buy lie or die an investigation of chinese st firms voluntary interim audit motive and auditor independence in the chinese stock market special treatment st firms are the firms listed as facing imminent danger of delisting unless they return to profitability after reporting two consecutive annual losses some st firms voluntarily pay substantial fees to their external auditors to conduct interim audits which are not required by regulations in this study we investigate and find that st firms that pay for voluntary interim audits report greater discretionary accrued earnings higher non operating earnings and higher returns on assets in ensuing annual reports as a result these firms are more likely to return to profitability and reduce their delisting risk our results which contribute to the current debate on auditor independence appear to be consistent with the possibility that st firms buy external auditors cooperation to manipulate earnings when faced with the threat of delisting

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

andersen and the market for lemons in audit reports previous accounting ethics research berates auditors for ethical lapses that contribute to the failure of andersen e g duska r 2005 journal of business ethics57 17 29 staubus g 2005 journal of business ethics57 5 15 however some of the blame must also fall on regulatory and professional bodies that exist to mitigate auditors ethical lapses in this paper we consider the ethical and economic context that existed and facilitated andersen s failure our analysis is grounded in akerlof s 1970 quarterly journal of economicsaugust 488 500 theory of the market for lemons and we characterize the market for audit reports as a market for lemons consistent with akerlof s model we consider the appropriateness of the countervailing mechanisms that existed at the time of andersen s demise that appeared to have effectively failed in counteracting andersen s ethical shortcomings finally we assess the appropriateness of the remedies proposed by the sarbanes oxley act of 2002 soa to ensure that similar ethical lapses will not occur in the future our analysis indicates that the soa regulatory reforms should counteract some of the necessary conditions of the lemons model and thereby mitigate the likelihood of audit failures however we contend that the effectiveness of the soa critically depends upon the focus and attention of the public companies accounting oversight board pcaob towards assessing the ethical climates of public accounting firms assessments by the pcaob of public accounting firm s ethical climate are needed to sufficiently ensure that public accounting firms effectively promote and maintain audit quality in situations where unconscious bias or economic incentives may erode the public accounting firm s independence

a field study of sales forecasting accuracy and processes abstract as might be expected surveys show accuracy is the most important criterion in selecting a forecasting strategy this may lead to the expectation that computer based software would be used to aid the forecasting effort however despite the wide availability of forecast software management judgement appears to be the preferred method this leads to the question does management judgement provide the most accurate forecast estimates this paper reports a field study of judgemental sales forecasting over thirteen manufacturing organisations to investigate whether these forecasts are accurate unbiased and efficient and whether better ex ante forecasts could have been developed using a computer based model the study shows that the company forecasts were not uniformly more accurate than a simple un seasonally adjusted naive forecast most of the source of error is due to both inefficiency a serial correlation in the errors and bias in the forecasts these two factors seemed to mask any contribution of contextual information to accuracy the results are also discussed in terms of forecasting objectives the organisations may have other than accuracy

competition policy burdens and state owned enterprise reform one of the most important remaining issues in china s transition to a market economy is the reform of state owned enterprises soe s when reforms started in late 1978 soe s dominated china s industrial sectors in every aspect after 18 years of gradual transition the soe share in china s total industrial output has declined from 77 6 percent in 1978 to 28 8 percent in 1996 however in 1996 soe s still employed 57 4 percent of urban workers and possessed 52 2 percent of total investment in industrial fixed assets improving soe performance is crucial for social stability and sustained growth in china however over 40 percent of soe s are losing money in this paper we will argue that the root of the soe problem is the separation of ownership and control and that the oftencriticized soft budget constraints arise from various state imposed policy burdens which make the state accountable for the poor perfornance of soe s the key for a successful soe reform is to remove the policy burdens and to create a level playing field so that market competition can provide sufficient information for the managerial performance of the soe s and make the managers incentives compatible with those of the state io competition and the performance of large corporation in a market economy

a comparison of event study methodologies using daily stock returns a simulation approach accounting research studies commonly use measures of abnormal security returns to test hypotheses about accounting information and policies alternative methods are used in these studies to detect abnormal performance and thereby examine the information content of identified events the ability of these methods to detect abnormal returns using simulation techniques is examined by brown and warner 1980 1984 morse 1984 addresses this issue analytically the analytical approach presumes that the event study data is generated by the process modeled while the simulation approach uses the security return data generated by the market simulation provides a tractable means of dealing with situations where an analytical approach may yield results suggesting direction but not magnitude or where such techniques are unusually cumbersome both limitations face us in this study brown and warner 1980 use monthly data to examine the comparative abilities of several combinations of return generating models and

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

designing development planning charges settlement patterns cost recovery and public facilities there is a large body of literature that discusses the control of settlement patterns using traditional planning instruments whilst there is some theoretical literature discussing the use of development charges to influence settlement patterns by addressing market failure there is limited literature examining how such charging is implemented in practice this paper presents the theoretical basis for development charging based on the pigouvian tradition and discusses how these charges can be calibrated it identifies the potential for second best approaches including hypothecation of revenues this approach is distinguished from infrastructure charging which is a cost recovery instrument the irish system of infrastructure charging is assessed as a means of exploring how current instrument design could be improved to align with policy aspirations using the lessons that theory provides

accommodating heterogeneity and nonlinearity in price effects for predicting brand sales and profits abstract we propose a hierarchical bayesian semiparametric approach to account simultaneously for heterogeneity and functional flexibility in store sales models to estimate own and cross price response flexibly a bayesian version of p splines is used heterogeneity across stores is accommodated by embedding the semiparametric model into a hierarchical bayesian framework that yields store specific own and cross price response curves more specifically we propose multiplicative store specific random effects that scale the nonlinear price curves while their overall shape is preserved estimation is fully bayesian and based on novel mcmc techniques in an empirical study we demonstrate a higher predictive performance of our new flexible heterogeneous model over competing models that capture heterogeneity or functional flexibility only or neither of them for nearly all brands analyzed in particular allowing for heterogeneity in addition to functional flexibility can improve the predictive performance of a store sales model considerably while incorporating heterogeneity alone only moderately improved or even decreased predictive validity taking into account model uncertainty we show that the proposed model leads to higher expected profits as well as to materially different pricing recommendations

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

assessing the relative merits of development charges and transferable development rights in an uncertain world traditionally regulatory instruments have been used to achieve planning objectives however emerging market based policy instruments such as transferable development rights a quantity based app

let s get real a factor analytical approach to disaggregated business cycle dynamics this paper develops a method for analysing the dynamics of large cross sections based on a factor analytic model we use law of large numbers arguments to show that the number of common factors can be determined by a principal components method the economy wide shocks can be identified by means of simple structural var techniques and that the parameters of the unobserved factor model can be estimated consistently by applying ols equation by equation we distinguish between a technological and a non technological shock identification is obtained by minimizing the negative realizations of the technology shock empirical results on 4 digit industrial output and productivity for the u s economy from 1958 to 1986 show that 1 at least two economy wide shocks both having a long run effect on sectoral output are needed to explain the common dynamics 2 although the technological shock accounts for at least 50 of the aggregate dynamics of output it cannot by itself explain dynamics at business cycle frequencies 3 sector specific shocks explain the main bulk of total variance but generate mainly high frequency dynamics 4 both the technological and the non technological component of output show a peak for positive sectoral comovements of output at business cycle frequencies 5 technological shocks are strongly correlated with the growth rates of the investment in machinery and equipment sectors and their inputs many interesting questions about cyclical fluctuations and economic growth can be answered only by studying the dynamic behaviour of sectoral variables when data contain information on time for a large cross section of sectors traditional econometric techniques used in the macroeconomic literature such as vector autoregressive var and vector autoregressive moving average varma models are not appropriate since they require the estimation of too many parameters this is why new methods which allow for the reduction of the parameter space need to be developed the objective of this paper is both methodological and descriptive at the methodological level we develop a simple framework for the dynamic analysis of large cross sections the basic model is a dynamic factor analytic model as in sargent and sims 1977 the sectoral variables are decomposed into two unobservable components a common component driven by macroeconomic shocks and a purely sectoral component when

forecasting with multivariate temporal aggregation the case of promotional modelling demand forecasting is central to decision making and operations in organisations as the volume of forecasts increases for example due to an increased product customisation that leads to more skus being traded or a reduction in the length of the forecasting cycle there is a pressing need for reliable automated forecasting conventionally companies rely on a statistical baseline forecast that captures only past demand patterns which is subsequently adjusted by human experts to incorporate additional information such as promotions although there is evidence that such process adds value to forecasting it is questionable how much it can scale up due to the human element instead in the literature it has been proposed to enhance the baseline forecasts with external well structured information such as the promotional plan of the company and let experts focus on the less structured information thus reducing their workload and allowing them to focus where they can add most value this change in forecasting support systems requires reliable multivariate forecasting models that can be automated accurate and robust this paper proposes an extension of the recently proposed muliple aggregation prediction algorithm mapa which uses temporal aggregation to improve upon the established exponential smoothing family of methods mapa is attractive as it has been found to increase both the accuracy and robustness of exponential smoothing the extended multivariate mapa is evaluated against established benchmarks in modelling a number of heavily promoted products and is found to perform well in terms of forecast bias and accuracy furthermore we demonstrate that modelling time series using multiple temporal aggregation levels makes the final forecast robust to model misspecification

a re examination of china s share issue privatization abstract previous studies show that in contrast to evidence that share issue privatization sip in most other countries have improved firm profitability china s sip of the 1990s had no such effect we argue that the main reason for the failure of china s sip is likely to have been the weak institutional environment in place at that time we examine china s sip in a more recent period in which the institutional environment was greatly improved using a matching sample method we find that sip firms continued to experience negative post sip profitability changes in our sample period however their performance decline was significantly less than that of their matched non sip soes we also find that the introduction of the independent director rule helped to improve firm performance our results reconcile the findings of the sip effect in china with international evidence and illustrate the importance of a developed capital market to ensuring the success of privatization schemes

demand forecasting with high dimensional data the case of sku retail sales forecasting with intra and inter category promotional information in marketing analytics applications in or the modeler often faces the problem of selecting key variables from a large number of possibilities for example sku level retail store sales are affected by inter and intra category effects which potentially need to be considered when deciding on promotional strategy and producing operational forecasts but no research has yet put this well accepted concept into forecasting practice an obvious obstacle is the ultra high dimensionality of the variable space this paper develops a four steps methodological framework to overcome the problem it is illustrated by investigating the value of both intra and inter category sku level promotional information in improving forecast accuracy the method consists of the identification of potentially influential categories the building of the explanatory variable space variable selection and model estimation by a multistage lasso regression and the use of a rolling scheme to generate forecasts the success of this new method for dealing with high dimensionality is demonstrated by improvements in forecasting accuracy compared to alternative methods of simplifying the variable space the empirical results show that models integrating more information perform significantly better than the baseline model when using the proposed methodology framework in general we can improve the forecasting accuracy by 12 6 percent over the model using only the sku s own predictors but of the improvements achieved 95 percent of it comes from the intra category information and only 5 percent from the inter category information the substantive marketing results also have implications for promotional category management

does religion mitigate tunneling evidence from chinese buddhism in the chinese stock market controlling shareholders often use inter corporate loans to expropriate a great amount of cash from listed firms through a process called tunneling using a sample of 10 170 firm year observations from the chinese stock market for the period of 2001 2010 i examine whether and how buddhism china s most influential religion can mitigate tunneling in particular using firm level buddhism data measured as the number of buddhist monasteries within a certain radius around chinese listed firms registered addresses this study provides strong evidence that buddhism intensity is significantly negatively associated with tunneling this finding is consistent with the view that buddhism has important influence on corporate behavior and can serve as a set of social norms and or an alternative mechanism to mitigate controlling shareholders unethical tunneling behavior in addition my findings also reveal that the negative association between buddhism intensity and tunneling is attenuated for firms that have high analyst coverage the results are robust to various measures of buddhism intensity and a variety of sensitivity tests

equity in infrastructure finance when are impact fees justified to the extent that impact fee financing of infrastructure replaces the property tax it shifts payment from owners of existing property to parties associated with newly devel oping property rapid growth in a community is often cited as justification for this shift a model of intergenerational equity is proposed based on benefit principle taxation and capitalization of tax costs and infrastructure benefits the study concludes that rapid growth per se need not bur den existing property owners unfairly unantici pated rapid growth on the other hand can lead to excess tax burdens on existing residents that may appropriately be mitigated through impact fees jel r11

does competition destroy ethical behavior explanations of unethical behavior often neglect the role of competition as opposed to greed in assuring its spread using the examples of child labor corruption excessive executive pay corporate earnings manipulation and commercial activities by universities this paper clarifies the role of competition in promoting censured conduct when unethical behavior cuts costs competition drives down prices and entrepreneurs incomes and thereby reduces their willingness to pay for ethical conduct nonetheless i suggest that competition might be good for ethical behavior in the long run because it promotes growth and raises incomes higher incomes raise the willingness to pay for ethical behavior but may also change what people believe to be ethical for the better this abstract was borrowed from another version of this item

tactical sales forecasting using a very large set of macroeconomic indicators abstract tactical forecasting in supply chain management supports planning for inventory scheduling production and raw material purchase amongst other functions it typically refers to forecasts up to 12 months ahead traditional forecasting models take into account univariate information extrapolating from the past but cannot anticipate macroeconomic events such as steep increases or declines in national economic activity in practice this is countered by using managerial expert judgement which is well known to suffer from various biases is expensive and not scalable this paper evaluates multiple approaches to improve tactical sales forecasting using macro economic leading indicators the proposed statistical forecast selects automatically both the type of leading indicators as well as the order of the lead for each of the selected indicators however as the future values of the leading indicators are unknown an additional uncertainty is introduced this uncertainty is controlled in our methodology by restricting inputs to an unconditional forecasting setup we compare this with the conditional setup where future indicator values are assumed to be known and assess the theoretical loss of forecast accuracy we also evaluate purely statistical model building against judgement aided models where potential leading indicators are pre filtered by experts quantifying the accuracy cost trade off the proposed framework improves on forecasting accuracy over established time series benchmarks while providing useful insights about the key leading indicators we evaluate the proposed approach on a real case study and find 18 8 accuracy gains over the current forecasting process

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models

smooth quantile based modeling of brand sales price and promotional effects from retail scanner panels semiparametric quantile regression is employed to flexibly estimate sales response for frequently purchased consumer goods using retail store level data we compare the performance of models with and without monotonic smoothing for fit and prediction accuracy we find that a flexible models with monotonicity constraints imposed on price effects dominate both in sample and out of sample comparisons while being robust even at the boundaries of the price distribution when data is sparse b quantile based confidence intervals are much more accurate compared to least squares based intervals c specifications reflecting that managers may not have exact knowledge about future competitive pricing perform extremely well