On modeling cross sectional distributions of financial ratios

Article Abstract:

A study was conducted on the modeling of cross sectional distributions of financial ratios. Contrary to previous literature, outliers were found to be essential for empirical financial-ratio distributions. Results also showed the conveniece of some modeling ratios with the finite-moment Pearson (1895), Ramberg-Schmeiser (1974) and stable-Paretian distribution systems. The recommended approach justified the assumption that a ratio maintains constant distribution parameters through the years.

Research, Distribution (Probability theory)

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The financial effects of takeover: accounting rates of return and accounting regulation

Article Abstract:

UK takeovers starting 1985 posted substantial profits with the introduction of the write-off accounting system. Under this system, firms enjoyed wider latitude in the valuation of assets affecting future profits, despite the absence of change in performance. During the 1977-1984 period, takeovers did not have significant change in profitability. This implies that the type of accounting system can greatly distort traditional measures of profitability.

Corporate Profits, United Kingdom, Finance, Acquisitions and mergers, Profit, Accounting and auditing, Profits, Economic policy

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Financial ratio cross-section dynamics: a non-parametric approach

Article Abstract:

A non-parametric Markov transition matrix strategy was employed to examine the changes in the cross-sectional dynamic behavior of financial ratios. The convergence of the financial ratios were tested using the ergodic distributions. Findings revealed high intra-distribution changes with more stability in the smallest and largest size classes. Moreover, there is no convergence towards the industry average.

Evaluation, Convergence (Mathematics), Ergodic theory

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