Dimitrios V. Kousenidis

Size and book-to-market factors in the relationship between average stock returns and average book returns: some evidence from an emerging market

The present paper examines the association between average stock returns and average book returns and addresses the question as to whether there are common size and book-to-market factors in earnings and returns. The results of the empirical research, conducted in the Athens Stock Exchange, suggest that when the sample firms are grouped into size, book-to-market portfolios stock returns properly reflect differences in the evolution of accounting profitability. Moreover, it is found that the return on investment (ROI) measure contains size and book-to-market factors analogous to the mimic risk factors inherent in stock returns, in the sense that they capture information missed by ROI.

A free cash flow version of the cash flow statement: a note

Purpose – This paper reports an attempt to design a free cash flow version of the cash flow statement. In specific, the paper relates the comprehensive income concept to the definition of free cash flows and shows how free cash flows and residual income can be calculated from the cash flow statement. Design/methodology/approach - This paper exhibits how this different version of the cash flow statement can be reported by illustrating the differences with the form of the statement required by the regulatory accounting bodies. Findings - This paper shows that the cash flows resulting from operating and investing activities are exactly equal to the cash flows received by debt and equity holders (financing activities) by using a simple definition of a companys free cash flow. Practical implications - The method used requires a different version of a cash flow statement in which all financing related cash flows, such as interest expense is not included in the cash flow from operating activities. This version of the cash flow statement can be used in order to evaluate and appreciate financial policy formulation. Originality/value - The paper provides to the shareholders and all the parties who are interested in firm and its operation (managers, lenders etc) with information about the companys ability to distribute dividends, to issue new debt and in general the companys ability to meet its obligations.

Analysis of divisional profitability using the residual income profile: a note on cash flows and rates of growth

The present note expands on the (Frigo and Ciecka (1995)) residual income profile in order to analyze the relationship between residual income (RI), return on investment (ROI) and cash flows. The results indicate that in addition to the question of whether RI and ROI are useful in divisional performance evaluation, both measures also have an important role to play as a means of approximating actual cash flow.

Disclosure requirements and voluntarily reporting of cash flow information in Greece

Purpose – To review the disclosure requirements for cash flow reporting in Greece and the willingness of Greek companies to voluntarily disclose cash flow information. Design/methodology/approach - The empirical research was conducted on a sample of 97 Greek firms listed in the Athens Stock Exchange by examining the relation between cash flows and other measures of profitability for year 1994 when IAS No. 7 was set in effect. Findings - The results show that despite the fact that cash flows are more informative than an accruals definition of profits, in deciding about financial policy issues Greek companies show an increased preference to funds flows defined in terms of working capital. Practical implications - The publication of a cash flow statement may reveal that many listed companies in Greece are not as robust as the balance sheet and the income statement potentially indicates. Thus, the main conclusion of the paper is that publication of the cash flow statement in Greece should become mandatory. Originality/value - The present study shows that, despite the desire of the regulatory authorities that investors receive adequate and relevant information, voluntarily cash flow disclosure is not apparent in Greece because cash flows reveal financial problems that other measures of performance do not. Thus, it provides directions for standard setters in making mandatory the publication of cash flow statement in Greece.

The Investigation of the Dynamic Linkages between Real Estate Market and Stock Market in Greece

We use quarterly data from Greece and investigate the dynamic linkages between the price of the real estate market and the price of the stock market focusing on two transmission mechanisms, namely the wealth and credit-price effects. The empirical analysis employs advanced methodological techniques and presents evidence supporting the existence of both the wealth effect and the credit effect in the long-run while in the short-run there is a one-way causal effect running from stock market towards house market. Results reveal asymmetric adjustment to equilibrium process and considerably stronger for positive deviations from the equilibrium.

The market impact of the Involvement of the EU/ECB/IMF in Crisis-Affected Countries during the European Sovereign Debt Crisis

Purpose - This paper aims to examine whether the release of news about policy interventions by the troika [European Union (EU)/the European Central Bank (ECB)/International Monetary Fund (IMF)] in the crisis-affected EU countries (Cyprus, Greece, Ireland, Italy, Portugal and Spain) and whether the policy responses of these countries’ governments had impacts on the return and risk of stocks in the financial and real-economy sectors of these countries. Design/methodology/approach - The paper uses a broad set of news announcements concerning the troika authorities’ policy interventions and the policy responses of the affected Eurozone states’ governments. To test for the risk and return effects of these announcements during the crisis period, a set of regression equations is estimated under a difference-in-difference approach using intercept and slope dummy variables for news releases from troika authorities and from the national governments of the six EU countries. This enables unraveling the effects of the crisis (first difference) and the effects of news announcements (second difference). Findings - The results indicate that the involvement of the troika managed to reverse some of the unfavourable market effects of the crisis. Moreover, the policy response of national governments was found to have stronger favourable effects in the markets of the affected countries implying that investors likely waited for the response of the national governments before they reacted to the policy actions of the troika. The simultaneous release of news from the troika and from national governments had adverse effects on the returns and risk of the firms in the real economy sectors, suggesting that cross-news announcements conveyed negative information in the markets. Originality/value - The paper provides evidence on the effects of policy-related news announcements on the development of the recent sovereign debt crisis in Europe. This issue is highly important, as it can reveal the effectiveness of the IMF’s and EU authorities’ policy interventions in affected Eurozone member states during the first major crisis in Europe since the monetary union.

Business and Economic Education - Criteria for Choice of Studies and Student Expectations

This paper examines the stance of the students of the Economic Department Sciences of the Aristotle University of Thessaloniki1 respecting the course of study they have chosen, with reference to the criteria behind their choice and the people that influenced them. It also looks at the expectations students have for the future application of their studies in their professional life. Then, criteria of choice of subject, influence and position advancement were analysed statistically by factor analysis. The results of the above study show that the students of the Economics Department chose their studies on the principal criterion of employment prospects. The role played by their own wishes indicates the conscious choice of subject according to their abilities and inclination to study economics and business-related subjects.

Recent Developments in Modelling Abnormal Stock Returns: A Review Essay

The paper provides a guide to the standard methodology applied in event studies in order to evaluate the information content of accounting numbers and to test the efficiency of securities markets. Moreover, the paper refers to the issue of non-stationarity of stock returns. De Jong, et al., (1992) have test for one form of non-stationarity, namely conditional heteroskedasticity, and found that it may lead to inefficient estimates of beta factors. In this context, De Jong et al., propose an extended version of the Market Model for event studies which is exposed separately in the paper.