Renê Coppe Pimentel

Is the Annual Earnings Response Coefficient Statistically Significant in Brazil

ABSTRACT The aim of this paper is to analyze the significance of firm-specific and pooled earnings response coefficients in the Brazilian market. The lag structure of earnings-return relations is also analyzed. The sample consists of 61 Brazilian public firms that represent all firms with a minimum of seven continual data from 1995 to 2008. The analysis is based on linear regressions of two different proxies of earnings and two different proxies of return. The results show that, for firm-regressions, few companies presented a significant relationship between earnings and stock returns, and for some firms a negative coefficient was found. In the pooled regressions a positive and statistically significant coefficient was found, and the tests suggest that variance in cross-sectional observation is more relevant in explaining the earnings response coefficient than the time-series variance.

THE ROLE OF EARNINGS PERSISTENCE IN VALUATION ACCURACY AND THE TIME HORIZON

En base al supuesto de que la persistencia de las ganancias tiene implicancias tanto en el analisis financiero como en los contratos de compensacion, el objetivo de este trabajo es investigar el rol de la persistencia de las ganancias, asumiendo que (i) es probable que las ganancias mas persistentes constituyan un mejor aporte a los modelos de valoracion y (ii) las ganancias mas persistentes tienen mas posibilidades de funcionar como una aproximacion al mercado de largo plazo y a la orientacion gerencial. El analisis se basa en empresas que cotizan en bolsa en Brasil desde 1995 hasta 2013 y si bien documentamos un sostenido apoyo a la relevancia de la persistencia de los ingresos en el analisis financiero y la valoracion, no hemos podido documentar una relacion significativa entre la persistencia de las ganancias y la orientacion de valor a largo plazo. Estos resultados son sensibles a diferentes especificaciones y otros resultados sugieren que el riesgo idiosincrasico de las empresas (riesgo total) resulta relevante para explicar la atencion centrada en los resultados de corto plazo (cortoplacismo) entre las diversas empresas. El aporte principal de este trabajo consiste en brindar evidencia empirica de la importancia de los numeros contables tanto en la valoracion como en las teorias contractuales, en un mercado emergente.Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms’ idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market

El rol de la persistencia de las ganancias en la exactitud de la valoración y el horizonte temporal

En base al supuesto de que la persistencia de las ganancias tiene implicancias tanto en el analisis financiero como en los contratos de compensacion, el objetivo de este trabajo es investigar el rol de la persistencia de las ganancias, asumiendo que (i) es probable que las ganancias mas persistentes constituyan un mejor aporte a los modelos de valoracion y (ii) las ganancias mas persistentes tienen mas posibilidades de funcionar como una aproximacion al mercado de largo plazo y a la orientacion gerencial. El analisis se basa en empresas que cotizan en bolsa en Brasil desde 1995 hasta 2013 y si bien documentamos un sostenido apoyo a la relevancia de la persistencia de los ingresos en el analisis financiero y la valoracion, no hemos podido documentar una relacion significativa entre la persistencia de las ganancias y la orientacion de valor a largo plazo. Estos resultados son sensibles a diferentes especificaciones y otros resultados sugieren que el riesgo idiosincrasico de las empresas (riesgo total) resulta relevante para explicar la atencion centrada en los resultados de corto plazo (cortoplacismo) entre las diversas empresas. El aporte principal de este trabajo consiste en brindar evidencia empirica de la importancia de los numeros contables tanto en la valoracion como en las teorias contractuales, en un mercado emergente.Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms’ idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market

O papel da persistência dos lucros na acurácia de avaliação e no horizonte temporal

En base al supuesto de que la persistencia de las ganancias tiene implicancias tanto en el analisis financiero como en los contratos de compensacion, el objetivo de este trabajo es investigar el rol de la persistencia de las ganancias, asumiendo que (i) es probable que las ganancias mas persistentes constituyan un mejor aporte a los modelos de valoracion y (ii) las ganancias mas persistentes tienen mas posibilidades de funcionar como una aproximacion al mercado de largo plazo y a la orientacion gerencial. El analisis se basa en empresas que cotizan en bolsa en Brasil desde 1995 hasta 2013 y si bien documentamos un sostenido apoyo a la relevancia de la persistencia de los ingresos en el analisis financiero y la valoracion, no hemos podido documentar una relacion significativa entre la persistencia de las ganancias y la orientacion de valor a largo plazo. Estos resultados son sensibles a diferentes especificaciones y otros resultados sugieren que el riesgo idiosincrasico de las empresas (riesgo total) resulta relevante para explicar la atencion centrada en los resultados de corto plazo (cortoplacismo) entre las diversas empresas. El aporte principal de este trabajo consiste en brindar evidencia empirica de la importancia de los numeros contables tanto en la valoracion como en las teorias contractuales, en un mercado emergente.Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms’ idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market

Quarterly long-term relation between liquidity and profitability indicators: evidence from textile companies

This paper analyzes the long-term relation between liquidity and profitability ratios for a group of Brazilian publicly traded textile companies, using quarterly data from March 1995 to March 2009. The underlying hypotheses of the study are that there is a significant and positive relation, in the medium- and the long-term, between liquidity and profitability indicators. In other words, low liquidity can worsen high profitability or vice-versa, and one can verify a general tendency toward the Granger causality among the indicators. The results suggest that there is a positive temporal relation and show that the companies reflect Granger causality in different directions (from profitability to liquidity and from liquidity to profitability). Thus, despite the long-term cross-relationship, it was impossible to establish a single relation regarding the direction of causality.