Journal of Applied Business Research (JABR) 2018-06-18T15:11:24+00:00 Stephanie Clute Open Journal Systems <p><strong>Published since 1985</strong><br>ISSN 0892-7626 (print), ISSN 2157-8834 (online)<br>The Journal of Applied Business Research (JABR) welcomes articles in all areas of applied business and economics research.</p> The Role Of Cash Holdings, Working Capital, Dividend Payout On Capital Investment 2018-06-18T15:11:24+00:00 Andrew Chan <p>An objective of this paper is to investigate the relationship between firms' capital investment spending, cash holdings, and working capital in an expanding Asian financial market.&nbsp; A sample of publicly traded manufacturing firms on the Hong Kong Stock Exchange was examined during the period 2005-2014.&nbsp;The empirical results provide strong and statistically significant evidence on the effect of cash flow on investment.&nbsp; Working capital also exhibits significant relationship with capital investment spending, though the relationship is not as strong and significant as that with cash flow and cash holding.&nbsp; Firms with low dividend payout policy over the sample period depended heavily on cash flow, changes in cash flow and, to a lesser extent, on working capital to finance spending on fixed plant and equipment.&nbsp; These results suggest that the effect of capital investment spending financed by internal cash flow on firm value may depend on a firm's dividend payout.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## The Influence Of Firm’s Fair Value System On Earnings Quality Under IFRS 2018-06-18T15:11:23+00:00 Chang Seop Rhee Eun Sil Choi Ji Yeon Ryu <p class="a">This paper analyzes the influence of firms’ fair value system on earnings quality under IFRS. Korean firms are required to adopt IFRS in 2011. IFRS adoption was expected to increase value relevance of book value of equity and benefit information users’ decision making. However, prior Korean studies report that value relevance of book value of equity is indifferent between under K-GAAP and IFRS. We consider that the indifference in value relevance of book value of equity after IFRS adoption is due to different level of fair value system among firms. We investigate whether the different level of fair value system among firms lead to the difference in earnings quality. Furthermore, we examine how each firm’s fair value system affect earnings quality under IFRS.</p> <p class="a">&nbsp;This study finds following results. First, firms with weak fair value system smooth income more frequently. Second, firms with weak fair value system experience small amount of positive profit and slight increase in net income compared to prior period more frequently. Third, firms with weak fair value system make less timely loss recognition. Lastly, book value of equity and goodwill has low relative value relevance for weak fair value systemic firms, while both book value of equity and goodwill have incremental value relevance for firms with strong fair value evaluation system.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Leapfrogging Under A Sequential Investment Strategy 2018-06-18T15:11:23+00:00 Hyung Rok Yim <p>A common FDI pattern observed across Korean parents investing in China is that they invest sequentially. Revoking that Korean parents are intended to achieve production efficiency in China, the economies of scale of a sequential investment strategy is relatively lower compared to a large scale one-shot investment; however, the latest production technologies can be applied to sequentially established subsidiaries, which can open a strategic pathway to leapfrog other competitors in the long run. A game model is constructed to demonstrate that as longer the Korean parents are expected to stay in China, they are better off by pursuing a sequential investment strategy. Unfortunately, this result does not mean that they can leapfrog competitors through sequential investment strategy. This can happen only when they begin with larger resource endowments. The model predicts that, under the lack of resources in establishing Chinese subsidiaries, Korean firms’ leapfrogging through sequential investment strategy can occur if technology shocks occur to follow-up investments after an initial investment is done. A scenario approach is performed to prove this prediction empirically. It turns out that the firm value of those Korean parents that pursue sequential investment strategy increases the most when the longer they operate in China and when their research and development investments are higher at the same time. Also, as they stay longer in China, they are intended to make more sequential investments.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Agency Theory Approach For The Performance Of Returnee Entrepreneurs 2018-06-18T15:11:23+00:00 Ping Yan Yunhyeong Choi Seong-jin Choi Sukyoon Jung <p class="a">A returnee entrepreneur playing an important role in China market is a notable phenomenon. While their advanced knowledge and overseas networking in developed countries have advantages over local counterparts, their lack of local knowledge and connection may mitigate their advantages. This study explores the research questions how and why external management control of returnee entrepreneur is inferior to local counterpart. Based on the data collected in year 2002 from Chinese technology venture companies in Zhongguancun Science Park (ZSP), we find that the performance of returnee entrepreneur’s firms is lower when they have more local subsidiaries and when they are owned by foreigners. It implies that returnee entrepreneurs may be less effective in management control over local subsidiaries which may indicate a low level of headquarters control. It also implies that foreign ownership gives rise to increase in agency conflicts between returnee entrepreneurs and foreign investors and thus has a negative impact on firms’ innovation performance.</p> <p>&nbsp;</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## How Do Institutional Investors Interact With Sell-Side Analysts? 2018-06-18T15:11:23+00:00 Grace Il Joo Kang Yong Keun Yoo Seung Min Cha <p>This paper examines how institutional investors interact with sell-side analysts (hereafter, SSAs) in Korean stock market. In particular, we examine the role of institutional investors as a more sophisticated mechanism which incorporates sell-side analysts’ stock recommendation, target price, and earnings forecast more rapidly than individual investors do. Moreover, we examine whether institutional investors differentiate the quality of sell-side analysts’ information. By using a sample of 1,421 firm-year observations in Korean stock market during 2001–2011, we find that the change of institutional investor’s ownership has a significantly positive association with the level of equity value estimates based on SSAs’ earnings forecasts relative to stock prices and their stock recommendation which are considered as SSAs’ indicator of stock market’s mispricing. In addition, we find that only when SSAs provide more accurate earnings forecasts, institutional investors incorporate SSA’s information into their stock trading. Thus, we conclude that institutional investors in Korean stock market contribute to the enhancement of stock market efficiency by incorporating SSAs’ information into their stock trading more rapidly than individual investors. Our findings add to the literature by shedding a light on the unobserved interaction among more sophisticated stock market participants, such as institutional investors and sell-side analysts.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Segment Reporting Level And Analyst Forecast Accuracy 2018-06-18T15:11:22+00:00 Kyongsun Heo Seoyoung Doo <p>In a setting where the primary financial statements have been converted from individual financial statements to consolidated financial statements in Korea, we examine the effect of segment information disclosed by the firm on analysts’ consolidated-base earnings forecast accuracy. Since Korean firms have prepared the primary financial statements on a non-consolidated basis in the pre-IFRS regime, the adoption of International Financial Reporting Standards (IFRS) leads to a great deal of difficulties and complexities in making accurate consolidated forecasts for users of financial statements, even for financial analysts who are sophisticated users of financial statements. In this situation, we conjecture that the amount of details&nbsp;and types of information in segment disclosure will influence analysts’ forecast accuracy. Consistent with the prediction, we find that financial analysts are able to make more accurate earnings projections when firms provide more disaggregated accounting figures by each segment. Moreover, we find that analysts can make forecasts more accurately when firms disclose more persistent earnings component (i.e., segment operating income). Furthermore, we find that the effect of the segment disclosure levels on analysts’ forecast accuracy is more pronounced for firms with multi-segments. Our results indicate that disaggregated segment information is a useful source for financial analysts to have better understanding about complete picture of firms’ consolidated earnings and improve their forecasting performance.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Stock Returns And Disagreement Among Sell-Side Analysts 2018-06-18T15:11:22+00:00 Jeffrey Hobbs David L. Kaufman Hei-Wai Lee Vivek Singh <p>Asymmetric information, investor optimism, and unbiased prices hypotheses are the main hypotheses proposed for explaining how investors’ difference of opinion may impact stock returns. We use a new measure for divergence in investor beliefs among sell-side analysts to test these three hypotheses.&nbsp; Our initial findings are not supportive of either the asymmetric information or the investor optimism hypotheses.&nbsp; However, since these two hypotheses predict opposing effects of divergence in opinion on stock returns, the effects could neutralize their respective impacts on stock prices.&nbsp; Our further empirical analysis though suggests that this is not the case.&nbsp; The weight of the evidence presented suggests thatwithin the sell-side, the difference of opinion does not impose a bias on future stock returns.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Key Management Model Of Added Value In The Historical Tourist Attractions: The Case Studies The Emerald Buddha Temple Bangkok Thailand 2018-06-18T15:11:22+00:00 Chayanan Kerdpitak <p>The promotion of the historical tourist attractions is an important mission that should be accomplished to ensure that the tourists have admired ancient sites that are valuable, rare, Inimitable andnon – substitution. The tourists are thus enthusiastic to visit the ancient sites and willing to promote and encourage other tourists to visit these tourist attractions. By this reason, the objective of this research is to study the main factors affecting the added value of the tourist to the historical tourist attractions in Thailand. The factors include, Participation Management, Processes Management, Resource Management, Tourists Satisfaction, Tourist Attractions Differentiation and Added Value of Tourists.</p> <p>In this study, the researcher has applied both quantitative and qualitative research methodologies using questionnaires and in-depth interview. The sample comprises visitors to the Temple of the Emerald Buddha. Meanwhile, the path analysis has been used to analyze the data. At the same time the researcher intends to propose the conceptual framework for this study with an aim to identify of the research question, there are any factors affecting to the added value of the visitors to the ancient sites. Moreover, the researcher has recommended 7 assumptions to find out the factors that have effects on the added value of the visitors to the ancient sites.</p> <p>The result has shown that the Tourists satisfaction and the differentiation in tourist attractions have affected the visitors’ added value with the significance level at 0.008. The result of this study can be used to set up the business operations policy of the Thai tourism business. The policy focuses on differentiation placing the development of tourist attractions as first priority followed by the environmental management, the promotion of tourist attractions and the renovation of ancient sites respectively.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## The Mexican Tourism Business: Lessons From Domestic Demand For Business Managers 2018-06-18T15:11:22+00:00 Liliana Ruiz Fuentes Delfino Vargas Chanes <p>The purpose of this research is to identify priority actions to be taken in Mexico in order to encourage tourism entrepreneurs to take advantage of and to meet domestic tourist demand. In order to do this, the role that domestic tourism has in consumption and demand both nationally and internationally is analysed; opinion leaders from the sector are interviewed and the concept mapping methodology is used in combination with multidimensional scaling to solve the difficulties of prioritizing activities, gaining consensus, and to show graphically how the various stakeholders relate. The main results show three principal groups of activities: one which can be directly addressed by entrepreneurs, and two others, which although they relate to public policy and measurement, can also be driven by the business community.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## Inferring The Cost Of Equity: Does The CAPM Consistently Outperform The Income And Multiples Valuation Models? 2018-06-18T15:11:21+00:00 Vusani Moyo Fidelis Mache <p>A number of surveys reveal that a large number of analysts, valuation experts, investors, chief financial officers and finance academics employ the capital asset pricing model (CAPM) of Sharpe (1962) and Lintner (1965) to estimate the cost of equity. There are, however, a number of alternative valuation models that can be used to infer the cost of equity. These alternative equity valuation models include the constant growth dividend discount, the earnings and book market multiples, the residual income and the Ohlson and Juettner-Nauroth (2005) abnormal earnings growth (AEG) models.&nbsp; Using four mature retail firms listed on the Johannesburg Stock Exchange, this paper tested for the equivalence of these models to the CAPM in estimating the cost of equity.&nbsp; The study found that the variants of the constant growth dividend discount and the AEG models give similar estimates which are closer to those of the CAPM. The variants of the price-to-earnings market multiples, price-to-book market multiples, and residual income models all yield estimates that are higher than those of the CAPM. Finally, the estimates seem to be affected by the stability of the firm’s earnings and financial position.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement## The Impact Of The National Credit Act On Residential Mortgage Lending In South Africa 2018-06-18T15:11:21+00:00 Catherine Boonzaaier Joseph Chisasa <p>The purpose of the study reported in this article was to determine the impact of the National Credit Act on residential mortgage lending in South Africa.&nbsp; The National Credit Act (NCA) was promulgated and implemented on 1 June 2007. The purpose of the NCA was to remove the many unfair practices, inappropriate disclosure and anti-competitive practices from the market and to achieve honesty in the credit market. Low-income groups were held back because they could not gain access to formal finance to build or improve houses or supplement housing subsidies to get bigger houses. This study applied a quantitative research design using monthly time series secondary data for the period January 2001 to August 2011.&nbsp;The statistical analysis techniques used in this study were t-tests, descriptive statistics, trend analysis and correlation analysis. It was found that the NCA had a positive effect on the residential mortgages in South Africa. These results have policy implications on the continued regulation of the credit market and the avoidance of reckless lending.</p> 2018-05-07T00:00:00+00:00 ##submission.copyrightStatement##