bluuebunny/crossref_metadata_2025 huggingface dataset:
The value‐relevance of earnings and operating cash flows during mergers
Authors: Christian Cal , Jones Jefferson P.
Published: June 2007

This paper examines the value relevance of operating cash flows in consideration of potential weaknesses in earnings quality in the context of a merger. When two firms merge, the earnings stream is altered reflecting the new entity that is created thus, making the prediction of future earnings challenging due to weaknesses in the quality of earnings. The quality of generally accepted accounting principle (GAAP) earnings, has recently been questioned by investors, analysts, and regulators. The difficulty with merged firm earnings has been exacerbated because, prior to June 2001, generally accepted accounting principles (GAAP) allowed firms to account for a merger using either the purchase or the pooling method of accounting. While the pooling method has been eliminated, this paper hypothesizes that difficulties arising from the purchase method of accounting will still exist and will continue to reduce the role of earnings in explaining security returns, and, consequently, the value‐relevance of operating cash flows is expected to increase as investors search for additional means to explain security returns. This paper finds that in the year of the merger, operating cash flows provide valuerelevant information beyond earnings. This finding supports the hypothesis that the quality of earnings in the year of the merger is difficult to interpret, and given this weakness, cash flows can aid in the explanation of abnormal security returns. Additional analyses indicate that the value‐relevance of operating cash flows is positively associated with the purchase method of recording the merger. This result is consistent with operating cash flows assuming a more important role in firm valuation when the difficulties in estimating the merged firm’s earnings are more severe. These findings also suggest that earning’s quality is more value relevant in a non‐merger year than in a merger year.
Corporate control and earnings management: evidence from MBOs
Authors: Wright Charlotte J. , Guan Liming
Published: June 2007

Using a matching approach and multivariate logit analysis we determine that management of firms involved in MBOs more frequently chose income increasing accounting policies than did a matched sample of non‐MBO firms. The results provide support for the managerial economic incentives hypothesis as a motivation for accounting policy choices. The results of the study are consistent with a number of earlier studies such as Groff and Wright (1989), Hagerman and Zmijewski (1979) and Zmijewski and Hagerman (1981) that also find support for the managerial economic incentives hypothesis for accounting choices. DeAngelo (1986), Perry and Williams (1994) and Wu (1997) find evidence supporting the hypothesis that, in order to reduce the cost of acquiring shares from current stockholders, managers seeking to take firms private make income decreasing discretionary accruals in the period immediately prior to the MBO. In testing this theory DeAngelo (1986), Perry and Williams (1994) and Wu (1997) focus on the overall effect of a pool of business decisions and accruals made in the year immediately prior to the MBO. We theorize that managements’ self‐serving behavior begins far in advance of the actual
MBO. The final terms of the MBO are the culmination of numerous actions and choices by management over a period longer than one year. In testing our hypotheses we focus on three specific accounting policy choices made over a period of three years leading up to an MBO and find significant evidence of self‐serving behavior through the use of income increasing accounting policy choices.
An empirical examination of alternative models for hedging emerging market currencies
Authors: Shaffer David R. , DeMaskey Andrea
Published: June 2007

This paper compares the hedging performance of the minimum‐extended Gini hedge ratio (MEGHR) and the minimum‐variance hedge ratio (MVHR) using three emerging market currencies. The MEGHR is consistent with the expected utility hypothesis under very general conditions, unlike the MVHR which requires special distributional assumptions. Our sample violates these conditions, and thus provides a context for contrasting the performance of the MEGHR and MVHR. Our results show that the MVHR and MEGHR are indeed different and in some cases the differences are substantial, both statistically and in order of magnitude. This indicates that the MEGHR should provide superior hedging performance given its theoretical robustness. Our hedging performance results support this conclusion for all currencies.
A theoretical model of bank’s motives for becoming a multinational bank and conditions for its lending abroad substituting or supplementing its domestic loan business
Authors: Bulmash Samuel B.
Published: June 2007

Many empirical studies have examined the motivation for doing business abroad by the multinational corporation (hence MNC). The theory of the MNC received less attention. Even less has been published on the theory of the multinational bank (hence MB). This paper fills the gap. It analyzes the motives and adds a particular perspective: A model driven by supplementation and substitution of business as motivation. While these two elements by themselves are not new to economic theory, their application to the multination bank, as is done in this paper, offers a useful new perspective. While many other studies have concentrated on risk reduction as the motive for asset diversification by the MB, this paper takes a different approach. Specifically, this paper presents a theoretical framework that shows that the conditions for going abroad to enhance the bank’s domestic business (supplementation motive) are different from those that motivate the bank to substitute international business for domestic business (substitution motive). The model provides analytical insights into the behavior of the international bank that can interest scholars and bank regulators. The model can also serve as a basis for future related Multinational Corporate research in general, as well as for other bank specific studies.
The importance of country versus sector characteristics
Authors: Sell Clifford W.
Published: June 2007

Does a company’s country of incorporation or the sector of its activity have a greater influence on the equity returns its shareholders earn? This question has been examined extensively using dummy variable regressions or factor models on pre‐determined characteristics; nevertheless, the results are inconclusive and vary with the range of companies and the time period studied. This study employs an alternative method that finds “naturally occurring” groups of companies based on the quantifiable relationship between the company returns themselves. The resulting groups are then examined in terms of their country and sector composition. The groups indicate that companies clearly cluster by country rather than by sector and that this effect has become more pronounced over time. This has important implications for financial analysts and portfolio managers.
Sampling rules to achieve quality, maximize benefit and minimize financial loss
Authors: de Korvin André , Shipley Margaret F.
Published: June 2007

Determining the proper sample size and frequency of sampling such that quality is assured while financial losses are not unnecessarily incurred is critical to an effective quality program. The main purpose of the present work is to design a fuzzy controller to adjust sample sizes and frequency of sampling according to potential fuzzy benefit/loss. A set of fuzzy rules is given where, depending on the antecedents, the sample size and/or sampling frequency may be decreased, remain static or be increased. At any given moment the proportion of defects in the sample determines the firing strength of the rules suggesting an appropriate sample size and sampling frequency. The firing strength is then modified to include an analysis of the decision maker’s belief that as sampling takes place and adjustments are being considered benefit or loss would be incorporated prior to any action or adjustment to sample size and/or frequency.
Analyzing the product‐mix decision by using a fuzzy hierarchical model
Authors: Bayou Mohamed E. , Reinstein Alan
Published: June 2007

The product‐mix decision has received considerable attention in management accounting and economics literatures. However, many studies in these literatures are contradicting, inconclusive and lack rigorous analysis of this complex decision. They seek to develop weights for the products in the product mix based on one objective, to maximize the firm’s profit ability. But before developing these weights, the studies must first rank these products, Ranking is a complex endeavor since it is often driven by a multitude of hierarchical financial and non‐financial goals and objectives. Ranking is also difficult due to the use of complex concepts such as time, uncertainty, cost and interdependencies between accounting systems and manufacturing systems and among the products of the product mix. These concepts are inherently fuzzy and coextensively applied often with a confluence of variables operating simultaneously. This paper applies an advanced mathematical model to account for the product mix decision. The model combines the powers of fuzzy‐set theory (Zadeh, 1965) and the analytic hierarchy process (Saaty, 1978). The fuzzy‐analytic‐hierarchical process (FAHP), developed by de Korvin and Kleyle (1999), is sufficiently powerful to account for the ambiguous variables and the web of prioritized strategies and goals of cost leadership, product differentiation, financial objectives of earnings, cash flows and market share and non financial goals such as tradition and owners’ convictions and philosophies underlying the ranking of the products in the product mix. By way of example, the paper applies the FAHP model to rank order four products subject to these strategies and goals.
Loss aversion: a qualitative study in behavioural finance
Authors: Kleinübing Godoi Christiane , Marcon Rosilene , Barbosa daSilva Anielson
Published: June 2007

The Behavioural Finance contests the modern financial theory statements, specially the rationality conception of the market as well as the agent behaviour. For the Behavioural Finance, the human being is susceptible to make mistakes and often acts under “irrational” and passional impulses. This article describes, comparatively, the Behavioural Finance and the modern finance theory investigating precisely the aversion feeling to loss under the investor view. The comprehension of the aversion feeling of loss is deepened from psychoanalytical theory contribution. As the aversion feeling to loss constitutes an aspect of the human subjectivity and cannot be explained just through quantification, the qualitative methodology was used. It was investigated about the influence meanings, experienced by the investors.
Forward looking UK interest rates: a point and figure chart approach
Authors: Giles Ronald L.
Published: June 2007

The advent of the European single currency and the UK’s decision not to participate in the Euro start‐up has placed the UK interest rate policy in a pivotal position. However, the competing fundamental positions are unclear with irreconcilable targets, a regime change or new paradigm, and supported by a poor forecasting record. In this paper an alternative approach is considered, dispensing with fundamental ideology. Forward looking interest rates are based on pattern recognition and congestion. This approach assumes that the data series can be interpreted as a memory pattern using past performance. Attention is focused on the votes of constituent members of the Bank of England’s Monetary Policy Committee. The point and figure chart is able to identify structural breaks in the data, thus only relevant time periods need be considered. Finally, the results become a leading indicator for competing fundamental models.
Moving average technical trading strategies for currencies of emerging economies
Authors: Ahmed Parvez , Beck Kristine , Goldreyer Elizabeth
Published: June 2007

This paper studies the efficacy of using moving average technical trading rules with currencies of emerging economies. If technical trading rules are successful, they can become a risk management tool for multinational firms and investors in emerging markets. Typical risk management tools such as forwards, futures, and options are not sufficiently active in emerging currency markets. In this paper we use four Variable Length Moving Average (VMA) trading models and compare them to a simple buy and hold strategy. Results support the effectiveness of our trading models, which imply the presence of strong serial correlation among currency returns for emerging markets. As a result, the predictability of future currency prices will allow investors to create effective hedges in the often volatile emerging markets.
Should investments professors join the “crowd”
Authors: Flanegin Frank R. , Rudd Denis P.
Published: June 2007

Just like the market which has its bulls and its bears, investments has its fundamentalists crowd and its technicians crowd. The academic finance profession must wake up and realize that investing is no longer driven solely by fundamental and statistical analysis. While as a profession we believe in and teach the fundamental investment subjects such as CAPM or EMH, we also realize the need to examine ways to explain the 80 per cent of the variability of stock returns not explained by the fundamentals. In addition to the fundamental investment subjects an increased exposure to both behavioral finance and the psychology of financial markets is absolutely necessary to increase the understanding of how and why stocks move. Just as the bulls need the bears, fundamentalists need technicians. Behavioral finance, crowd psychology, and the psychology of financial markets are the underpinnings of technical analysis. Western technical analysis predates CAPM and EMH by decades, if not more, tracing its roots back to Charles Dow founder of Dow Jones.
Trading currencies using moving averages – trend following versus contrarian strategies
Authors: Dahlquist Julie R.
Published: June 2007

Moving average trading strategies are examined for trading ten major currencies during the 1997‐2001 time period. Both a traditional trend‐following moving average cross over strategy and a contrarian strategy are tested. Following a simple moving average cross over out performed, on average, the contrarian strategy. However, neither strategy consistently outperformed a simple strategy of holding U.S. dollars during the four‐year test period.
Electricity load pattern hedging with static forward strategies
Authors: Näsäkkälä Erkka , Keppo Jussi
Published: June 2007

We consider the partial hedging of stochastic electricity load pattern with static forward strategies. We assume that the company under consideration maximizes the risk adjusted expected value of its electricity cash flows. First, we calculate an optimal hedge ratio and after that we use this hedge ratio to solve the optimal hedging time. Our results indicate, for instance that agents with high load volatility hedge later than agents that have low load volatility. Moreover, negative correlation between forwards and electricity load pattern postpones the hedging timing.
Executive compensation contracts and voluntary disclosure to security analysts
Authors: Johnson Marilyn F. , Natarajan Ram
Published: June 2007

We hypothesize that a CEO’s responsiveness to security analysts’ demands for information about the firm is influenced by the structure of the CEO’s compensation package. Our analysis is based on a sample of 469 CEO presentations to security analyst societies by 149 firms during the period 1984‐1988. Consistent with the argu ments of Nagar (1999; 1998) that CEO shareholdings and golden parachutes reduce the cost to the CEO of disclosing proprietary information, we find that CEO share holdings and the presence of golden parachutes are positively associated with the total amount of information that a CEO discloses at an analyst society presentation. Consistent with the argument that CEOs whose cash compensation is sensitive to firm performance have incentives to release bad news so as to lower expectations about future performance and, hence, bonus targets, CEO cash compensation performance sensitivities are positively associated with the CEO’s willingness to disclose bad news.
Stock option plans in EuroStoxx 50 companies
Authors: Muurling Rutger , Lehnert Thorsten
Published: June 2007

Employee Stock Options are the most widely used incentive compensation tool, and prior research has shown their advantages. However, research among different peer groups, different time frames, different research methodologies, and the constantly changing public opinion prevents unanimous agreements on the various benefits of Employee Stock Options. In this paper we apply a number of research hypotheses tested in recent US studies to a European sample of EuroStoxx 50 companies. Due to the globalisation, the similar accounting regulations and the IT and telecommunications revolu tions, Europe and the United States have grown closer together than ever before and are expected to display similar business practices. This assessment should be especially relevant for the large European companies, which mostly have a dual listing in the United States and are therefore essentially forced to manage according to American practices. How ever, the results differ significantly from the existing US research, providing insufficient grounds to accept previous findings for European companies.
Enforcing the Law of One Price: Nonlinear Mean Reversion in the ADR Market
Authors: Dante Suarez E.
Published: June 2007

This work presents evidence that cross‐isted stocks (ADRs) are traded in markets that are not completely integrated, and it is the presence of high frequency arbitrage activity that forces these stock pairs to be most commonly in relative equilibrium. A Threshold Autoregressive (TAR) model tests the hypothesis that the reversion to equilibrium of the price discrepancy series is a nonlinear function that has nontrivial thresholds, and that large price discrepancies are relatively short‐lived. The TAR specification models the neutralization of arbitrage forces with thresholds that separate outer regions where large discrepancies have a strong reversion to equilibrium from a central region where transaction costs significantly mitigate this reversion.
The Effective Bid‐Ask Spread and Transaction Likelihood
Authors: Ferri Arthur A. , Jain Ravi
Published: June 2007

This study empirically examines the relationship between the effective bid‐ask spread on foreign currency options traded on the Philadelphia Stock Exchange and the likelihood of a transaction occurring. Important contributions of this research include the use of a more precise measure of the effective bid‐ask spread than generally used in the literature and the use of data on actual transactions, plus several requests for quotes that did not culminate in a transaction. Consistent with prior theoretical work in the market micro structure literature, the results document empirical evidence that the likelihood of a transaction is inversely proportional to the effective bid‐ask spread.
International Cash Management in the 21st century: Theory and Practice
Authors: Menyah Kojo
Published: June 2007

This paper outlines the theoretical models of international cash management and assesses their implications for corporate practice. Corporate practice is then reviewed through the analysis of survey research and case studies. It emerges that whilst the implications of theoretical models are captured in essence by corporate practice, there is scant evidence of companies using sophisticated models in international cash management. The practice of international cash management is largely driven by developments in communications and computer technology, relaxation of regulatory and tax impediments, the internationalisation of banking and the development of new banking prod ucts. International treasurers may therefore be able to find appropriate cash management solutions to meet their business needs with the co‐operation of banks and technology providers. Further academic research should evaluate the extent to which corporate practice is consistent with extant multi‐currency balance and net work optimisation models and also explain why particular approaches to interna tional cash management persist in companies.
International Cash Management Practices in a Russian Multinational
Authors: Tsamenyi Mathew , Skliarova Darina
Published: June 2007

management practices in a Russian Multinational Company (RMC). The paper is motivated by the lack of empirical evidence on financial management practices outside the Western World (especially from Russia and from other Commonwealth of Independent States). Data for the analysis are gathered from documents and in‐depth interviews with finance managers in the company. The findings of the paper suggest that the company implemented an international cash management system reminiscent of international cash management discussed in the Western literature. For example, techniques such as netting, leading and lagging, re‐invoicing center and cash flow planning are used in the company. Thus, our conclusion is that financial management techniques are likely to be the same in Russia as in the Western world. However, differences are likely to be found in the ways in which these techniques are implemented and used in practice due to differences in environmental conditions. For example, the company did not use any of the sophisticated cash management models discussed in the literature. Our research has implications for understanding financial management practices outside the Western World, especially in Russia.
The Productivity of European Co‐operative Banks
Authors: Molyneux Philip , Williams Jonathan
Published: June 2007

This paper examines the cost and profit productivity of European co‐operative banks between 1996 and 2003 using the parametric productivity decomposition suggested by Berger and Mester (2003). We find that over the period co‐operative banks benefited from substantial gains in both profit and cost productivity. Annual profit improvements range between 4% and 8% for the majority of co‐operative banks, with even larger cost productivity gains. These productivity improvements have predominantly been generated by the enhanced performance of best practice banks relative to other banks. This means that the best practice co‐operative banks have moved further away from other banks in terms of increasing profits and reducing costs.
Panel unit root tests of the size and growth of large US credit unions
Authors: Goddard John , McKillop Donal G. , Wilson John O.S.
Published: June 2007

This article explores the size‐growth relationship for a panel of large US credit unions, using the panel unit root tests of Im et al. (2003) and Maddala and Wu (1999). The reference point is Gibrat’s Law, or the Law of Proportionate Effect, according to which firm growth rates are independent of firm sizes. The panel unit root tests are applied to the log as sets and log membership series of a sample of 997 surviving credit unions which reported data over the period 1993 to 2002. In each case the panel unit root tests fail to reject the null hypothesis of non‐stationarity in the logarithmic size series for all credit unions. The implication is that credit union sizes follow random walks, producing a tendency for industry concentration to increase in the long term. With many of the largest institutions currently offering portfolios of products and services similar to those of commercial banks and other financial institutions, these implications of the panel unit root test results appear consistent with observed patterns within the sector in recent years.
A Puzzle of Emerging Markets: A Systemic ‘Surprisingability’
Authors: Sevic Zeljko
Published: June 2007

Since the early 1980s when the term ‘emerging markets’ was first coined by the IMF and World Bank to describe the performance in countries with changing institutional framework, the theory has failed to produce a coherent and systemic theory. Overtime the term became generic, initially including developing countries (mainly in Asia and Latin America), but later covering the former socialist countries/economies (labelled as transitional countries), and some ‘developed’ countries that did not have extensive experience of capital market development (mainly due to having a bank‐based financial system).
Asset Management Companies, State‐Owned Commercial Bank Debt Transfers and Contingent Claims: Issues in the Valuation of China’s Non‐Performing Loans
Authors: McIver Ron
Published: June 2007

This article outlines contingent claims created as a result of the arrangements underlying the transfer of state‐owned commercial banks’ non‐performing loans to asset management companies. An understanding of these factors is central in analysing the potential for China’s as set management companies to realise value from their acquisition of these nonperforming state‐owned enterprise loans. After establishing the scale of the non‐performing loan problem, the article identifies and describes a number of real and financial options that may assist in the consideration of the value of assets associated with the transfer of non‐performing loans from the state‐owned commercial banks to the asset management companies. Real and financial options appear in the form of implied guarantees over asset management corporation debt, implied guarantees associated with the non‐performing assets remaining with the stateowned commercial banks, and within the equity positions held by the asset management companies as a result of equity‐for‐debt swaps initiated under the current reform process. The article concludes that any gains made to the credit standing of the state‐owned commercial banks reflect the value of implied guarantees over both the asset management corporation debt and the remaining stock of non‐performing loans held by the banks. Furthermore, institutional arrangements associated with the equity positions held by the asset management corporations significantly reduce the value of options associated with operation and control of firms in which the equity positions are held. Additionally, the structure of equity positions taken under the equity‐debt swaps suggest that the value of equity positions held in state‐owned enterprises by the asset management companies will be considerably lower than hoped for and implied in the asset management companies’ mandates.
Pricing of Equities in China: Evidence from the Shanghai Stock Exchange
Authors: Drew Michael E. , Naughton Tony , Veeraragavan Madhu
Published: June 2007

In this article we compare the performance of the traditional CAPM with the multi factor model of Fama and French (1996) for equities listed in the Shanghai Stock Exchange. We also investigate the explanatory power of idiosyncratic volatility and respond to the claim that multi factor model findings can be explained by the turn of the year effect. Our results show that firm size, book to market equity and idiosyncratic volatility are priced risk factors in addition to the theoretically well specified market factor. As far as the turn of the year effect is concerned we reject the claim that the findings are driven by seasonal factors.
Does ownership matter? A study of German and UK IPOs
Authors: Goergen Marc , Renneboog Luc
Published: June 2007

Purpose

This paper seeks to answer the question whether control and changes in control after a firm's initial public offering (IPO) have a significant influence on firm value in two very different systems of corporate governance, i.e. Germany and the UK.

Design/methodology/approach

The dynamics of post‐IPO firm performance are investigated for size‐ and industry‐matched German and UK samples.

Findings

It was found that, although the post‐IPO evolution of control in German and UK companies differs significantly, there is no significant change in their long‐run financial and operating performance. The paper concludes that the long‐run performance of IPOs is not correlated with control and ownership retention. Moreover, the results presented in the paper suggest that the poor long‐term performance of IPOs documented in empirical literature can neither be explained by potential agency conflicts arising from the reduction in control held by the original shareholders nor by a reduction in the incumbents’ control.

Practical implications

Contrary to what may be expected, the involvement of the pre‐IPO shareholders in the firm after the flotation is not crucial to the firm in terms of value generation. Although a reduction in control is expected to lead to less intensive monitoring as strong blockholders are no longer present, there is still no evidence that the firm will suffer in terms of its performance over the long run.

Originality/value

The paper uses an original methodology which consists of matched samples of German and UK firms with similar initial levels of control. The paper then tracks changes in control over the six years after the IPO and links these to the levels of and changes in performance.
The long‐run performance of initial public offerings in Germany
Authors: Bessler Wolfgang , Thies Stefan
Published: June 2007

Purpose

The objective of this study is to investigate the long‐run performance of initial public offerings (IPOs) in Germany for the period from 1977 to 1995. The paper studies why some IPO firms have substantial positive and others have substantial negative long‐run buy‐and‐hold abnormal returns.

Design/methodology/approach

The paper approaches this problem by differentiating the abnormal return patterns by the following criteria: benchmark, year of going public, security design, money raised, market value and magnitude of underpricing.

Findings

The empirical findings suggest that the subsequent financing activity in the equity market is the most important factor for determining the future performance of an IPO. This variable separates the out‐performers from the under‐performers. Thus, only successful firms have the opportunity to raise additional funds in the equity market through a seasoned equity offering.

Research limitations/implications

Future research should concentrate on investigating whether the introduction of new stock market segments in Germany has changed the long‐run performance of IPOs.

Practical implications

The results suggest that firms with a superior performance have the opportunity to raise additional equity whereas the poor performers do not get a second chance to sell equity to the public. This means that firms have to earn at least their cost of capital in order to receive additional funding.

Originality/value

Compared to other research, this study explains the significant difference in long‐run performance between two groups of IPOs based on the future financing decision. This finding offers new insights to both academics and practitioners alike.
Financial integration, regulation and competitiveness in Middle East and North Africa countries
Authors: Gentzoglanis Anastassios
Published: June 2007

Purpose

The purpose of this article is to examine is to the link between stock markets and economic growth in advanced and emerging economies in the Middle East and North Africa (mena) region.

Design/methodology/approach

Indices measuring the degree of financial openness and market development are constructed and used to perform various Granger causality tests to identify predictors of current growth rates.

Findings

It is found that the link exists only in the group of high income countries but this relationship is rather weak for the low income MENA economies. Privatization alone, although necessary, is not enough to spur economic growth. The establishment of sound institutions and well‐defined regulatory policies are needed to protect investors’ rights and entice them to invest in real and financial assets in the MENA region.

Originality/value

The paper offers insights into financial integration, regulation and competitiveness in MENA countries.
Tradeoffs within costing systems between incentives and measurement objectives
Authors: Alles Michael , Datar Srikant , Gupta Mahendra
Published: June 2007

Explains that a common problem of cost control at design stage is the firm’s (manager’s) desire for the lowest cost compatible with supporting innovation and the designer’s preference for the optimal design, which may be unnecessarily sophisticated. Develops a mathematical model to represent this situation, pointing out that the manager is usually unaware of the design alternatives unless they are revealed by the designer, but can use budgetary limits and “load” costs onto certain cost drivers (e.g. number of parts) to influence the designer’s choice and align his/her interests with those of the firm. Suggests that the difference between actual and “loaded” costs is a function of the non‐cost benefits from design choice (e.g. competitive edge) and the degree of information asymmetry between manager and designer. Considers the implications for costing activities and the limitations of the model.
Perpetual analysis and continuous improvements: a must for organizational competitiveness
Authors: Mehra Satish
Published: June 2007

Outlines increasing US concern over the inadequacy of traditional cost‐based performance measures in helping manufacturing businesses to achieve excellence in operations and reproduces a case from Tatikonda and Tatikonda (1993) to illustrate the problem. Summarizes some ideas on costing for competitive strength and proposes a framework to enhance competitiveness through profound process knowledge as a basis for fast and continuous improvement. Stresses the importance of determining strategy, using benchmarks based on a good activity‐based costing system and creating a supporting and motivating performance measurement system specific to the needs of the firm as a whole. Calls for further research on developing and implementing these ideas in a specific business and warns that “competitiveness will be a never ending race”.
Three routes for target costing
Authors: Bayou Mohamed E. , Reinstein Alan
Published: June 2007

Suggests that many Western managers find target costing hard to understand, gives an overview of the Japanese approach and explains three paths towards rational cost decrease: cost improvement, cost cutting and cost shifting. Emphasizes the importance of cost improvement in a total cost management (TCM) programme and the other strategies which should support it, e.g. comprehensiveness, integration, flexibility and dynamism. Recognizes that the weaknesses which may develop in a TCM programme can divert cost improvement into cost cutting or cost shifting but sees this as no more than a short‐term solution.
The risk of signalling failure and managers’ trading before self‐tender stock repurchases
Authors: Liu Feng‐Ying , Gombola Michael
Published: June 2007

Outlines previous research on the signalling power of stock repurchases and insider trading activity before stock repurchases. Examines data from a sample of self‐tender stock repurchases used by Comment and Jarrell (1991) to examine the relationship between managers’ trading activity prior to the repurchase announcement and their wealth risk of false signalling. Shows that they buy significantly more shares before at‐risk repurchase announcements (i.e. those where their proportionate ownership will increase and the minimum share price is more than two per cent above the closing market price four days before the announcement) than before not‐at‐risk announcements, and sell less. Supports Comment and Jarrell’s conclusion that signalling strength is greater when managers face a personal risk of false signalling.
Stock return seasonalities in low‐income African emerging markets
Authors: Felix Ayadi O. , Dufrene Uric B. , Chatterjee Amitava
Published: June 2007

Surveys African stock markets to find out if they are as efficient as developed markets, and follow the same “turn‐of‐the‐year” pattern as other markets. Compares Ghana, Zimbabwe and Nigeria, and focuses on the period between 1985 and 1995. Describes the environment of each, and computes monthly stock returns, testing them for seasonality. Finds evidence of the January effect only in Ghana, and there it is small. Notes that this may be the result of spillover from London.
Financial intermediation under information asymmetry: implications for capital market efficiency in selected developing countries
Authors: Agbetsiafa Douglas K.
Published: June 2007

Considers the methods whereby income is likely to grow in developing countries, given imperfect information and the need for credit for investment. Looks at the link between financial intermediation and economic growth for nine countries between 1969 and 1992, using a financial intermediation model, comparing demand‐following and supply‐leading financial linkages. Finds that financial structure variables explain income growth better than investment variables in five countries ; demand‐following intermediation fitted two countries better; and the supply‐leading channel fitted three countries better. Concludes that financial intermediaries mobilize domestic resources for economic growth in several countries.
Multinationality of US corporations: the tax implications
Authors: Sage Judith A. , Susan Stiner M. , Sage Lloyd G.
Published: June 2007

Lists the tax implications for multinationals of US double taxation on income earned abroad or in the USA, from sources of income, including inventory profits, transfer pricing, personal property sales and intangible property and the rules about control led foreign corporations and foreign personal holding companies. Explains issues about income recipients’ status and foreign dividends, and how to avoid double taxation.
Multinationality of US corporations: the auditing implications
Authors: Tucker Robert R.
Published: June 2007

Explains the auditing problems encountered by multinational companies under the US Foreign Corrupt Practices Act and the Regulation of Technology Transfers and the complications of resource allocation in countries with different cultures to the USA. Highlights currency fluctuations, human resources and environmental audit. Lists some of the differences between US and foreign auditor independence and auditing standards. Lays down the requirements for an auditor on foreign assignment.
Management controls in Sino‐American joint ventures: a comparative case study
Authors: Chalos Peter , O’Connor Neale G.
Published: June 2007

Studies the characteristics, control and performance of joint ventures producing a model based on four cases. Explains the theory of complementary strategic objectives, and the need for delineating specific transaction costs and management controls under differing cultures. Interviews managers of four Sino‐American Joint Ventures in manufacturing for several years. Finds that the US partner controlled the technology, the Chinese partner wanted to reduce imports and import management and product skills. Focuses on raw material sourcing as a cause of conflict, as well as slow learning and high transaction costs from a poorly controlled system. Points out the keenness for incentive payments among Chinese workers and the reluctance by Chinese managers to have their performance evaluated.
The effects of country return and risk differences on predication performance of earnings forecasts
Authors: Riahi‐Belkaoui Ahmed , Koula Alvertos Dimitra
Published: June 2007

Summarizes previous research on financial analysts’ forecasts and the segmentation of international finance markets. Hypothesizes that the accuracy of earnings forecasts in a country is negatively related to the country return, and positively to the country risk. Uses 1992‐94 data from 12 countries to test this, supports the hypothesis and calls for further research.
Divergence of analysts’ earnings forecasts and the stock returns‐earnings relation
Authors: Kirk Florence R. , Lobo Gerald J. , Fritsche Stephen R.
Published: June 2007

Outlines previous research on the relationship between stock returns and earnings and investigates the effects of divergence between security analysts’ earnings forecasts on this relationship. Uses cross‐sectional analysis, time series and variable parameter models on 1981‐88 US data to see whether the stock returns‐earnings coefficient decreases with increased disagreement between analysts and shows that it does. Considers the implications for policy makers and accounting research design; and consistency with other research.
Financial analysts’ earnings forecasts for loss firms
Authors: Das Somnath
Published: June 2007

Refers to previous research on the accuracy of financial analysts’ earnings forecasts and explores the differences in accuracy for loss making and non‐loss making firms using 1985‐1993 US data. Finds an optimistic bias for both types of firms (smaller for more recent forecasts); which is greater for loss making firms even after controlling for forecast horizon, year of forecast and industry. Considers possible explanations for this finding and consistency with other research.
Bank performance measurement in a developing economy: an application of data envelopment analysis
Authors: Felix Ayadi O. , Adebayo Arinola O. , Omolehinwa Eddy
Published: June 2007

Outlines previous research on measuring the performance of banks and the factors leading up to the banking crisis in Nigeria in the 1990s. Applies data envelopment analysis to 1991‐1994 data on ten listed Nigerian banks to assess their relative efficiency and tabulates the results for each year, year by year. Discusses the consistency of the findings with other research and draws conclusions on the root causes of Nigeria’s banking problem, e.g. government interface, poor management, unprofessional practices etc. Calls for a halt to government interference and better bank performance monitoring.
The determinants of US foreign investment in India: implications and policy issues
Authors: Maniam Balasundram , Chatterjee Amitava
Published: June 2007

Traces the growth of US foreign direct investment (FDI) in India and the changing attitude of the Indian government towards it as part of its liberalization programme. Reviews previous research on the determinants of FDI and uses regression analysis on 1962‐1994 data to identify the factors affecting US FDI in India, current trends and the impact on the Indian economy. Finds that only the relatively weak exchange rate appears to be a significant factor and that US FDI has been increasing in dollar amounts and relative percentage growth, especially since the economic reforms of the 1990s. Calls for improvements in infrastructure and reductions in red tape and protectionism to encourage further growth.
An analysis of the problems and obstacles to global accounting harmonization
Authors: Gbenedio Pender O. , Benson Eric D. , Omolehinwa Eddy
Published: June 2007

Traces the history of efforts to harmonize global accounting and presents a study analysing obstacles to it, using multidimensional scaling. Illustrates the environmental influences on global accounting, groups 37 factors obstructing harmonization into economic, social, political/legal and cultural groups; and assesses their impact in both developing and industrially developed countries (IDCs). Finds that political, economic and social variables create more difficulties for IDCs, but that cultural factors affect both groups equally. Displays the results graphically, discusses them further and calls for extended research to explore this “great challenge to the accounting profession”.
Federal reserve policy and information flow
Authors: Madura Jeff , Schnusenberg Oliver
Published: June 2007

Outlines previous research on the impact of US Federal Reserve policies on market interest rates and returns; and the relationship between interest rates and market returns. Investigates these effects over three time periods: Sept 1974‐Oct 1979 (interest rate targeting through the federal funds rate), Oct 1979‐Aug 1987 (reserves targeting using the discount rate) and Aug 1987‐Jan 1996 (interest rate targeting again); using four mathematical models. Discusses the results, which suggest that changes in the relevant federal policy tool have a significant negative effect on equity returns, especially during the first two periods and when the change reverses previous change. Concludes that announcements of changes in policy contain valuable information not already included in share prices.
Validity of the short‐ and long‐run Fisher relationships: an empirical analysis
Authors: Shrestha Keshab , Chen Sheng‐Syan
Published: June 2007

Outlines the Fisher hypothesis, cites previous relevant research and develops mathematical models for long‐run and short‐run Fisher relationships. Applies them to the UK, USA, Canada and Japan, using 1978‐1997 monthly data and Eurocurrency interest rates to explore the relationship between nominal interest rates and inflation rates. Finds a significant positive relationship for all four currencies in the long run; and for the UK and Japan but not for Canada in the short run, with significance only at the 10 per cent level for the USA.
An evaluation of user ratings of cash vs accrual based financial reports in Australia
Authors: Jones Stewart
Published: June 2007

Outlines Australia’s adoption of the direct method of cash flow reporting and presents a survey of 83 loan officers and 76 financial analysts to assess its decision relevance compared with traditional financial statements for commercial loan and investment decisions. Finds both groups (but especially financial analysts) rate cash flow statements more highly across all decisions except performance evaluation; but notes some differences in their relative ratings of the profit and loss account and the balance sheet. Contrasts the findings with other research and recognizes the limitations of the study but suggests that it may provide support for enforcing the direct method of cash flow reporting in other countries, e.g. the USA.
Foreign currency exposure and the hedging possibilities for pension funds
Authors: Chaudhry Mukesh K. , Christie‐David Rohan A. , Sackley William H.
Published: June 2007

Notes increasing investment by US pension funds in foreign currency denominated assets and briefly outlines previous research on the links between various types of assets/currencies. Uses cointegration methodologies on 1978‐1996 futures data for commodities and four currencies (Swiss, German, British and Canadian) to assess the long‐run stochastic relationships between them; and suggests that currencies are more closely cointegrated with soft commodities and precious metals than with livestock. Considers the implications for hedging and diversification by pension fund managers trying to manage risk.
Investing for retirement
Authors: Sigler Kevin J.
Published: June 2007

Outlines some research on the effects of risk on portfolios for retirement planning and puts forward a method to help individuals “increase their chances of not outliving their retirement portfolios”. Uses numerical examples to show how calculations of the savings needed to achieve specific retirement incomes may prove inaccurate, and how regular portfolio assessment can be used to make any necessary adjustments during the accumulation and/or the retirement stage.