Comparing the Ability of Bayesian networks and Adaboost for Predicting Financial Distress of Firms listed on Tehran Stock Rxchange (TSE) 1

Abstract: Financial distress and bankruptcy of companies may cause the resources to be wasted and the investment opportunities to be faded. Bankruptcy prediction by providing necessary warnings can make the companies aware of this problem. The aim of this study is to compare the ability of Bayesian networks and adaboost for predicting financial distress of firms listed on Tehran Stock Exchange (TSE). Two naïve bayes models were developed based upon conditional correlation between variables and conditional likelihood. The accuracy in predicting bankruptcy of the first naïve bayes model's performance that is based upon conditional correlation is 90% and the accuracy of the second naïve bayes model is 93% and finally the accuracy of the adaboost that was built to compare with naïve bayes models is 88%. Collectively the results show that it is possible to predict financial distress using Bayesian and Adaboost models. But, Bayesian networks are more capable to predict financial distress of companies listed on TSE compare to Adaboost. With respect to the variables in developed models in this research we find that firms with lower profitability and more long term liabilities and lower liquidity are more in Risk of financial distress. To reduce financial distress risk, firms should use more conservative methods which lead to decrease in debts and reduce their costs

An Appraisal of Interpersonal and Informational Justice on Strategic Supplier Superior Performance in Power Sector

ABSTRACT The rationale for effective inter-organisational buyer-supplier relationship is consistently governed by the extent of its commitment to equitable justice perception, relevant performance metrics and high utilization of sensitive predictors of performance outcomes. Based on the conceptual model from the perspective of system theory, the mediating role of trust, satisfaction and socialization would be examine against the effect of antecedent variable such as interpersonal and informational justice towards achieving superior supplier performance. The expectation is, there would be a greatest impact of informational and interpersonal justice on trust, satisfaction and socialization, with an indirect effect on supplier performance in a long term cooperative relationship. There are extensive study on the buyer-supplier relationship and how the buying firm manages its supplier though, recent researches have articulate the need to investigate the impact of informational and interpersonal justice on behavioural performance because of the little attention paid to i

Assessment of accounting information, market value, cost of equity and moderating effect of intellectual capital

It is contended among the accounting researchers that information asymmetry could be reduced through disclosure of information pertaining to quality of earnings and recognition of intellectual capital. Correspondingly, this study examined the relationship between accounting earnings attributes i.e. relevance and conservatism of earnings and cost of equity. This study included an investigation of the moderating effect of intellectual capital on (i) the relationship between earnings and book value (individually and aggregate) and market price, and (ii) the relevance of earnings and cost of equity. The data for the study were based on annual financial reports, Datastream and Bloomberg of firms from the Technology, Trading and Services, Consumer Products and Hotel sectors listed in the main board of Bursa Malaysia from 2006 to 2010. The study employed multiple and moderated multiple regression to analyse data. The results showed that, firstly, firms with high quality of relevance of earnings benefit more from lower cost of equity and there is no relationship between conservatism of earnings and cost of equity, Secondly, the moderating of intellectual capital has an effect on the relationship between earnings and book value with market price. Lastly, the findings showed that intellectual capital has a moderating effect on relevance of earnings and cost of equity. This study contributes to the valuation theory through extension of Ohlson model by the inclusion of new-knowledge of intellectual capital. Besides that, it contributes to the understanding of signaling theory through the explanation of the moderating effect of intellectual capital on the relationship between relevance of earnings and cost of equity. The findings of the study has shown the importance of intellectual capital and it is recommended that accounting standard setting authorities must pave the avenue for the disclosure of intellectual capital in a firm?s annual financial report

Effect of conservatim of intellectual capital (ex ante) and conservatism of earnings (ex post) on relevance of earnings

This paper reviews the effect of both conservatism namely, conservatism of intellectual capital and conservatism of earnings on relevance of earnings. This paper shows that the decrease in the relevance of earnings is probably due to ex an te and ex post conservatism. Review of this paper suggests that researchers, practitioners, and accountants are required to seek and resolve this long standing issue by extending the horizon of research, which measures the role of conservatism of intellectual capital and conservatism of earnings. Therefore, this paper proposes a model that examines the effect of conservatism of intellectual capital (ex ante) and conservatism of earnings (ex post) on relevance of earnings

Conservatism of earnings and investor protection

This paper reviews the conservatism of earnings and cost of equity to enhancement and improvement of quality information pertaining to earnings quality that leads to the reduction of information asymmetry (information risk) and consequently reduces cost of equity. Review of this paper suggests that managers should disclose more quality information particularly related to earnings in order to increase investor’s willingness to invest in capital market. Therefore, this paper intends to resolve the issue of information asymmetry by determining the role of conservatism of earnings on cost of equity

Dividend payout policy, investment opportunity set and corporate financing in the industrial products sector of Malaysia

This paper investigates the relationship between Investment Opportunity Set (IOS) and dividend policy and if ethnicity and family ownership moderates this relationship in an emerging economy context. The contracting explanation based on Jensen’s Free Cash Flow Theory (FCF) [22, 36] is empirically examined using a series of firm characteristics including industry type, size, return on assets, duality, government linked and debt to assets. Family ownership is examined because there seemed to be companies in the Bursa which are less diffused and dominated by companies with substantial shareholders. Ethnicity is examined because Malaysia is not only a developing country with an emerging capital market but also because there is considerable division based on ethnicity, language and religion. The results suggest that, there is strong support on the negative significant association between growth opportunities and dividend payout in the context of family controlled firms but not in the context of ethnicity

Effect of recognition of intellectual capital on relevance of accounting information

Innovation is the result of human inquisitive nature. Transacting from Stone Age to the technological driven era, human has been endeavored hard to innovate and improve the life standards of this earth. This paper reviews the effect of recognition of intellectual capital (IC) on relevance of accounting information. The review of this paper suggests that recognition of IC has significant impact on financial information. This paper advocates the major modification in traditional accounting standards and conventional accounting practices to comply with the stipulations of modern and competitive business era and pave the avenue for the recognition of IC as an asset to the firm. Therefore, this paper proposes to researchers, practitioners, and accountants to resolve this long standing issue (non-recognition of IC) by extending the horizon of research, which measures IC

The impact of supplier selection on inventory handling performance under catastrophic risk and environmental uncertainty: an emerging market scanning

It is becoming increasingly difficult in recent times to ignore the importance of supplier evaluation and selection assessment with renewed interest in risk and turbulent business environmental uncertainties. Basic emphasis should be placed on supply chain performance improvement and monitoring mechanism when evaluating the available and potential supply source. Based on the conceptual model from the perspective of agency theory view, the moderating role of catastrophic risk and environmental uncertainty would be examine against the effect of antecedent variable such as supplier evaluation, geographic location, cultural fit and supplier capabilities in achieving superior supplier performance. Supplier handling buyer