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Impact of European Funds on Value Creation of Portuguese Companies
Nuno Teixeira,
Luís Vitorino,
Rui Brites,
Teresa Godinho
Issue:
Volume 5, Issue 1, March 2020
Pages:
1-11
Received:
24 December 2019
Accepted:
31 December 2019
Published:
10 March 2020
Abstract: This work aims to highlight the impact of Community funds on the capacity to create financial value of Portuguese companies. We develop a theoretical framework with a reflection on various topics relevant to research, namely the importance of investments for companies, the concepts of financial performance and the logic of value creation, the metrics for value creation and the cost of capital. In addition, we have looked at several studies with similar research objectives to observe the methodologies used and the research results achieved. The study we developed looked at the 166 companies that benefited from EU funds in 2014 under the Sistema de Incentivos à Inovação, which is a part of the EU Incentives System for Research and Technological Development. To measure value creation capacity, we used EVA, since it is an indicator which allows you to easily measure the value created in each period and can be obtained directly from the financial statements of companies. The research results showed that the companies studied presented a greater capacity to create value, create employment and internationalize the activity in the financial year 2016 (although only job creation and internationalisation have shown statistically relevant differences). However, the statistical tests performed did not show any relationship among companies' best performance in the three indicators and the subsidies received, which means that, eventually, such positive developments have occurred due to other factors, such as the very favorable evolution of the Portuguese economy.
Abstract: This work aims to highlight the impact of Community funds on the capacity to create financial value of Portuguese companies. We develop a theoretical framework with a reflection on various topics relevant to research, namely the importance of investments for companies, the concepts of financial performance and the logic of value creation, the metri...
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Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)
Ana Bela de Sousa Delicado Teixeira,
Rosa Maria Morgado Galvão,
Sandra Cristina Dias Nunes
Issue:
Volume 5, Issue 1, March 2020
Pages:
12-25
Received:
24 December 2019
Accepted:
2 January 2020
Published:
10 March 2020
Abstract: Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.
Abstract: Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicator...
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Value Creation: EVA® Value Drivers - The Case of Euronext Lisbon
Rosa Maria Morgado Galvão,
Ana Bela de Sousa Delicado Teixeira,
Sandra Cristina Dias Nunes
Issue:
Volume 5, Issue 1, March 2020
Pages:
26-39
Received:
24 December 2019
Accepted:
2 January 2020
Published:
10 March 2020
Abstract: Value-based management has gained prominence in both business and academia, supported by the notion that It is no longer sufficient for a company to generate profit, it is also required that the profit be higher than the cost of the total capital invested in the company. To increase value creation, managers need to understand which are its relevant determinants (value drivers). Therefore, this study aims to identify the main value creation drivers measured by EVA® (economic value added), one of the value-based performance measures more referenced in financial literature. A sample of non-financial listed companies on Euronext Lisbon, from 2011 till 2016, is analyzed. The data was collected from the companies’ annual consolidated financial reports. The data was analyzed using tree statistical analysis techniques, binary logistic regression, Pearson correlation coefficient, and t-test for independent groups, with SPSS (Statistical package for social sciences). The results show that the variables more relevant to value creation are the operating profit margin ratio, invested capital turnover, and the cost of equity rate. This study provides valuable information that assists managers in their decision-making, allowing to maximize value creation, through the identification of the main value drivers, and it also contributes to the dissemination on the subject of value creation.
Abstract: Value-based management has gained prominence in both business and academia, supported by the notion that It is no longer sufficient for a company to generate profit, it is also required that the profit be higher than the cost of the total capital invested in the company. To increase value creation, managers need to understand which are its relevant...
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Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets
Rui Dias,
Paula Heliodoro,
Nuno Teixeira,
Teresa Godinho
Issue:
Volume 5, Issue 1, March 2020
Pages:
40-51
Received:
24 December 2019
Accepted:
2 January 2020
Published:
10 March 2020
Abstract: The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.
Abstract: The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the...
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Financial Instruments’ Disclosure in Compliance with IFRS 7: The Portuguese Companies
Francisco Leote,
Clarisse Pereira,
Rui Brites,
Teresa Godinho
Issue:
Volume 5, Issue 1, March 2020
Pages:
52-61
Received:
30 December 2019
Accepted:
6 January 2020
Published:
10 March 2020
Abstract: The constant changes in the business context and international relations have led companies to be provided with financial reporting with useful information, including their relevance, comparability and harmonization as required by International Financial Reporting Standards (IFRS). This study analyzes the level of disclosure of derivative financial instruments from companies in the PSI20 stock index, in the Euronext Lisbon stock exchange, according to requirements of IRFS 7. A disclosure index was created, based on the reports and accounts of companies in the period 2015-2017. To analyze the evolution of the disclosure level according to companies’ characteristics (dimension, profitability, share price and auditor type), we applied a cluster analysis. The results show a high level of disclosure. This evidence may be related to the mandatory adoption of IAS / IFRS and may also reflect companies' greater concern in disclosing this type of information due to the negative impact that the global financial crisis has had on corporate performance in general. The dimension is the variable that affects disclosure. That is, there is a tendency to, the higher the company the higher the level of disclosure. However, the results show that smaller companies also have high levels of disclosure. This may be associated with greater or lesser quantity or value of derivative financial instruments used.
Abstract: The constant changes in the business context and international relations have led companies to be provided with financial reporting with useful information, including their relevance, comparability and harmonization as required by International Financial Reporting Standards (IFRS). This study analyzes the level of disclosure of derivative financial...
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The Impact of Financial Leverage on the Performance of Commercial Banks: Evidence from Selected Commercial Banks in Ethiopia
Issue:
Volume 5, Issue 1, March 2020
Pages:
62-68
Received:
16 October 2019
Accepted:
24 December 2019
Published:
14 April 2020
Abstract: The financing decision function of corporate finance deals with determining the best financing mix or capital structure of the firm in order to maximize the value of firm or wealth of owners. In Ethiopia, Commercial Banks use a combination of debt and equity source of finance in their capital structure. Each source of finance has its own cost of capital in the capital structure and hence effect on value of corporation. The ratio used to measure the proportion of debt to equity is considered as Financial Leverage. The main objective of this study is to investigate the effect of financial leverage on the financial performance of Ethiopian Commercial Banks for the period of 10 years (2008-2017) for the 5 selected commercial banks. As a measure of financial leverage for the independent variables three variables such as Debt ratio (DR), Debt Equity ratio (DER) and Interest coverage ratio (ICR) (times interest earned ratio) were used. As a measure of financial performance, the dependent variable two ratios such as return on asset (ROA) and return on equity (ROE) were used. The ex-post facto and longitudinal research design were used. The secondary data were collected from the audited financial reports (profit and loss statement and statement of financial position) of selected commercial banks operated in Ethiopian financial system. Descriptive statistics and Fixed Effect model were used. The result of the study showed that, Debt Ratio (DR) has a negative insignificant effect on Banks’ performance measured by Return on Assets (ROA) and Return on Equity (ROE) while Debt Equity Ratio (DER) And Interest Coverage Ratio (ICR) have significant positive Effect on Banks’ performance measured by Return on Assets (ROA) and Return on Equity (ROE).
Abstract: The financing decision function of corporate finance deals with determining the best financing mix or capital structure of the firm in order to maximize the value of firm or wealth of owners. In Ethiopia, Commercial Banks use a combination of debt and equity source of finance in their capital structure. Each source of finance has its own cost of ca...
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