of International Studies

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“…There exits positive relationship between profitability and distance to default (Vu, Do, Dang and Nguyen, 2019). Lau and Mahat (2019) suggested that firms should manage cash flow prudently in considerations of firm value from the shareholder's perspective, measured directly using stock return. So Roa is included as a profitability variable.…”

Section: Sample and Methodologymentioning

confidence: 99%

The Effects of Financial Constraints on Investments in Korean Stock Market

Kang¹

2019

East Asia Bus Econ Assoc

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Purpose -This paper empirically investigates what factors contribute to corporate investments under financial constraint condition in the Korean stock market. In the paper, tangible assets' growth rate and fixed assets' growth rate were employed as investment performance and total assets were also used for comparison purpose.Research design and methodology -Samples are constructed by manufacturing firms listed on the stock market of Korea as well as those who settle accounts in December from 2001 to 2018. Financial institutions are excluded from the sample as their accounting procedures, governance and regulations differ. This study adopted a fixed panel regression model to assess the sample construction including yearly and cross-sectional data.Results -This results support the literatures that major shareholders showed positive significance to investment in financially unconstrained firms and no significance to investment in financially constrained firms. ROA showed positive significance to investment in financially unconstrained and constrained firms, whereas firm size showed negative significance to investment in financially unconstrained and constrained firms. Debt showed no positive significance to investment in financially unconstrained firms and negative significance to investment in financially constrained firms.Conclusions -This paper documented evidence that ROA and firm size are important factors to investment irrespective of firms' financial constraints. And this paper also supports that major shareholders give positive impact to investments in financially unconstrained firms. This means that financial constraints itself rule corporate' investment decision in financially constrained firms.

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“…The results also show that investors can be unpredictable; they do not consider using any information measures to make decisions, especially those investors focused on using income information instead of cash flow. Lau and Mahat (2019) conducted research on the different roles of cash flows in assessing the return on investment in the Association of Southeast Asian Nations (ASEAN) suggesting that companies should manage cash flow prudently in considerations of firm value from the shareholder's perspective, measured directly using stock return. Cash returns on assets will become an important performance indicator for the company, while higher cash component over reported earnings is preferred.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Operating Cash Flow in Decision-Making of Individual Investors in Vietnam’s Stock Market

Nguyễn¹,

Nguyen²

2020

JAFEB

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The paper examines the impact of information about cash flow from operating activities of firms listed on Vietnam's stock market to the decision making of individual investors. Data were collected from interviews with 160 individual investors about their investment decisions based on information on profit growth and cash flow growth from operating activities. T-test was conducted to research on Vietnam's stock market -a market considered as information that is not really public, transparent and ineffective. The research results show that: (1) investors do not care about cash flow from operating activities when making investment decisions if the company's profits grow positively, (2) information about cash flow from operating activities only affects the decisions of individual investors once profit growth is negative, and (3) conflicting information between profit growth and cash flow growth from business activities significantly affects the confidence and comfort of investors in Vietnam's stock market when they make investment decisions. Then, the study points out the mistake of investors when making investment decisions, and offers recommendations to investors when making investment decisions, not only concerned with profit growth, but also paying special attention to cash flow growth, especially cash flow from the company's business operations.

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Robustness of Cash Flow Value: Investment in ASEAN

Cited by 6 publications

References 39 publications

Empirical evidence of profitability anomaly in the Thai stock market

Empirical evidence of profitability anomaly in the Thai stock market

The Effects of Financial Constraints on Investments in Korean Stock Market

The Impact of Operating Cash Flow in Decision-Making of Individual Investors in Vietnam’s Stock Market

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