operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

attitudes toward risk and the risk return paradox prospect theory explanations this study attempted to explain bowman s risk return paradox in terms of recent research in behavioral decision theory and prospect theory the research emphasized the role of reference or target

fragmentation and multinational production abstract this paper examines the consequences of falling transport costs for intermediate goods and shows how this leads to the spatial fragmentation of production as firms divide their production between countries they become either vertical multinationals if upstream activities are labour intensive or horizontal multinationals if downstream activities are labour intensive in the former case the volume of world trade increases and in the latter it falls fragmentation need not narrow international factor price differences which depend on the factor intensity of the activities that relocate

fundamental analysis future earnings and stock prices in this paper we investigate how detailed financial statement data fundamental signals enter the decisions of market participants by examining whether current changes in the signals are informative about subsequent earnings changes our approach is consistent with the view expressed by penman 1992 and others that predicting accounting earnings as opposed to explaining security returns should be the central task of fundamental analysis studying the links between fundamental signals and future earnings changes allows us to test directly the validity of the economic intuition that underlies the original construction of the signals an alternative and less direct approach followed by lev and thiagarajan 1993 henceforth lt is based on an examination of the relations between the fundamental signals and contemporaneous returns

foreign direct investment and exports with growing demand we explore entry into a foreign market with uncertain demand growth a multinational can serve the foreign demand by two modes or by a combination thereof it can export its products or it can create productive capacityvia foreign direct investment fdi the advantage of fdi is that it allows for lower marginal cost than exporting does the disadvantage is that fdi is irreversible and hence entails the risk of creating under utilized capacity in the case that the market turns out to be small the presence of demand uncertainty and irreversibility gives rise to an interior solution where the multinational under certain conditions both exports its products and does fdi

truthfulness in accounting how to discriminate accounting manipulators from non manipulators accountants preparing information are in a position to manipulate the view of economic reality presented in such information to interested parties these manipulations can be regarded as morally reprehensible because they are not fair to users they involve in an unjust exercise of power and they tend to weaken the authority of accounting regulators this paper develops a model for detecting earnings manipulators using financial statements ratios in a sample of spanish listed companies our results provide evidence that accounting data can be extremely useful in detecting manipulators this approach can be used by a large category of users of accounting information among which we can cite stock exchange supervisors or investing professionals

ethical compliance programs and corporate illegality testing the assumptions of the corporate sentencing guidelines this paper analyses the ethical performance of foreign investment enterprises operating in china in comparison to that of the indigenous state owned enterprises collectives and private enterprises it uses both the deontological approach and the utilitarian approach in conceptualization and applies quantitative and econometric techniques to ethical evaluations of empirical evidences it shows that according to various ethical performance indicators foreign investment enterprises have fared well in comparison with local firms this paper also tries to unravel the effect of a difference in business culture and competitive market forces on ethical performance by comparing the behavior of foreign investment enterprises with that of the indigenous state owned enterprises and collectives on the one hand and with that of the indigenous private enterprises on the other

a behavioral theory of r d expenditures and innovations evidence from shipbuilding i base an integrated model of innovation development and launch on the behavioral theory of the firm this model specifies that research and development expenses are increased when low performance causes problemistic search and when excess resources cause slack search innovations generated by search are launched if low performance gives managers high risk tolerance using data from shipbuilding firms i show that high performance reduces r d intensity and innovation launches and high slack increases r d intensity as predicted

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

research in accounting for income taxes abstract this paper comprehensively reviews the accounting for income taxes afit literature we begin by identifying four distinctive aspects of afit and briefly covering the rules surrounding afit we then review the existing studies in detail and offer suggestions for future research we emphasize the research questions that have been addressed most of which relate to whether the tax accounts are used to manage earnings and whether the tax accounts are priced by equity market participants we also highlight areas that have not received much research attention and that warrant future analysis

learning and capacity expansion under demand uncertainty a competitive dynamic model of entry into a new industry is set up and both its positive and normative aspects are studied the main assumptions are that entry is sequential that it occurs under imperfect information on the size of the market and that better information becomes available as time goes on the gradual improvement in information is due to the fact that later waves of entrants are able to observe the profitability of earlier entrants the major results reported here under suitable restrictions are that the equilibrium rate of entry is monotonically decreasing over time and that at any given point in time it is smaller than the socially optimal one when a new market opens as a result of a product being newly invented for instance or when an existing market starts to expand uncertainty with respect to its size is likely to prevail as a result of this uncertainty entry of firms into such markets typically will occur in waves some firms will enter initially while others will wait to see the consequences of that initial entry if the experience of early entrants is favourable entry will continue otherwise entry will cease hence with the introduction of a new product two phases are associated the growth phase typified by positive operating profits for existing firms and expansion of productive capacity due to entry of new firms and the mature phase typified by erosion of profits and fixed total productive capacity empiricists estimating the time pattern of investments during the growth phase have found an s shaped diffusion curve see mansfield 1986 and gort and klepper 1982 the purpose of the present paper is to theoretically characterize these time patterns and to investigate their welfare properties any attempt to model the type of entry described above must account for differences in both entry dates and resultant earnings in other words the theory must explain why the realized earnings of different cohorts of firms are not equal often such ex post differences are reconciled by assuming heterogeneity with respect to some latent underlying characteristic managerial ability for instance and attributing differences in earnings to differences in that characteristic in this paper instead earning differentials are attributable to luck only ex ante all firms are technologically identical and equally capable of forecasting market prospects and rationally acting upon those forecasts ex post some firms turn out to have entered at the right time and are for that reason more profitable the model developed in this paper analyzes a parametric example of a sequential entry problem in which the uncertainty over market size is gradually resolved over time in a bayesian setting in an environment of perfect competition and constant returns toscale a free entry equilibrium concept is introduced and the aggregate implications of the time path of investments are derived i then compare this actual time path to the optimum this comparison is interesting because the equilibrium is analysed under the

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

unionised labour market and strategic production decision of a multinational i show that a foreign firm may sell the same product through both foreign direct investment fdi and export and this decision depends on the size of the product market it happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty i explain the co existence of fdi and export in a world with certainty the endogenous determination of the wage rate plays an important role for my results my analysis shows the effects of the fixed cost of fdi and competition in the product market on the production strategy of the foreign firm

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

motive opportunity choice and corporate illegality research on corporate illegality spans several distinct literatures and defies ready integration this article helps to overcome those problems analysis of data from 80 u s industrial organizations indicates that lower industry profitability is associated with higher frequencies of detected serious violations of federal environmental laws organizational profitability industry concentration organization size structural complexity organizational decentralization and ethical climate join this variable in statistical interactions also associated with detected instances of serious environmental violations however none of those variables are found to be associated with the incidence of detected nonserious violations these results provide qualified support for a model of corporate illegality in which illegal behaviors are attributable to the interactive effects of motive opportunity and choice they suggest that illegal corporate activities resist simple explanation and that future research on corporate illegality should concentrate on further development of multivariable models

the value relevance of taxes international evidence on the proxy for profitability role of tax surprise abstract despite evidence that tax surprise is incrementally value relevant the literature has done little to broaden the investigation beyond the united states or examine circumstances that affect informativeness after extending to the international setting i examine the impact of tax enforcement i report strong results of greater value relevance when tax enforcement is high and that the value relevance of tax surprise is mostly contained within its interaction with tax enforcement these findings highlight the importance of tax enforcement in determining the information content of tax surprise and suggest that extant and future discussions should be broadened to include it

fundamental information analysis fundamental analysis is aimed at determining the value of corporate securities by a careful examination of key value drivers such as earnings risk growth and competitive position in the context of such analysis we identify below a set of financial variables fundamentals claimed by analysts to be useful in security valuation and examine these claims by estimating the incremental value relevance of these variables over earnings our findings support the incremental value relevance of most of the identified fundamentals in fact for the 1980s the fundamentals add approximately 70 on average to the explanatory power of earnings with respect to excess returns we also show that the returns fundamentals relation is considerably strengthened when it is conditioned on macroeconomic variables thereby demonstrating the importance of a contextual capital market analysis for example several fundamentals that appear only weakly value relevant or even irrelevant in the unconditional analysis exhibit strong association with returns under specific economic conditions e g the accounts receivable and the provision for doubtful receivables signals during high inflation from a general examination of the role of fundamentals in security valuation we turn to the related issues of earnings persistence growth and the earnings response coefficient we hypothesize that the funda

how mncs choose entry modes and form alliances the china experience this study examine two dimensions of firms foreign market entry strategy mode of entry and formation of alliances based on the existing literature we propose a model that describes how host country home country and industry specific factors affect foreign firms decisions on how they enter the market and whether they will enter with a partner firm or not the model also describes how operation related factors i e the location and the level of local government affect these decisions seven major hypotheses were tested using a longitudinal sample of 2 998 foreign business activities in china between 1979 and 1993 our sample consists of foreign investing firms from the u s europe japan and other asian countries by choosing china as a host country the study offers insights into how firms of different regional groups adapted their strategies to a changing host environment

venture capital investment cycles the impact of public markets abstract it is well documented that the venture capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets this paper examines how changes in public market signals affected venture capital investing between 1975 and 1998 we find that venture capitalists with the most industry experience increase their investments the most when public market signals become more favorable their reaction to an increase is greater than the reaction of venture capital organizations with relatively little industry experience and those with considerable experience but in other industries the increase in investment rates does not affect the success of these transactions adversely to a significant extent these findings are consistent with the view that venture capitalists rationally respond to attractive investment opportunities signaled by public market shifts

the information content of earnings and prices a simultaneous equations approach abstract the price earnings relation can be characterized as a system of simultaneous equations earnings and prices can behave as if they are both endogenously determined because they are jointly affected by information that is difficult to specify explicitly specification tests provide evidence that both earnings changes and price changes are endogenous the price and earnings coefficients increase from ols to joint estimation and under a restrictive set of assumptions provide increasingly similar estimates of the permanent component of earnings the evidence is consistent with the contention that a portion of the single equation bias can be mitigated via joint estimation

density social networks and job search methods theory and application to egypt we first develop a theoretical model in which individuals are embedded within a network of social relationships we show that conditional on being employed the probability to find a job through social networks relative to other search methods increases and is concave with the size of the network the effects are stronger for the uneducated there is however a critical size of the network above which this probability decreases we then test empirically these theoretical findings for egypt using the 1998 labor market survey the empirical evidence supports the predictions of our theoretical model

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

asymmetric demand information and foreign direct investment we examine the fdi versus exports decision of firms competing in an oligopolistic quantitysetting market under demand uncertainty and asymmetric information compared to a firm that chooses to export a firm that chooses to set up a plant in the host market has superior information about local market demand in addition to the well known tension between the fixed set up costs of investment the additional variable costs of exports and oligopoly sizes the incentive to invest abroad is explained by the strategic learning effect fdi may be observed even if trade costs are zero the analysis is robust to price competition and to the possibility that a foreign firm can engage in both fdi and exports

the impact of informal networks on quit behavior sector disaggregation the change in the level effect accounts for only 0 35 0 41 percentage point of the 2 24 percentage point deceleration in labor productivity growth between the 1948 65 and 1973 78 periods the aggregate rate and level effects are not very sensitive to the degree of disaggregation 12versus 60 sector although some large level effects are evident within and across major industrial divisions they often cancel out in the aggregate however the level effect from the shift out of farming is quantitatively large and is close to the aggregate level effect using either 12 sector or 60 sector disaggregation although one can approximate the aggregate level effect by looking only at that for agriculture one should note that other fairly large level effects exist both within and across major industrial divisions other than agriculture

investment in new foreign subsidiaries under receding perception of uncertainty research on foreign direct investment has focused considerable attention on the moment of market entry but less on the dynamics of investment in the post entry phase this paper centres the influence of uncertainty on investment and develops a growth options model to explain the sequence of investment in new foreign subsidiaries in a learning process that starts at entry investors perceive receding levels of uncertainty and shift their reason for investment from option values towards net present values the findings of a panel study of 634 german subsidiaries support the propositions and reveal the potential of the real options approach to improve the understanding of internationalisation processes

the optimal timing of a foreign direct investment analyses of the optimal timing of foreign direct investment fdi decisions have been curiously lacking in the general literature on multinational enterprises cf buckley 1979a b although comparative static analyses exist comparing exporting to the host country with market servicing from a production unit sited in the host country horst 1971 hirsh 1976 the only attempt to predict the timing of the switch from exporting to foreign based production is that of aliber 1970 although vernon 1966 gives a cost based rationale for the switch this chapter attempts to fill this gap in the theory of fdi section 2 1 outlines and criticises previous attempts to deal with the problem sections 2 2 4 present a simple model which ignores set up costs and sections 2 5 and 2 6 give a more detailed analysis including such costs further extensions of the theory are considered in section 2 7 and the conclusions are summarised in section 2 8 the problem emerges as being more complex than had previously been appreciated

earnings volatility and earnings predictability abstract survey evidence indicates widely held managerial beliefs that earnings volatility is negatively related to earnings predictability in addition existing research suggests that earnings volatility is determined by economic and accounting factors and both of these factors reduce earnings predictability we find that the consideration of earnings volatility brings substantial improvements in the prediction of both short and long term earnings conditioning on volatility information also allows one to identify systematic errors in analyst forecasts which implies that analysts do not fully understand the implications of earnings volatility for earnings predictability

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

licensing versus direct investment a model of internalization by the multinational enterprise a firm must decide whether to serve a foreign market by exporting building a foreign branch plant or licensing the production to an existing foreign producer the existence of reputations implies that any licensing agreement must provide a licensee with the incentive to maintain the reputation this creates a motive for the firm to internalize transactions by building a branch plant i e by becoming a multinational the model reflects a more general notion that the inability of the firm to control a licensee s agent s actions can provide incentives for multinational activity the paper explores the determinants of the firm s mode of operation as well as the consequences of certain government policies

automated earnings forecasts beat analysts or combine and conquer prior studies attribute analysts forecast superiority over time series forecasting models to their access to a large set of firm industry and macroeconomic information an information advantage which they use to update their forecasts on a daily weekly or monthly basis a timing advantage this study leverages recently developed mixed data sampling midas regression methods to synthesize a broad spectrum of high frequency data to construct forecasts of firm level earnings we compare the accuracy of these forecasts to those of analysts at short horizons of one quarter or less we find that our midas forecasts are more accurate and have forecast errors that are smaller than analysts when forecast dispersion is high and when the firm size is smaller in addition we find that combining our midas forecasts with analysts forecasts systematically outperforms analysts alone which indicates that our midas models provide information orthogonal to analysts our results provide preliminary support for th

strategic reference point theory how can executives achieve a match between expected external environmental conditions and internal organizational capabilities that facilitates improved performance this paper argues that a firm s choice of reference points can help achieve strategic alignment capable of yielding improved performance and potentially even a sustainable competitive advantage building upon prospect theory and other relevant theoretical perspectives the strategic reference point srp matrix is developed a firm s srp consists of three dimensions internal capability external conditions and time a theory is developed which posits an optimal srp structure and propositions are offered which articulate the expected relationships between the srp strategic choice behavior and firm performance the paper closes with some suggestions for using strategic reference points in both research and practice

real investment implications of employee stock option exercises this paper examines a real cost of awarding employee stock options based on the observation that managers are extremely concerned about earnings per share dilution in equity related compensation we predict and find that firms experiencing significant employee stock option eso exercises shift resources away from real investments towards the repurchase of their own stocks we further find weak evidence of a decline in subsequent firm performance as measured by return on assets for several years following the cut in discretionary investments as a result of stock option exercises though this result is sensitive to the metric used to measure performance collectively our findings indicate that eso exercises potentially impose a real cost on the firm in terms of foregone investment opportunities

strategic second sourcing by multinationals multinationals often serve foreign markets by exporting as well as by investing directly in foreign production facilities we argue that if the multinational competes in an oligopolistic market characterized by strategic complements then there are strategic reasons to use two production facilities committing to a second source allows the firm to keep average cost low while increasing its marginal cost the increase in marginal cost softens product market competition resulting in higher profits we argue that this theory also has implications for the make or buy literature in production management and the literature on second sourcing in industrial organization

internal control system earnings quality and the dynamics of financial reporting using an earnings management model in which managers manipulate information when the firm s control system fails i introduce a measure of earnings quality based on the notion of integral precision that has solid theoretical foundations a trade off between the frequency and the magnitude of overstatements is shown overstatements are larger when misreporting is less likely overall the model generates a distribution of earnings announcements similar to its empirical analogue and provides a structural method to identify the likelihood and magnitude of misreporting by exploiting information from the moments of the distribution of reported earnings

learning and strategic pricing we consider the situation where a single consumer buys a stream of goods from different sellers over time the true value of each seller s product to the buyer is initially unknown additional information can be gained only by experimentation for exogeneously given prices the buyer s problem is a multi armed bandit problem the innovation in this paper is to endogenize the cost of experimentation to the consumer by allowing for price competition between the sellers the role of prices is then to allocate intertemporally the costs and benefits of learning between buyers and sellers we examine how strategic aspects of the oligopoly model interact with the learning process all markov perfect equilibria mpe are efficient we identify an equilibrium which besides its unique robustness properties has a strikingly simple seemingly myopic pricing rule prices below marginal cost emerge naturally to sustain experimentation intertemporal exchange of the gains of learning is necessary to support efficient experimentation we analyze the asymptotic behavior of the equilibria

going multinational under exchange rate uncertainty abstract we analyze a model where an exporting firm competes a la cournot in a foreign market the firm faces exchange rate uncertainty and has the option to invest abroad the paper contributes four results first real option pricing techniques are used to derive the optimal timing rule of the investment and the price of the firm and foreign competitors second the sunk cost of entry into the foreign market introduces hysteresis in direct investment flows we find that the degree of hysteresis grows with the number of firms in the industry third we determine the conditions under which dumping may appear and the role of fdi in precluding this type of dumping fourth tariffs have the well known fdi inducing effect more so in less competitive markets and are more effective at deterring delocation furthermore a tariff might have the effect of triggering dumping

executive compensation female executives and networking the phrase it s who you know not what you know that counts is often heard in conversations about people who get ahead in economic terms this phrase translates into it s your connections not your human capital investments that count this study attempts to determine the influence of networking in addition to human capital investments by examining a sample of top female executives in the united states we conclude that networking is as important as performance variables in helping women climb the corporate ladder

internet downturn finding valuation factors in spring 2000 abstract during spring 2000 the internet stock index declined 45 using a sample of internet firms this paper investigates whether this decline was associated with new disclosures such as earnings analyst forecast revisions and web traffic measures or to a reassessment by investors of pre existing information we find only modest evidence that the decline was associated with new disclosures however returns and post decline stock prices are significantly explained by 1999 annual report data when earnings are decomposed into gross profit and various expenses traditional financial information contributes significantly more in explaining the cross sectional returns and price levels than non financial information

job contact networks abstract many workers hear about or obtain their jobs through friends and relatives the aim of this paper is twofold first we relate both individual and aggregate labor market outcomes to the network structure of personal contacts second we study strategic network formation to this purpose we develop a model specifying at the individual level both the decision to form contacts with other agents and the process by which information about jobs is obtained and transmitted we show that equilibrium networks always exist and that only moderate levels of network asymmetry can be sustained at equilibrium also we establish a general non monotonicity result on information flow and unemployment with respect to network size in symmetric networks

why good firms do bad things the effects of high aspirations high expectations and prominence on the incidence of corporate illegality recent high profile corporate scandals involving prominent high performing firms cast doubt on assertions that the costs of getting caught decrease the likelihood such high performers will act illegally we explain this paradox by using theories of loss aversion and hubris to examine a sample of s p 500 manufacturers results demonstrate that both performance above internal aspirations and performance above external expectations increase the likelihood of illegal activities the sample firms prominence enhanced the effects of performance above expectations on the likelihood of illegal actions prominent and less prominent firms displayed different patterns of behavior when their performance failed to meet aspirations

o papel das redes sociais na condicao do desempregado uma analise usando a teoria de matching the paper investigates whether the size of social networks can aect the unemployment rate of the economy therefore based on a theoretical model of matching i propose a technique for simulating the eects of networks on the employability of workers the proposal is applied to a database of portugal noting evidence that there is an optimal size of network that minimizes the unemployment rate

exports and foreign distributional activities evidence on japanese firms in the united states the relationship between japanese exports to the united states and distributional activities of japanese affiliates in the u s wholesale trade sector is examined by using a sample of forty four three digit japanese exporting industries matched to u s industries the statistical analysis provides evidence supporting the hypothesis that japanese direct investment in distribution has strongly promoted japanese exports to the u s markets copyright 1991 by mit press

predicting accounting misconduct the role of firm level investor optimism motivated by a large literature on how firm specific resources such as leadership and management skills strategies organizational capabilities and intellectual properties drive firm performance we propose and find that heterogeneity in investor optimism regarding firm specific attributes plays a very important role in influencing the managerial propensity to manipulate financial statements when firm level investor optimism is moderate the incidence of accounting misconduct increases but it decreases when investors are highly optimistic further market reaction to the announcement of financial restatements is more negative when investors held more optimistic firm specific beliefs at the time of initial misstatement these findings are robust to alternative firm specific optimism measures linked to analysts general investors and unsophisticated individual investors controls for market wide consumer sentiment unexplained by macroeconomic factors economy wide and industry level optimism potential selection bias and reverse causality our analysis highlights the importance of firm level investor optimism in predicting preventing and detecting accounting misconduct

when does the bond price reaction to earnings announcements predict future stock returns abstract in this paper i show that the bond price reaction to earnings announcements has predictive power for post announcement stock returns and that this predictive ability is driven by the bonds of non investment grade firms i find that bonds predictive ability is more pronounced in firms that have a lower level of institutional shareholder ownership and whose bonds are more liquid this paper enhances our understanding of the relation between the stock and bond markets and complements the literature which documents whether and under what circumstances various accounting based measures and financial statement components predict post announcement stock returns

the detection of earnings manipulation presented are a profile of a sample of earnings manipulators their distinguishing characteristics and a suggested model for detecting manipulation the model s variables are designed to capture either the financial statement distortions that can result from manipulation or preconditions that might prompt companies to engage in such activity the results suggest a systematic relationship between the probability of manipulation and some financial statement variables this evidence is consistent with the usefulness of accounting data in detecting manipulation and assessing the reliability of reported earnings the model identifies approximately half of the companies involved in earnings manipulation prior to public discovery because companies that are discovered manipulating earnings see their stocks plummet in value the model can be a useful screening device for investment professionals the screening results however require determination of whether the distortions in the financial statement numbers r

connecting supply short sellers and stock returns research challenges abstract one key challenge for the short selling literature is to identify the incremental contribution of various measures of short sale constraints although variables such as loan fee loan supply and short interest are determined simultaneously in the market for borrowing stock new incremental information may be found in each variable examined papers such as beneish et al 2015 attempt to disentangle the effect of one particular variable and attempt to shed light on the parallel challenge faced by investors in determining which variables will make the most impact on returns as well as trading costs we discuss a number of practical approaches to this challenge and we also consider a potentially new take that considers accounting data driven anomalies as one of the possible exogenously determined variables in the equilibrium of the equity loan market

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

does multinational activity displace trade kimberly a clausing using two panel data sets on the operations of u s multinational firms abroad and the operations of foreign multinational firms in the united states this article examines the empirical relationship between international trade and multinational activity the evidence supports the conclusion that multinational activity and trade are complementary activities particularly multinational activity and intrafirm trade this empirical result is consistent with the theoretical reasons one might expect a complementary relationship between the two activities and is also robust to different approaches and specifications jel f23 i introduction in recent years foreign direct investment fdi has become an increasingly important part of world integration flows of fdi have been increasing faster than trade flows which in turn have been growing faster than income 1 in addition multinational firms play a very large role in world trade for the united states 83 of exports in 1994 were either intrafirm shipments between multinational parents and their affiliates 36 or arms length trade between multinationals and unaffiliated buyers 47 2 although it is clear that multinational firms have an important role in world trade it is certainly less clear what the relationship is between production abroad and trade for multinational firms the popular press often assumes that multinational investment by u s firms replaces u s exports and in fact some economists have assumed that the rapid growth of foreign direct investment in recent years implies that multinational activity will eventually displace trade 3 this article examines the empirical relationship between multinational activity and trade and finds that there is evidence that multinational activity complements rather than displaces trade the article utilizes two panel data sets constructed from aggregate survey data published by the bureau of economic analysis bea the data vary by country and over time the first data set is used to study the relationship between u s exports and the activities of u s affiliates abroad this data set is constructed from data describing the operations of u s multinational firms in 29 host countries between 1977 and 1994 together with data on u s exports both intrafirm and arms length the second data set is used to study the relationship between u s imports and the activities of foreign affiliates operating in the united states it uses data describing operations in the united states by foreign affiliates of firms based in 29 home countries between 1977 and 1994 together with data on u s imports both intrafi rm and arms length most previous studies of this question have examined the relationship between multinational activity and trade for a cross section of countries by using data that also vary over time it is possible to explore more thoroughly the relationship between multinational activity and trade and how this relationship evolves it is also possible to control for fixed country effects that may be influencing the observed relationships previous studies have tended to focus on the relationship between outward multinational activity and exports this article looks as well at the relationship between inward multinational activity and imports finally this article considers the question of complementarity between multinational activity and trade in two ways in addition to looking at the relationship between the quantities of multinational activity and trade the article also studies complementarity much as one might think of complementarity in a demand study by considering cross price effects in particular the article includes an analysis of the relationship between price variables that measure the cost of multinational activity abroad and exports since the price of operating abroad is negatively related to exports this is further evidence of a complementary relationship between trade and multinational activity

the red queen effect competitive actions and firm performance we investigate the red queen effect as a contest of competitive moves or actions among rivalrous firms the results from a multi industry study of over 4 700 actions confirms the existence of red q

tariffs licensing and market structure this paper challenges the conventional wisdom that exclusive owners of an advanced technology are always better off when producing as a monopolist than when competing against another firm competition against a less efficient firm weakens the power that a host country can exert on the incumbent in the form of its tariff policy we show that this gives a motive for a monopolist to license its technology to another foreign firm a host country gains more from increased competition if it can induce the foreign incumbent to transfer technology to the host country firm we show that the host country can do so by tariff commitment we also discuss the implications of bargaining under licensing and bertrand competition in the product market hence this paper qualifies and extends the recent work of kabiraj and marjit protecting consumers through protection the role of tariff induced technology transfer european economic review 47 113 124

the ability of earnings to predict future operating cash flows has been increasing not decreasing we investigate the relationship between earnings and one year ahead operating cash flows from 1973 to 2000 although the extant research indicates a weakening relationship between contemporaneous earnings and stock prices over time we find that the relationship between current earnings and future operating cash flows has increased over time this result holds for numerous divisions of our sample out of sample predictions of operating cash flows generally show increasing forecast accuracy over time increasing accounting conservatism appears to play a role in this phenomenon

demand and supply in new markets diffusion with bilateral learning i explore the endogenous joint evolution of demand and supply in new markets firms and consumers learn in a bayesian fashion by observing the behavior of other firms and consumers respectively as a result endogenous information diffusion takes place on both sides of the market in equilibrium entry occurs in waves and its level depends on two distinct informational effects the model identifies an externality that provides a natural explanation for s shaped diffusion paths entry reveals information to the consumers about the value of the new product and thus early waves of entry affect the expected profitability of subsequent entry

endogenous leadership in a new market in this article i analyze strategic investment under uncertainty in a new market where firms face a tradeoff between commitment and flexibility the model predicts asymmetric equilibria under fairly general conditions even though firms are ex ante identical and have symmetric opportunities to enter the market in equilibrium one firm commits to early investment and the other firm follows a wait and see strategy in the ex post outcome firms end up with asymmetric sizes if the market profitability turns out close to or lower than expected firms end up in symmetric position if the market turns out highly profitable if uncertainty is small the model yields approximately stackelberg outcomes