The Effect of Profit Management on Shares

Question: Discuss about The Effect of Profit Management on Shares. Answer: Introduction The main focus area of this research will be profit management and its impact on the shares. In order to understand the subject and analyze the same in better way, the study will use the case study of Jordan Telecom Group, which is one of the largest companies in the telecommunication sector in Jordan. In the words of Fallah and Heirany (2016), in order to compete in the national as well as international market, every company needs to manage its profits in an efficient manner. As per the current scenario, it can be stated that the companies especially the large organizations are recruiting financial experts just to get the special advice of them for better profit management. Calabrese (2015) stated that profit management is important because better profit management helps the companies to secure their future. At the same time, Zhongdang, Lirong and Lirong (2014) added that the profit management is important because in future, profit helps the companies to expand their business. Carter (2014) stated that proper profit management requires specific knowledge over the subject of accounting or finance. If the particular case of Jordan Telecom Group will be considered, then it will be identified that in last few years, the profit level of the company has reduced by near about 30% (Zawya.com 2016). This reduction in the profit percentage is clearly indicating that the profit management at Jordan Telecom Group is not strong enough to maintain the profit of the company. It has also been identified that due to the issue in the profit management or reduction in the profit percentage, the share prices of the company has also decreased (Lazov 2016). This is clearly indicating that the profit management and the share prices of the companies are positively related to each other. Therefore, it must be said that in order to enhance the share value in the market, the companies must emphasize on their profit management strategies. Problem of the study Companies emphasizes on the profit management to improve their financial health (Kaplan and Atkinson 2015). However, in recent scenario, it has been identified that in many companies especially the telecommunication companies in Jordan, the shareholders are not much satisfied with their return percentage (Fallah and Heirany 2016). This indicates that the financial health of the companies is not so good. However, the financial statements of the companies are showing good amount of profit in each year, which means the profit management is better in that companies. Therefore, the main problem that this study will face that the shareholders of the companies are not satisfied though there is good profit management in the companies. Hence, it is important to analyze the effects of profit management on the shares as well as shareholders. Importance of the study This study will conduct an in-depth analysis on the profit management strategies taken by the companies and at the same time this will also try to identify the reason for which the shareholders are dissatisfied though the companies are earning huge profit. With the help of the results of this study, the impact of profit management on the shares will be clear. Along with that the recommendations of the study will provide some guidelines that will help the companies in better profit management by satisfying the shareholders. Research aim and objectives The aim of this research will be to identify and analyze the relationship between the profit manage and the share of the company. The objectives of this study will be as follows: To identify the strategies that the companies in Jordan are taking for better profit management To evaluate and analyze the relationship between the shares and profit management strategies of the companies To understand and identify the positive and negative impacts of profit management on the shares of Jordan Telecom Group To recommend some possible strategies that the companies can utilize for better profit management Research questions and hypothesis The questions of this research will be as follows: What strategies that companies in Jordan have taken for better profit management? What is the relationship between profit management and shares? How the shares are affected by the profit management of Jordan Telecom Group? How the companies in Jordan can improve their current profit management strategies? Hypotheses: H0: Profit management has no effect on the shares of a company H1: Profit management has high income on the shares of a company Conceptual framework Figure 1: Conceptual framework (Source: Created by author) Explaining the variables There will be mainly two variables in this study profit management and shares. Between these two variables, profit management will be the independent variable and shares will be the dependent variable because the shares are depended on the quality of the profit management. The term profit management refers to the handling of the profits of a company in a better way that ensures better future of the company. The future of a company will be better only when the financial position or the market position of the company will be strong and the market position of the company becomes strong, when the share value of the company is high (Carter 2014). Therefore, it must be stated that shares or value of the shares of a company is depended on the quality of its profit management. On the other side, Ghamkhari and Mohsenian-Rad (2013) mentioned that it is not always true that profit management and share values of the companies are always positively related. Sometimes, profit management creates negative impacts on the share values of the companies. Due to excessive strict profit management strategies, the companies provide the dividend to the shareholder at very less percentage. This creates dissatisfaction in the minds of the shareholders and if shareholders are dissatisfied, then value of the shares starts to decrease. Therefore, it can be said that the variables of this particular study will be related to each other. Literature review Evaluating the concept of profit management According to Calabrese (2015), profit management does not indicate maximization of profit rather it indicates the maintenance of the standard level of profit, while minimizing the level of risks. In the words of Lazov (2016), profit management means maintaining the profitability of the company to the standard that helps the company to secure its future properly. Suzuki and Nakaoka (2013) has defined profit management as the way, which is important to the company for maintaining the sustainability. On the other side, Azandaryani, Javid and Soleimani (2014) stated that profit management is the group of professional activities that includes planning, operating, delivering and supporting the profit items at any business organization. At current scenario, profit management is important because the level of competition in the market is much high (Carter 2014). The companies are taking different strategies to manage their profit in a proper way. The strategies of profit management are state d below. Identifying the current profit management strategies applied by the companies in Jordan According Zadeh, Mehrazeen and MR Shorvarzi (2015), profit management is an essential part of the business operations. Better profit management helps to enhance the financial capacity of the companies. As per the current scenario in Jordan, the companies are applying various strategies to manage their profits in better way (Ghamkhari and Mohsenian-Rad 2013). These strategies are as follows: The most common strategies taken by the companies in Jordan is reinvestment of profit for the further business development. Berengueret al. (2015) argued that it has been identified in many business organizations in Jordan that management prefer to use the maximum percentage of net profit in business expansion and business development and due to that the percentage of return to the equity shareholders is low. The companies in Jordan are also taking the strategy of keeping high amount of reserve. Monjardinoet al. (2015) stated that this strategy helps the companies to save their future in better way by utilizing the profit. Another strategy taken by the companies is paying dividends. However, Choi (2016) argued that the number of companies in Jordan is low, which are paying high amount of dividend with the increased profit percentage. Analyzing the positive and negative impacts of profit management on shares Most of the people in the business world state that profit management is beneficial for the business growth of the companies. Hu, Liu and Wang (2016) mentioned that profit management has several positive impacts on the business of the companies. In support of this, Choi (2016) added that profit management helps to minimize the risks of the companies. Better profit management improves the financial health of the companies and so thee business risks are reduced. Zadeh, Mehrazeen and MR Shorvarzi (2015) commented that profit management helps to maintain positive cash inflow within the company. The positive cash inflow helps the companies to attract more investors. At the same time, Monjardino et al. (2015) stated that better profit management is essential to secure the future of a company. However, Berenguer et al. (2015) argued that the strategies taken by the companies for profit management sometimes reduce the return percentage of the equity shareholders. This creates dissatisfaction in the minds of the shareholders and ultimately, the goodwill of the company is hampered (Zhongdang, Lirong and Lirong 2014). Research methodology Types of investigation In a research, the investigation can be done by following some particular research philosophy, approach and design (Mackey and Gass 2015). This research will also follow a particular type of investigation. The research will choose the positivism philosophy among all the available research philosophies. The research will select the positivism philosophy because it will help to analyze the data on the basis of logical view points. At the same time, the positivism philosophy will also help to analyze the research data within very short time span (Flick 2015). On the other side, the research will select the deductive research approach because the deductive research approach will help the research to analyze the data very quickly and identifying the to-the-point results (Marais and Pienaar-Marais 2016). The study will also select the descriptive research design because the descriptive research design helps to analyze the data in detail with the help of the existing literature. Therefore, with the help of descriptive research design, the research will be done in better way. Data collection method Data collection is the most important activity in a research work. Without data collection, the main work of research cannot be started. A research can use two types of data, one is primary data and the other is the secondary data. Primary data is new in nature and this data is unavailable in any sources like, book, websites or journals (Dunlap et al. 2016). This data needs to be collected through survey, interview, focus group and observations. On the other side, secondary data is the old or existing data, which is easily available in different sources like, websites, books and journals. This type of data can be gathered very easily and by spending less time and money (Mackey and Gass 2015). However, this particular study will use both primary as well as secondary data. The primary data will be collected from the shareholders and the mangers of Jordan Telecom Group. The survey method will be followed with the shareholders and the interview will be taken from the managers. The secondary data will be collected from different websites and journals as well as books. Sampling method and sample size In order to collect the primary data, the research will select a sample size and the sample will be selected through random sampling method. The probability sampling technique will be followed to select the sample for the survey and the non-probability sampling will be followed to select the sample for the interview. The survey questionnaire will be sent to 70 shareholders of Jordan Telecom Group and it is expected that at least 50 will reply back. The approach for the interview will be done to 7 managers and it is expected that at least 3 will be ready for the interview. Therefore, the expected sample size for interview will be 3 and for survey will be 50. Data analysis technique Data analysis is another vital part of a research work. There are two techniques of data analysis are available quantitative data analysis and qualitative data analysis (Dunlap et al. 2016). Quantitative technique of data analysis helps to analyze the data in mathematical form. The quantitative data analysis technique discloses the results of the data analysis in the numeric terms, which are easy to understand and explain. Moreover, if the data analysis in a research paper in done on the basis of quantitative technique, then it takes less time to get the result (Mackey and Gass 2015). On the other side, qualitative technique of data analysis helps to analyze the data in a detailed manner. Qualitative data analysis technique conducts in-depth analysis of data. In this technique of data analysis, no numerical or mathematical terms are used and so it takes more time than the quantitative data analysis (Marais and Pienaar-Marais 2016). However, this study will follow both the types of data analysis. The quantitative data analysis technique will be followed to analyze the survey data and the qualitative method will be followed to analyze the interview data. As in case of survey, the number or quantity of data will be huge, it will be easier to follow the quantitative method. This particular method will help to analyze the huge quantity of data easily and within limited time. On the other side, the interview data will be less in quantity and so it will be possible to conduct in-depth analysis of this data. Hence, the qualitative data will be used to analyze the interview data. Ethical consideration At the time of conducting a research work, it is very important to take care of the ethical aspects of the study. Ethical issues can take place because of inaccurate selection of data collection and data analysis techniques or regarding the maintenance of confidentiality of the survey participants (Marais and Pienaar-Marais 2016). In order to manage the ethical issues, this study will at first take permission from the appropriate authority. Apart from that, reliability and validity of the data collection and data analysis techniques will also be maintained and at the same time, the confidentiality of the survey participants will be maintained properly. Limitations of the study A research paper may face the several limitations at the time of collecting and analyzing the data. This may also happen in case of this particular study. The major limitation that this study may face is the time and cost limitation. The available time for this research will be less and so problem may take place while collecting and analyzing the data. At the same time, the available money will be also limited, which may create barrier for the research. At the same time, getting the appointment from the managers at Jordan Telecom Group will be also difficult. Reference list: Azandaryani, n.h., javid, d. And soleimani, h., 2014. The study of relationship between information asymmetry and concentration of ownership with profit management in the listed companies in tehran stock exchange.Kuwait Chapter of the Arabian Journal of Business and Management Review,4(1), p.344. Berenguer, G., Keskinocak, P., Shanthikumar, J.G., Swaminathan, J.M. and Van Wassenhove, L., 2015. Call for Papers: Special Issue of Production and Operations Management: Not for Profit Operations Management.Production and Operations Management,24(2), pp.352-353. Calabrese, T.D., 2015, November. Using Evidence-Based Management and Policy to Improve Not-for-Profit Financial Operations. In2015 Fall Conference: The Golden Age of Evidence-Based Policy. Appam. Carter, M., 2014. Reboot your profit: management.The Dairy Mail,21(4), pp.45-47. Choi, T.M., 2016. Multi-period risk minimization purchasing models for fashion products with interest rate, budget, and profit target considerations.Annals of Operations Research,237(1-2), pp.77-98. Dunlap, G., Barton, E.E., Ledford, J.R., Lane, J.D., Decker, J., Germansky, S.E., Hemmeter, M.L., Kaiser, A., Dennis, L.R., Hughes-Scholes, C.H. and Gatt, S.L., 2016. Contributions of Single Case Research Methodology to Early Childhood Special Education.Childhood,36(1). Fallah, M. and Heirany, F., 2016. Evaluating the effect of family relations in the board of directors on profit management by applying" dechow and dichev" and" kothari" models.Journal of Fundamental and Applied Sciences,8(2), pp.1344-1362. Flick, U., 2015.Introducing research methodology: A beginner's guide to doing a research project. Sage. Ghamkhari, M. and Mohsenian-Rad, H., 2013. Energy and performance management of green data centers: A profit maximization approach.IEEE Transactions on Smart Grid,4(2), pp.1017-1025. Hu, M., Liu, Y. and Wang, W., 2016. Altruistic Rationality: The Values of Strategic Farmers and (NON-) Profit Firms in Crop Planting Decisions.Available at SSRN 2847477. Imai, N., 2014. Profit Management Model to Overcome the Enterprise Crisis.Management of Enterprise Crises in Japan,10, p.109. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning. Lazov, I., 2016. Profit management of car rental companies.European Journal of Operational Research. Mackey, A. and Gass, S.M., 2015.Second language research: Methodology and design. Routledge. Marais, H.C. and Pienaar-Marais, M., 2016, May. Analysis of Research Methodology in Business and Management Studies as Reflected in the ECRM 2015 Proceedings. InECRM2016-Proceedings of the 15th European Conference on Research Methodology for Business Management": ECRM2016(p. 167). Academic Conferences and publishing limited. Monjardino, M., McBeath, T., Ouzman, J., Llewellyn, R. and Jones, B., 2015. Farmer risk-aversion limits closure of yield and profit gaps: A study of nitrogen management in the southern Australian wheatbelt.Agricultural Systems,137, pp.108-118. Pelham, A.M., 2015. The Influence of Consulting Oriented Sales Management Programs on Customer Retention and Long-Term Profit Growth. InCreating and Delivering Value in Marketing(pp. 66-66). Springer International Publishing. Suzuki, A. and Nakaoka, H., 2013. The Optimum Profit Management in Publication Business: The Optimum Strategy for Print Runs under Uncertainty.Journal of Real Options and Strategy,6(1), pp.1-15. Zadeh, S., Mehrazeen, A.R. and MR Shorvarzi, F., 2015. Ephic Perfective of the Managers and Profit Management.Global Journal of Management And Business Research,15(1). Zawya.com. 2016. [online] Available at: https://www.zawya.com/ [Accessed 7 Nov. 2016]. Zhongdang, S., Lirong, H. and Lirong, S.Z.H., 2014. Research on the Influence Factors of the Auditing Quality from the Perspective of Profit Management.,9, p.050.