Industry Signals Relayed by Corporate Earnings Restatements

This study finds that downward earnings restatements are associated with negative industry valuation effects. These effects are more pronounced when the valuation effects and the change in earnings of the firm restating its earnings are worse, when the restatement is initiated for reasons other than fraud, when the bubble was bursting, and when the restatement is subsequent to the publicity regarding Enron's fraud. The negative industry effects are more pronounced in industries that have a higher level of accruals and intangible assets, weaker sales growth, and a higher degree of stock volatility.     

The Era of Cross‐Border M&A: How Current Market Dynamics are Changing the M&A Landscape

Rising equity volatility, surging energy prices, a weakening dollar, and widening credit spreads are influencing both tactical financing decisions and long‐term financial strategy. Amid this turbulence is a quickly changing global M&A landscape that portends long‐term opportunities to deliver value to shareholders. In this environment, the authors offer the following suggestions for U.S. multinationals: (1) continue looking overseas for well‐positioned targets, especially in emerging markets, even in the context of a weak U.S. dollar; (2) consider using their financial flexibility for opportunistic deals today now that asset values are contracting; and (3) critically evaluate non‐core assets at home or abroad that might be valuable to cross‐border acquirers. For multinationals in Europe and developing economies, the time may be right to consider transformational cross‐border “megadeals.” Emerging‐market companies have the opportunity to buy low and sell high by using high‐valued equity as an acquisition currency, particularly to gain access to developed markets. Companies in need of new capital should consider the financial and strategic benefits of selling minority stakes to a sovereign wealth fund or other foreign partner.     

Organizational Form Outside the Principal–agent Paradigm

This paper provides a review of theories of hierarchies in organizations where the rationale for hierarchical organization derives from agents’ limited capacities for acquiring and communicating information. In these circumstances, hierarchical organization of agents may serve to reduce the amount of time necessary for completion of production tasks, or to improve the quality of information for decision-making on how to undertake production tasks. An informal discussion of theories of hierarchy is provided as well as a formal presentation of key models and results. Limitations of existing approaches are considered.     

Accounting Quality,Liquidity Risk,and Post‐Earnings‐Announcement Drift

Recent microstructure research finds that liquidity risk, in particular its information component, plays an important role in explaining the post‐earnings‐announcement drift (PEAD). We decompose liquidity risk into an accounting‐associated component and a nonaccounting‐associated component and examine their relative importance in explaining PEAD. Our research is motivated by recent findings that liquidity risk is a systematic risk and earnings quality is negatively associated with liquidity risk. We find that the accounting‐associated component is more strongly related to PEAD returns than is its nonaccounting‐associated counterpart. Further analyses reveal that the relation between accounting‐associated liquidity risk and PEAD returns is weaker for firms with greater analyst following. We also find that in a significant market downturn, the relation between accounting‐associated liquidity risk and PEAD returns becomes more pronounced. Our study is the first to document a liquidity risk‐based role of accounting quality in explaining the PEAD phenomenon. It parses out the PEAD risk premia associated with accounting versus nonaccounting sources and, by so doing, sheds light on the role of accounting quality in shaping the liquidity risk‐PEAD returns relation.     

The impact of offering two versus three alternatives in choice modelling experiments

Researchers designing choice modelling experiments have some latitude over the number of choice alternatives that can be offered in each choice set. There is some evidence that design dimensions, including the number of alternatives available in each choice set, can influence model outcomes. A key issue is whether referendum formats with binary options are preferable to choice sets with multiple alternatives.A choice modelling experiment was performed where questionnaires delivered to two split samples differed only according to whether two or three alternatives were offered to respondents in each choice set. The results indicate that more robust models could be constructed from the three-alternative split compared to the two-alternative split. One reason for the difference is that respondents tended to display serial non-participation in the two-alternative format, choosing an alternative consistently without regard for changes in the attributes. For practitioners of the CM technique, the results suggest that it may be preferable to offer more than two alternatives in a choice set that includes a status quo option.     

Buying behavior,social support and credit card indebtedness of college students

This research examines three factors that are associated with college students' credit card indebtedness. Using survey data, we find that college students' buying patterns and social networks affect their credit card indebtedness. Specifically, students with a tendency towards compulsive buying are more likely and those with greater social support are less likely to hold credit card debts. Depth interview data further illustrate the contexts and causes of overusing credit cards as well as solutions for their debt problem. This research sheds light on reasons why college students fall into credit card debt and suggests strategies for helping them use credit cards wisely.     

How Cisco creates new value via global customer service

In Bust the Silos: Opening Your Organization for Growth, Hunter Hastings and Jeff Saperstein offer a new concept for business growth in today's global economy. It is called “demand creation”: the design of new organizational structures and processes to make managing the demand for a product or service a process‐based, predictable, and repeatable science. The challenge is how to harness the capabilities of new productivity tools with new business processes for success. Hastings and Saperstein argue that forward‐thinking organizations must work differently: in roles, not just jobs; in new forms of multifunctional teams, not just departments; in networks, not just rigid structures; and in listening to escalate responsiveness, not just communicating to get the message across. We all now operate in a highly connected, rapidly evolving, customer‐centric, and knowledge‐driven environment. Yet, most of our current management practices, organizational models, and job functions are not effective in serving our customers. Value is created through relationships with customers. Companies must adopt principles and practices that encourage every individual in the diverse groups of employees to have a shared sense of purpose to engage in more effective ways of working together to build customer intimacy and loyalty. This article profiles the Cisco Customer Interaction Network and the transformation of its global operations from call centers to customer‐relationship builders. It addresses the following questions:

• Why is being adaptive necessary for organizational survival?
• How does one design a customer support system that listens and teaches rather than just fixes problems?
• How does one take full advantage of the Web for customer support?
• How does one give front‐line professionals the training and tools to be consultants rather than mechanistic problem solvers?
• How can evolving metrics be a game changer?

The article is adapted from Bust the Silos: Opening Your Organization for Growth by Hunter Hastings and Jeff Saperstein (BookSurge, 2009). © 2010 Wiley Periodicals, Inc.     

Sequential sampling models of choice: Some recent advances

Choice models in marketing and economics are generally derived without specifying the underlying cognitive process of decision making. This approach has been successfully used to predict choice behavior. However, it has not much to say about such aspects of decision making as deliberation, attention, conflict, and cognitive limitations and how these influence choices. In contrast, sequential sampling models developed in cognitive psychology explain observed choices based on assumptions about cognitive processes that return the observed choice as the terminal state. We illustrate three advantages of this perspective. First, making explicit assumptions about underlying cognitive processes results in measures of deliberation, attention, conflict, and cognitive limitation. Second, the mathematical representations of underlying cognitive processes imply well documented departures from Luce’s Choice Axiom such as the similarity, compromise, and attraction effects. Third, the process perspective predicts response time and thus allows for inference based on observed choices and response times. Finally, we briefly discuss the relationship between these cognitive models and rules for statistically optimal decisions in sequential designs.     

Multi-Stakeholder Labour Monitoring Organizations: Egoists,Instrumentalists, or Moralists?

This article examines four leading multi-stakeholder labour monitoring organizations. All operating in the maquiladora industry, these organizations are viewed in light of the growing global trend toward industry self-regulation, or what has been referred to as the ‘global out-sourcing of regulation’. Their Board compositions, codes of conduct and monitoring and enforcement strategies are all examined as a means of tentatively positioning these organizations along an ‘egoist-instrumentalist-moralist’ ethical culture continuum. Such a framing provides insights into the perceived salience of these organizations’ broader stakeholders, the effectiveness of codes of conduct on workplace practices more generally, and the role that ethics plays in the governance and accountability of these increasingly important types of organizations. Jeff S. Everett teaches financial accounting at the University of Calgary's Haskayne School of Business. Along with his research on maquilas, Jeff conducts research in the areas of professional ethics, environmental accounting, and accounting education. Dean Neu is a professor of accounting at the Haskayne School of Business. His research examines how accounting numbers play a crucial role in shaping public perceptions and public policy. Currently a research assistant at the Haskayne School of Business. Daniel Martinez is examining issues related to fair trade, corruption, and economic development in indigenous communities.