Earnings Predictability,Bond Ratings,and Bond Yields

We examine the role that earnings predictability plays in establishing a firm’s cost of debt capital by measuring its influence on establishing a new issue’s bond rating. In addition, we also examine the effects of earnings predictability on the initial pricing of the firm’s debt. Using new corporate bond issues from the period 1990–2000, our results indicate that the degree of predictability of a firm’s earnings is positively associated with a firm’s bond rating. Moreover, earnings predictability is also documented to be negatively associated with the offering yield. Importantly, bond rating classification accuracy is improved when specific measures of a firm’s earnings predictability are added to a robust model.JEL Classification:     

Domestic currency appreciation and foreign capital inflows: What comes first? (Chile, 1977–1982)

The purpose of this paper is to find (Granger) causality relations between the real exchange rate, the inflow of foreign capital, interest rate arbitrage, and the terms of trade, in a representative indebted, developing country Chilé. This is done for a time period in which Chile went from an unprecedented expansion (1977–1981) to a severe recession (1982). The paper confronts two competing hypotheses that purport to explain such behavior. Hypothesis one claims that causality went from the real exchange rate (affected by nominal exchange rate policy) to capital inflows, in what could be termed a current-account–deficit-induced demand for foreign funds. Hypothesis two posits a causality that ran the other way—from capital inflows to the real exchange rate—in which case the ‘exogenous’ inflows of foreign money implied a current account deficit. Special attention is paid to the role played by two other related factors, interest rate arbitrage and terms of trade variations. By applying innovation accounting techniques based on estimated vector autoregressions, support is found for the second of these hypotheses. Thus, the real issue—in Chile and in many other currently indebted Latin American countries—should be the timing and extent of the capital account liberalization process carried out during the period.     

The Real Effects of Credit Ratings: The Sovereign Ceiling Channel

We show that sovereign debt impairments can have a significant effect on financial markets and real economies through a credit ratings channel. Specifically, we find that firms reduce their investment and reliance on credit markets due to a rising cost of debt capital following a sovereign rating downgrade. We identify these effects by exploiting exogenous variation in corporate ratings due to rating agencies' sovereign ceiling policies, which require that firms' ratings remain at or below the sovereign rating of their country of domicile.     

Long waves and geography in the 21st century

Intersecting macrohistorical rhythms provide insights into the processes that will guide geographical change in the first half of the next century. The repetition of long-wave rhythms provides a key to what lies 25 and 50 years ahead, helping us to identify the patterns, determine the processes, and work out their logical consequences. To understand this it is necessary to clarify the concepts of ‘techno-economic systems’ and ‘long waves of prices’ and their interrelationships in ‘growth logistics’. A second key to the next half-century is provided by the baby boom-baby bust generational rhythms that interlock with long waves and growth logistics at double the frequency. Together, the two keys not only provide a macrohistorical framework for unraveling the course of economic and social history; they provide a basis for geographical anticipations.     

Monetary policy, ‘dollarization,’ and parallel market exchange rates: The case of the Dominican Republic

Excessive money creation may give rise to inflation tax revenues and to a depreciation of the domestic currency. this in turn leads to a shift away from the domestic currency into a foreign currency (e.g., the US dollar, hence the term ‘dollarization’). From the domestic monetary authority's point of view, ‘dollarization’ is an unwelcomed phenomenomn, thus the monetary authorities will attempt to arrest the ‘dollarization’ phenomenon while maintaining the excessive money growth. This paper develops and tests a model which analyzes the effects of monetary policy on dollarization and the ‘parallel’ market exchange rates.     

Information and the transnational SME controller

One of the issues that face the small- and medium-sized enterprise (SME) when expanding is the ‘control’ issue and this paper investigates and presents preliminary evidence of ‘controlling’ or ‘management accounting’ practice in a transnational SME. Wibsey, the site of the case, is now a small group of companies that have expanded from a U.K. base into 10 European countries. This expansion has posed complex problems, which have increased the information requirements of the SME. The contextual issues of complexity and resulting challenges for the transnational organization in its management accounting, information and control systems are considered. Wibsey uses traditional management accounting as the basis of supporting decision-making in the group and a lower level of information need is reported, in contrast to Dent (1996) (Dent, J. F., 1996. Global competition: challenges for management accounting and control,Management Accounting Research , 7(2), 247–269), because the group chooses to maintain a traditional ‘accounting-led’ evaluation system in controlling and evaluating its transnational operations.     

Exploring (false) dualisms for environmental accounting praxis

This paper focuses on the political nature of the linguistic dualisms or ‘false antinomies’ that inhere in environmental accounting practice and environmental accounting research. These dualisms, ‘subject–object,’ ‘man–woman,’ ‘mind–body,’ and ‘culture–nature,’ the paper argues, need to be ‘ambiguized’ if the politics inherent in these dualisms are to be resisted. Two strategies for the ‘ambiguization’ of these dualisms are suggested: ‘performative parody,’ which is a strategy intended for environmental accounting practitioners, and ‘democratic reflexivity,’ which is a strategy intended for environmental accounting researchers. In taking this linguistic focus, the paper challenges common sense constructions of the environment and the potentially elitist and anti-democratic nature of environmental accounting research. By offering these two strategies, the paper provides a means of environmental accounting praxis, or means of resisting global ‘environmental’ domination.     

Corporate debt issues and interest rate risk management: Hedging or market timing?

Apart from the obvious reasons for raising capital, a firm can hedge its interest rate exposure by issuing debt, the value of which moves in an opposite direction from the value of its assets as interest rate varies. We examine whether firms in the UK market make full use of debt issuances for hedging purposes or if they have other considerations. Our evidence shows that firms’ choices of debt issues are primarily driven by debt market conditions in an effort to lower their costs of capital rather than managing their firm-specific interest rate exposures. This suggests that market timing, as opposed to hedging, is the primary motivation behind corporate debt issuances.     

Beyond the mundane: reconciling breadth and depth in futures enquiry

For some time there has been a need within Futures Studies (FS) to develop methods which go beyond the dominant empirical tradition. For many years there has been a near-exclusive emphasis on understanding the external world ‘out there’. But as time has gone by, so it has become clear that our ability to understand the world ‘out there’ crucially depends on an underlying world of reference that is ‘in here’. Understanding the near-future environment calls for a combination of ‘inner’ and ‘outer’ views which, for example, give as much credence to judgment as to calculation. This paper considers a way of considering these very different ‘ways of knowing’. Overall, the aim is to go beyond what might be termed ‘mundane’ analysis, i.e. that which is preoccupied with surfaces, and to open out a broader arena for futures enquiry.     

地方公共债务与资本回报率——来自新口径债务数据和三重机制检验的经验证据

资本回报率对于理解我国经济运行具有重要意义。本文通过匹配2006-2015年地级市层面的新口径债务数据和资本回报率数据,实证检验了地方公共债务扩张对资本回报率的影响效应及其地区异质性表现,并从宏观、中观和微观三个角度开展作用机制分析。研究发现:第一,地方公共债务扩张对我国宏观资本回报率产生了负面影响,此影响在经过一系列稳健性检验后依然存在;第二,地方公共债务的扩张通过降低基础设施投资效率、提高房地产业投资占比和挤出企业投资产生影响;第三,上述负面影响在非城市群、非大中城市和土地融资依赖度更高的城市表现更为突出。以上结论为深化地方政府投融资体制改革提供了政策参考,未来应注重债务资金的绩效管理和使用效率,促进经济高质量发展。     

International market segmentation and Eurodebt issues

Implications of capital market segmentation for international capital structure (ICS)—capital structure consisting of equity issued in one country and debt issued in another—are examined. Necessary conditions for the emergence of ICS are analyzed under two options for debt issues (foreign debt and Eurodebt) and comparisons are made. It is shown that in cases where the project cannot support an ICS including foreign debt Eurobonds can be issued and would be profitable.     

Global modelling in the 1990s : A critical evaluation of a new wave

It seems that after a ‘golden decade’ in the 1970s and a period of decay in the 1980s, global modelling is making a comeback. In particular, the report Scanning the Future seems to mark the beginning of a new era in this respect. In this article this ‘new wave’ of the 1990s is compared with the ‘old wave’ of the 1970s. Although there is progress in the scientific realm, these new models lack a deep concern for the burning problems of our time like the poverty gap between the North and the South and the ‘ecological problematique’. In many ways these new models reflect the new mood of the times, which lacks any vision of a new paradigm and which is strongly ‘northern-centric’.     

The non-neutrality of debt in investment timing: a new NPV rule

Summary Limited liability debt financing of irreversible investments can affect investment timing through an entrepreneur’s option value, even after compensating a lender for expected default losses. This non-neutrality of debt arises from an entrepreneur’s unique investment opportunity, and it is shown in a standard model of irreversible investment that includes the equilibrium effect of a competitive lending sector. The analysis is partial, in that it takes as exogenously given an entrepreneur’s use of debt. Intuitively, limited liability lowers downside risk for the entrepreneur by truncating the lower tail of risks, and lowers the investment threshold. Compensating the lender for expected default losses reduces project profitability to the entrepreneur, and increases the investment threshold. The net effect is negative, because lower downside risk has an additional impact on the option value of delaying investment. The standard NPV rule in real options theory implicitly assumes debt to be neutral. With non-neutrality of debt, an investment threshold is higher than investment cost, but lower than the standard NPV rule. Comparisons with other standard investment thresholds show similar relationships.     

Bridging the divides of online reporting

This paper looks at the possibilities of improving online reporting by closing the ‘digital divide’ through a ‘digitalised revolution’ and by narrowing the ‘accounting divide’ through the sharing of power and the expansion of membership in the International Accounting Standards Board (IASB). Paradoxically, whilst the IASB may have contributed to the ‘accounting divide’ it may very well possess the potential to close it and thus improve online reporting. The potential to bridge the ‘accounting divide’ rests with the greater participation by developing country members to exert influence and ownership of the accounting standards setting process.     

The environment in an ‘information society’: A transition stage towards more sustainable development?

Social scientists and futurists have suggested that societal development is advancing to a novel stage, to an ‘information society’. However, the crucial qualifiers of this ‘new’ society are ambiguous. Furthermore, environmental goals have created new challenges for information society studies. This paper examines the interaction and dynamics between the information society and sustainable development, which most often manifest themselves as competing scientific and socio-political discourses. On the one hand, there is the potential for reducing the stress on the environment: the emergence of information technologies and services can lead to a dematerialisation of production and immaterialisation of consumption. On the other hand, there are risks: positive environmental effects might be overcome by the ‘rebound effect’ caused by excessive economic growth. It is concluded that further theoretical and empirical studies are needed in order to examine the complex and contradictory relationship between the information society and environmental issues.     

Revisiting the ‘Court of Generations’ Amendment : A conversation

In 1991, futurist Bruce E. Tonn proposed a ‘Court of Generations’ Amendment to the US Constitution. His proposed ‘Court of Generations’ lacked punitive powers but, hopefully, would have sufficient legitimacy to counteract extreme present-minded thinking evident in US political processes and institutions. Although Tonn's ‘Court of Generations’ Amendment has been well received in the futures community, who else has heard of it? Otherwise, has it made any difference? How can the cumbersome and nonfuturistic amendment procedure in the US Constitution generate a futures-oriented ‘Court of Generations’? And for those who sincerely look forward to a ‘Court of Generations,’ precisely what kind of tactically savvy visionary leadership will give the ‘Court of Generations’ any chance of being approved? During 1997, Vincent Kelly Pollard engaged Dr. Tonn in an Internet conversation aimed at clarifying these issues.     

Accounting for People: A real step forward or more a case of wishing and hoping?

In principle, the Accounting for People initiative announced by the UK government in January 2003 held out the possibility of a real step forward in promoting the interests of employees. Despite its distinctly managerialist discourse, the initiative acknowledged that having now recognised that ‘people are our greatest asset’, employers should begin to consider how to report on their people management activities in financial statements. After more than three and a half years of consultation, debate and deliberation, larger UK quoted companies are now charged with providing only a minimal level of general information on their employees. Whatever promise may have been evident to wishful thinkers in the early months of the initiative, this outcome confirms that there is little possibility for progressively ‘accounting for people’ as long as such practices are shaped by powerful sectional interests. The purpose of this paper is to subject the initiative to critical scrutiny. The paper seeks to document how the Accounting for People initiative was quickly and effectively emasculated as a consequence of the power and influence wielded by the UK accountancy profession, identified as a key agent of capital. Additionally, attention is drawn to a number of contemporary developments, largely and perhaps knowingly ignored in the course of the Accounting for People debate, that may yet inform and energise a more radical approach to accounting for people.     

Smaller business governance: Exploring accountability and enterprise from the margins

Smaller businesses now rank higher upon the corporate governance agenda. This agenda places their accountability and ‘enterprise’ particularly at issue. It is only put at issue because of just one possible problematization however. That problematization firstly assumes judicious accountability to be the crux of good governance with accounting at its hub. It secondly assumes that smaller businesses are the very seedbed of any ‘enterprise economy’, virtually irrespective of what form they take, or ‘enterprise’ they display. By then combining these assumptions together, this finally reproblematizes any relationship between accountability and ‘enterprise’, so that ‘de-regulation’ and decoupled accountability liberates smaller business ‘enterprise’ further. Others might question and challenge the very basis, as well as particular formulation, of this problematization however. A better grasp of the greater fluidity and complexity of smaller businesses would make the boundaries of their accountability and ‘enterprise’ more clear and leave their respective margins more suitably exposed. As a key potential instrument for that purpose managerial accounting research might then better inform the debate by specifically rendering these boundaries more visible while also identifying the precise scope for manoeuvre at/across their margins as well. To that end this paper uses certain enabling frameworks to construct and interpret the particular case of managerially accounting for a grown smaller business working across exactly those margins from the perspective of a ‘reflective practitioner’ acting as a field researcher for these purposes. As well as offering fresh insights into how far the boundaries of accountability and enterprise might legitimately stretch, this case calls for more critical thinking about how they might change.     

THE IMPACT OF THE QUALITY OF EARNINGS ON THE VALUATION RELEVANCE OF CASH FLOW DISCLOSURES

This study investigates whether the ‘quality of earnings’, defined as the relationship between profitability and cash generating ability, is a conditioning factor with regard to the valuation relevance of cash flow disclosures. The study is performed on a sample of 197 British firms employing data over a 23-year period. The results of the study support the contention that the valuation relevance of cash flow disclosures is conditional upon the ‘quality of earnings’, as previously defined. Specifically, the decomposition of unexpected earnings into its cash flow and accruals components provides incremental information content to earnings when the firm-specific time-series correlation between earnings and cash flows is low. Furthermore, the cash flow ‘surprise’ is valued more than the accruals ‘surprise’ when the firm-specific time-series correlation between earnings and cash flows is low.     

The end in sight?: Some speculations on environmental trends in the twenty-first century

For a generation there has been unresolved debate between anxious environmentalists and sanguine ‘contrarians’, both of which have been able to amass strong evidence in favour of their positions. This is an important paradox, and the paper attempts to resolve it by means of an elementary but robust model of environmental trends between 1950 and 2100. A crucial feature of the approach is to disaggregate the developed ‘North’ and developing ‘South’, revealing strikingly different patterns. The North's environmental impact will decline steadily, but in the South a rapid increase in environmental impact can be expected in the first half of the 21st century, followed by an equally rapid decline. This dramatic environmental ‘spike’ will be unique in human history and mark a fundament transition to the sustainable state. Its qualities and duration will determine many features of the human and natural world for millennia to come. Many policy implications flow from this analysis. Controversially, it suggests that the ‘spike’ should be embraced and managed rather than avoided or delayed.