A note on value relevance of mark-to-market values of energy contracts under EITF Issue No. 98-10

This paper examines whether marked-to-market values of energy trading assets and liabilities of companies that enter into energy contracts are related to market value of equity. The Emerging Issues Task Force of the Financial Accounting Standards Board ruled in November 2002 to ban the use of mark-to-market accounting for energy contracts out of concern that fair values can be easily inflated. We find that the excess of fair value over original value of energy trading assets and energy trading liabilities is not relevant for valuation. It may be inferred that fair values which are subject to management estimates and not verifiable are poor signals of worth and performance (Watts, R., 2003. Conservatism in accounting Part I: Explanations and implications. Accounting Horizons 17, 207–221).     

Picking the Measuring Stick: The Role of Leaders in Social Comparisons

Organizational members frequently evaluate how their abilities and standing compare with those of their colleagues. Although these comparisons can have a negative impact on organizations, little attention has been paid to the role of leaders in these processes. Drawing on interviews with individuals in leadership positions in business schools, we develop a framework to explain what triggers leaders’ attention to social comparisons among faculty and how they become involved in them. Central to this framework are leaders’ self‐schemas, which encompass their preferences about the criteria members should use in making comparisons. Leaders’ self‐schemas are activated by discrepancies between their own comparative judgements and those they perceive members to be making and impel them to act in ways consistent with their preferred bases of comparison. Our framework repositions social comparisons as a multi‐perspectival, political phenomenon in which leaders see themselves as playing a role in shaping members’ evaluations and workplace interactions.     

Predictors of H1N1 Influenza Pandemic News Coverage: Explicating the Relationships between Framing and News Release Selection

In health pandemic situations characterized by urgency, uncertainty and information scarcity, news media are highly reliant on information subsidies from public health agencies. This study, based on a content analysis, examines the relationships between the framing characteristics of news releases and subsequent publication to identify the predictors of news release selection for news coverage in the 2009 H1N1 A Influenza pandemic in Singapore. Through the news releases issued by the Singapore Ministry of Health and the resulting news stories in a Singapore newspaper, The Straits Times, this study found that six framing variables significantly predict a news release’s selection for news coverage: theme, episodic vs. thematic framing, emotion appeal, tone, gain vs. loss, and outbreak vs. nonoutbreak situation. News releases are more likely to be selected for news coverage when they focus on a preventive frame, rely on thematic framing, use emotion appeal, have a positive tone, are framed as gain, and are issued during an outbreak situation.     

Can Bank Lines of Credit Protect REITs against a Credit Crisis?

In a tight credit market, the primary concern of most real estate investment trusts (REITs) is the ability to access capital and maintain adequate liquidity. Bank lines of credit or loan commitments, which are legally binding contracts arranged to provide debt at the call of the borrowers under prespecified terms, have been theorized to provide insurance protection against a credit crisis. This article examines whether bank lines of credit can indeed provide some insurance for REITs and allow them to access credit during bad times. Covering three credit crunch events, both the origination and utilization patterns of commitment loans by 275 REITs publicly traded between 1992 and 2007 are analyzed. We find that bank lines of credit insulated REITs from credit rationing at both the broad market level as well as at the firm level. However, the insurance value is qualified in the case of smaller and risky firms which may not get to extend their credit limit or draw down on their existing credit lines in a credit crisis.     

Heterogeneous Agents and the Indifference Pricing of Property Index Linked Swaps

Swap spreads predicted by the traditional risk-neutral valuation models are much lower than the quoted market spreads for property index linked swaps (Patel and Pereira, Journal of Real Estate Finance and Economics, 36:5–21, 2008). This paper attempts to develop a utility indifference-based model for evaluating the reservation spreads of swap receivers and payers based on the principle of expected wealth utility equivalence rather than the traditional risk-neutral argument. Under the proposed model framework, this paper addresses the determination of the swap spreads. When the incompleteness of real estate markets and heterogeneity of representative agents are taken into consideration, it is shown that the agents’ risk preferences and heterogeneous beliefs about expected future property returns are the remarkable determinants for the swap spreads. Our model also identifies market power and the settlement rules in the event of counterparty default as important factors in determining the swap spreads. Our model provides a possible interpretation for the difference between the spreads predicted by the traditional models and the actual market spreads.     

Mortgagor Motivations in Prepayments for Adjustable Rate Mortgages

This paper provides the first rigorous analysis of residential adjustable mortgage prepayment using individual ARM mortgage data in Singapore. The prepayment rate for residential mortgages is low and is dominated more by macroeconomic factors than mortgage–specific factors. Specifically, the prepayment rate is increasing in residential property prices, but decreasing in income as proxied by GDP and volatility in mortgage rates. There is weak evidence to suggest that prepayment is increasing in the borrower's age, mortgage rate hikes, cash–availability variables and sentiments of the stock market, and decreasing in the price premium over valuation, payment–to–income ratio, loan–to–value ratio, loan term and floor level of the property.     

Indonesia's new national accounts

This note addresses some of the main changes in Indonesia's national accounts, from 2000. These have resulted in higher estimates of GDP and slightly higher rates of GDP growth. The changes are part of a regular cycle of revisions and improvements in national accounting by the central statistics agency, BPS. On the output side, the higher level of GDP in 2000 is mainly due to upward revisions of value added in manufacturing industry, banking and trade. On the expenditure side, the higher level is mainly due to an upward revision of exports and the introduction of an estimate of investment in inventories. The choice of a new base year has resulted in higher weights for sectors with relatively high growth. This explains the higher rates of total GDP growth during 2000–03.