The integration substitute: the role of controls in managing human asset specificity

As the integration solution to the problem of specific assets cannot be replicated on human asset specificity because slavery is illegal, economic theory states that control systems substitute for integration through a balanced structure to help align diverse interests. To understand the intricate design features of the balance, we examine a case‐study firm. For low human asset specificity, the restriction and segregation of usable decision rights link with standards. However, incentives are traced to individuals only to the extent task deviations do not create relevant future costs that are difficult to be self‐corrected. For high specificity, incentives are related to outputs rather than outcomes, because outcome variations reduce the attractiveness of maintaining the balance. Subjective assessment is used as an efficient alternate ‘balancing’ solution and decision control is shared when available subjective data are inadequate.     

Transaction costs and asset prices: a dynamic equilibrium model

In this article we study the effects of transaction costs onasset prices. We assume an overlapping generations economy witha riskless, liquid bond, and many risky stocks carrying proportionaltransaction costs. We obtain stock prices and turnover in closedform. Surprisingly, a stock's price may increase in transactioncosts, and a more frequently traded stock may be less adverselyaffected by an increase in transaction costs. Calculations basedon the 'marginal' investor overestimate the effects of transactioncosts. For realistic parameter values, transaction costs havevery small effects on stock prices but large effects on turnover.     

A note on the valuation of asset management firms

Market capitalization relative to assets under management is often used to value asset management firms. Huberman’s (2004) dividend discount model implies that cross-sectional variations in this metric are explained by cross-sectional differences in operating margins, and yet we find no evidence of this in our data set. We show that a superior model—inspired by the work of Berk and Green (2004)—includes also the level of fees as an explanatory variable. This approach dramatically increases the fit of our valuation model and casts doubt on the relevance of the so-called Huberman puzzle.     

Size and investment performance: a research note

This article examines the performance of actively managed Australian equity funds and the extent to which both fund size and manager size are related to risk-adjusted returns. Larger investment managers, by definition, engage in higher trade volume. The literature documents that transaction costs and trade difficulty increase with trade size, given difficulties associated with 'large' trades and their potential market impact on security prices. Therefore, ceteris paribus , large orders are consistent with lower levels of efficiency in trade execution and higher transaction costs. While larger investment managers may experience material disadvantages relative to their smaller counterparts, the Australian literature to date has largely ignored the issues of asset size and the long run performance of investment offerings. This article, employing returns and fund size data that control for survivorship bias, documents that while large retail active equity funds earn higher risk-adjusted returns (after expenses) than small funds, the difference in mean performance is not significantly different. In the institutional sphere, the study also finds no statistically significant performance differences (net of expenses) between funds on the basis of portfolio size. These findings suggest the hypothesis that performance declines with fund size is not supported empirically.     

On the role of the organization in auditors’ client-acceptance decisions

The objective of this research is to better understand the role that the accounting firm organization plays when auditors make difficult client-acceptance decisions in the midst of conflicting influences—specifically between the professional and commercial “logics of action”. The investigation was conducted via a field study at three Big Six firms located in Canada. The main argument that is developed in the paper is that the firm sets the stage for auditors’ decision-making by making its formal organizational components (e.g., the firm's partner-compensation scheme and decision-making policies) more reflective of one of the two logics, thereby establishing and helping reproduce certain patterns of order and consistency within the firm. However, the firm's organizational components are also to some extent reflective of the other logic, thereby providing decision-makers with a legitimizing space to influence the decision process differently. I present fieldwork data that is consistent with the paper's argument.     

The wisdom of crowds: Mutual fund investors’ aggregate asset allocation decisions

We find that the aggregate asset allocation decisions of US mutual fund investors depend on economic conditions. Both anticipated economic downturns and periods of turmoil lead investors to direct flow away from risky equity funds and towards lower-risk money market funds. These patterns are markedly stronger for investors in low cost and low turnover funds relative to investors in high cost and high turnover funds, consistent with sophisticated investors being more sensitive to changing conditions. Benchmarked against a buy-and-hold strategy, these asset allocation strategies reduce risk without degrading the risk-return trade-off. Our evidence suggests that individual investors, often dismissed as noise traders, collectively react to economic signals in a sensible manner when determining asset allocations.     

The role of environmental disclosures as tools of legitimacy: A research note

Legitimacy theory suggests companies with poorer environmental performance would be expected to provide more extensive off-setting or positive environmental disclosures in their financial reports. However, recent investigations of the performance/disclosure relation [Al-Tuwaijri, S. A., Christensen, T. E., &; Hughes II, K. E. (2004). The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach. Accounting, Organizations and Society, 29, 447–471; Hughes, S. B., Anderson, A., &; Golden, S. (2001). Corporate environmental disclosures: are they useful in determining environmental performance? Journal of Accounting and Public Policy, 20, 217–240; Hughes, S. B., Sander, J. F., &; Reier, J. C. (2000). Do environmental disclosures in US annual reports differ by environmental performance? Advances in Environmental Accounting and Management, 141–161; Patten, D. M. (2002). The relation between environmental performance and environmental disclosure: a research note. Accounting, Organizations and Society, 27, 763–773] report mixed results. In this study, we use size-matched groups based on industry membership (environmentally sensitive versus non-environmentally sensitive) and environmental performance (worse performers versus better performers, based on data from KLD Research and Analytics, Inc.) to test for differences in the use of monetary and non-monetary non-litigation related environmental disclosure. Results indicate that the use of monetary and non-monetary components of the non-litigation related environmental disclosure varies across groups. In general, the findings provide additional support for the argument that companies use disclosure as a legitimizing tool.     

Heterogeneous time varying transaction costs and asset pricing in international equity markets

In this paper, we examine the time variation in transaction costs relative to excess returns, in a panel consisting of 10 international equity indices over the time period 1984–2005. This is undertaken by extending the consumption CAPM (CCAPM) model proposed by Campbell and Shiller (Rev. Financ. Stud. 1:195–228, 1988) to incorporate time varying proportional transaction costs. We rigorously address both the cross-country heterogeneity in the estimated model and endogeneity. We find strong evidence that suggests transaction costs should be included as an additional explanatory variable in the CCAPM. This leads to the conclusion that transaction costs should be included in asset pricing models as their stochastic process impacts directly on private consumption expenditure.

Voluntary disclosure in a bargaining setting: A research note

We conduct an experiment on voluntary disclosure within a simple bargaining setting wherein a proposer must choose one of two possible offers and a responder chooses whether to reject or accept that offer. In one treatment the proposer has the option to disclose whether a fairer (more equal) offer was available relative to the one chosen. Under standard economic theory, a responder will interpret no disclosure to mean the proposer's offer was the less fair alternative, and so a proposer who is making the fairer offer will disclose. In consequence, voluntary disclosure should perform as well as mandatory disclosure in motivating proposers to make fair offers. Given their rejection rates, we find responders properly infer the meaning of non-disclosure. However, despite the correct inferences made by responders, proposers submit twice as many fair offers with mandatory disclosure than with voluntary disclosure. Our results suggest that the choice of voluntary versus mandatory disclosure has consequences for resource allocation within the firm even though under standard assumptions about preferences it should not.     

Irish women accountants and career progression: a research note

This article presents the findings of research into the career progression of Irish Chartered Accountants which compares the career progress of men and women and examines the obstacles to progression encountered by women. The research indicates that women face obstacles that are not encountered by their male counterparts and that career progression is frequently made at substantial cost to their personal lives.     

The consumption based asset pricing model: A note on potential tests and applications

Breeden's demonstration that Merton's multi-beta capital asset pricing model can be collapsed into a single-beta model where betas are computed with respect to aggregate consumption is an important theoretical advance. Nonetheless, Breeden's model retains many of the empirical problems that beset Merton's earlier version. In general the consumption betas will be nonstationary, so that the state variables must be observable for the model to be estimated.     

On a historical note: the legacy of Thomas Hodgkin

Physicians in the practice of insurance medicine are exposed to an unbelievable spectrum of pathology. This series of short biographies is intended to give the reader a quick overview of the history of diseases encountered in our everyday practice and to see "the face behind the name." In the first article of this series, I wish to pay homage to one of the "great men of Guy's," Dr. Thomas Hodgkin.     

On the robustness of risk-based asset allocations

Since the subprime crisis, portfolios based on risk diversification are of great interest to both academic researchers and market practitioners. They have also been employed by several asset management firms and their performance appears promising. Since they do not rely on estimates of expected returns, they are assumed to be robust. The same argument holds for minimum variance and equally weighted portfolios. In this paper, we consider a Monte Carlo simulation, as well as an empirical global portfolio dataset, to study the effect of estimation errors on the outcomes of two recently proposed asset allocations, the equally weighted risk contribution (ERC) and the principal component analysis (PCA) portfolio. The ERC portfolio is more robust to changes in the input parameters and has a smaller estimation error than the Markowitz approaches, whereas the PCA portfolio is even more unstable than the classical approaches. In the worst-case scenario, neither approach delivers what it promises. However, in every case the resulting return?Crisk relationship is dominated by the Markowitz approaches.     

How information systems influence user decisions: a research framework and literature review

Technology has created new information alternatives that may influence the way information system users make decisions. This paper proposes a research framework for examining how features of an information system affect the decision-making process. The framework is synthesized by merging frameworks from the accounting information systems (AIS) literature and the human information processing (HIP) literature. The framework is then used to organize a literature review of 15 journals from 1987 through mid-1999, which identified 57 decision-making studies. Findings indicate that a wide range of opportunities is available for information systems research on issues of contemporary importance. This discussion includes changes in the decision process initiated by implementing enterprise resource planning (ERP) systems, data warehouses, electronic commerce, virtual organizations, on-line financial reporting, and disaggregated financial statement information.     

Auditors' behaviour in an audit conflict situation: A research note on the role of locus of control and ethical reasoning

This study investigates the interaction effects of locus of control, a personality variable, and ethical reasoning on the behaviour of auditors in an audit conflict situation. Eighty experienced auditors from a sample of Big Six and Non-Big Six CPA firms in Hong Kong were provided with a case study involving an audit conflict situation and were asked to state the extent to which they would accede to the client's request. Subjects were also administered Rotter's Locus of Control Scale and the Denning Issues Test (DIT) to measure ethical reasoning. Analyses of the data using multiple regression found that ethical reasoning moderated the relationship between locus of control and the auditors' responses to accede to client's request in an audit conflict situation. An implication of these results is that the explicit recognition of both locus of control and ethical reasoning provides a better explanation for differences in auditors' ethical decision making.     

软件研发项目外包的管理方法

在信息技术日新月异发展的今天,中小商业银行由于其有限的资金实力,软件研发队伍规模不大,导致研发软件产品耗时长、速度慢,难以满足业务发展的需要。因此,中小商业银行与专业软件研发公司等合作,做好软件研发项目外包,共同研发适应市场需求的新产品,已成为中小商业银行实现技术创新、促进业务创新发展的重要途径。     

Communication costs, information acquisition, and voting decisions in proxy contests

This article synthesizes some recent progress in the theoriesof corporate control and political lobbying to model the proxycampaign as a political campaign. The model yields a numberof testable implications, only some of which have been examinedin the literature. For example, if the loss from voting fora 'bad' dissident exceeds the gain from voting for a 'good'dissident, the model predicts that as communication costs fall,the number of proxy fights increases, announcement day returnsdecrease, and the fraction of dissident wins first increasesand then decreases.     

Linear predictability vs. bull and bear market models in strategic asset allocation decisions: evidence from UK data

Most papers in the portfolio choice literature have examined linear predictability frameworks based on the idea that simple but flexible Vector Autoregressive (VAR) models can be expanded to produce portfolio allocations that hedge against the bull and bear dynamics typical of financial markets through careful selection of predictor variables that capture business cycles and market sentiment. Yet, a distinct literature exists that shows that non-linear econometric frameworks, such as Markov switching, are also natural tools to compute optimal portfolios arising from the existence of good and bad market states. This paper examines whether and how simple VARs can produce portfolio rules similar to those obtained under a simple Markov switching, by studying the effects of expanding both the order of the VAR and the number/selection of predictor variables included. In a typical stock-bond strategic asset allocation problem for UK data, we compute the out-of-sample certainty equivalent returns for a wide range of VARs and compare these measures of performance with those of non-linear models. We conclude that most VARs cannot produce portfolio rules, hedging demands or (net of transaction costs) out-of-sample performances that approximate those obtained from simple non-linear frameworks.     

Binary response and logistic regression in recent accounting research publications: a methodological note

We review 31 articles in leading accounting journals that performed a logistic regression analysis for a binary dependent variable. Our review shows that many of these articles have ambiguities and errors in the presentation of the logistic regression model. We explain that incorrect presentations of the model, even in conjunction with a correct analysis, may lead to a serious misinterpretation of research findings. Two articles are critiqued to demonstrate the reporting problems. Our note is a call for improvement in model presentation and related statistical analysis in the accounting field.     

A note on the impact of audit qualifications on lending and credit decisions

This paper examines the impact of certain types of qualified auditors' report on bank lending decisions and credit analysts' decisions in the United Kingdom. The research design involved sending a set of financial statements, which contained one of four different types of audit report, to a large sample of bankers and credit analysts. They were asked to state how much they would lend, or how much credit they would give, for each of the hour audit report situations. The mean loan-credit responses for each audit report type were then examined to see if there were any significant differences. It was found that two types of audit qualification, namely going concern problems and asset valuation problems, significantly affected decisions and that firms suffering these types of qualifications had their credit standing significantly impaired.