search query: @indexterm BUSINESS RATIOS / total: 167
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| Author: | Wu, C. Ho, S-J. K. |
| Title: | Financial ratio adjustment: Industry-wide effects or strategic management |
| Journal: | Review of Quantitative Finance and Accounting
1997 : JUL, VOL. 9:1, p. 71-88 |
| Index terms: | BUSINESS RATIOS ERROR CORRECTION MODELS STEADY STATE MODELS STRATEGIC MANAGEMENT |
| Language: | eng |
| Abstract: | This study suggest an alternative model to characterize the financial ratio behavior. The model allows to separate passive industry-wide effects from the active management component of financial ratio movement. The model differs from the simple partial adjustment model that treats all changes in financial ratios as adjustment towards the long-term desired targets. The results show that the financial ratio movement can be due to reactions to external shocks or active adjustment by management toward the desired target. Failure to draw this distinction may lead to an overestimation of managers' ability to adjust financial ratio to the optimal target level. |
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