Exploring the ethical behavior of managers: A comparative study of four countries

Donaldson and Dunfee's (1994) social contracts theory of economic ethics was subjected to empirical scrutiny to determine whether it can explain differences in behavior between cultures. Data collected utilizing a series of vignettes developed by Fritzsche and Becker (1984) were examined for differences in indicated ethical behavior among American, Japanese, Korean and Taiwanese managers. Rationale for the behavior was classified according to hyper and community norms which were supported or violated. The results suggest that the three East Asian countries do not neatly cluster together in relation to the U.S. in terms of their patterns of ethical behavior. Nonetheless, when we examined the specific rationale for the decisions provided by the managers, the effects of Asian cultural characteristics became more notable. We also found that the social contracts theory provided a much needed bridge between ethical universalists and relativists. The specific reasons underlying their decisions are discussed in the light of cultural and social differences.This research project was partially supported by a research grant from the School of Business and Management, The Hong Kong University of Science and Technology.     

Ownership Structure,Business Group Affiliation,Listing Status,and Earnings Management: Evidence from Korea*

Using a large sample of both publicly traded and privately held firms in South Korea (hereafter “Korea”), we investigate whether, and how, the deviation of controlling shareholders' control from ownership, business group affiliation, and listing status differentially affect the extent of earnings management. Our study yields three major findings. First, we find that as the control‐ownership disparity becomes larger, controlling shareholders tend to engage more in opportunistic earnings management to hide their behavior and avoid adverse consequences such as disciplinary action. The result of our full‐model regression reveals that an increase in the control‐ownership wedge by 1 percent leads to an increase in the magnitude of (unsigned) discretionary accruals by 1.3 percent of lagged total assets, ceteris paribus. Second, we find that for our full‐model regression, the magnitude of (unsigned) discretionary accruals is greater for group‐affiliated firms than for nonaffiliated firms by 0.8 percent of lagged total assets. This result suggests that business group affiliation provides controlling shareholders with more incentives and opportunities for earnings management. Finally, we find that for our full‐model regression, the magnitude of (unsigned) discretionary accruals is greater for publicly traded firms than for privately held firms by 1.2 percent of lagged total assets. This result supports the notion that stock markets create incentives for public firms to manage reported earnings to satisfy the expectations of various market participants that are often expressed in earnings numbers.     

The impact of product market competition on earnings quality

The objective of this paper is to examine the impact of product market competition on earnings quality. Based on a sample from the US manufacturing sector for the period 1996–2005, we find consistent evidence showing a positive relation between product market competition and earnings quality. Additional tests also confirm a positive relation between product market competition and the precision of public and private information held by investors and analysts. We also provide evidence that firms competing in concentrated and heterogeneous industries are associated with a number of earnings attributes and information quality not shared by those competing in concentrated but homogeneous industries. These findings are consistent with the intuition that firms enjoying a monopolistic advantage tend to avoid the attention of their competitors and politicians by creating a more opaque information environment.     

PILL,PATCH, OR SHOT? SUBJECTIVE EXPECTATIONS AND BIRTH CONTROL CHOICE*

When choosing a contraception method, women base their decisions on their subjective expectations about the realizations of method‐related outcomes. Examples of outcomes include getting pregnant and contracting a sexually transmitted disease (STD). I combine innovative data on probabilistic expectations with observed contraceptive choices to estimate a random utility model of birth control choice. The availability of expectations data is essential to identify preferences from beliefs. Effectiveness, protection against STDs, and partner's disapproval are found to be the most important factors in the decision process. The elicited expectations and inferred preference parameters are used to simulate the impact of various policies.     

Bank Lending and Inflation in Malaysia: Assessment from Unrestricted Error-Correction Models

The paper estimates inflation models for Malaysia by considering the influence of bank lending. The unrestricted error-correction model (UECM) proposed in Pesaran et al. (2000) was employed as being appropriate for small sample analysis such as the present study which covered annual data from 1973 to 1997. The results of 'bounds' tests confirmed a long-run equilibrium relationship between inflation and its determinants, namely import price, money supply (M3), bank credit and real income. The estimated UECMs revealed that the important factors in the Malaysian inflation process are import price and real-income variables. It was found that concurrent fiscal policies had a major influence on the impact of the depreciation of the naira on inflation. The UECMs appear to perform well and to provide an appropriate framework for forecasting the Malaysian inflation behaviour.     

Advertising Spending Efficiency of Beauty-Care Product Companies: Comparison Between Local Companies and Multinational Companies in the U.S. Market

ABSTRACT

In this study, the authors apply data envelopment analysis (DEA) to evaluate the financial efficiency of U.S. beauty-care companies and foreign companies based on their media advertising expenditures in eight key media outlets (i.e., magazines, newspapers, outdoor, network TV, spot TV, syndication TV, cable TV, and radio) and their revenues in the U.S. market. The analyses revealed that 47.4% of the companies examined advertised efficiently. Companies that advertised inefficiently could save, on average, 75% of their advertising spending. The results also indicated that although U.S. companies are more efficient overall than are non-U.S. companies in terms of advertising spending, the competitiveness of non-U.S. companies should not be underestimated because some of them advertised efficiently (e.g., Kao Corporation from Japan) or almost efficiently.     

A REASSESSMENT OF AGGREGATE IMPORT DEMAND FUNCTION IN THE ASEAN-5: A Cointegration Analysis

This study aims to reinvestigate the empirical evidence on the long-run relationship of aggregate import demand behavior for the ASEAN-5 founding nations. This study adopts the import demand equation that has been developed by Xu (2002). The results of bounds test (Pesaran et al., 2001) show the volume of imports, activity variable (national cash flow), and relative price of imports are cointegrated in Malaysia and Singapore. However, no empirical evidence supports that these variables are cointegrated in Indonesia, Thailand, and the Philippines. This study provides a relevant implication specifically that devaluation strengthens the balance of trade. Following the Marshall-Lerner condition, exchange rate policies such as devaluation, can used to improve trade balance in Malaysia, Singapore, the Philippines, and Thailand, but not in Indonesia.     

Foreign Direct Investment,Merchandise and Services Trade in a Transition Economy: The Case of Cambodia

Since the liberalization of trade and investment in the 1990s, inward foreign direct investment (FDI) has been seen to play a greater role in forging trade flows, integration into the regional and international markets and economic development for a transition economy such as Cambodia. Despite her recent progress in attracting FDI and fostering trade, the direction of causality between inward FDI, exports and imports of merchandise as well as services has not been empirically explored. The findings show that inward FDI not only can promote both merchandise and services exports but also indicate the presence of backward and forward linkages, which could result in positive externalities. However, based on the impulse response analysis, it seems that merchandise exports are more vulnerable than services exports to an unanticipated shift in FDI inflows in the medium run.     

A dynamic analysis of the Korea–Japan free trade area: simulations with the G‐cubed Asia–Pacific model

This paper explores the effects of the proposed free trade agreement between Japan and Korea. Our experiments are based on a new dynamic simulation model, called the Asia‐Pacific G‐cubed Model, which incorporates the rational expectations and intertemporal optimizing behaviour of agents. The simulations show that both Korea and Japan benefit from the bilateral FTA although other countries lose. The output gains from the FTA are estimated to be larger when trade liberalization is undertaken by a tariff reduction that is more gradually phased‐in than rapid.

JEL Classification: F15     

A theory of reasoned action perspective of voting behavior: Model and empirical test

A model based on the theory of reasoned action was developed to analyze voting behavior. Based on an empirical test in Singapore, the proposed model was found to be generally effective in predicting the intentions of voters. Attitudes toward the candidate and political party contributed more to explaining variation in voting intention than interpersonal and mass media subjective-norm components. Direct measures of affect served to better account for voting intention variation than componentially derived measures, although they did not completely mediate the latter's effect. Implications of the findings are discussed and suggestions for future research furnished © 1995 John Wiley & Sons, Inc.