No topic Essay Example | Topics and Well Written Essays - 250 words - 34

No topic - Essay Example I like shopping for new and unique things that will draw the attention of others. On the other hand, as an experience, I’m self-motivated sometimes as I do not rest until I achieve my goals. I’m of course young, enthusiastic and as much as I try to control it, I’m not able to strictly follow my shopping list, I like impulse buying. I actually like ‘’cool stuff,’’ therefore I must admit that I spend a good proportion of my income in acquiring such stuff. I actually like buying nice stuff that would make my house look appealing and fashionable, but very unique. I therefore like buying just stuff for interior dà ©cor like nice paintings, mats, coffee tables and designer chairs. I also like buying fashionable outfits that make me look enthusiastic and seek peoples’ opinion about myself. I also like shopping for readily prepared foodstuff from the supermarket such as spring rolls, sausages, and such

Application and development of relevant business management knowledge Essay - 2

Application and development of relevant business management knowledge - Essay Example Moreover, in order to make the best use of knowledge, a firm is required to have a system for regulating and organising knowledge management processes and this invariably involves changing organizational culture, technological processes and methodologies (Bhatt). In other words, effective knowledge management manages people, technologies and methodologies and does not focus on one or the other. Gold, Malhortra and Segars argue that successful organizations have the ability to realize economic goals via stockpiling knowledge and distributing it throughout the organization. However, Argote and Ingram caution that while it is important to create and distribute knowledge within the firm, managing knowledge, particularly business knowledge is very important to safeguard against the risk of internally created knowledge is not leaked to competitors. Regardless, Wig maintains that organization managers are persistently looking for ways to enhance the firms outcomes and performance. As a result, managers are consistently attempting to understand â€Å"underlying, but complex mechanisms such as knowledge† which influence the firm’s effectiveness and efficiency (Wig, 6). According Wig: Knowledge is said to be divided among a number of categories. For example, knowledge can be â€Å"tacit† and â€Å"explicit† (Stenmark, 36). Tacit knowledge is that which possessed by individuals and is observed by their activities and behaviour. Explicit knowledge is that which is easier to express and is often contained in manuals, regulations, procedures and can be distributed. Knowledge can also be cultural, encoded, â€Å"encultured† and embedded (Stenmark, 36). Although business knowledge narrows the field, it is also complex. The Fraunhofer CCKM construct of business knowledge management is demonstrative of the complexities involved in the creation, application and distribution of business

ELISA ASSAY Essay Example | Topics and Well Written Essays - 500 words

ELISA ASSAY - Essay Example In this graph various dilution of mouse anti rabbit Ig G antibodies were used to determined concentration of rabbit Ig G. the most effective dilution will be between 1/4000 to 1/8000, as in rest of the cases, at lower concentration of Ig G there is no linearity with increasing concentration of rabbit IgG (like in case of 1/2000). At1/2000 dilution concentration of mouse anti-rabbit Ig G is too high compared to rabbit IgG and hence there is no linier relation. Similarly at more than 1/8000 dilution concentration of anti rabbit IgG becomes to less compared to concentration of rabbit Ig G. hence there will not be any anti rabbit Ig G available to bind with rabbit Ig G at higher concentration. In given scenario the optimum dilution for mouse anti- rabbit IgG will be 1/6000 which gives linear correlation with increase in concentration of rabbit IgG. Here in case of goat anti rabbit Ig G the over all binding and absorption profiles restricts it use for estimation of rabbit IgG. There are two different scenario 1) In case of lower dilution (1/2000) there is lots of non specific binding resulted in to very high absorption at lower concentration of rabbit Ig G and get saturated at slightly higher concentrations of rabbit Ig G. 2) In case of higher dilution (1/4000 and above) there is very less binding due to non specificity of polyclonal anti body.

The McDonald's Global Human Resource Strategy Term Paper

The McDonald's Global Human Resource Strategy - Term Paper Example There is a vigorous awards system for such things as putting customers first, years of service, or jobs done particularly well. These awards may include money, trips, plaques, and certificates and they are commemorated with much celebration and delight. The managers at McDonald’s always seem to be very relaxed and are most of the time indistinguishable from the other employees because they do not simply give orders to those under them, but they also accept feedback from them and are ready to get alternatives to their decisions. This, according to Kincheloe (2002), helps to show that although they have managers, the employee teams at McDonald’s are obviously in their later stages of development and are very comfortable outside their predefined roles, displaying high levels of motivation. The managers do not attempt to put any verbal barriers between themselves and their employees and they, instead, show genuine concern in the emotional and physical well being of their employees, something that is very rare in this type of environment. The McDonald’s restaurants have a culture that is generally inviting to new employees and these are motivated to work in these restaurants. This is because of the laid-back environment found within them and the fact that the jobs are not very stressful for the employees. Another reason why employees are motivated to continue working at McDonald’s are the different shift schedules, which the management formulates so that they can accommodate every employee. Since most of the jobs found in these restaurants are low skilled and any other employee can take over the other’s shift if they are not able to make it work due to a need to attend to other more pressing obligations.  

Applications paper Movie Review Example | Topics and Well Written Essays - 1500 words

Applications paper - Movie Review Example As Guy planned revenge, a twist in the ending showed Buddy confessing having had same bullied treatment before he became the manager, and this is his way of motivating Guy to succeed. Plot 2. Smoking Room is a movie about discrimination and culture.(The world of business in movies, 2009). It is about a middle level executive (Ramirez), who got enraged when his U.S. based office ban smoking in the office premises. If anyone wants to smoke, he has to go out of at least 20 ft. from the office premises, sometimes exposed to freezing cold or burning heat of temperatures. Ramirez who claims to have a Spanish descent, believes this rule is discriminating and disregards the acceptability of the Spanish smoking culture. He was alone in his campaign after his colleagues left him in his fight due to office politics, agenda and convenience.(The World of Business in Movies, 2009). Let us first identify the fundamental concepts of organizational behavior. These are individual differences, perception, whole person, motivation, desire for involvement, and human dignity. These concepts are transformed in the four models of organization that are described in the movie. Study looks at the concept of human dignity in â€Å"Swimming with Sharks† and Individual differences thru diversity in â€Å"Smoking Room†. â€Å"Swimming with Sharks† is a movie that reflects an organizational concept of boss-employee relationship that is defined in an autocratic manner. It is a movie shown in 1994 but continues to share its relevance in organizational behavior studies today. Although the movie is done in a comical way, the characters played perfectly the roles in a conflict situation in an organization; one that tries autocratic authority to compel obedience, and an employee-employer relationship based on fear. The movie gives credit to the saying â€Å"the end justifies the means†, wherein the finale of the movie shows the assistant elevated to a higher

Police Brutality Essay Example for Free

Police Brutality Essay Unfortunately, nowadays the people who are supposed to protect us and help us when we are in need, sometimes cannot be trusted. Police brutality has always been a problem, but theres been a dramatic rise in police murders and brutalization of citizens. Police Brutality is anything from harassment from a police officer to being murdered by one.Police officers risk their lives everyday they put on their uniform. They serve the community by keeping it safe from those who break the law. Police are trained to use force when necessary and to have discretion on how much force to use on someone. The tactics they use are to apprehend a criminal, and to keep those who are around a criminal, safe. Officers carry weapons such as a baton, mace, or a gun. These weapons are to keep themselves and the communities they serve safe. Sometimes officers who are either not properly trained or who neglect to use the appropriate amount of force on a suspect, can suffer the consequences of police brutality. â€Å"Police brutality is a civil rights violation that occurs when a police officer acts with excessive force by using an amount of force with regards to a civilian that is more than necessary. Excessive force by a law enforcement officers is a violation of a persons rights. Force should be used in only the minimum amount needed to achieve a purpose. Police brutality is a direct violation of the laws within the police force. The use of excessive force is also a direct violation of the Fifth and Fourteenth Amendments of the U.S Constitution regarding cruelty and protection of the laws†(definitions.uslegal.com). One of the major causes of police brutality is stress. Each day, police officers have to deal with the fact that their lives are within their own hands and being that they are thought of as the enemy by a criminal they feel the need to protect themselves at any cost. An officer may feel threatened and might not know his or her own strength, therefore they might  do anything to protect themselves if they feel threatened. The stress of being a cop can lead to other issues other than police brutality. The amount of stress of their job is so high it can affect them in various ways later in life. â€Å"The extreme stress and pressure placed on police officers has caused an increasing numbers of Post Traumatic Stress Disorder cases, alcoholism, suicide, early retirement, breakdowns and burnout being reported by police officers across the country†(www.essortment.com). Another cause of police brutality is simply abuse of power. Not all cops break the rules, but not all cops follow t hem. Police brutality can be any of the following acts; â€Å"profane or abusive language, commands to move or go home, field stops and searches, threats of implied violence, prodding with a nightstick or approaching with a pistol, the actual use of physical force†(www.policecrimes.com). Racism is also a major cause of police brutality. The most famous of all police brutality cases is, of course, Rodney Kings case. On March 3, 1991, four Los Angeles police officers beat Rodney King as eleven other officers stood by watching. Rodney King was in a high-speed car chase with the officers, when his car was finally stopped, he hesitated to get out of his car. When he did, he was said to jump at the officers. He was hit by two darts from a stun gun, which didnt seem to work. Rodney King still refused to obey the officers and lie flat on the ground. But, in less than two minutes, he was hit with 56 baton blows and kicked six times. He suffered from eleven skull fractures, brain damage, broken bones, knocked out teeth and kidney damage. Also, emotional and physical trauma. Not in all cases are the victims of police brutality innocent, obviously, as you can see in Rodney Kings case (law.umkc.edu)But no matter how rude or uncooperative a suspect is being, this extreme force from officers should not be used. Racism has always been and always be around. The fact that it is policing is evident through such acts as these. Sometimes these harmful acts go overlooked by departments, either because of they do not want the publicity, the department might not know what actually happened, or they simply do not care. Racism is not just against African Americans, all minorities are at risk for being the victim of a cops believes or disbelieves. Another reason police brutality happens is some officers believe that its necessary to come down hard on those who resist arrest because they may kill the next police officer who tries to arrest  them so you have to teach them a lesson. â€Å"Another practice is the screen test, police jargon for applying the brakes on a police vehicle to that the handcuffed prisoner in back will be thrown against the metal protective screen†(www.policecrimes.com). When an officer breaks the law and victimizes a person he or she will should be punished and depending on the case they should face suspension, job termination, or even jail time. Those whose rights have been violated often receive large amounts of money in out of court settlements, which means the taxpayer is paying for authorities right to abuse their power . Cops who have committed these acts usually face no serious prosecution, if any at all. So far, of all the documented murders since 1977, only one officer has been convicted of homicide. Any man that kills another, for no matter what reason, should have to face consequences. Anyone can become a victim of police brutality, but the most common are minorities, juveniles, and low class citizens. Minorities are victimized because of their skin color and the believes of the officer they encounter. The fact that officers target minorities has been known for decades. Many races are still not accepted by people today. Juveniles can also become targets of the police. Young adults often find themselves in tough situations getting in trouble with the law. They struggle to find a sense of self and often look to crime as an easy way out. An officer might target a young adult assuming he or she is up to no good, judging solely by the way they carry themselves. Low class citizens often do not have the money for a good lawyer so even if they were victimized they have no one to turn to for help. They most likely do not have guidance on how to properly seek justice they rightfully deserve. Also in most cases, unless there is physical evidence, police misconduct is often on e side of the story against another. In order to prevent police from using unnecessary amount of force on citizens there must be an understanding of each others position on society. Although a beating from a police officer may not be the victims fault, there are some ways to try and prevent from being a part of a traumatic experience. When an officer does not feel threatened he or she is less  likely to become frantic and full of adrenaline which would make the confrontation with him or her less dangerous and beneficial to both the cop and the civilian. The number of cases of police brutality is not as high as the years of the civil rights act, but there is still a need for a way to help fix the problem. Not every case is known to the public and reported. Departments need to properly train officers to deal with certain situations properly. While they might not be perfect when it comes to hiring, they should keep a close eye on those who they hire to make sure any officer hired doesnt have a different personality when on duty. A personality that would be dangerous to those who surround him or her. Hopefully there will be a system in the future that will help minimize the chances of police brutality. Sources 1.) Above the Law: Police and the Excessive Use Of Force by: Jerome H. Skolnick, James J. Fyfe 1994. Published by: The Free Press, New York. 2.) Definitions.uslegal.com 3.) www.essortment.com 4.) www.policecrimes.com 5.) law.umkc.edu

Permanent versus Transitory Earnings and Security Valuation

Permanent versus Transitory Earnings and Security Valuation In this study we examine the role of permanent and transitory earnings and cash flows in explaining security r in three major capital markets, UK, USA and France. We hypothesize that the relationship between cash flows and security returns improves when earnings are transitory and this robustness is country specific. The dataset consists of more than 40,000 USA, UK and French firm-year observations over a nine year period. Multivariate statistical regression analysis is undertaken to test the major research hypotheses. Results indicate that when earnings are transitory (not stable), investors pay more attention to cash flows and less attention to earnings, a result indicating that investors penalize firms with unstable earnings. In summary, the evidence provided in this study supports that indeed there are substantial differences in the way investors and financial analysts perceive financial information such as earnings and cash flows in the UK, France and the USA. These results shou ld be of great importance to the major stakeholders such as investors, creditors, financial analysts, especially after the recent global financial crisis and the collapse of giant organizations worldwide. Keywords: Permanent and Transitory Earnings, Capital markets, Earnings, Cash flows, France, Empirical. * Dr. Melita Charitou is an Assistant Professor of Finance and Accounting, University of Nicosia, Cyprus. Address for correspondence: Division of Finance and Economics, School of Business, University of Nicosia, Cyprus, email: [emailprotected] .1. INTRODUCTION Capital markets emphasized to a great extent the value relevance of earnings in the marketplace. The usefulness of earnings has also been examined recently in conjunction with cash flows (Bali et al (2009), Banker et al (2009), Bartov et al., 2001; Charitou et al., 2001, Ball et al., 2000, among others). Empirical research provided evidence to support that earnings are more useful than cash flows in the capital markets. Existing evidence on the association of operating cash flows beyond earnings in explaining security returns has been inconclusive. Furthermore, to date comparative international research on the value relevance of cash flows has been limited. Moreover, researchers argue that when aggregate data is used, it is assumed that the relationship between earnings and cash flows with security returns is homogeneous across firms. It should be noted that this assumption that investors react identically to earnings and cash flows of all firms is not that pragmatic.The present stud y hypothesizes the value relevance of earnings and cash flows is country specific and it depends on the transitoriness of earnings. Earnings persistence studies consistently report that earnings persistence is significantly positively associated with ERC (Easton and Zmijewski, 1989; Donnelly and Walker, 1995; Ali and Zarowin, 1992; Chambers, 2004). Cheng et al. (1996) extended prior studies on this topic and added cash flow variables in their models. They found that the incremental information content of cash flow from operations(CFO) should increase with a decrease in the permanence of earnings. Furthermore, Ali (1994) using non-linear models concluded that earnings, cash flows and working capital from operations(WCFO) have incremental information, which increases the lower are the absolute changes in earnings, cash flows and WCFO respectively. Finally, Ali and Zarowin (1992) show that the more transitory the previous periods earnings are, the greater the increase in the ERC and the expected incremental explanatory power from inclusion of the level variable. According to Cho and Chung (1991) the persistence meas ure used in those studies has 3 limitations: first, although persistence is changing over time, a constant parameter assumption is made which is problematic, especially when estimations are based on annual data for several year time series. Second, a measurement error problem exists, from using time-series reported earnings. Easton and Zmijewski (1989) use revision coefficient avoiding to some extend the latter problem. The third limitation is that persistence as measured by the time series of earnings is a crude proxy for the construct because it contains little economic content. Researchers also extended prior studies in order to examine the value relevance of the permanent and transitory earnings. Cheng et al (1996), Ali (1994), Ali and Zarowin (1992) and Easton and Zmijewski (1989) among others examine the impact of permanent and transitory earnings on the relations between returns and earnings or between returns and cash flows. Ali and Zarowin (1992) concluded that for firms with permanent earnings in the previous period, when the earnings level variable is included in the model, the incremental explanatory power and the increase in Earnings Response Coefficient (ERC) are small. Cheng et al. (1996) investigated whether the incremental information content of cash flows increases when earnings are transitory. Transitory earnings have smaller marginal impact on security returns. Moreover, their results showed that the incremental information content of accounting earnings decreases, and the incremental information content of cash flows increases with a decre ase in the permanence of earnings. Regression analysis was undertaken to test the major hypothesis. A sample of more than 40,000 USA, UK and French firm year observations was used to test the research hypotheses. The major conclusions of the empirical results are summarized as follows. First, regarding our basic proposition which stated that earnings and cash flows are associated with stock prices in USA, UK and France, results indicate that indeed both earnings and cash flows are taken into consideration by investors in their investment decisions. Second, regarding our major hypothesis which stated that the value relevance of earnings and cash flows is country specific and depends on the transitoriness of earnings, results indicate that when earnings are transitory (not stable), investors pay more attention to cash flows and less attention to earnings, a result indicating that investors penalize firms with unstable earnings. In summary, evidence provided in this study supports that indeed there are substantial differences in the way investors and financial analysts perceive financial information such as earnings and cash flows in UK, France and USA and that the value relevance of cash flows depends on the transitoriness of earnings. .2. LITERATURE REVIEW and Hypotheses development. Earnings are of primary importance to managers, because managerial executive compensation contracts are usually based on earnings. Managers select financial reporting methods to maximize the value of their bonus awards through incentives created by bonus schemes. In addition, managers indulge in income smoothing, that is, taking actions to dampen fluctuations in their organizations earnings, as investors pay more for a firm with a smoother income stream (Dechow et al. 2003; Barth et al. 2005). In the past few years there has been an increased interest in the role of earnings and cash flows in explaining security returns. Contextual factors, such as earnings transitoriness, have a common objective. To identify specific circumstances where the value relevance of earnings and cash flows is altered (improves or deteriorates). Using USA data, Freeman and Tse (1992) and Ali (1994) showed that transitory earnings have smaller marginal impact on security returns. Cheng et al (1996) and Charitou et al (2001) extended these studies by hypothesizing that when earnings are transitory, the value relevance of earnings diminishes, whereas the value relevance of cash flows is expected to increase. Earnings transitoriness was measured as the earnings change scaled by the beginning of period price and also by the earnings to price ratio. Extreme values of these measures could be considered as an indication of earnings transitoriness. Transitory items are expected to have limited valuation implications. Examples of transitory items in earnings include current and long-term accruals such as losses due to restructuring, current recognition through asset sales of previous periods increases in market values, one time impact on income from changes in accounting standards. The results of the Cheng et al. (1996) study indicated that a) when level and changes in earnings and cash flows are included in the model, all are value relevant in the marketplace, and b) when earnings are transitory the value relevance of earnings diminishes substantially, and simultaneously the value relevance of cash flows increases. In summary, these results are indeed of great importance since earlier studies assumed that the earnings returns relation is homogeneous across firms. These studies, however, disprove this assumption and indeed show that the value relevance of earnings and cash flows depends on the permanence or transitoriness of these measures. The present study goes a step further to examine whether the value relevance of earnings and cash flows is country specific and whether it depends on the transitoriness of earnings. 2.2 Research HypothesIs Empirical evidence supports that earnings are valued more than cash flows in the marketplace. Extant evidence though on the incremental information content of cash flows beyond earnings in different countries when earnings are transitory has been inconclusive (Barth et al., 2004, Bartov et al., 2001). The inconclusive results in prior studies, and the limited research on this issue provide motivation for this study. The research hypothesis to be tested is: Hypothesis 1: The value relevance of cash flows improves when earnings are transitory, whereas the value relevance of earnings decreases when earnings are transitory. The framework developed thus far suggests that both earnings levels and changes have explanatory power when they are included simultaneously in explaining stock returns. Earning changes are used as a proxy for unexpected earnings, following the assumption that earnings follow a random walk. Based on these arguments, in developing the theoretical framework on the transitoriness of earnings, it is proposed that annual earnings follow an Integrated Moving Average, IMA (1,1) process, which includes both levels and changes, i.e. permits for both transitory and permanent components. IMA was chosen because prior theoretical and empirical evidence shows that annual earnings follow a random walk (Cheng et al., 1996; Easton and Harris, 1991). This hypothesis predicts that the value relevance of earnings decreases when earnings are transitory and therefore, the value relevance of cash flows improves in all three countries when earnings are transitory. The issue of the time permanence of earnings has raised the stimulus in the present study in examining the role of operating cash flows when earnings are transitory. As Cheng, Liu and Schafer (1996) argue, earnings may contain transitory items with limited valuation implications. For example, transitory items that may be included are current and long- term accruals such as losses due to restructuring, current recognition (through asset sales) of increases in market value previously (or currently), one-time impact on income from changes in accounting standards etc. Moreover, because of compensation contracts and debt covenants are often based on reported accounting income, incentives exist for managers to introduce transitory elements in earnings. Dechow (1994) and Charitou et al (2001) also argue that because management has some discretion over the recognition of accruals, this can be used to manipulate earnings. Following Ali and Zarowin (1992) and Cheng, Liu and Schafer (1996), included in the theoretical framework, both levels and changes in order to characterise the unexpected components of earnings, whereas they also include levels and changes of cash flows from operations. This is done in order to test the hypothesis that when earnings are transitory the earnings response coefficients (ERCs) on both levels and changes will have reduced significance in explaining security returns. In this situation the importance of cash flows from operations will be greater. As in Freeman and Tse (1992) and Ali (1994) transitory elements are more likely to be present when unexpected earning values are large relative to price. Hence in the model [58], the coefficients c1t + c2t and c3t+ c4t represent the estimates of the earnings and cash flow response coefficients when earnings are mainly permanent. The coefficients c5t+ c6t and c7t+ c8t capture the additional information content of earnings and cash fl ows for firms with predominantly transitory earnings. It is expected c5t+ c6t to be negative and c7t+ c8t to be positive. In summary, following the aforementioned theoretical framework, I hypothesize that the incremental information content of cash flows from operations is expected to increase as the permanence of earnings decreases (see also Freeman and Tse, 1992; Ali, 1994; and Cheng, Liu and Schafer, 1996. Prior studies that examined earnings transitoriness include Cheng et al (1996) for the USA and Charitou et al (2000) for the UK. Prior studies have not examined the role of the cash flows when earnings are transitory in both Anglo-Saxon and code law countries. 3.0 Research Design 3.1 Dataset All industrial firms that belong in the Manufacturing Industry (SIC 100-4299, 4400-4799), Retail Industry (SIC 5000-5999) and Service Industry (SIC 7000-8999) from the USA, UK and France over the recent nine year period were selected. Industrial firms that had all the information available for the computation of operating cash flows, operating earnings and security returns were included in the sample, resulting in the following firm-year observations for the recent nine year period: USA =36695, UK =4234 and France = 1181. Consistent with prior empirical studies, observations that were regarded as outliers were excluded from the sample, i.e. observations with absolute change in earnings/market value, absolute change in cash flows/market value, earnings/market value and cash flow/market value greater than 150%. Also observations that were in excess of three absolute studentized residuals were considered outliers and were excluded from the sample. These restrictions resulted in approxim ate reduction of the sample size of about 2%, which is consistent with prior empirical studies. Therefore, the final sample size used for regression analysis purposes equals to 35872 firm-year observations for the USA sample, 4178 firm-year observations for the UK sample and 1165 firm-year observations for the French sample. 3.2 Measurement of financial and market variables In order to examine whether investors in UK, USA and France take into consideration in their investment decisions the levels and changes of earnings and cash flows, independent of each other, the following univariate regression model will be used: Univariate (Simple Regression) Model: RETit = b0 + biXi + eI (1) where: Xi: is replaced by: E: Operating Earnings ΔE: Change in operating-earnings CFO: Operating cash flows ΔCFO: Change in operating cash flows. RETit: stock return for firm i measured over a 12-month return interval ending three months after the fiscal-year-end. b0: the intercept term bi: slope coefficient ei: error term In order to test whether both the levels and changes of earnings and cash flows are valued differently in the capital markets, namely in USA, UK and France, the following multivariate regression model will be used: 3.3 Permanent vs transitory earnings models: In order to investigate the role of permanence of earnings, the basic regression model that includes the level and changes of earnings and cash flows will be extended to include additional dummy variables. The following model will be tested: RETit = c0 + c1Eit + c2 Ã¢â‚¬Å¾Eit + c3CFOit + c4 Ã¢â‚¬Å¾CFOit + c5Eit*D + c6 Ã¢â‚¬Å¾Eit*D + c7CFOit*D + c8 Ã¢â‚¬Å¾CFOit*D + eit where RETit= Security returns for the year, Eit = operating earnings CFOit = operating cash flows for firm i in period t,  Ã¢â‚¬Å¾ denotes the change in a variable, eit is the error term for firm i in period t D is a dummy variable taking a value of one when earnings are transitory and zero otherwise. Consistent with Cheng et al. (1996), two alternative definitions are used to determine D. Under one approach, D equals 1 (0) when |  Ã¢â‚¬Å¾Eit/ Pit-1 | is greater than (less than) its yearly cross-sectional median (Ali, 1994). Under the second approach, firms are ranked each year according to their Eit/ Pit-1 , placing firms with positive Eit/ Pit-1 into the first nine groups with equal number of firms per group and firms with negative earnings in the tenth group. Earnings are classified in the bottom two and top two groups as transitory (D=1) and earnings in the middle six groups as permanent (D=0) (Ali and Zarowin, 1992, Charitou et al, 2001). 4.0 EMPIRICAL RESULTS 4.1. Descriptive Statistics Table 1 presents basic descriptive statistics for all the earnings, cash flows and security returns variables examined in the study for all three countries (USA, UK and France) for the recent nine year period. Results indicate the following: a) the mean security return for UK and USA is the highest (0.092 and 0.08, respectively), whereas in France is somewhat lower, 0.055, b) the mean earnings level is higher for UK (0.057) and lowest for USA. For the French dataset the mean of earnings levels is 0.037; c) the mean of the cash flow levels is shown to be the highest for the French dataset (0.184) and lower for UK and USA (0.123 and 0.057, respectively); d) as expected the standard deviation of the levels and changes of cash flows is always higher than the level and changes of earnings in all three countries. These results are consistent with the results provided in prior empirical studies. Moreover, untabultated correlation analysis results indicate that there are no significant corre lations that may possibly affect the results. 4.2. Regression analysis results 4.2.1 Univariate and multivariate regression analysis results on the value relevance of earnings and cash flows for the USA, UK and France. Univariate results presented in table 2 indicate the following. First, as far as the value relevance of earnings is concerned, as expected, the results indicate that both the levels and changes in earnings are positive and statistically significant in all three countries. Interestingly, the size of the levels of earnings and the size of the changes in earnings is approximately equal in all three countries, in spite of the fact that the French financial reporting system is much more conservative. Specifically, the coefficients of the level of earnings are 0.759, 0.767 and 0.793 for the USA, the UK, and France, respectively. The coefficients of the changes in earnings are 0.701, 0.612 and 0.669, for the US, UK and France, respectively. As far as the R2 is concerned, results indicate that French earnings (levels and changes) are more value relevant than the earnings in the USA and the UK, even though the financial reporting system in France in more conservative. The R2 for the level of earnings is 11.20%, 8.80% and 6.70% for France, the UK and the USA. The same ranking applies to the changes in earnings, although the R2 is somewhat lower, indicating that the level of earnings is more value relevant than the changes in earnings. As far as the value relevance of cash flows is concerned, as expected, results indicate that cash flows are value relevant in all three countries. All the coefficients of the levels and changes in cash flows are positive and statistically significant. The size of the coefficients of cash flows as well as the magnitude of the R2 are somewhat higher in the Anglo-Saxon countries, suggesting that cash flows could be less value relevant in France. Moreover, as it was expected the size of the earnings coefficients and the magnitude of the R2 are relatively higher than the equivalent cash flow statistics. These results are consistent with our hypotheses, expectations and consistent with prior empirical evidence. This is due to the fact that earnings are considered more value relevant in the stock markets. 4.2.2 Multivariate regression analysis results for examining the valuation of earnings and cash flows when the earnings are transitory. Hypothesis 1 predicts that the value relevance of earnings decreases when earnings are transitory and thus, the value relevance of cash flows is expected to improve in all three countries when earnings are transitory. The issue of the earnings permanence has raised the stimulus in the present study in examining the role of operating cash flows when earnings are transitory. As Cheng, Liu and Schafer (1996) argue, earnings may contain transitory items with limited valuation implications. For example, transitory items that may be included are accruals such as losses due to restructuring, current recognition through sale of assets of previous periods, increases in market value, one-time impact on income from changes in accounting standards etc. Moreover, because of compensation contracts and debt covenants are usually based on profit, incentives exist for managers to introduce transitory elements in earnings and thus manipulate earnings. Results in Table 3 provide evidence to support hypothesis 1, that is, when earnings are transitory the role of earnings in stock markets decreases and the role of cash flows improves. Consistent with prior studies and with my theoretical framework, I included in my multivariate regression model in Table 3 both the level and changes of earnings and cash flows (Cheng, Liu and Schafer, 1996), in order to characterise the unexpected components of earnings and the unexpected components of cash flows from operations. This is done in order to test the hypothesis that when earnings are transitory the earnings response coefficients on both levels and changes will have reduced significance in explaining security returns. In this situation the importance of cash flows from operations will be greater. Therefore, in the model in Table 3, the coefficients c1t + c2t and c3t+ c4t represent the estimates of the earnings and cash flow response coefficients when earnings are mainly permanent. The coeff icients c5t+ c6t and c7t+ c8t capture the additional information content of earnings and cash flows for firms with predominantly transitory earnings. It is expected that c5t+ c6t to be negative and c7t + c8t to be positive. Specifically, results in Table 3 indicate the following. First, as expected, the sum of the coefficients of earnings (c3+c4) are positive and statistically significant in all three countries, the USA, the UK and France. These results indicate that in all three countries, the earnings are taken into consideration in the valuation of stock prices by security analysts and investors. Second, as expected, the sum of the coefficients of cash flows is positive and statistically significant in all three countries. Again, these results show that cash flows are important to security analysts and investors in the USA, the UK and France for stock valuation purposes. These results are consistent with the results provided thus far in all previous models. Third, the sum of the coefficients of earnings c5+c6 is negative and statistically significant in all three countries, the UK, the USA and France. These results are consistent with my expectations and with my hypothesis. These results mean that wh en earnings are transitory, i.e. when the variation of the earnings compare to stock prices is relatively high (in the present study above its median), then the stock market does not perceive this information as good news and the relative importance of earnings on stock prices decreases. This is measured by the sum of the coefficients of (c1+c2) + (c5+c6). To give an example to make things clearer, let us assume that earnings are stable, not transitory. In that case the effect of earnings on stock prices in the UK will be 5.65 (sum of coefficients of earnings c1+c2). In contrast, when earnings are transitory for a firm in the UK, the effect of earnings on stock prices will not be 5.65 as above, but it will be 5.65 minus 4.933 (b5+b6), which is 0.68 only. So for, stable or permanent earnings firms in the UK the effect of earnings on stock prices is 5.65 whereas for transitory earnings firms the effect of earnings on stock prices in the UK is only 0.68. As far as the USA and France is concerned the results are consistent with the UK results just discussed. Specifically, in the USA results indicate that when earnings are permanent the effect of earnings on stock prices is 5.88 (c1+c2), but when earnings are transitory (not permanent), then the effect of earnings on stock prices is only 1.08 (i.e. 5.88 minus 4.8 or c1+c2 minus c5+c6). Results in France also support the results of the UK and the USA. French results in Table 20 indicate that when earnings are permanent, the effect of earnings on stock prices is 5.66 (c1+c2), but when earnings are transitory (not permanent), then the effect of earnings on stock prices is only 1.15 (ie., 5.66 minus 4.51 or c1+c2 minus c5+c6). Fourth, as hypothesised, results in Table 3 support that the cash flow variables are taken into consideration by investors in investment decisions. Specifically, the sum of the coefficients of cash flows c3+c4 is positive and statistically significant in all three countries. For example, in the UK it is 0.15, in the USA it is 0.095 and in France is 0.18. These results are consistent with the results provided thus far in all previous models and hypotheses. Fifth, as hypothesised, results in Table 3 support that when earnings are transitory, investors and security analysts in the UK and the USA pay more attention to cash flows. This is evidenced by the sum of the coefficients of cash flows c7+c8. For example, in the UK when earnings are transitory, stock prices are affected more by 0.03 (c7+c8) from changes in cash flows. Similarly, in the USA, when earnings are transitory, stock prices are affected by 0.02 more from changes in cash flows. These results are very interesting because they show that in Anglo-Saxon countries such as the USA and the UK, investors do pay additional attention to cash flows because they do know that earnings are of lower value when they are transitory. On the other hand, consistent with prior evidence in previous models and tables of this study, French analysts and investors pay more attention to earnings because their code law system make financial reporting in France much more conservative, and thus the varia bility of earnings is not that high as the variability of earnings in the UK and the USA. Sixth, in all countries examined, results support that the model is statistically significant and the variation of stock returns as explained by the R2 is 15.6 in the UK, 12.8 in the USA and 17.2% in France. In summary, results presented in Table 3 support my hypothesis that when earnings are transitory (not permanent), investors pay less attention to earnings and more attention to cash flows. 5.0 Conclusions Consistent with our hypotheses and our expectations, these results indicate that earnings and cash flow information is country specific, that is investors and financial analysts pay different attention to earnings and cash flows depending on the country under investigation and on whether earnings are transitory or permanent. Specifically, results indicate that earnings and cash flows are perceived differently by investors, depending on the country to which they belong. When earnings are transitory, investors in Anglo-Saxon countries penalize more these firms because the effect of earnings on stock returns is much more negative (c5+c6= -4.933 and -4.8 for UK and USA, respectively, whereas it is only -4.51 for France). The results of this study have practical implications as well and should be of great importance to the major stakeholders such as investors, creditors, financial analysts, especially with the latest events that are taking place, and the major collapses of giant organizations worldwide such as Lehman Brothers, Bear Stearns, among others. Regulatory bodies, investors, financial analysts and the financial press, blamed among others, the possible manipulation of financial information supplied to the investors by these organizations. The question raised, is whether this type of information is taken into consideration by investors in their investment decisions.