bluuebunny/crossref_metadata_2025 huggingface dataset:
Short‐Run Supply Responses in the U.S. Beef‐Cattle Industry
Authors: Aadland David , Bailey DeeVon
Published: March 2003

This article investigates the response of beef‐cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short‐run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that separates the markets for fed and unfed beef. This separation generates predictions that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks.
The Theory and Econometrics of Health Information in Cross‐Sectional Nutrient Demand Analysis
Authors: Park Jaehong , Davis George C.
Published: March 2003

Understanding the role of health information in food and nutrient demand has become an important issue over the last decade. Endogeneity and measurement error are two empirical problems that are inherent in this type of analysis. While some type of instrumental variables estimation would appear the obvious solution, this article provides several theoretical and empirical reasons why this is not the case in cross‐sectional analysis. An alternative estimation strategy is pursued, an empirical example is given, and the implications are discussed.
How Should Food Safety Certification be Financed?
Authors: Crespi John M. , Marette St)phan
Published: March 2003

An analytical framework where consumers are imperfectly informed about the safety of products is used to investigate the welfare effects of a public certification system. Several certification fees under alternative structures of certification cost are analyzed. By maintaining competition among numerous sellers, voluntary certification financed by a per‐unit fee is efficient (and sufficient) to signal product safety. However, mandatory certification linked with a fixed user fee may be necessary if a seller wields monopoly power. Further, certification by a single, private agency results in a distorted fee.
Leadership and the Provision of Safe Food
Authors: Hennessy David A. , Roosen Jutta , Miranowski John A.
Published: March 2003

Modern food production typically involves many interacting stages and two or more decision makers. There is reason to believe that inputs in determining quality likely complement. And it is not possible to regulate many of these inputs. In a food production system possessing these characteristics, we show that leadership by one or more firms through communicating actions may be used as a mechanism to increase overall food quality. As there may be no private incentive to lead, there may be strategic merit in assigning liability through legislation. We also suggest the possibility that genetics are leadership instruments in hog production systems.
Optimal Regulation of Eutrophying Lakes, Fjords, and Rivers in the Presence of Threshold Effects
Authors: Nævdal Eric
Published: March 2003

Eutrophication is a biological process that has an unfavorable economic impact on the economic value of the water basins it affects. Eutrophication depends on thresholds effects, and optimal policies for the regulation of eutrophication must take this into account. Such optimal policies are derived in the present article by utilizing a novel technique in optimal control theory. This technique facilitates a proper analysis of deterministic stock pollutants with thresholds effects, a topic it is argued has been poorly understood in the literature.
Measuring Producers' Risk Preferences: A Global Risk‐Attitude Construct
Authors: Pennings Joost M.E. , Garcia Philip
Published: March 2003

In applied agricultural economic research various risk‐attitude elicitation techniques are used. Here, we investigate whether risk‐attitude measures rooted in the expected utility framework are related to measures rooted in the multi‐item scale framework. Using a second‐order factor analytical model, and data obtained from personal computer‐guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk‐attitude measures can be accounted for by a global risk‐attitude construct. We find that the different risk‐attitude measures are related, and that the global risk‐attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher‐order characteristic that cannot be effectively extracted by a single measure.
Symmetric Positive Equilibrium Problem: A Framework for Rationalizing Economic Behavior with Limited Information
Authors: Paris Quirino
Published: March 2003

The PMP methodology is extended to deal with many economic units, self‐selection arising from heterogeneous economic behavior, and multiple limiting inputs. The novel structure for the analysis of this type of problems acquires the name “symmetric positive equilibrium problem.” This methodology is articulated in three phases that parallel those one of positive mathematical programming. The recovery of a cost function that calibrates the base‐year decisions of each economic unit is realized within a maximum entropy framework. The methodology is illustrated by the analysis of a sample of Italian farms that operate under the complex policy mandates of the European Union.
Australian Commonwealth Entities: An Analysis of Their Environmental Disclosures
Authors: Burritt Roger L. , Welch Stephen
Published: March 2003

Environmental disclosures of Australian public‐sector entities have received scant attention by researchers. Using descriptive statistics, this paper provides an exploratory analysis of the environmental disclosures of a sample of Commonwealth public‐sector entities. Following consideration of approaches to accountability and expected trends in types of environmental disclosures and levels of disclosure in the public sector, the annual reports of sixty Commonwealth entities, over the ten‐year period 1984 to 1993, are examined. Based on the sample observations, the following results are found: as expected total environmental disclosures increased over the period; on average, budget entities reported a greater volume of environmental disclosures than non‐budget entities; over time there was an increase in internal relative to external disclosures for budget entities; non‐budget entities disclosed less internal environmental data than budget entities; the predominant form of environmental disclosure was qualitative rather than physical or financial; and, finally, seven themes were evident in the disclosures identified, the greatest volume being community education and training, and energy‐related disclosures. Comment is made on the possible reasons for these observations. Finally, future directions for the work in this area are explored, including consideration of possible new accountability structures based on ecological considerations and measurable environmental outcomes.
New Light on Accrual, Aggregation and Allocation, Using an Axiomatic Analysis of Accounting Numbers' Fundamental and Statistical Character
Authors: Gibbins Michael , Willett Roger J.
Published: March 2003

The general nature of basic accounting measurement procedures is analysed from the perspective of their representational faithfulness rather than, as is normally nowadays done, from the perspective of relevance to user decision models. The character of accounting numbers is examined using an axiomatic framework based in statistical theory to demonstrate that statistical properties of the numbers are created by the process of preparing, constructing, the numbers. These properties, deriving from the process of constructing the numbers, are there regardless of the uses to which the numbers may be put, and therefore knowledge of them informs not only preparers of the numbers but also those who decide whether and how to disclose them to others, and those who make use of them for any purpose.

The article argues, with axiomatic analysis and examples, that accounting numbers are statistics having properties such as distribution and variance that affect their usefulness in general and that may be examined separately from any use. Such an examination is helpful partly because it then avoids confounding the understanding of accounting measures' technical nature with issues of disclosure choice and use. The necessary axiomatic framework is presented briefly to establish its perspective on measurement questions, then the value of the framework for examining vexing accounting issues is illustrated with examinations of accrual accounting and matching, cross‐sectional and time‐series allocation, and accounting‐relevant market values.
Intraday Returns and the Frequency of Trading at the Ask on the Sydney Futures Exchange: A Research Note
Authors: Aitken Michael , Frino Alex , Jarnecic Elvis
Published: March 2003

This article documents and provides explanations for intraday patterns in returns for the Share Price Index (SPI) futures contract traded on the Sydney Futures Exchange (SFE). Consistent with overseas futures markets research, a positive and significant overnight return is documented. Unlike overseas futures markets, we find little evidence of an end of day price rise. Our evidence suggests that overnight returns for the SPI contract are largely driven by the way returns are typically measured, which ignores the fact that there is a significantly greater frequency of sellers at the market close and buyers at the start of the day. These patterns are consistent with hedging behaviour by futures traders with long positions in the underlying stock.
The Earnings Smoothing Potential of Systematic Depreciation
Authors: Hillier John , McCrae Michael
Published: March 2003

Ample evidence exists that managers attempt to use ‘artificial’ choices concerning alternative accounting procedures for classification, valuation and allocation of transactions to smooth reported periodic income or earnings series. However, the actual smoothing effect of such choices and their influence on the properties of earnings numbers is unknown. This study analyses the smoothing potential of depreciation when systematically applied. It exploits an idea regarding the effects of inclusion of expectations information in earnings calculations due to Willett (1988, 1991b), theoretically elaborated by Gibbins and Willett (1997) and applied analytically by Lane and Willett (1997). Using a statistical activity cost theory (SACT) framework, we quantify the smoothing (variance reduction) potential of straight‐line and reducing‐balance depreciation methods and compare the potential with an analytically derived depreciation method which optimizes variance reduction. We also evaluate the effects of conditioning factors such as accuracy of managers’ expectations and relative asset acquisition and disposal values upon smoothing potential. We find that systematically depreciating assets can smooth undepreciated earnings numbers. Straight‐line depreciation can exploit virtually all of this potential and reducing‐balance depreciation a substantial proportion. However, realising this potential varies greatly depending on conditioning factors. The investigation is practical and policy oriented but complementary to theoretical extensions of the sort suggested by Butler et al. (1994). While the article focuses on depreciation, the SACT framework is completely general and may be extended to any choice of method for smoothing earnings series.
Auditor Expertise and the Estimation of Dollar Error in Accounts
Authors: Kent Pamela , Weber Ron
Published: March 2003

A major task that auditors undertake in formulating their audit opinion is to estimate the dollar error that might exist in accounts in light of their evaluation of internal control strengths and weaknesses. The research that has been undertaken to evaluate the quality of auditor performance on this task, however, has produced mixed results. The current study tries to overcome some theoretical limitations and measurement limitations that have undermined prior studies. Forty practising auditors rated their abilities on fourteen characteristics derived from a model of expertise. They then undertook an experiment where they judged the extent of dollar error that might exist in the inventories of a manufacturing company. They based their judgments on working papers provided to them that contained, among other information, an evaluation of the company's internal control system. An estimate of the ‘true’ dollar error in the inventories was calculated using a program that simulated the company's internal control and accounting system. This estimate was then used to calculate the accuracy of the auditors’ judgments. Their ratings on the expertise characteristics were not related to their judgment accuracy. Their ratings were related, however, to their confidence in their judgment accuracy. Auditors who considered themselves more expert at the task were more confident in their judgment accuracy but they were, in fact, no more accurate than auditors who considered themselves to be less expert at the task.
Australian Financial Graphs: An Empirical Study
Authors: Beattie Vivien , Jones John Michael
Published: March 2003

The use of graphs to disclose financial information in corporate annual reports represents a significant dimension of financial disclosure management. This study replicates and extends previous research into financial graphs by documenting the nature and extent of graph use and departures from representational neutrality among the 1991 corporate annual reports of the top one hundred companies listed on the Australian Stock Exchange. Eighty‐nine per cent of companies use graphs; the mean number is 9.4, with diversified companies using the most graphs. The most commonly graphed financial variables are sales, profit, EPS and DPS. Evidence is found that graph use is contingent upon favourable performance. In addition, material measurement distortion is found in 34 per cent of all key financial graphs. Eighty‐six per cent of companies have slope parameters which depart more than 10° from the optimum, thus impairing communicative effectiveness. A range of design strategies are employed which are consistent with the adoption of an impression management schema. No persistent systematic differences between forms of distortion and industry group are found. Comparison with prior single‐country studies reveals that graphs are used more extensively in Australia than in the U.S.A., the U.K. or Canada, but that there is less evidence of impression management. This latter finding is consistent with the view that there are fewer short‐term and capital‐market pressures in Australia.
Organizational Levels and Perceived Importance of Attributes for Superior Audit Performance
Authors: Tan Hun‐Tong
Published: March 2003

This article examines the attributes considered to be important for superior performance as an auditor and the changing importance of these attributes at different levels of the firm. It also investigates whether auditors are aware of the relative importance of these attributes. Auditors from three Big Six firms provided responses on the relative importance of various attributes for superior performance. The results showed variations in the relative importance of these attributes across different organizational levels. In addition, the results suggest that auditors generally have low to moderate levels of awareness of the relative importance of these attributes.
City Markets as a Unit of Analysis in Audit Research and the Re‐Examination of Big 6 Market Shares
Authors: Francis Jere R. , Stokes Donald J. , Anderson Don
Published: March 2003

Big 6 market shares based on aggregate national data have been used in prior research to infer market leadership and industry expertise, and to differentiate Big 6 accounting firms from one another. In this study it is demonstrated that further differences exist with respect to city‐specific audit markets, both between firms and within the same firm across different city markets. The specific finding is that the national market leader is not the city‐specific market leader the vast majority of time. Usefulness of the city‐level unit of analysis is further demonstrated by re‐examining the 1989 mergers creating Ernst & Young and Deloitte Touche. The primary effect of the Ernst & Young merger was to increase market shares in cities in which the pre‐merger firms already had significant market shares, resulting in an increase in the number of cities in which the merged firm achieved top ranking. In contrast, the primary effect of the Deloitte Touche merger was an expansionof the number of city‐level markets in which the merged firm had significant (though not leading) market shares. The findings of this study suggest that, in order to move beyond our current understanding, important audit research questions such as the reason for particular auditor–client alignments, the competitive nature of markets, audit pricing of reputations, and auditor reporting and independence issues should be investigated in city‐level markets where audit contracting occurs and where Big 6 market shares (and presumably reputations) vary widely from city to city.
A Quarter of a Century of Performance Auditing in the Australian Federal Public Sector: A Malleable Masque
Authors: Guthrie James E. , Parker Lee D.
Published: March 2003

Utilizing Porter’s (1981) theoretical framework for historical narrative analysis, this article examines the history of performance auditing in the Australian federal public sector. The analysis considers four crucial events in the period 1973‐98 the Royal Commission on Australian Government Administration (1976), the Australian National Audit Office efficiency audit developments (1979), the Joint Committee of Public Accounts Inquiry (1989), and the struggles over the passage of the Audit Act 1997. The analysis supports the proposition that performance auditing is a malleable social construct rather than a definitive performance review technology. The construction of its technological basis has been contested, with several concepts being included or excluded by various groups. These have both reflected and influenced agendas and activities at individual, organizational, institutional, sociopolitical and socioeconomic levels in the Australian public sector. Performance auditing is therefore revealed as a masque that ultimately may defy any universal technical definition.
The Lead–Lag Relationship Between Stock Indices and Stock Index Futures Contracts: Further Australian Evidence
Authors: Frino Alex , West Andrew
Published: March 2003

This article examines the lead‐lag relationship in returns on stock index futures and the underlying stock index for the Australian market between 1992 and 1997. On average across the sample period, futures returns lead index returns by twenty to twenty‐five minutes and there is some evidence of feedback from the equities market to the futures market. Analysis conducted on a year‐by‐year basis suggests that the extent to which the futures market leads the equities market has decreased over time and the relationship between the two markets has generally strengthened. This is consistent with an increase in the level of integration between the markets. The results suggest that prior research that compares lead‐lag relationships across international markets and time periods in drawing inferences on the effects of market structure needs to be interpreted with caution.
Chambers on Methods of Inquiry
Authors: Gaffikin Michael J. R.
Published: March 2003

Some of Chambers’ earliest works concerned the need for intellectual rigour in accounting research. Drawing from his reading in philosophy, science, organizational behaviour and economics, he determined the principles of scientific theory, enunciated these and consciously followed these precepts in developing his own theory. His 1950s and 1960s theoretical works were seminal contributions to methodological inquiry in accounting. They sought to rectify the lack of theoretical foundation in accounting thought and the observed ad hoc rules of accounting practice. While annoying many, including the doyen of U.S. accounting academe, A. C. Littleton, he practised what he preached and the theory he later developed followed closely precepts that were set out in those early methodological inquiries. He was attacked by a new wave of positive researchers in the 1970s, but a closer examination reveals they share the same ontology and epistemological proclivities. Differences arise from the different assumptions and aims of their theorizing. Their methodology is hypothetico‐deductivism derived from logical empiricism. This has been shown to be a defective and moribund method for developing acceptable reliable knowledge. Despite the claims of its adherents it ignores the ideological, political and social elements that make objective, value‐free theorizing impossible.
The Value Relevance of Financial Institutions’ Fair Value Disclosures: A Study in the Difficulty of Linking Unrealized Gains and Losses to Equity Values
Authors: Mozes Haim A.
Published: March 2003

This article provides a residual‐income valuation framework for assessing whether fair value disclosures required by SFAS 119, Disclosures About Derivative Financial Instruments and Fair Values of Financial Instruments, are value‐relevant. The primary theoretical and empirical result is that when using a residual‐income valuation model, the estimated relation between variables measuring fair value‐book value differences for financial instruments and security prices may be contrary to what one would have expected. Specifically, the greater the firm’s return on invested capital and growth rate relative to its cost of capital, the more negative the estimated relation between fair value‐book value differences for financial instruments and security prices. A generalization of this result is that tests linking equity values to various types of unrecognized gains and losses are, in many cases, unlikely to generate the hypothesized positive relation between equity values and the unrecognized gains and losses.
An Analysis of the International Development of the Equity Method
Authors: Nobes Christopher
Published: March 2003

The equity method was used as an early form of consolidation for all subsidiaries in the U.K. and for certain subsidiaries in the U.S. Another use of the method in some countries, even in the era of full consolidation, has been in the financial statements of investor legal entities. This seems to result from using the equity method as a technique for valuation or as an aid in the preparation of consolidated statements rather than as a form of consolidation. The method has also been used as a substitute for consolidation for excluded subsidiaries or for controlled companies not included in the definition of subsidiaries. Later, the equity method was introduced for joint ventures and then for other forms of ‘strategic alliance’, but the latter bring definitional problems, which have led to a consensus around an arbitrary threshold of 20 per cent of voting rights. This article traces these developments across time and space, and criticizes several of the past and present applications of the equity method. There is also an examination of the development of the terms ‘equity method’ and ‘associated company’.
Corporate Lobbying Behaviour on Accounting for Stock‐Based Compensation: Venue and Format Choices
Authors: Hill Nancy Thorley , Shelton Sandra Waller , Stevens Kevin T.
Published: March 2003

This article investigates U.S. corporate lobbying of the Financial Accounting Standards Board (FASB) in the U.S. on the exposure draft to Financial Accounting Standard No. 123 (FAS 123), Accounting for Stock‐Based Compensation. Essentially, firms lobbied the FASB in one of three ways: (a) against disclosure/recognition of any additional information beyond that already required in U.S. proxy statements, (b) for summary footnote disclosure of all employee stock‐based compensation (SBC), or (c) for either pro forma or formal income statement recognition of all employee SBC.

This study finds that the higher the level of the SBC of the top five executives, the less likely firms are to favour disclosing that information. This finding supports the hypothesis that economic self‐interests motivated lobbying behaviour on FAS 123. Furthermore, the study finds that U.S. corporations lobby against disclosure of executive SBC in the annual reports even when the annual reports would disclose no additional information beyond that currently disclosed in proxy statements. This is evidence that managers perceive that the venue of disclosure (proxy versus annual report) matters. It is posited that managers lobbied against disclosure of SBC to avoid possible changes to compensation contracts which in turn could adversely affect stock prices. In sum, the results support the notion that managerial self‐interest affects lobbying behaviour on the venue as well as the format of disclosure.
Asset Write‐Offs—Managerial Incentives and Macroeconomic Factors
Authors: Loh Alfred Lye Chye , Tan Tin Hoe
Published: March 2003

The objective of this study is to explain what firm‐specific and macroeconomic factors are likely to influence the asset write‐off decision in Singapore, where upward revaluations, unlike in the U.S., are also permitted. The focus is on write‐offs relating to two main asset categories, namely, fixed assets and long‐term investments. Data on seventy‐eight firms listed on the Stock Exchange of Singapore Mainboard were collected from 1983 to 1997. Results of cross‐sectional and time‐series analyses identify relevant macroeconomic factors to be unemployment rate, GDP growth rate and occupancy rate of properties, and firm‐specific factors to be profitability and a change of board chairman.
The Impact of Graph Slope on Rate of Change Judgments in Corporate Reports
Authors: Beattie Vivien , Jones Michael John
Published: March 2003

The use of graphs to disclose financial information in annual reports represents a significant dimension of financial disclosure management. Statistical graphics studies demonstrate that the accurate visual decoding of a graph is contingent upon the graph’s slope parameter. This article reports two related studies into the slope parameter in a financial reporting context. A laboratory experiment indicates that sub‐optimal slope parameters produce distorted judgments of corporate performance and an examination of the graphical formatting choices of 240 large U.K. companies indicates material departures from the optimal slope parameter. Policy implications are discussed.
Accounting for Private Estates and the Household in the Twentieth‐Century BC Middle Kingdom, Ancient Egypt
Authors: Ezzamel Mahmoud
Published: March 2003

This article examines the role of accounting in running the household economy and private estates in ancient Egypt. Drawing on translations of original accounts and business letters dating back to the Middle Kingdom, a number of diverse accounting roles are isolated. Firstly, the accounts and business letters shed interesting light on the determination of rations for individual members of the owner’s household during a period of hardship caused by high Nile inundation. Accounting calculations were an instrument of both planning the economy of the household and underpinning a specific pecking order of the relative standing of individual members of the household. Secondly, the accounts and business letters were used as a means of facilitating the ‘management at a distance’ of the affairs of the private estate, while the owner was absent having entrusted its day‐to‐day running to his agents. Not only were targets of performance set for the expected crop from the cultivation of the land owned, but also of land to be rented for cultivation. Finally, calculations were made to account for the manufacture of textiles from flax. The quantification produced by accounting calculations rendered the activities of human agents visible to the owner acting at a distance. Moreover, even when dealing with concrete, visible commodities, such as grain, the intervention of accounting sharpened this visibility by converting the concrete into an abstract theoretical value via the use of ‘monies of account’ to attain a measure of economic and social reciprocity.
Proportionate Growth and the Theoretical Foundations of Financial Ratios
Authors: McLeay Stuart , Trigueiros Duarte
Published: March 2003

The article proposes a theoretical framework for understanding financial ratios, showing that the multiplicative character of the financial variables from which financial ratios are constructed is a necessary condition of valid ratio usage, not just an assumption supported by evidence. Also, by assuming that firm size is a measurable statistical effect, the article offers an informed reappraisal of the limitations of financial ratios, particularly the well–known limitation of proportionality. The article is divided into two parts, one where ratio components are viewed as deterministic vari– ables and the other where they are random. Such an approach allows the characteristics of ratios to be more easily understood before generalizing the relationship between ratio components to encompass randomness. In the second part, when variability introduced by firm size is treated as a random effect, it is shown that if the accounting variables Y and X used to calculate a financial ratio Y/X are exponential Brownian motion, and if continuous growth rates are equal and proportionate to firm size, this may lead to ratios which are asymmetric but which do not necessarily drift.
Strategy and management control systems: A study of the design and use of management control systems following takeover
Authors: Nilsson Fredrik
Published: March 2003

This paper describes and analyses the approach taken by four well‐known Swedish companies to management control following takeover. The findings suggest two factors which can explain how the management control systems were designed and used after an acquisition: the corporate strategy of the acquirer and the business strategy of the acquired company. The case studies show how these forces could impose mutually inconsistent requirements on the management control system of the acquired firm, and also how these inconsistencies were resolved.
Persistence in capital budgeting reinvestment decisions – personal responsibility antecedent and information asymmetry moderator: A note
Authors: Schulz Axel K‐D. , Cheng Mandy M.
Published: March 2003

In this study we examine the effects of personal responsibility and information asymmetry on managers’ tendencies to escalate their commitment to poorly performing investment projects. Consistent with the recommendations by critics of the escalation literature (e.g. Bowen, 1987), we provided subjects with unequivocal negative project feedback. However, counter to other recent conflicting studies adopting Bowen’s recommendations, we reverted back to Staw’s (1976) original methodology and incorporated “free‐choice” into our personal responsibility construct. Our results confirm Staw’s (1976) original proposition of a positive relation between a manager’s personal responsibility for a poorly performing project and his/her subsequent escalation of commitment to the project. Further, we proposed that information asymmetry moderates the relation between the level of personal responsibility and escalation of commitment. Our results did not confirm this proposition. As such, results from our study re‐establish personal responsibility as an important antecedent variable to escalation of commitment.
Implicit deposit insurance and deposit guarantees: Characteristics of Australian bank risk premia
Authors: Dennis Steven A. , Sharpe Ian G. , Sim Ah Boon
Published: March 2003

This paper examines the hypothesis that CD issue yields of Australian banks incorporate a premium that reflects bank risk. Our empirical analysis of Australian banks’ CD premiums suggests the data is consistent with this hypothesis and hence supports the view that CD holders do not perceive their deposits as being risk‐free. Nor do we find any statistically significant difference between the premiums paid by private banks with implicit deposit insurance vis‐a‐vis those paid by government‐owned banks with explicit government guarantees.
Accounting and non‐accounting based information in the market for debt: Evidence from Australian private debt contracts
Authors: Ramsay Ian , Sidhu Baljit
Published: March 2003

This paper examines accounting and non‐accounting based restrictive covenants in Australian private debt agreements. With respect to the former, our findings differ from previous research on public debt. We find more varied definitions of constraints and their specified tightness in private debt contracts than in public debt contracts. Further, limits on interest cover are found to be continuing constraints and not ‘once‐off’ limits. The paper reports frequent use of more specific or ‘tailored’ accounting based constraints and the frequent inclusion of off‐balance sheet numbers in the measurement rules specified.

The paper also provides the first Australian evidence on the use of non‐accounting based constraints. These are pervasive and cover a wide range of corporate activity. While largely consistent with previous research the paper also reports evidence of restrictions previously argued to be sub‐optimal and hence, unlikely to be observed. Specifically, there are frequent restrictions on firms’ production and investment policies.
Earnings Management of Firms Subjected to Product Price Controls
Authors: Lim Stephen , Matolcsy Zoltan
Published: March 2003

This study documents Australian firms’ earnings management activities in response to product price controls established by the Australian government in the early 1970s. We predict that firms subject to price controls will adjust their discretionary accounting accruals downward to reduce reported net income and to increase the likelihood of approval of the requested price increase. To control for the confounding effect of performance, we analyse the performance of two groups of firms subject to price scrutiny prior to the event window and estimate the earnings management of these firms and a control group of firms during the period of scrutiny. Our results based on both longitudinal and a cross sectional experimental designs confirm that firms that were subject to the greatest scrutiny engaged in significant negative earnings management during the period of scrutiny, but not outside that period. Further, firms that were not subject to price controls did not engage in any significant earnings management during the same periods.

JEL classification: M41; M43
The effects of understanding rules and a worked example on the acquisition of procedural knowledge and task performance
Authors: Wynder Monte B. , Luckett Peter F.
Published: March 2003

Previous research (for example, Bonner and Walker, 1994) has investigated the impact of alternative forms of instruction and practice on both the acquisition of procedural knowledge and task performance. Responding to the call to consider alternative forms of instruction, this study reports the results of an experiment designed to distinguish between the effects of understanding rules and a worked example. Worked examples (such as previously prepared working papers, analysis sheets and spreadsheet templates) are of particular interest as they constitute an important source, frequently used by novice accountants, for understanding and performing various tasks.

The results indicate that understanding rules increase task performance through the acquisition of procedural knowledge, while a worked example provides task‐specific heuristics that increase task performance but not procedural knowledge. The different benefits of the two forms of instruction emphasise the importance of matching instruction methods to learning objectives. Furthermore, combining the two forms of instruction lead to the highest levels of task performance even with limited practice and no feedback.

JEL classification: I20; M41
Political cost influences on income smoothing via extraordinary item classification
Authors: Godfrey Jayne M. , Jones Kerrie L.
Published: March 2003

Until 1990, Australian managers could classify recurring gains and losses outside the normal operations of the firm as either operating or extraordinary items. The results of this study indicate that managers of companies with highly unionised workforces, and therefore subject to labour‐related political costs, attempted to affect the probability of wealth transfers by smoothing reported net operating profit via the classification of those recurring gains and losses. The degree of management ownership is associated with classificatory smoothing but interest coverage is not, indicating differential contracting influences.
The information content of portfolio performance history and persistence in fund performance: An examination of rollover funds
Authors: Hallahan Terrence A.
Published: March 2003

This paper examines the relation between past and future performance and explores the optimal past performance information set for a subset of Australian investment funds, namely, rollover funds. Four categories of funds are examined: fixed interest; multi‐sector yield; multi‐sector balanced; and multi‐sector growth. This study extends the performance persistence literature through the use of three methodologies (1) regression analysis;(2) non‐parametric contingency tables; and (3) top (and bottom) quartile rankings to explore the information content of fund performance history for groups of funds differentiated by investment objective. The results of the regression analysis suggest that there is evidence in support of persistence in performance for the fixed interest funds (particularly when performance is measured in terms of Jensen Alpha) but much more ambiguous evidence in relation to the multi‐sector funds. Contingency table analysis of fund performance histories of varying lengths reveals quite different results depending upon whether raw or risk‐adjusted returns are used. Use of raw returns creates an overall impression of performance reversals, whereas use of risk‐adjusted returns suggests the existence of performance persistence. Finally, the use of prior period top‐quartile and bottom‐quartile ranking are found to show strong evidence of persistence in respect to the risk‐adjusted performance of fixed‐interest funds.
Valuation‐based accounting research: Implications for financial reporting and opportunities for future research
Authors: Barth Mary E.
Published: March 2003

This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research.
Earnings, cashflows and returns: Functional relations and the impact of firm size
Authors: Hodgson Allan , Stevenson‐Clarke Peta
Published: March 2003

The relation between stock returns, earnings and cashflows is of importance because it directly addresses the issue of whether accounting data provide value relevant information. The empirical evidence to date, however, has documented low explanatory power for earnings and inconclusive incremental information content for cashflows. This research re‐evaluates the incremental information content debate using Australian data. Our research is motivated by: recent innovations in research design, including the specification of nonlinear functional relations between accounting variables and prices, and the fact that differences in firm size characteristics may influence the relative information content of the accounting variables. We observe that: (i) a nonlinear functional relation provides greater explanatory power for both earnings and cashflows;(ii) the results are consistent with more transitory earnings components for smaller firms; and (iii) contrary to received theory, cashflows add greater incremental explanatory power for large firms.
Cost efficiency in Australian non‐bank financial institutions: A non‐parametric approach
Authors: Worthington Andrew
Published: March 2003

A two‐stage procedure is employed to evaluate non‐bank financial institution cost efficiency. In the first stage, data envelopment analysis is used to calculate technical, allocative and cost efficiency indices using a sample of 200 Australian credit unions. The results indicate that a typical credit union’s costs in 1997 were 30 per cent above what could be considered efficient on the basis of observed best practice. The major source of overall cost inefficiency would appear to be allocative inefficiency, rather than technical inefficiency. The second stage uses limited dependent variable regression techniques to relate credit union efficiency scores to financial statement information. The results indicate that commercial lending activities, expenditures on information technology and marketing and promotion, the proportion of non‐interest income, and association membership are a significant influence on the level of cost efficiency. The results are found to be invariant to alternative model specifications where input prices are first assumed to be different for each credit union and then assumed to be identical across the sample.
The effects of experience and task difficulty on accuracy and confidence assessments of auditors
Authors: Chung Janne , Monroe Gary
Published: March 2003

This study extends prior research in psychology and auditing by examining the effects of audit experience and task difficulty on control risk evaluation. It also examines whether the effect of framing is mitigated by the simultaneous presentation of information. Ninety‐eight auditors performed a control risk evaluation task and recorded their judgement and their confidence. We find that judgement confidence increases with audit experience and that judgement confidence decreases as perceived task difficulty increases. However, we find no relation between audit experience and judgement accuracy or between perceived task difficulty and judgement accuracy. In addition, we find a significant negative relation between judgement confidence and judgement accuracy, which indicates that the participants’ confidence is not appropriate. As expected, there is no framing effect when information is presented simultaneously.
Order effects and recency: where do we go from here?
Authors: Trotman Ken , Wright Arnold
Published: March 2003

Previous studies of auditor judgments have examined whether the order in which information is received affects their judgments. In particular, these studies have considered whether there is a recency effect which occurs when the disconfirmatory/confirmatory evidence treatment results in a final judgment which is significantly higher than the confirmatory/disconfirmatory treatment. More recent studies have investigated the circumstances when recency effects exist and when they are mitigated. The results of the studies are mixed. After the addition of two further studies (Arnold et al., 2000; Monroe and Ng, 2000) in this edition of the journal, the results are still mixed. The paper outlines the possible explanations for the mixed results across studies and some issues that need to be addressed prior to collection of further empirical evidence.
Futures and forward price differential and the effect of marking‐to‐market: Australian evidence
Authors: Alles Lakshman A. , Peace Phoebe P.K.
Published: March 2003

The objective of this paper is to examine the effects of marking‐to‐market of futures contracts on the price differential between futures and forward contracts based on the predictions of the Cox, Ingersoll and Ross (1981) (CIR) model. Cox et al., (1981) derive a series of propositions with respect to the relationship between futures and forward prices and a set of testable implications. These are tested empirically in this paper using Australian data from November 1991 to June 1997. The results provide evidence of the presence of significant futures and forward price differences, where the futures price is consistently below the forward price. Only partial support is found for the Cox et al., (1981) propositions, implying that the effect of marking‐to‐market is not able to fully account for the price differential. Therefore, it is not possible to rule out the influence of other institutional factors on the futures‐forward price difference.
Attribution of investment performance: an analysis of Australian pooled superannuation funds*
Authors: Gallagher David R.
Published: March 2003

This paper evaluates the market timing and security selection capabilities of Australian pooled superannuation funds over the eight‐year period from January 1991 to December 1998. Evaluation of both components of investment performance is surprisingly scarce in the Australian literature despite active investment managers engaging in both market timing and security selection. The paper also evaluates performance for the three largest asset classes within diversified superannuation funds and their contribution to overall portfolio return. The importance of an accurately specified market portfolio proxy in the measurement of investment performance is demonstrated. This paper employs performance benchmarks that account for the multi‐sector investment decisions of active investment managers in a manner that is consistent with their unique investment strategy. Consistent with U.S. literature, the empirical results indicate that Australian pooled superannuation funds do not exhibit significantly positive security selection or market timing skill.
The intertemporal relationship between market return and variance: an Australian perspective
Authors: Dean Warren G. , Faff Robert W.
Published: March 2003

In this paper we investigate the intertemporal relationship between the market risk premium and its conditional variance in an Australian setting. Using a bivariate EGARCH‐M model combined with the dynamic conditional correlation (DCC) framework as proposed by Engle (2000), we find evidence of a positive relationship between the market risk premium and its variance and evidence of two distinct interest rate effects. Furthermore, while the bond market’s own variance is not priced by investors, we find that the covariance between equity and bond markets is a significant risk factor that is priced in the market.
The post–announcement performance of dividend–changing companies: The dividend–signalling hypothesis revisited
Authors: Gunasekarage Abeyratna , Power David M.
Published: March 2003

This study revisits the dividend–signalling hypothesis by examining the post–announcement performance of U.K. companies which disclose dividend and earnings news to the capital market on the same day. For this purpose, we first analyse market–adjusted excess returns for three periods around the announcement and then examine the financial performance in the year of the announcement and in the subsequent five–year period. The near announcement excess returns and the announcement–year financial profiles provide strong evidence in support of the dividend–signalling hypothesis. However, in contrast to the predictions of the hypothesis, the longer–term results suggest that the companies which announce a reduction in both dividends and earnings (bad news companies) outperform their dividend–increasing counterparts.