IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vxxivy2021ispecial1p325-340.html
   My bibliography  Save this article

An Analysis of External Cash Flows of Capital Groups

Author

Listed:
  • Edyta Mioduchowska-Jaroszewicz

Abstract

Purpose: The aim of the article is to analyze the external cash flows of capital groups. Cash flows have a double dimension, internal and external. Internal cash flows are of exclusive nature as they create private benefits as a result of achieving additional cash flows through commercial and civil law transactions between the parent entity and its subsidiaries or associates. External cash flows are part of financial reporting as they originate from economic events that are reflected in the accounting records, and when synthesized are reflected in the cash flow statement. Design/Methodology/Approach: The article is based on two types of ratios, ratios calculated on the basis of the consolidated financial statements of the capital group and ratios calculated on the basis of separate financial statements of the parent company. The hypothesis put forward in the article is that the assessment of cash flows performed on the basis of a consolidated statement of the capital group differs from the assessment of cash flows of the parent company. Sufficiency and cash productivity ratios were used to assess cash flows of the Polish capital groups. The indicators are to enable the assessment of cash flows of the capital group in the context of the financial standing of the parent companies and other members of the capital group, mainly with respect to the financial liquidity and solvency of the entity. Findings: The lack of correlation between the indicators from the parent company and the capital group indicates that the main motive for merging into capital groups is not the improvement of external financial results presented by cash financial indicators. Practical Implications: The research results indicate that financial results are not the motive for combining enterprises into capital groups. Originality/Value: The article examines the external cash flows (cash effects) of capital groups on the basis of consolidated and separate financial statements, assesses the cash efficiency and effectiveness of Polish capital groups.

Suggested Citation

  • Edyta Mioduchowska-Jaroszewicz, 2021. "An Analysis of External Cash Flows of Capital Groups," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 325-340.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:special1:p:325-340
    as

    Download full text from publisher

    File URL: https://ersj.eu/journal/2044/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andreas Charitou & Nikos Vafeas, 1998. "The Association Between Operating Cash Flows and Dividend Changes: An Empirical Investigation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1‐2), pages 225-249, January.
    2. Andreas Charitou & Nikos Vafeas, 1998. "The Association Between Operating Cash Flows and Dividend Changes: An Empirical Investigation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1&2), pages 225-249.
    3. Ezzeddine Ben Mohamed & Baccar Ame & Abdelfatteh Bouri, 2013. "Investment Cash Flow Sensitivity and Managerial Optimism: A Literature Review via the Classification Scheme Technique," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 5(1), pages 007-026, June.
    4. Olatundun Adelegan, 2003. "An Empirical Analysis of the Relationship between Cash Flow and Dividend Changes in Nigeria," African Development Review, African Development Bank, vol. 15(1), pages 35-49.
    5. Thang Nguyen & Charlie X. Cai & Patrick McColgan, 2017. "How firms manage their cash flows: an examination of diversification’s effect," Review of Quantitative Finance and Accounting, Springer, vol. 48(3), pages 701-724, April.
    6. Gerald Lawson, 1996. "The measurement of the economic performance of the US Nonfinancial Corporate Business Sector 1946-1990: an application of the shareholder value creation concept," European Accounting Review, Taylor & Francis Journals, vol. 5(4), pages 715-741.
    7. Imen Derouiche & Majdi Hassan & Sarra Amdouni, 2018. "Ownership structure and investment-cash flow sensitivity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 31-54, March.
    8. Xin Chang & Sudipto Dasgupta & George Wong & Jiaquan Yao, 2014. "Cash-Flow Sensitivities and the Allocation of Internal Cash Flow," The Review of Financial Studies, Society for Financial Studies, vol. 27(12), pages 3628-3657.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dorota Czerwińska-Kayzer & Joanna Florek & Ryszard Staniszewski & Dariusz Kayzer, 2021. "Application of Canonical Variate Analysis to Compare Different Groups of Food Industry Companies in Terms of Financial Liquidity and Profitability," Energies, MDPI, vol. 14(15), pages 1-16, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abdallah Atieh & Simon Hussain, 2012. "Accounting data and UK dividends," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 13(1), pages 56-70, May.
    2. Chen, Ni-Yun & Liu, Chi-Chun, 2021. "The effect of repurchase regulations on actual share reacquisitions and cost of debt," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    3. Sven-Olov Daunfeldt & Carina Selander & Magnus Wikstrom, 2009. "Taxation, Dividend Payments and Ex-Day Price-Changes," Multinational Finance Journal, Multinational Finance Journal, vol. 13(1-2), pages 135-154, March-Jun.
    4. Takashi Obinata, 2002. "Concept and Relevance of Income," CIRJE F-Series CIRJE-F-171, CIRJE, Faculty of Economics, University of Tokyo.
    5. Andreas Charitou & Neophytos Lambertides & Giorgos Theodoulou, 2010. "The Effect of Past Earnings and Dividend Patterns on the Information Content of Dividends When Earnings Are Reduced," Abacus, Accounting Foundation, University of Sydney, vol. 46(2), pages 153-187, June.
    6. Basil Al-Najjar & Yacine Belghitar, 2012. "The information content of cashflows in the context of dividend smoothing," Economic Issues Journal Articles, Economic Issues, vol. 17(2), pages 57-70, September.
    7. Hadri Kusuma, 2014. "The Incremental Information Content of the Cash Flow Statement: An Australian Empirical Investigation," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 5(4), pages 90-102, July.
    8. Stela JAKOVA, 2017. "Impact of Dividend Taxation Changing on Dividend Policy of Romanian Companies Listed on Stock Market," Romanian Statistical Review, Romanian Statistical Review, vol. 65(3), pages 81-92, September.
    9. Dragota, Mihaela & Dragota, Victor & Tatu, Lucian & Tatu, Delia, 2009. "Income Taxation Regulation And Companies’ Behaviour: Is The Romanian Companies’ Dividend Policy Influenced By The Changes In Income Taxation?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(1), pages 76-93, March.
    10. Andreas Charitou & Evi Neophytou & Chris Charalambous, 2004. "Predicting corporate failure: empirical evidence for the UK," European Accounting Review, Taylor & Francis Journals, vol. 13(3), pages 465-497.
    11. Andreas Charitou & George Panagiotides, 1999. "Financial analysis, future earnings and cash flows, and the prediction of stock returns: evidence for the UK," Accounting and Business Research, Taylor & Francis Journals, vol. 29(4), pages 281-298.
    12. Fan, Jianyong & Liu, Yu & Zhang, Qi & Zhao, Peng, 2022. "Does government debt impede firm innovation? Evidence from the rise of LGFVs in China," Journal of Banking & Finance, Elsevier, vol. 138(C).
    13. Liu, Xiangsheng & Lv, Lingli, 2023. "The effect of China's low carbon city pilot policy on corporate financialization," Finance Research Letters, Elsevier, vol. 54(C).
    14. Décamps, Jean-Paul & Gryglewicz, S. & Morellec, E. & Villeneuve, Stéphane, 2015. "Corporate Policies with Temporary and Permanent Shocks," TSE Working Papers 15-552, Toulouse School of Economics (TSE), revised 15 Jun 2016.
    15. Zeineb Barka & Taher Hamza, 2020. "The effect of large controlling shareholders on equity prices in France: monitoring or entrenchment?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 769-798, September.
    16. Basu, Debarati & Sen, Kaustav, 2022. "Organizational form and access to capital: The role of regulatory interventions," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(3).
    17. Drobetz, Wolfgang & Haller, Rebekka & Meier, Iwan & Tarhan, Vefa, 2017. "The impact of liquidity crises on cash flow sensitivities," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 225-239.
    18. Minetti, Raoul & Moreland, Timothy & Kokas, Sotirios, 2021. "Financial Consolidation and the Cyclicality of Corporate Financing," Working Papers 2021-1, Michigan State University, Department of Economics.
    19. Mohammad Ali AL Hayek, 2018. "The Relationship Between Sales Revenue and Net Profit with Net Cash Flows from Operating Activities in Jordanian Industrial Joint Stock Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 149-162, July.
    20. Dinithi Ranasinghe, 2021. "Managerial entrenchment, financial constraints, and investment choice in unlisted firms," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 258-270, January.

    More about this item

    Keywords

    External Cash Flows; Cash Productivity of Sales (CPS); Cash Productivity of Assets (CPA); Cash Productivity of Operating Profit (CPOP).;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:journl:v:xxiv:y:2021:i:special1:p:325-340. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.