nep-cfn New Economics Papers
on Corporate Finance
Issue of 2014‒07‒21
two papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. When does cash matter? Evidence for private firms By Paul Ehling; David Haushalter
  2. Pertinence des mesures non-GAAP pour les marchés boursiers : le cas des firmes du CAC 40 By Denis Cormier; Samira Demaria

  1. By: Paul Ehling (BI Norwegian business school); David Haushalter (Sheal college of business)
    Abstract: Using a database of more than 180,000 private companies from 2000 to 2009, we find that the benefits of holding more cash vary substantially with a firm’s size and the conditions it faces. Cash holdings matter most for small firms: when there are negative shocks to industry or macroeconomic conditions, a small firm’s cash holdings are positively associated with changes in its sales and assets. Cash is less important for other conditions. Differences in the benefits of cash holdings between large and small firms are traced to a firm’s ability – and willingness – to increase leverage when there is a cash shortfall.
    Keywords: cash holdings, benefits of cash holdings, private companies
    JEL: G30 G32 G35
    Date: 2014–06
  2. By: Denis Cormier (ESG UQAM, Montreal, Canada); Samira Demaria (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: This study focuses on the use of non-GAAP by French companies (CAC 40) and its impact on the stock market controlling for corporate governance. Our main results are as follows. First, we find a complementary effect between residual earnings and non- GAAP for market valuation. Second, in the presence of good governance, the impact of the publication of non-GAAP (number) on the valuation of residual results decreases. This could mean an abundance of non-GAAP reduces its relevance. Corporate governance would substitute to non-GAAP measures (number) for residual earnings valuation. Third governance itself has a positive impact on residual earnings valuation. However, unlike the number of non-GAAP published, the level of detail (number of pages) is not affected by corporate governance in residual earnings valuation. This could be explained by the fact that the AMF advocates for a reconciliation of non-GAAP and IFRS financial data. Fourth, our results suggest that after a certain threshold, non-GAAP (number or pages) create asymmetry in equity markets.
    Keywords: Corporate governance, Non-GAAP, Residual earnings, Stock market valuation
    JEL: M41 G14
    Date: 2014–07

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