Magni New Perspectives of Profit Smoothing

Empirical Evidence from China
1. Auflage 2019
ISBN: 978-3-030-21286-5
Verlag: Springer International Publishing
Format: PDF
Kopierschutz: Wasserzeichen (»Systemvoraussetzungen)

E-Book, Englisch, 261 Seiten, eBook

In a first approximation, profit may seem like a simple and intuitive concept, but the definition is not limited to a single conceptual category. Analysis of the definition and role of profit must be implemented with a study at the corporate level. This book discusses the phenomenon of profit smoothing, implemented by management, which aims to maintain a constant flow of profit over time. On an operational level, the phenomenon of profit smoothing analyses and determines the correlation existing between a shock to a variable at the corporate level and the relationship between this shock and profit.This book discusses the main reasons, at the strategic level, of the phenomenon of profit smoothing and summarizes this into three groups. Firstly, the functionality of this phenomenon for corporate management is to transmit to the external environment, and especially to external investors, a business reality devoid of crisis and imbalances. Secondly, this initial motivation engages basically the second. In fact, levelling the trend of profit from year to year, top management can reduce the risk perceived from the outsiders and as from the company’s insiders. Thirdly, this justification is related to the stability of the flow of dividends. Profit smoothing places great emphasis on the phenomenon of dividends. It should be note how in fact the profit smoothing is used to keep the expectations of shareholders profit from one period to another.This book is focused on the profit smoothing and, in particular, how this phenomenon is established in developing-economies like the Chinese one, and will be of interest to academics, researchers, and students of corporate finance.

Zielgruppe

Research

Autoren/Hrsg.

Magni, Domitilla

Inhaltsverzeichnis

CONTENTS 1.       Chapter 1. Theory of Profit1.1 Profit in traditional argumentation way1.1.1 Classical economist’s thinking1.1.2 Arguments of the neoclassical economic view1.1.2.1 Alfred Marshall. Short and long-term1.1.2.2 Equilibrium characteristics1.2 Economic governance of the firm1.2.1 Distributive and productive logic1.2.2 Governance structure and transaction cost1.2.3 Definition model of the governance structure: Williamson’s View1.2.4 Re-discussing Williamson’s Model1.2.5 Markets Served1.2.6 Interdependence Between Production and Commercialization Strategies 2.       Chapter 2. Profit impact in Business Vision2.1 The concept of profit in business vision2.1.1 Profit and profitability2.1.2 Profit as a business objective2.1.3 Problems in maximizing profit as a business goal2.1.4 Theoretical settings for the purpose of the enterprise2.2 Profit as a negotiable income2.2.1 Ricardian return, Paretian rent and monopolistic annuities2.2.2 Entrepreneurial Rents Theory2.2.3 Managerial Rents Model2.2.4 Rent Appropriation Theory2.3 From profit to value creation and sharing2.3.1 Stakeholder views2.3.2 Shareholder views 3.       Chapter 3. Smoothing and Earnings Management Policies3.1 Smoothing3.1.1 Capital Market3.1.1.1 Stock Market3.1.1.2 Banking System3.1.2 Governance3.2 Real earnings management policies3.2.1 Earnings management policies based on end-of-period valuations3.2.2 Income smoothing policies3.2.3 Big Bath earnings management3.2.4 Income minimization and income maximization policies3.2.5 Underlying reasons for the implementation of financial statement policies 4.       Chapter 4. Towards a definition of Profit Smoothing4.1 Income Smoothing4.1.1 Approaches to the study of income smoothing4.1.1.1 Classical Approach4.1.1.2 Income Variability Approach4.1.1.3 Dual Economy Approach4.1.2 When Insiders know more than Outsiders4.1.3 Income Smooth Attributes4.1.4 Classification of Firms into Smoothers Categories4.1.5 Accounting techniques for smoothing4.1.5.1 Motivation of income smoothing4.1.5.2 Gross Revenue Manipulation4.1.5.3 Inventory Accounting4.2 Profit Smoothing and Corporate Finance4.2.1 Profit’s strategic reasons4.2.2 Gordon’s model related to managerial goals4.2.3 Culture of extra profit as a threat to the shareholder value 5.       Chapter 5. Why China?      5.1 Introduction5.2 China’s development: a powerful imperialist pole emerges5.2.1 Chinese development5.2.2 Development’s reasons5.2.3 China in the world market5.2.4 Economic and global issues5.2.5 Political implications of Chinese development5.3 Chinese Financial System5.3.1 Importance of the financial structure5.3.2 Gradual reform of the Chinese financial system                        5.3.3 Evolution of the financial structure in China5.3.4 Problems with the structure of the Chinese financial system5.4 Corporate governance and development of Chinese Financial Economy5.4.1 The “public-private” business structure in China5.4.2 Conclusion on the Chinese system 6.       Chapter 6. Empirical analysis of Profit Smoothing6.1 Empirical study on accounting and financial data6.2. Empirical Review6.2.1 Profit Smoothing Hypothesis6.2.2 Smoothing Criterion and detecting approaches6.3 Methodology of research6.3.1 Dataset and Data Collection6.3.2 Variables6.3.3 Model6.4 Results6.4.1 Descriptive analysis6.4.2 ANOVA test: General effects6.4.3 Profit Smoothing and sign of demand shock6.4.4 Firms’ Size and Profit Smoothing6.4.5 Profit smoothing: sectorial breakdown 7.       Chapter 7. Management behavior and Profit Smoothing. Implications of the study7.1 Country breakdown analysis7.2 Summary of results and investigation on the phenomenon7.3 Conclusive remarks on the Profit Smoothing phenomenon

Über Autor(innen)

Domitilla Magni is currently a Research Fellow at the Roma Tre University, Italy, after completing her PhD in 2017 from La Sapienza University of Rome, Italy in Management Banking and Commodity Sciences. She has participated as a lecturer at many conferences on financial issues and strategic management alongside authoring many international publications. Her research interests include business strategies, corporate finance, and managerial issues.