Earnings quality measures and stock return volatility in South Africa

Fonou-Dombeu, Nyanine Chuele; Mbonigaba, Josue; Olarewaju, Odunayo Magret; Nomlala, Bomi Cyril

doi:10.1186/s43093-022-00115-x

Future Business Journal

Table 1 Regression analysis of stock return volatility on various measures of earnings quality and control variables

From: Earnings quality measures and stock return volatility in South Africa

	Column 1		Column 2		Column 3		Column 4		Column 5		Column 6
	Estimate	t-statistic	Estimate	t-statistic	Estimate	t-statistic	Estimate	t-statistic	Estimate	t-statistic	Estimate	t-statistic
Intercept	− 3.4258***	− 9.9404	− 4.0368***	− 12.303	− 3.9973***	− 12.07	− 4.08939***	− 12.523	− 4.0211***	− 12.239	− 4.2874***	− 13.285
SIZE	− 0.0867***	− 4.3583	− 0.0481***	− 2.525	− 0.0491***	− 2.574	− 0.04114**	− 2.161	− 0.0474***	− 2.491	− 0.0527***	− 2.827
LEVERAGE	− 0.3874**	− 2.3044	− 0.4913***	− 2.852	− 0.5136***	− 2.973	− 0.40651***	− 2.345	− 0.4585***	− 2.616	− 0.3684**	− 2.166
BTM	0.0039	0.8415	0.0026	0.546	0.011	1.031	0.003426	0.706	0.0021	0.451	0.0019	0.412
CFV	3.5188***	4.1925	1.8413**	2.187	1.9054**	2.26	1.532473*	1.817	1.8270**	2.169	3.5918***	4.189
OPF	− 2.6486***	− 7.7654	− 3.3896***	− 9.87	− 3.4313***	− 9.901	− 3.22625***	− 9.329	− 3.3146***	− 9.471	− 2.8278***	− 8.342
SRP	− 0.3352***	− 4.0428	− 0.2760***	− 3.229	− 0.2841***	− 3.318	− 0.27244***	− 3.215	− 0.2773***	− 3.248	− 0.3659***	− 4.401
AQ	− 3.1804***	− 4.9268
CONSER1			− 0.0199	− 0.729
CONSER2					− 0.01	− 0.908
PERSIST							− 0.18156***	− 3.157
PREDICT									− 0.1257	− 1.137
SMOOTH											0.0984***	3.583

SIZE is defined as the natural logarithm of total assets. LEVERAGE is estimated as total debts divided by total assets. BTM is the growth computed as market to book value ratio. CFV is the cash flow volatility computed as the variance of cash flow from operations scaled by total assets, calculated over rolling 5-year window. OPF is the operating performance calculated as the earnings before extraordinary item scaled by total assets. SRP is the stock return performance defined as the annual buy and hold return
AQ is the accrual quality computed as the standard deviation of residual obtained using the modified Dechow and Dechev [12] model, the regression of change in working capital on cash flow from operation year t − 1, t and t + 1, sales and properties, plants and equipment. CONSER 1 is the conditional conservatism, estimated using the Basu [5] model; CONSER 2 is the unconditional conservatism computed as the book value of the firm divided by its market value. PERSIST is the earnings persistence estimated as the slope coefficient obtained from the regression of current earnings on previous earnings. PREDICT is the earnings predictability measured as the square root error variance from the earnings persistence models; the detailed description of these models is provided in “Measuring the independent variables”. SMOOTH is the earnings smoothness calculated as the ratio of the standard deviation of operating income divided by cash flow from operation
***, ** and *Significance at 1%, 5% and 10% level, respectively

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