Classical Political Economy Theory and JB Hi-Fi’s Decision to Disclose the Downgrade
1. The classical theory of Economics is mainly the overall Foundation that was laid for the modern economics, which was essential to promote growth, free trade and competition without the interference of government regulations. classical theory of Economics directly indicated the use of self-regulating methods which could effectively allow the economy to improve without the intervention of the government. classical economist mainly evaluated the growth of a country with GDP output level and not by the detecting the wealth of the king or government. This will help in laying the foundation for modern economics, while promoting trades conducted without government intervention. The classical theory of Economics can be evaluated on the decision made by JB hi fi in disclosing the downgrade in their profits during the fiscal year. From the evaluation point of you the decision made by JB Hi-Fi was directly considered as an independent move where the organisation effectively complied with all the relevant regulations laid down before conducting the announcement. Hence, the intervention of ASX was not needed as the overall profit downgrade was relatively under the material disclosure limit. Therefore, it could be understood that under the measures of classical theory of Economics organisation adequately portrayed free competition without the intervention of government regulations. Therefore, under the classical political economy theory the decision made by JB Hi-Fi regarding the disclosure of the profit downgrade was adequate. the company is able to disclose all the relevant information regarding their operations regardless of the intervention from governments, as it complied with all the relevant regulations laid down by ASX. In this context, Onions & Schefold (2017) stated that with adequate disclosure measure the organisation is able to minimise any kind of rumours that might hamper its share price and have impact on their capital reserves.
The institutional theory directly indicates that organisation needs to follow the regulations structures and establishment that is portrayed by regulator for depicting their social behaviour. the social behaviour of the organisation is essential as it delivers all the relevant information to the stakeholders in accordance to the changes in its operations. according to the institutional theory company has effectively portrayed all the relevant information to the ASX and investors where is no manipulation is being conducted by the company. JB hi fi has relatively portrait the information in an adequate way, where no additional information was required as the material impact was below 3%, as stated in the ASX regulations. Major compliance with all the relevant information directly indicates the usefulness of institutional theory in detecting the major problems faced by the company. hence, it could be identified that under the institutional theory measure JB hi fi has adequately complied with all the regulations laid down by ASX regarding the disclosure measure of their profit downgrade (Willmott, 2018). Before after evaluating all the relevant evidence from the case study it will be identified that JB hi fi has effectively followed all the relevant regulations before conducting the announcement. This relevantly supports the measures drafted by institutional theory and indicates that the organisation has complied with all the regulations of ASX.
Institutional Theory and JB Hi-Fi’s Compliance with Regulations
References:
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Onions, C. T., & Schefold, B. (2017). Essays on Piero Sraffa: Critical perspectives on the revival of classical theory. Routledge.
Johnson, H. G. (2017). Macroeconomics and monetary theory. Routledge.
Greenwood, R., Oliver, C., Lawrence, T. B., & Meyer, R. E. (Eds.). (2017). The Sage handbook of organizational institutionalism. Sage.
Willmott, H. (2018). Can It? On Expanding Institutional Theory by Disarming Critique. Journal of Management Inquiry, 1056492617744893.
2: From the evaluation of managerial branch of stakeholder theory it could be identified that are relevant information needs to be provided to stakeholders who can help the organization achieve their goals. The overall managerial branch of stakeholder theory indicates the adequate information that needs to be provided to different level of stakeholders of the company depicting their progress. Moreover, the theory effectively helps the organisation to manage specific stakeholder groups within the society for effectively detecting the impact of disclosure policies on the market. Directly indicates that the organisation does not have to respond to all the stakeholders equally instead which should segregate the stakeholders to identify the most powerful ones. this would eventually help the organisation to understand the level of control over resources that is required by the organisation. Furthermore, it will be identified that assessing the significance of stakeholder demand is a strategic move made by the organisation to fulfil its firm objective. Additionally, the decision made by JB Hi-Fi regarding the profit downgrade announcement is relatively considered to be under the managerial branch of stakeholder theory. the company has effectively disclosed all the relevant information to these specific stakeholders during the conference by addressing the relevant problems faced by the organisation. This information is relatively supporting the stakeholders such as to take adequate steps in valuing the company’s share price. The drastic decline in share price of the company is also result of adequate announcements conducted by the company regarding the current financial position to the adequate stakeholders (Poulton, Barnes & Clarke, 2017).
After while reading the case study it will be identified that the relevant information regarding the downgrade of Profits by 3% was directly announced to the shareholders of the company. This information transfer was essential by the organisation for depicting Problems related to future profit that will incur in the fiscal year. Furthermore, the information that is provided by the organisation was adequate, while ASX indicated that a separate announcement needs to be conducted by the organisation to highlight the decline in future profit. However, the mandate that was provided by ASX mainly instigated that if the overall material changes is higher than 5% then adequate information needs to be delivered in a different announcement. moreover, if the impact is less than 5% then the organisation is not viable to provide separate information or announcement to the shareholders and stakeholders of the organisation. Hence, under the evaluation of stakeholder theory the decision made by JB hi fi for reporting the annual decline and profit was adequate. The company adequately followed all the relevant information needed by the Stakeholders who are supporting the organisation to achieve its goal (Kent & Zunker, 2017). Therefore, under managerial branch of stakeholder theory JB hi fi have adequately provided all the relevant information to the stakeholders, who can help the organisation to achieve higher growth in future. Investment executive such as Smith directly supported the operations of JB hi fi, which directly indicates that the information depicted by the organisation was adequately supported by the investors.
Managerial Branch of Stakeholder Theory and JB Hi-Fi’s Reporting Decisions
References:
Insert your references here, for example:
Kent, P., & Zunker, T. (2017). A stakeholder analysis of employee disclosures in annual reports. Accounting & Finance, 57(2), 533-563.
Poulton, E., Barnes, L., & Clarke, F. (2017). Disclosure and Reporting of Governance Practices by Australian Residential Aged Care Providers: Accountability to Stakeholders.
Pérez, A., López, C., & García-De los Salmones, M. D. M. (2017). An empirical exploration of the link between reporting to stakeholders and corporate social responsibility reputation in the Spanish context. Accounting, Auditing & Accountability Journal, 30(3), 668-698.
Hussain, N., Rigoni, U., & Orij, R. P. (2018). Corporate governance and sustainability performance: Analysis of triple bottom line performance. Journal of Business Ethics, 149(2), 411-432.
3: The share price of the organisation relatively declined after the announcement of the profit downgrade, which was not activated by JB hi fi. JB Hi-Fi directly indicated that the decline and share price was not anticipated by the organisation due to the low impact of materiality on its profits. The organisation directly indicated that only 3% decline in its overall profit will income during the fiscal year, which led to the mass panic among investors, who dumped all the relevant shares of the organisation to minimise the negative impact on their investment capital. The continuation of the relevant decline and share price was mainly a signal from the investors regarding the current evaluation of the organisation. Moreover, the share price of the company directly instigated the relevant decline and its future learning that has been declared in the article. According to the case study, the share price of the organisation fell up to 10% on a single day after the announcement was made by JB hi fi. This significant move was previously conducted in 2011, where the organisations future was not certain. Therefore, the mass panic conducted by the investors directly indicating the current financial position and share price valuation of the organisation. Moreover, from the evaluation of the share price movement from the announcement date to the lowest point of the share it could be identified that the company share has been declined from 25.7 per share to 22.05 per share. The anticipation of the investors regarding the future earnings announcement of the organisation is effectively depicted with the help of current share price. Investors relatively use share price valuation to determine the actual value of the organisation. Moreover, the decisions made by the organisation in the announcement relatively depicted the actual valuation of the company, which was delivered by the change in its share price. In this context, Xu & Beck (2017) stated that fundamental analysis uses financial report of the organisation to evaluate its future growth. On the other hand, Lee & Tong (2018) argued that due to the limitations of fundamental analysis investors are not able to understand the level of changes in short term that will is conducted in share price of the organisation.
Anticipation of Future Earnings Announcements by Share Prices
Therefore, the current share price of JB hi fi is relatively putting the anticipated future earnings announcement of the organisation. The company will eventually have a decline in its profits during the fiscal year, which will result in declining valuation of the organisation. hence, the current decline in share price of the company relatively defected the future valuation of the organisation and the anticipation of a declining profit. Thus, the change in share price is mainly estimated from the future progress and growth of the organisation, as investor use different valuation models to detect the level of share price that is for the company. The decline in share price after the announcement was mainly aggressive, which instigated wide spread panic among the investors. This is the main reason behind the drastic fall in share price of JB Hi-Fi.
References:
Insert your references here, for example:
Asx.com.au. (2018). Asx.com.au. Retrieved 30 May 2018, from https://www.asx.com.au/asx/share-price-research/company/JBH
Lee, Y. T., & Tong, W. H. (2018). The impact of reporting frequency on the information quality of share price: evidence from Chinese state-owned enterprises. Frontiers of Business Research in China, 12(1), 9.
Xu, D., & Beck, C. (2017). Symbolic dynamics techniques for complex systems: Application to share price dynamics. EPL (Europhysics Letters), 118(3), 30001.
4: Under Brunswik Lens Model the decision made by the investors can be evaluated under different circumstances and cue, which led to the decision of buying or selling the shares of JB hi fi. The evaluation directly indicates that under the Brunswik Lens Model, all the relevant information that is provided by the organisation is a relatively evaluated by investors under scrutiny level (Sahoo & Sahoo, 2017). This mainly helps in detecting the decisions that could be made by the investors regarding the selling or buying of shares. the announcement conducted by JB hi fi regarding the decline in its profit during the fiscal year by 3% directly indicated a massive production in profits of the organisation. the company has been portraying a loss during the previous fiscal years, why the information regarding the loss of further 3% would directly indicate the revaluation condition of the organisation. According to Brunswik Lens Model, the investors directly evaluated the announcement on different valuation models, which helped in detecting the actual share value of the organisation. Therefore, the announcement was a major event which allowed the investors to make the buying and selling of JB hi fi shares. According to the Brunswik Lens Model, investors seeing the decline in overall profit of JB hi fi decided to reduce their exposure to the organisation. this drastic move was made due to the low returns that will be generated by the company during the fiscal year. the anticipation of share value is a relatively based on valuation of company’s future growth and prospects. Therefore, the changes in future growth rate of JB Hi-Fi directly nullified the current share valuation of the organisation and instigated a massive selling of share (Kaminski & Sporer, 2018). This was mainly with this during the announcement by 10% of the share value declined during a single day trade. Moreover, the continuation of the decline and share price was seen throughout the week where the values of the company declined from 25.7 per share to 22.05 per share.
Using the Brunswik Lens Model to Understand Investor Decisions
Hence, under the lens model it could be identified that investors are selling the shares of the organisation due to the low prospects. Hamm & Yang (2017) stated that evaluation of investors decision regarding the share price valuation of the company is essential as the organisation could detect the impact of the announcement on its overall valuation. On the contrary, Beckstead (2017) argued that sometimes due to adverse situations investors panic and degrade the valuation of an organisation, which does not indicate the actual decisions made by the investors regarding valuation of a particular company. According to Brunswik Lens Model, the investors am in selling the shares of JB hi fi due to the low future prospects of the company. In addition, the situation and mood of the investor are basically portraying then input for Brunswik Lens Model, where the reaction provided by the investors were adequate, as the massive selling needs to be conducted due to the future drop in profit level.
References:
Insert your references here, for example:
Hamm, R. M., & Yang, H. (2017). Alternative lens model equations for dichotomous judgments about dichotomous criteria. Journal of behavioral decision making, 30(2), 527-532.
Beckstead, J. W. (2017). The bifocal lens model and equation: Examining the linkage between clinical judgments and decisions. Medical Decision Making, 37(1), 35-45.
Illingworth, D. A., Thomas, R. P., Rozga, A., & Smith, C. J. (2017, September). Cue Use in Distal Autism Spectrum Assessment: A Lens Model Analysis of the Efficacy of Telehealth Technologies. In Proceedings of the Human Factors and Ergonomics Society Annual Meeting (Vol. 61, No. 1, pp. 170-170). Sage CA: Los Angeles, CA: SAGE Publications.
Sahoo, F. M., & Sahoo, K. (2017). The perceived predictors of achievement in management students: An innovative use of lens model. Journal of the Indian Academy of Applied Psychology, 43(1), 34.
Kaminski, K. S., & Sporer, S. L. (2018). Observer judgments of identification accuracy are affected by non?valid cues: A Brunswikian lens model analysis. European Journal of Social Psychology, 48(1), 47-61.
5: After conducting the adequate evaluation it could be identified that the case study effectively supports the critical view of accounting, where it helps legitimise the capitalist system currently used by the organisation. The case study directly indicates the relevant changes in accounting vegetables that is adopted by organisations to support its capitalist system. In the case study, the evaluation used by JB hi fi for disclosing all the relevant information regarding its future growth in a relevant conference is directly indicating the ways of capitalist system. The company directly indicated that relevant measures used by the accounting professionals help in drafting the future profits of an organisation. Therefore. it could be understood that the case study directly supports the critical view of accounting, where Accountants are conducting relevant legitimate action to accommodate the capitalist system within the organisation. The disclosure that was made by the company was a relatively considered as a capital system which indicate future growth rate of an organisation. Accounting professionals has effectively been using the accounting system to legitimacy capitalist measures used by organisations. The critical view of accounting directly indicates that accounting is effectively made to support operational capability of the company well discarding any kind of ethical measures for minimising the impact of capitalist system. The system relatively uses different types of measures such as depreciation tax lineage impairment loss and other valuation methods to help capital system to maximize their profits while minimising any kind of cash outflow. The accounting profession has helped the capitalist system to flourish and maximize its profitability, by providing them with different types of loopholes for supporting their actions. Therefore, the measures used by JB hi fi while disclosing the decline in its profits for the fiscal year is relatively indicating the measures that was taken by accounting profession for legitimizing the capitalist system. Moreover, from the evaluation it could also be identified that the case study supports all the relevant actions of capitalist system, which is entitled to improve their profits in future. this relatively supports the haves against the have nots, as big corporations able to generate higher rate of returns while poor people are deprived of the facilities. In this context, Matthews (2017) stated that the finical crisis can be identified as the relevant measure used by accounting professional for legalising the actions of capitalist, where the unethical measure led to the financial crisis and liquidated financial market of the world.
Thus, under the valuation it could be understood that the company will not provide high level of return during the fiscal year, which will directly have the negative impact on share price of the company. Therefore, the intention of the company was to minimise the negative impact of the profit downgrade on its hare price, as it was supported by Bruce one of the investment bankers. This relevantly indicates that accounting professional directly help the organisation in their use to legitimate the capitalist ways. Consequently, the actions of the organisation are considered capitalist, where it focuses on maximising their profits (Kamla & Haque, 2017).
References:
Insert your references here, for example:
Alawattage, C., Wickramasinghe, D., & Uddin, S. (2017). Theorising management accounting practices in Less Developed Countries. The Routledge Companion to Performance Management and Control.
Matthews, D. R. (2017). Accountants and the professional project. Accounting, Auditing & Accountability Journal, 30(2), 306-327.
Morales, J., & Sponem, S. (2017). You too can have a critical perspective! 25 years of Critical Perspectives on Accounting. Critical Perspectives on Accounting, 43, 149-166.
Kamla, R., & Haque, F. (2017). Islamic accounting, neo-imperialism and identity staging: The Accounting and Auditing Organization for Islamic Financial Institutions. Critical Perspectives on Accounting.
Lin, L. (2017). Institutional Problems for Chinese Environmental Accounting: Evidence from the Accounting Profession (Doctoral dissertation, School of Management).
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