Does Industry Regulation Matter? New Evidence on Audit Committees and Earnings Management

This paper investigates the moderating role of industry regulation on the effectiveness of audit committees in restricting earnings management. Using comprehensive panel data of S&P 1500 firms between 2003 and 2007, we find that the proportion of CEO directors on an audit committee is positively associated with earnings management in unregulated industries, while this association is significantly weaker in regulated industries. Further, the proportion of financial experts on an audit committee is negatively associated with earnings management. Our results also indicate that the average board tenure of audit committee members is negatively related to earnings management in regulated industries, but positively affects earnings management in unregulated industries. Finally, audit committee members’ average directorship increases earnings management in regulated industries, but reduces earnings management in unregulated industries. Overall, our results suggest that the effectiveness of audit committees in reducing earnings management and improving financial reporting quality is influenced by industry regulation.     

Does Globalisation Affect Crime? Theory and Evidence

Globalisation sceptics argue that trade liberalisation has high social costs, including an increase in expropriative behaviour such as civil conflict, coercion of labour and crime. We show that a theoretical relationship between trade and expropriation exists, but the sign differs for developed and developing economies. We verify this empirically using data on crime rates. Specifically, we find that trade liberalisation, as measured by both higher openness and lower import duty rates, tends to increase burglaries and theft in very labour‐abundant countries. For other countries, however, we find that trade liberalisation has either a small negative effect on crime or no effect, depending on the country's capital abundance.     

How Much Does Wealth Matter in the Acquisition of Financial Literacy?

The acknowledged widespread lack of financial literacy casts serious doubts on the ability of individuals to make financial decisions. Some studies suggest that financial experience can affect financial knowledge and that household financial wealth can be a factor leading to the acquisition of financial literacy. This article investigated the determinants of financial literacy using the 2006 wave of the Italian survey on household income and wealth. Empirical results indicated that wealth has a positive but small effect on the degree of financial knowledge.     

When and How Does Supplier Opportunism Matter for Small Retailers' Channel Relationships with the Suppliers?

This study examines the moderating influences of power‐dependence structure and environmental volatility on the relationships between supplier opportunism and its outcomes. Data were collected from 102 small retailers using a mail survey. The results of multiple regressions indicate that supplier opportunism decreases small retailer credibility/benevolence and long‐term orientation. Further, the findings show that the lower the small retailer dependence, the stronger the negative influences of supplier opportunism on small retailer long‐term orientation. Finally, the lower the environmental volatility, the stronger the negative influences of supplier opportunism on small retailer credibility/benevolence and its long‐term orientation. Marketing implications and recommendations are provided.     

Does the Product Really Matter? A Look at Mainstream Pro-Environmental Consumption Behavior

The overall objective of this article is to determine if the product matters in determining willingness to pay for pro-environmental products compared to non-pro-environmental products through experimental design. Ultimately, this research aims to use a posteriori or behavioral segmentation approach to cluster consumers using the price collected through a controlled auction experiment they would actually pay to purchase a pro-environmental product as opposed to a non-pro-environmental product, as well as profiling each segment according to (a) perceived product benefits; (b) values; (c) perceived consequences of purchase behavior; and (d) demographics based on self-reported survey data.     

Innovation and Exporting: Does Quality Matter?

We study the effect of innovation on a firm’s propensity to export, developing a simple model where heterogeneous firms operate in a monopolistically competitive market and set their prices as a markup above the marginal cost. The key proposition of our model is that firms that invest in better quality products are more likely to export. We test it using Italian firms’ data. Econometric results suggest that innovation, defined as quality upgrading, has a significant effect on the firms’ propensity to export; and, for those who are already exporting, innovation—defined as new products—has a significant effect on a firm’s turnover.     

How Robust is the Kearney/Foreign Policy Globalisation Index?

We argue that the Kearney/Foreign Policy (KFP) index of globalisation is constructed by making some problematic assumptions about the measurement, normalisation and weighting of the variables included in the index. We propose alternative measurement, normalisation and weighting rules, and using these rules, recalculate the ranking of the fifty countries, using the original KFP data. Specifically, we use, in various combinations: (i) variables ‘adjusted’ for geographical characteristics of countries; (ii) statistically optimal weights obtained by principal components analysis; (iii) a normalisation rule that treats different years of observations separately. We find that the country rankings change significantly when adjusted variables are used, indicating that the original KFP index is partially measuring geographical differences between countries.     

Justice in the Organizational Context： How Does Rating Disagreement Matter？

Since managers and employees play unequal roles in organizations, they have different perceptions regarding managerial practices. Understanding such differences and investigating the underlying causes help improve business administration and motivate organizational members. Employing data obtained from a sample of large SOEs （state owned enterprises）, this study evaluates disagreement between managers and employees in terms of their perception of organizational justice. Plausible causes of the disagreement and managerial implications are offered.     

How Has Globalisation Affected Inflation in China?

This paper investigates how globalisation has affected inflation in China. We estimated standard Phillips curve inflation equations and examined whether globalisation has affected the structure of inflation dynamics as captured by the Phillips curve. Empirical results suggest that the globalisation of the Chinese economy has changed the behaviour of inflation dynamics. In particular, the impact of domestic and global output gaps on domestic inflation in China has changed significantly since 1994. Before 1994, the domestic output gap was a major factor in driving domestic inflation. After 1994, however, the global output gap plays a significant and more important role in affecting domestic inflation. The finding implies that Chinese monetary authorities should specifically take into account the developments in global output in their monetary policymaking process.     

Corruption and FDI: Does the Use of Distinct Proxies for Corruption Matter?

Abstract

The relationship between FDI and corruption/institutional quality in host countries has been widely analyzed. However, the use of distinct samples and indicators for corruption tends to hinder the interpretation and outcomes of econometric assessments. The aims of this paper are to assess the extent to which the use of distinct proxies for corruption provides diverse evidence regarding the relationship between corruption and FDI, and to assess whether controlling for other indicators of institutional quality reinforces the effect of corruption indicators on FDI inflows. In order to accomplish these goals, we estimate a set of multivariate logistic models using 96 countries over the period 2000 to 2010. The results evidence that using distinct proxies for corruption variables, as well as controlling for other types of the countries’ institutional quality, generate distinct outcomes. In isolation, a country’s transparency and its citizens’ corruption perceptions fail to impact on FDI whereas a bribe-free environment is conducive to FDI inflows. When we control for the human, social and economic development of the countries, the impact of a transparent and bribe-free context on FDI attraction is enhanced. Overall, it is clear that in order to become a large recipient of FDI a country has to guarantee a transparent and bribe-free environment, characterized by low income taxes, high literacy rates and generalized economic freedom (own labor and property control by citizens).     

How is the Financial Crisis Affecting China''s Exhibition Industry?

As the financial crisis, which was caused by the American subprime crisis, spreads across the globe, some countries and regions including the Unit-ed States, Japan and the European Union have plunged into economic recession.     

China''''s Auto Industry at the Crossroad

The century-old world automobileindustry has experienced two majorreorganizations.The first one tookplace during the industrialized countries'internal merger that started in the early yearsof the 20th Century.Scores or hundreds ofautomobile factories in these countries weremerged into three or four large groups;thesecond one was a new round of a worldwidemajor reorganization happened in the late1990s,which was initiated by the GermanDaimler-Benz's purchasing the US Chryslerthree years ago.For today's world autoindustry pattern,authoritative persons give     

How Does the Largest Shareholder Affect Dividends?

Focusing on the legal protection of minority shareholders in Japan, which suggests that manager‐owned firms are better governed than corporation‐owned firms, this study presents a new test of two dividend models: the substitute model and the outcome model. In support of the latter, I find that manager‐owned firms pay higher dividends than corporation‐owned firms. The paper also examines the association between ownership by the largest shareholder and dividend payments. I find an inverted U‐shaped relationship for manager‐owned firms and a U‐shaped relationship for corporation‐owned firms between them. These results can be explained by the benefits and drawbacks of concentrated ownership.     

Leverage and Corporate Performance: Does Institutional Environment Matter?

This paper aims to provide new empirical evidence on a major corporate governance issue: the relationship between leverage and corporate performance. We propose two major findings to this literature by applying frontier efficiency techniques to measure performance of medium-sized firms from seven European countries. A maximum likelihood procedure is used to estimate a stochastic cost frontier and the parameters of an equation relating cost inefficiency to leverage simultaneously. We find that the relationship between leverage and corporate performance varies across countries, which tends to support the influence of institutional factors on this link. We then suggest the influence of the efficiency of the legal system and in a lesser degree of the access to bank credit on the relationship between leverage and corporate performance.      

Volatile Environments and Interfirm Governance: Does Trust Matter?

Purpose: Manufacturers in volatile environments should rely on governance mechanisms to reduce the risks inherent in those environments. However, it remains to be determined which governance mechanism a given manufacturer will develop in volatile environments in order to manage the relationship with its supplier. The principal objective of this study is to explain circumstances in which different governance mechanisms function under volatile environmental conditions.

Methodology: The empirical test was conducted with manufacturing companies in the context of manufacturer-supplier relationships. Construct measures were based on existing measures and previous research. Measurement reliability and validity were established using exploratory and confirmatory factor analysis and an overall measurement model was assessed with structural equation modeling using LISREL 8.54.

Findings: The results of this study showed that manufacturers should consider the level of trust they bestow on their suppliers to select an appropriate governance mechanism to deal with environmental volatility. When a manufacturer does not trust its supplier under conditions of environmental volatility, the manufacturer should consider adopting unilateral governance. If a manufacturer trusts its supplier, it should consider bilateral governance to respond in a timely manner to changes in the resource market.

Contribution: This study introduced trust to explain governance mechanisms in an uncertain environment and showed that interorganizational trust is a condition for influencing a manufacturer's propensity toward a specific governance mechanism.     

Emotional Labor and Job Satisfaction: Does Social Support Matter?

ABSTRACT

For the purpose of withstanding the fierce competition in the banking sector, various banks in Ghana requires employees to display emotions whenever dealing with customers. However, these emotions come with their own consequences. The question is could social support provided by these banks serve as a way to mitigate the negative outcomes of such behaviors and increase employee job satisfaction? This paper, therefore, examined the moderating role of social support in the effect of emotional labor on employee job satisfaction in the banking sector. Data were collected from 140 bank employees. The analytical tool used was Structural Equation Modeling.     

How Does the Market Value Corporate Sustainability Performance?

This study provides empirical evidence on how corporate sustainability performance (CSP), as proxied by membership of the Dow Jones sustainability index, is reflected in the market value of equity. Using a theoretical framework combining institutional perspectives, stakeholder theory, and resource-based perspectives, we develop a set of hypotheses that relate the market value of equity to CSP. For a sample of North American firms, our preliminary results show that CSP has significant explanatory power for stock prices over the traditional summary accounting measures such as earnings and book value of equity. However, further analyses suggest that we should not focus on corporate sustainability itself. Our findings suggest that what investors really do is to penalize large profitable firms with low level of CSP. Firms with incentives to develop a high level of CSP not engaging on such strategy are, thus, penalized by the market.     

The Level of Compliance with the International Code of Marketing of Breast-Milk Substitutes: Does it Matter to Stock Markets?

The present paper explores, theoretically, and empirically, whether compliance with the International Code of marketing of breast-milk substitutes impacts on financial performance measured by stock markets. The empirical analysis, which considers a 20-year period, shows that stock markets are indifferent to the level of compliance by manufacturers with the International Code. Two important issues emerge from this result. Based on our finding that financial performance as measured by stock markets cannot explain the level of compliance, the first issue refers to what alternative types of mechanisms drive manufacturers who comply the least with voluntary codes such as the International Code. Conversely, from our finding that stock markets do not reward the most compliant, the second issue raised is an inherent weakness of stock markets to fully incorporate social and environmental values.