bluuebunny/crossref_metadata_2025 huggingface dataset:
Earnings Announcements and Information Asymmetry: An Intra‐Day Analysis*
Authors: Libby Theresa , Mathieu Robert , Robb Sean W. G.
Published: November 2003

This paper examines the effect of earnings announcements on information asymmetry as perceived by specialists. We use changes in quoted bid‐ask spreads and depths (relative to the average value in the non‐announcement period) as proxies for changes in information asymmetry in the market. To our knowledge, we are the first to employ a model that captures the simultaneous nature of the specialists' choice of spreads and depths in reaction to earnings news. We provide evidence that spreads are wider and depths are smaller before the release of earnings announcements. We also find that changes to depths are greater for announcements of quarterly earnings than for announcements of annual earnings and changes to spreads persist longer into the post‐announcement period when announcements are made outside trading hours. These changes to spreads and depths persist when earnings announcements are made after trading hours.
Outsourcing and Audit Risk for Internal Audit Services*
Authors: CAPLAN DENNIS H. , KIRSCHENHEITER MICHAEL
Published: November 2003

Some companies now outsource their internal audit function to public accountants. Internal auditors and accounting firms disagree about the merits of outsourcing. Each type of auditor claims to provide more cost‐effective services and appears to claim superior expertise. This paper uses agency theory to examine outsourcing and reconciles the outsourcing debate without resorting to differential auditor expertise. Under the assumptions that public accountants' “deep pockets” provide incentives to outsource and their higher opportunity cost provides a disincentive, we characterize the optimal employment contract with each auditor. We find that public accountants provide higher levels of testing, but possibly for a higher expected fee. This result supports both the internal auditor's claim as the lower cost provider, and the public accountant's claim of higher quality. We also find that incentives to outsource generally increase in various measures of risk, including the risk that a control weakness exists and the size of the loss that can result from an undetected control weakness.
Independence in Appearance and in Fact: An Experimental Investigation*
Authors: Dopuch Nicholas , King Ronald R. , Schwartz Rachel
Published: November 2003

In this study, we use experimental markets to assess the effect of the Security and Exchange Commission's (SEC's) new independence rule on investors' perceptions of independence, investors' payoff distributions, and market prices. The new rule requires client firms to disclose in their annual proxy statements the amount of nonaudit fees paid to their auditors. The new disclosure is intended to inform investors of auditors' incentives to compromise their independence. Our experimental design is a 2 3 between‐subjects design, where we control the presence (unbiased reports) or absence of auditor independence in fact (biased reports). While independence in fact was not immediately observable to investors, we controlled for independence in appearance by varying the public disclosure of the extent of nonaudit services provided by the auditor to the client. In one market setting, investors were not given any information about whether the auditor provided such nonaudit services; in a second setting, investors were explicitly informed that the auditor did not provide any non‐audit services; and in a third setting, investors were told that the auditor provided nonaudit services that could be perceived to have an adverse effect on independence in fact.

We found that disclosures of nonaudit services reduced the accuracy of investors' beliefs of auditors' independence in fact when independence in appearance was inconsistent with independence in fact. This then caused prices of assets to deviate more from their economic predictions (lower market efficiency) in the inconsistent settings relative to the no‐disclosure and consistent settings. Thus, disclosures of fees for nonaudit services could reduce the efficiency of capital markets if such disclosures result in investors forming inaccurate beliefs of auditor independence in fact ‐ that is, auditors appear independent but they are not independent in fact, or vice versa. The latter is the maintained position of the American Institute of Certified Public Accountants (AICPA), which argued against the new rule. Further research is needed to assess the degree of correspondence between independence in fact and independence in appearance.
Corporate Governance: Factors Influencing Voluntary Disclosure by Publicly Traded Canadian Firms*
Authors: BUJAKI MERRIDEE , McCONOMY BRUCE J.
Published: November 2003

We report on the comprehensiveness of voluntary corporate governance disclosures in the annual reports and management information circulars of Toronto Stock Exchange (TSE) firms. We focus on disclosure of the corporate governance practices implemented by our sample of TSE 300 firms vis‐à‐vis the 14 guidelines set out in the TSE's report on corporate governance Where Were the Directors? Our analysis indicates that only a very few firms disclose that they have fully implemented the TSE guidelines, and that the extent of disclosure of corporate governance practices implemented varies widely among the firms. We then test factors associated with the comprehensiveness of such disclosures and the choice of disclosure medium using simultaneous equations multivariate analysis. We also assess the influence of publicized corporate governance failures on disclosure. Overall, our results suggest that the choices of disclosure medium and the extent of disclosure are made concurrently, and are influenced by the strategic considerations of management.
Improving Financial Reports by Revealing the Accuracy of Prior Estimates*
Authors: Hirst D. Eric , Jackson Kevin E. , Koonce Lisa
Published: November 2003

Several researchers (e.g., Lundholm 1999; Ryan 1997; Petroni, Ryan, and Wahlen 2000) have proposed a reporting mechanism to enhance the reliability of estimates and other forward‐looking information in financial reports. Their proposals require companies to report reconciliations of prior‐year estimates to actual realizations as supplemental information in their financial reports. Such disclosures would enable investors to distinguish between accurate and opportunistic reporting behavior, and, arguably, should create incentives for companies to estimate accurately in the first place.

Our study provides evidence on these proposals. Specifically, we conduct two experiments within the context of an important intangible asset requiring estimation ‐ software development costs. Our results show that the proposed reporting mechanism is effective in communicating information about the accuracy of financial estimates. We find, however, that not all disclosures are equally useful. The most effective disclosures explicitly describe the implications of misestimation (if any) on both the balance sheet and on earnings, thereby reducing the computational complexity associated with less explicit disclosures. Furthermore, our results show that when the disclosures explicitly describe the implications of misestimation, investors reward accurate estimators but do not explicitly punish those who are inaccurate. We conclude that information about previous estimate accuracy is useful to investors and that regulators should consider the type of disclosure, because not all disclosures may be equally effective in creating management incentives for accurate estimation. Moreover, the competitive advantage conferred on firms that provide accurate estimates arguably should create incentives for all companies to estimate accurately in the future.
Changing Graph Use in Corporate Annual Reports: A Time‐Series Analysis
Authors: BEATTIE VIVIEN A. , JONES MICHAEL J.
Published: November 2003

Graphs in corporate annual reports form part of a powerfully designed annual report package that offers considerable potential for “impression management.” The primary purpose of this paper is to determine whether graph use depends on corporate performance. Time‐series analysis, not previously used in the financial graphs literature, allows discretionary changes in graph use by companies to be identified and related to changes in individual companies' corporate performance over time. Based on the prior financial graphs and accounting choice literature, we develop two hypotheses that relate changes in graph use to changes in corporate performance. These hypotheses focus on the aggregate and individual company levels. We base our analysis on the corporate annual reports of 137 top UK companies that were in continued existence during the five‐year period from 1988 to 1992. At both the aggregate and individual company levels, we find the decision to use key financial variable (KFV) graphs, the primary graphical choice, to be associated positively with corporate performance measures. This finding is consistent with the manipulation hypothesis ‐ that is, that financial graphs in corporate annual reports are used to “manage” favorably the reader's impression of company performance, and hence that there is a reporting bias.
The Investment Opportunity Set and Acquired Goodwill*
Authors: WONG JILNAUGHT , WONG NORMAN
Published: November 2003

This paper examines how managers in New Zealand allocate the cost of firms' investments in subsidiaries between net tangible assets and acquired goodwill. We find a negative relation between acquired goodwill and leverage. This could be interpreted as the result of managers of highly leveraged acquiring firms opportunistically allocating a lower portion of the acquisition price to acquired goodwill. However, this analysis, like much of the research on accounting choice, suffers from an omitted variables problem. We present evidence that the observed negative relation between acquired goodwill and leverage may stem from each variable's relation to the investment opportunity set. Further, we find no evidence that acquired goodwill is related to the existence of debt covenants. Together, these results suggest an endogenous relation between the firm's asset structure, its financing policy, and the allocation of acquisition price to acquired goodwill.
Commentary: Research Productivity Measurement and the Field of Academic Accounting*
Authors: EVERETT JEFFERY , NEU DEAN , GREEN DUNCAN L.
Published: November 2003

The previous issue of Canadian Accounting Perspectives contained three studies that examined various aspects of performance measurement in universities. In this issue, we step back from the acts of performance measurement and disclosure to consider the context within which the demand for increased performance measurement has arisen. The current commentary considers the use of research productivity measures in the field of academic accounting and why the use of these measures is drawing such an equivocal response from academics in the field. Starting from three theoretical perspectives, we consider the use, response, and consequences associated with research productivity measurement.
Disclosure and Recognition Requirements: Corporate Investment Decisions with Externalities*
Authors: SRIDHAR SRI S. , MAGEE ROBERT P.
Published: November 2003

This paper examines the effects of disclosure and recognition requirements on investment decisions when shareholders have limited liability. Firms' investment projects have either high initial pollution prevention costs or high subsequent clean‐up costs, and their liability for clean‐up costs may be either individual or joint and several. Even with individual liability for clean‐up costs, shareholders' limited liability creates an incentive to select the latter project type and to impose costs on the rest of the economy. This tendency is exacerbated when clean‐up liability is joint and several. We show that a disclosure requirement cannot have an unambiguous effect on the selection of the “cleaner” project. However, an accrual requirement, together with an accounting‐based dividend restriction, is shown to promote choice of the project that imposes lower expected costs on the rest of the economy. Moreover, we find that it is possible for a recognition requirement to have a greater impact in a joint‐and‐several liability regime than in an individual liability regime.
On Comparing Cash Flow and Accrual Accounting Models for Use in Equity Valuation: A Response to Lundholm and O'Keefe (CAR, Summer 2001)*
Authors: Penman Stephen H.
Published: November 2003

A claim is commonly made that cash flow and accrual accounting methods for valuing equities must always yield equivalent valuations. A recent paper by Lundholm and O'Keefe 2001, for example, claims that, because of this equivalence, there is nothing to be learned from empirical comparison of valuation models. So they dismiss recent research that has shown that accrual accounting residual income models and earnings capitalization models perform, over a range of conditions, better than cash flow or dividend discount models. This paper demonstrates, with examples, that the claim is misguided. Practice inevitably involves forecasting over finite, truncated horizons, and the accounting specified in a model — cash versus accrual accounting in particular — is pertinent to valuation with finite‐horizon forecasting. Indeed, the issue of choosing a valuation model is an issue of specifying pro forma accounting, and so, for finite‐horizon forecasts, one cannot be indifferent to the accounting.
Institutional Ownership and the Extent to which Stock Prices Reflect Future Earnings*
Authors: Jiambalvo James , Rajgopal Shivaram , Venkatachalam Mohan
Published: November 2003

Articles in the financial press suggest that institutional investors are overly focused on current profitability, which suggests that as institutional ownership increases, stock prices reflect less current period information that is predictive of future period earnings. On the other hand, institutional investors are often characterized in academic research as sophisticated investors and sophisticated investors should be better able to use current‐period information to predict future earnings compared with other owners. According to this characterization, as institutional ownership increases, stock prices should reflect more current‐period information that is predictive of future period earnings. Consistent with this latter view, we find that the extent to which stock prices lead earnings is positively related to the percentage of institutional ownership. This result holds after controlling for various factors that affect the relation between price and earnings. It also holds when we control for endogenous portfolio choices of institutions (e.g., institutional investors may be attracted to firms in richer information environments where stock prices tend to lead earnings). Further, a regression of stock returns on order backlog, conditional on the percentage of institutional ownership, indicates that institutional owners place more weight on order backlog compared with other owners. This result is consistent with institutional owners using non‐earnings information to predict future earnings. It also explains, in part, why prices lead earnings to a greater extent when there is a higher concentration of institutional owners.
The Effect of Accountability and Time Budgets on Auditors' Testing Strategies*
Authors: ASARE STEPHEN K. , TROMPETER GREGORY M. , WRIGHT ARNOLD M.
Published: November 2003

This study investigates the joint effects of accountability and time budgets on auditors' testing strategies. The task studied, substantive analytical procedures, requires auditors to identify and test hypotheses when investigating the cause of unexpected fluctuations. Thus, auditors must determine the number of tests to conduct (i.e., extent), the number of potential hypotheses to directly test (i.e., breadth), the number of tests for each hypothesis (i.e., depth) and the number of potential error or non‐error hypotheses to test (i.e., focus). Testing strategies, which we define as choices made with respect to extent, focus, depth, and breadth of testing, have significant practical and theoretical implications. For example, reducing the breadth of testing may result in failure to test the correct hypothesis, potentially impairing audit effectiveness.

In this study, auditors inherited five potential causes of an unexpected increase in the gross margin of a client. As in practice, their task was to conduct tests to investigate and identify the actual cause of the fluctuation. Auditors were randomly assigned to one of four conditions created by fully crossing accountability and time budgets. The results indicate that accountability leads to an increase in the extent and breadth of testing but does not affect the depth of testing. Further, accountability leads to an increase in the testing of errors but results in a decrease in the testing of non‐errors. The focus on breadth and error testing is consistent with the notion that accountability, to a superior with unspecified preferences, promotes more cautious behavior. The results also show that a time budget decreases the extent and depth of testing but does not affect the breadth of testing. There was no evidence that the two factors interactively affected testing strategies or performance. Finally, increased breadth of testing was the mechanism that led to better performance as measured by the identification of the actual cause of the unexpected fluctuation.
Experimental Evidence of the Impact of Increasing Auditors' Legal Liability on Firms' New Investments*
Authors: Yu Hung‐Chao
Published: November 2003

This laboratory market study examines the potential effect of increasing auditors' liability on firms' new investments. The experimental hypotheses are derived from Shibano's 2000 model, which predicts that an increase in auditors' liability will decrease the frequency of audit failures and may decrease firms' new investments if the liability level is “excessive”. Results from three experimental market settings (with low, medium, and high liability levels) suggest two major conclusions. First, firms' new investments increase significantly when auditors' liability level increases from low to medium, and decrease significantly as the liability level increases from medium to high. This result provides support for the argument that adequate auditor liability is necessary to motivate firms to invest in new projects. Excessive liability, however, may discourage firms from making new investments. Second, the frequency of audit failure decreases insignificantly when auditors' liability increases. These two results have an important policy implication: the benefit of imposing high liability on the auditor (i.e., an insignificant decrease in audit failure) may be more than offset by its cost (i.e., a significant decrease in new investments).
An Emerging Market's Reaction to Initial Modified Audit Opinions: Evidence from the Shanghai Stock Exchange*
Authors: CHEN CHARLES J. P. , SU XIJIA , ZHAO RONALD
Published: November 2003

This study investigates the valuation effect of modified audit opinions (MAOs) on the emerging Chinese stock market. Here, the term MAO refers to both qualified opinions and unqualified opinions with explanatory notes. The latter can be considered an alternative form of a qualified opinion in China. The institutional setting in China enables us to find compelling evidence in support of the monitoring role of independent auditing as an institution. First, we find a significantly negative association between MAOs and cumulative abnormal returns after controlling for effects of other concurrent announcements. Further, results from a by‐year analysis suggest that investors did not reach negative consensus about MAOs' valuation effect until the second year, exhibiting the learning process of a market without prior exposure to MAOs. Second, we do not observe significant differences between market reaction to non‐GAAP‐ and GAAP‐violation‐related MAOs. Third, no significant difference is found between market reaction to qualified opinions and market reaction to unqualified opinions with explanatory notes.
Audit Review: Managers' Interpersonal Expectations and Conduct of the Review*
Authors: Gibbins Michael , Trotman Ken T.
Published: November 2003

This paper presents an interpersonal model of audit file review centered on the audit manager. A manager's conduct of the review is affected by four components: the manager's expectations about the client, expectations about the preparer, expectations about the partner, and the manager's own approach and circumstances. The paper then presents a comprehensive field‐based analysis of how a working paper review is conducted. It supplements the mostly experimental research on working paper review by reporting the results of a retrospective field questionnaire that asked audit managers to report on their behavior and their relationships with preparers and partners on actual audit engagements. The extent of review was sensitive to specific features of the client and the file (including risk factors), to features of the preparer, and particularly to the style of the reviewer, which was quite stable across cases. Although the evidence of managers' awareness of preparers' “stylizing” the file to suit the manager was weak, the evidence of managers' stylizing for the partners was pervasive, affecting both work done and documentation. Managers believed that good reviews emphasized key issues and risks rather than detail. Other new descriptive evidence on the nature of the review process is provided, including the purpose of the review process, how frequently surprises are found in the review process, and the qualities of good reviewers compared with poor reviewers. The implications of our model and our results for future research are outlined.
Accounting Policy Disclosures and Analysts' Forecasts
Authors: Hope Ole‐Kristian
Published: November 2003

Using an international sample, I investigate whether the extent of firms' disclosure of their accounting policies in the annual report is associated with properties of analysts' earnings forecasts. Controlling for firm‐ and country‐level variables, I find that the level of accounting policy disclosure is significantly negatively related to forecast dispersion and forecast error. In particular, I find that accounting policy disclosures are incrementally useful to analysts over and above all other annual report disclosures. These findings suggest that accounting policy disclosures reduce uncertainty about forecasted earnings. I find univariate but not multivariate support for the hypothesis that accounting policy disclosures are especially helpful to analysts in environments where firms can choose among a larger set of accounting methods.
The Difficult Client‐Acceptance Decision in Canadian Audit Firms: A Field Investigation*
Authors: Gendron Yves
Published: November 2003

Auditing is often depicted in scientific and professional literature as being subject to conflicting forces, such as mechanization versus flexibility, and professionalism versus commercialism. This paper examines how auditors actually make the client‐acceptance decision in the midst of these forces. The investigation was conducted via a field study at three Big 6 firms located in Canada.

The results show that in all firms the client‐acceptance decision process in action is largely flexible, being characterized by a high degree of informal communication and the adaptation of the client‐acceptance written policies and decision aids to circumstances. Furthermore, while commercialism in one firm (A) has a significant influence on the decision process, in the two other firms (B and C) the decision process is mostly consistent with professionalism. This result conflicts with the concerns that North American regulators have recently expressed about auditors' professionalism.
The Effects of Exposure to Practice Risk on Tax Professionals' Judgements and Recommendations*
Authors: Kadous Kathryn , Magro Anne M.
Published: November 2003

Tax professionals are responsible for objectively evaluating tax authorities and evidence relevant to their application and for serving as client advocates. We predict that practice risk — that is, exposure to monetary and nonmonetary costs of making inappropriate recommendations — will affect tax professionals' ability to meet these responsibilities by influencing the manner in which they process information about a tax situation as well as their resulting recommendations for clients. We conduct an experiment in which we manipulate practice risk through client characteristics. We also manipulate provision and nature of outcome information. We find that tax professionals process information differently for clients of different risk levels. Specifically, tax professionals weight negative outcome information more heavily when forming likelihood assessments underlying recommendations for a high‐risk client, relative to a low‐risk client. Further, risk directly affects recommendations in that tax professionals more strongly recommend an aggressive position for a low‐risk client. Differential processing of information for clients with identical transactions but different risk levels may protect the tax professional from the higher expected costs of making inappropriate recommendations to high‐risk clients. However, it indicates that tax professionals do not evaluate evidence objectively for all types of clients.
Commentary: An International Comparison and Evaluation of Financial Accounting Concepts Statements*
Authors: SCOTT WILLIAM R.
Published: November 2003

Standard setters in several jurisdictions have adopted statements of financial accounting concepts. Given that concepts statements influence accounting standards, similarities and differences of concepts across jurisdictions will affect the ability of the International Accounting Standards Board (IASB) and other accounting bodies to secure standards convergence.

This paper analyzes the concepts statements of Australia, Canada, New Zealand, the United Kingdom, the United States, and the IASB. Although these statements seem similar at a “broad brush” level, a closer look reveals substantial differences. The main purpose of this paper is to evaluate these differences and the extent to which they may impair standards convergence. The paper also proposes broadening the scope of the concepts structure to include normative agency‐theoretic considerations, which would bring the legitimate interests of management into the concepts structure, with the potential to move some of the trade‐offs necessary to secure managers' acceptance of accounting standards into the structure itself.
Private Predecision Information, Performance Measure Congruity, and the Value of Delegation*
Authors: BUSHMAN ROBERT M. , INDJEJIKIAN RAFFI J. , PENNO MARK C.
Published: November 2003

We use a linear contracting framework to study how the relation between performance measures used in an agent's incentive contract and the agent's private predecision information affects the value of delegating decision rights to the agent. The analysis relies on the idea that available performance measures are often imperfect representations of the economic consequences of managerial actions and decisions, and this, along with gaming possibilities provided to the agent by access to private predecision information, may overwhelm any benefits associated with delegation. Our analytical framework allows us to derive intuitive conditions under which delegation does and does not have value, and to provide new insights into the linkage between imperfections in performance measurement and agency costs.
Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income Model*
Authors: Lundholm Russell , O'Keefe Terry
Published: November 2003

This paper examines why practitioners and researchers get different estimates of equity value when they use a discounted cash flow (CF) model versus a residual income (RI) model. Both models are derived from the same underlying assumption — that price is the present value of expected future net dividends discounted at the cost of equity capital — but in practice and in research they frequently yield different estimates. We argue that the research literature devoted to comparing the accuracy of these two models is misguided; properly implemented, both models yield identical valuations for all firms in all years. We identify how prior research has applied inconsistent assumptions to the two models and show how these seemingly small errors cause surprisingly large differences in the value estimates.
Analyst Following and Market Liquidity*
Authors: Roulstone Darren T.
Published: November 2003

This paper investigates the relation between analyst characteristics (number of analysts following a firm and their forecast dispersion) and market liquidity characteristics (bid‐ask spreads and depths and the adverse‐selection component of the spread). Prior research has found contradictory results on the relation between analyst following and market liquidity and has offered differing theories on how analysts affect liquidity. While prior research has posited analysts as proxies for privately informed trade or as signals of information asymmetry, I hypothesize that analysts provide public information, implying that analyst following (forecast dispersion) should have a positive (negative) association with liquidity. Cross‐sectional simultaneous estimations provide support for this hypothesis. The results are both statistically significant and economically important. Granger causality tests indicate that analyst characteristics lead market liquidity characteristics. These results clarify the role of analysts in providing information to financial markets and highlight benefits of increased analyst following.
The Relative and Incremental Explanatory Power of Earnings and Alternative (to Earnings) Performance Measures for Returns*
Authors: Francis Jennifer , Schipper Katherine , Vincent Linda
Published: November 2003

We analyze the ability of earnings and non‐earnings performance metrics to explain the variability in annual stock returns for industries where we identify, ex ante, an allegedly preferred (for valuation purposes) summary performance metric. We identify three industries where earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash from operations (CFO) are preferred, and three industries where specific non‐GAAP performance metrics are preferred. As a benchmark, we also examine the ability of EBITDA and CFO to explain returns for seven industries for which earnings is the preferred metric. Results for the benchmark earnings industries show that earnings dominates EBITDA and CFO in explaining returns. All other results are inconsistent with the view that perceptions of preferred metrics are reflected in actual aggregate investment behaviors.
The Directional Effects of Discussion on Auditors' Moral Reasoning*
Authors: Thorne Linda , Hartwick Jon
Published: November 2003

Auditors' professional judgements are typically made following a discussion of contentious issues with other auditors (Gibbins and Mason 1988). These discussions may be with others at various levels in the hierarchy of the audit firm, with informal discussion with peers often taking place prior to formal discussions with audit supervisors (see, e.g., Solomon 1987). This study uses an experiment, involving 286 public accountants, to consider how discussion with peers may influence auditors' subsequent resolution of realistic audit‐specific moral dilemmas. Auditors were asked to prescriptively discuss how an accountant ideally should resolve a moral dilemma, or to deliberatively discuss how an accountant actually would resolve a moral dilemma. The results showed that auditors have higher moral reasoning scores after prescriptive discussion with peers and lower moral reasoning scores after deliberative discussion with peers. Thus, the study findings point to the significance of discussion of contentious dilemmas with peers and the importance of type of discussion for predicting and explaining auditors' moral reasoning. More specifically, the results indicate that discussion with peers may provide information and/or signal what is important and acceptable to the resolution of a moral dilemma, which facilitates transformation of an auditor's moral reasoning. This suggests the importance of informal mechanisms, such as peer discussion, as part of the social control system in audit firms.
The Effect of Reward Structures on the Performance of Cross-Functional Product Development Teams
Authors: Sarin Shikhar , Mahajan Vijay
Published: November 2003

This study examines the effect of reward structures on the performance of cross-functional product development teams. Results suggest that when it is easy to evaluate individual performances, position-based differential rewards lead to greater satisfaction. For long and complex projects, process-based rewards have a negative effect and outcome-based rewards have a positive effect on performance. For risky projects and highly competitive or relatively stable industries, a nonlinear and monotonically decreasing relationship exists between outcome-based rewards and product quality.
Choice of Supplier in Embedded Markets: Relationship and Marketing Program Effects
Authors: Wathne Kenneth H. , Biong Harald , Heide Jan B.
Published: November 2003

Recent research has documented how exchanges between buyers and sellers are frequently embedded in social relationships. An unresolved question, however, is the extent to which such relationships protect incumbent suppliers from new competitors and their marketing programs. The authors develop a conceptual framework of how relationship and marketing variables influence choice of supplier and test the framework empirically in the context of business-to-business services. The results show that interpersonal relationships between buyers and suppliers serve as a switching barrier but are considerably less important than both firm-level switching costs and marketing variables. Moreover, unlike switching costs, interpersonal relationships do not play the frequently mentioned role of a buffer against price and product competition. Finally, the authors show that buyers and suppliers hold systematically different views of the determinants of switching.
An Investigation into the Antecedents of Organizational Participation in Business-to-Business Electronic Markets
Authors: Grewal Rajdeep , Comer James M. , Mehta Raj
Published: November 2003

Business-to-business electronic markets have a profound influence on the manner in which organizational buyers and sellers interact. As a result, it is important to develop an understanding of the behaviors of firms that participate in these markets. The authors develop a typology for the nature of organizational participation to explain the behaviors of user firms in business-to-business electronic markets. The proposed model hypothesizes that the nature of participation depends on organizational motivation and ability. The authors conceptualize motivational factors in terms of efficiency and legitimacy motivations and theorize that ability results from the influence of organizational learning and information technology capabilities. They test the model using organizational-level survey data from jewelry traders that conduct business in an electronic market. The results indicate that both motivation and ability are important in determining the nature of participation; however, the level of influence of motivation and ability varies with the nature of participation.
Reducing Assortment: An Attribute-Based Approach
Authors: Boatwright Peter , Nunes Joseph C.
Published: November 2003

Most supermarket categories are cluttered with items, or stockkeeping units (SKUs), that differ very little at the attribute level. Previous research has found that reductions (up to 54%) in the number of low-selling SKUs need not affect perceptions of variety and therefore sales, significantly. In this research, the authors analyze data from a natural experiment conducted by an online grocer, in which 94% of the categories experienced dramatic cuts in the number of SKUs offered, particularly low-selling SKUs. Sales were indeed affected dramatically, increasing an average of 11% across the 42 categories examined. Sales rose in more than two-thirds of these categories, nearly half of which experienced an increase of 10% or more; 75% of households increased their overall expenditures after the cut in SKUs. In turn, the authors examine how different types of SKU reductions—defined by how the cuts affect the available attributes or features of a category (e.g., the number of brands)—affected purchase behavior differently. The results indicate that consumers experienced divergent reactions to the reduction in sizes, but they uniformly welcomed the elimination of clutter brought on by the reduction in redundant items. In addition, of households that were loyal to a single brand, size, or brand–size combination that was eliminated, nearly half continued purchasing within the category. Also, contrary to previous research on SKU reductions, the authors find that category sales depend on the total number of SKUs offered. The authors extend the previous research by showing that (1) category sales depend on the availability of key product and category attributes and (2) two particularly important attributes to consumers in an assortment are brand and flavor.
Communicating the Consequences of Early Detection: The Role of Evidence and Framing
Authors: Cox Dena , Cox Anthony D.
Published: November 2003

Despite the enormous benefits of early-detection products, consumers are reluctant to use them. The authors explore this reluctance, testing alternative approaches to communicating the consequences of detection behaviors. The results suggest that anecdotal messages are more involving than statistical messages and that positive anecdotes (about gains from screening) are less persuasive than negative anecdotes (about the losses from failing to get screened); positive anecdotes appear to cause a “boomerang” effect. The authors discuss implications for promoting consumer risk-reduction behaviors.
Dependence, Trust, and Relational Behavior on the Part of Foreign Subsidiary Marketing Operations: Implications for Managing Global Marketing Operations
Authors: Hewett Kelly , Bearden William O.
Published: November 2003

The authors explore how a global firm's ability to foster successful relationships between its foreign subsidiaries’ and headquarters’ marketing operations can enhance the performance of products across markets. The results show that cooperative behaviors are positively associated with product performance in the subsidiaries’ markets. National culture in the foreign markets is also found to moderate the effect of trust on relational behaviors. In addition, the subsidiaries’ acquiescence becomes increasingly important as the firm attempts to standardize marketing programs.
The Severity of Contract Enforcement in Interfirm Channel Relationships
Authors: Antia Kersi D. , Frazier Gary L.
Published: November 2003

Little is known about how channel members react to violations of explicit contracts. The authors develop and test an integrative conceptual framework that focuses on the severity of the enforcement response in channel relationships. The empirical results provide evidence of discerning enforcement practices by channel members, reflecting channel system, network, and dyadic concerns.
Consumer Trust, Value, and Loyalty in Relational Exchanges
Authors: Sirdeshmukh Deepak , Singh Jagdip , Sabol Barry
Published: November 2003

The authors develop a framework for understanding the behaviors and practices of service providers that build or deplete consumer trust and the mechanisms that convert consumer trust into value and loyalty in relational exchanges. The proposed framework (1) uses a multidimensional conceptualization for the trustworthiness construct; (2) incorporates two distinct facets of consumer trust, namely, frontline employees and management policies and practices; and (3) specifies value as a key mediator of the trust–loyalty relationship. The authors test the proposed model using data from two service contexts—retail clothing (N = 264) and nonbusiness airline travel (N = 113). The results support a tripartite view of trustworthiness evaluations along operational competence, operational benevolence, and problem-solving orientation dimensions. Moreover, the authors find evidence of contingent asymmetric relationships between trustworthiness dimensions and consumer trust. For frontline employees, benevolent behaviors demonstrate a dominant “negativity” effect (i.e., a unit negative performance has a stronger effect than a unit positive performance), whereas problem-solving orientation has a dominant “positivity” effect (i.e., a unit positive performance has a stronger effect than a unit negative performance). Value completely mediates the effect of frontline employee trust on loyalty in the retailing context and partially mediates the effect of management policies and practices trust on loyalty in the airlines context. The role of frontline employees is more critical in the retailing context, whereas management practices and policies play the dominant role in the airlines context. Overall, the proposed framework successfully models trust and loyalty mechanisms across the two industries examined in the study, while remaining sensitive to essential contextual differences.
Transfer of training emotionally biased interpretations
Authors: Hertel Paula T. , Mathews Andrew , Peterson Samanthe , Kintner Katherine
Published: November 2003

Non‐anxious college students first performed a semantic‐judgement task that was designed to train either threat‐related or threat‐unrelated interpretations of threat‐ambiguous homographs (e.g. mug). Next they performed an ostensibly separate transfer task of constructing personal mental images for single words, in a series that included new, threat‐ambiguous homographs. In two experiments, the number of threat‐related interpretations in the transfer task significantly increased following threat‐related experience during the training phase, compared to other training conditions. We conclude that interpretive biases typically shown by anxious people can be established in non‐anxious students in ways that generalize to novel tasks and materials. Copyright © 2003 John Wiley & Sons, Ltd.
How schemas affect eyewitness memory over repeated retrieval attempts
Authors: Rae Tuckey Michelle , Brewer Neil
Published: November 2003

After observing a crime eyewitnesses are typically interviewed many times over an extended period of time. We examined how schema for a crime influenced the types of information eyewitnesses remembered and forgot across multiple interviews. People's schema for a bank robbery were identified, and recall of schema‐consistent, schema‐inconsistent and schema‐irrelevant information was extracted from eyewitness interviews conducted in two experiments which manipulated retention interval (3 days–12 weeks) and number of interviews (2–4). Consistent with fuzzy‐trace and associative network theories, schemas preserved accuracy for information central to the crime (schema‐consistent and inconsistent) at the expense of schema‐irrelevant information. Schema‐consistent intrusions did not increase across interviews. Copyright © 2003 John Wiley & Sons, Ltd.
Increased iron absorption in lemurs: Quantitative screening and assessment of dietary prevention
Authors: Wood C. , Fang S.G. , Hunt A. , Streich W.J. , Clauss M.
Published: November 2003

Iron storage disease (ISD) in lemurs has been reported since as early as the 1960s, and in the 1980s was demonstrated to be a consistent finding in postmortem investigations of captive lemurs. Since then this disease has consistently been diagnosed at the point of necropsy. In the current study we describe a preclinical screening procedure, as well as the quantified preventive effects of dietary intervention upon iron absorption. Twenty‐three individual lemurs of four species were initially tested with the transferrin saturation test (%TS); 21 of these animals were on conventional zoo diets, and two were fed a specific diabetic diet. Initially, 20 of 21 lemurs on conventional zoo diets were demonstrated to have %TS levels above the normal range for humans; 17 of these lemurs were in the category (for humans) of excessive iron absorption. A dietary change aimed at reducing dietary iron and vitamin C levels and increasing the levels of iron‐chelating tannins and/or phytates was instigated. After the animals were retested, a matched‐pair comparison of %TS values before and after the diet change revealed significantly (P=0.038, n=7) lower %TS values after the diet change. All species averages were in the human hyperabsorption range on conventional zoo diets (n=21). No species averages were in that range after the dietary change (n=18). The results indicate that further investigations into the use of %TS testing in lemur husbandry, and specific preventive dietary measures, should be conducted. Am. J. Primatol. 61:101–110, 2003. © 2003 Wiley‐Liss, Inc.
A new variable‐speed, constant‐frequency, stand‐alone power generating system
Authors: Kawabata Yoshitaka , Morine Yoshihisa , Oka Toshihisa , Kawabata Takao
Published: November 2003

Variable‐speed and constant‐frequency power generating systems using rotor excitation of the wound‐rotor induction machines have been used for such applications as variable‐speed pump generators and flywheel energy storage systems. However, the stand‐alone generating system of this type has only been reported and has not yet been practically used.

On the other hand, the stand‐alone generating systems using diesel engines have been widely used for emergency supplies of plants or isolated islands and so on. However, in these cases, synchronous generators are usually used. If the output frequency is to be kept constant, there is the need to control the speed of the engine using a high‐performance governor. Even then, the output frequency changes in the case of a sudden load change.

This paper proposes a new stand‐alone power generating system. In this system, the constant‐frequency output voltage can be obtained even though rotor speed changes by several percent. © 2003 Wiley Periodicals, Inc. Electr Eng Jpn, 146(2): 75–85, 2004; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/eej.10191
Fast transmission power control using UPFC under output voltage saturation
Authors: Takeshita Takaharu , Kuroda Takeshi , Toyoda Yasunobu , Matsui Nobuyuki
Published: November 2003

This paper presents an electric power control scheme in the transmission line using a UPFC (Unified Power Flow Controller). From the practical application viewpoint, the simultaneous realization of fast power response and reduced power converter capacity are desired. The authors propose a new power control scheme of the UPFC with a current minor control loop. Using the proposed control, the fast power response can be realized and the necessary power converter capacity can be reduced considering the voltage saturation of the converter. The effectiveness of the proposed algorithm has been verified by experiments. © 2003 Wiley Periodicals, Inc. Electr Eng Jpn, 146(2): 66–74, 2004; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/eej.10220