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Smith, M., &Taffler, R. J. (2000). The chairman’s statement-a content analysis of discretionary narrative disclosures. Accounting, Auditing & Accountability Journal, 13(5), 624-647.
The author explores the relationship between the discretionarynarrative disclosure that that firms release and the likelihood of firm failure, measured as the risk of bankruptcy. The authors contend that the narrative sections of the annual reports provide at least 40 percent of the information that analysts quote. The author point out that the unaudited discretionary disclosures contain essential information relating to the future of a company, and not just its past performance.
The strength of the empirical research lies in exploring the likely information content contained in discretionary financial disclosures. The study uses a methodological approach in its content analysis of the role that the chairman’s letter plays in predicting bankruptcy. The advantage of content analysis lies in the fact that it is unobtrusive.
The research paper applies to the case study because it shows how management narratives can be used by financial analysts to predict the opportunities and risks a company holds. The research paper suggests that companies that are clear in their exposition tend to have better firm performance. Firms that have performed well financially communicate clearly while firms that have performed poorly tend to be obscure and overoptimistic in their discussions.
Filbeck, G., & Krueger, T. M. (2005). An analysis of working capital management results across industries. American Journal of Business, 20(2), 11-20.
The authors sought to explore the differences across industries in the measures relating to working capital. The researchers discovered that the approaches relating to working capital change across industries over time.
The author uses the working capital survey, a joint venture between CFO magazine and REL Consultancy Group. The authors rely on the survey because it collects data on various benchmarks of working capital. Some of the benchmarks of the survey include cash conversion efficiency, days of working capital. The survey allows the authors to conduct the study because the survey provides firm and industry data for such variables as days sales outstanding, days payable outstanding, and inventory turnover. The authors use variance analysis and Kendall’s Coefficient of Concordance for statistical analysis.
The value of the study to the analysis of the case study lies in its showing of the average rate of cash conversion efficiency, days of working capital, and days sales outstanding. The research also explains the factors why companies perform well or poorly in working capital management across industries.
Sufi, A. (2007). Bank lines of credit in corporate finance: An empirical analysis. The Review of Financial Studies, 22(3), 1057-1088.
The author investigates the arrangement under which public firms receive lines of credit. The author points out that the dominant type of debt instrument among public firms are lines of credit. The author asserts that lines of credit are a significant source of financial flexibility for the firms that employ them. However, banks only give lines of credit to highly profitable firms, and they tend to often adjust such credit upwards or downwardsin substantial magnitude.
The author used 300 randomly sampled firms within the Compustatdatabase, tracking them from 1996 to 2003. The author collected detailed information relating to where the firms received their corporate debt facilities, the amount they used, and the amount that remained unused. The author realized that contrary to assertions of current scholars, lines of credit do not represent the unconditional obligation that financial institutions have toward companies. Banks tend to deny firms lines of credit in the event of negative earnings.
The research paper is instructive to the case study because it shows the advantages and Drawbacks of using lines of credit. The flexibility of lines of credit include that they ca marginally increase or decrease a firm’s debt levels. Secondly, firms can easily raise or lower their levels of lines of credit.
References
Filbeck, G., & Krueger, T. M. (2005). An analysis of working capital management results across industries. American Journal of Business, 20(2), 11-20.
Smith, M., &Taffler, R. J. (2000). The chairman’s statement-a content analysis of discretionary narrative disclosures. Accounting, Auditing & Accountability Journal, 13(5), 624-647.
Sufi, A. (2007). Bank lines of credit in corporate finance: An empirical analysis. The Review of Financial Studies, 22(3), 1057-1088.
