Earnings conservatism: panel data evidence from the European Union and the United States

This paper focuses on earnings conservatism, and provides new evidence based on procedures that account for variability at the firm level, drawing a comparison between the European Union and the United States. A key finding is that the estimated responsiveness of earnings to bad news is substantially higher when unobserved firm-specific effects are modelled. Furthermore, it is shown that accounting has become more conservative not only in the U.S. but also in the EU when taken as a whole, and there is little evidence of marked differences in the asymmetric timeliness of earnings between the two. Indeed, any changes in this property of earnings are likely to be attributable to a common factor that influences firms similarly in both locations, and not necessarily to the process of economic convergence that has taken place in the EU.     

The Location of Markets,Perceived Entrepreneurial Risk,and Start-up Capital of Micro Rural Firms

It is argued that when founders of SMEs perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the start-up capital. This paper provides an empirical examination of two concurrent hypotheses. Firstly, that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk. Secondly, that the location of the market for the firm’s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start-up capital. A statistical analysis based on the simultaneous tobit model is used. Results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity, as well as entrepreneurial experience and the location of the markets for the firm’s output. The results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation.     

Implications of regulation for entry and investment in the local loop

A number of countries around the world are trying to promote competition at the local loop as demand for higher bandwidth to the home increases. Different technologies (xDSL, cable modems, and wireless local loop) offer alternative solutions and the issue for regulators is to design a framework that promotes competition and investment. Regulators can promote competition in a number of ways, but two “pure” strategies are services and infrastructure competition. This paper models the regulator and incumbent–entrant interactions explicitly in order to understand how the structure of the voice services might evolve under different regulatory frameworks. Our analysis suggests that a “mix” of infrastructure and service competition like the one promoted in Netherlands, stimulates investment by incumbents and entrants alike and offers better consumer benefits. The message for policy makers is that the introduction of “sunset clauses” provides new entrants with strong incentives to invest while allowing them to enter in service competition and to acquire important knowledge about their new market.     

Access to the agricultural market for small farmers in Southern Africa: The farmer support programme

Two recent events have led to a re‐evaluation of the appropriate approach to agricultural development in the self‐governing and independent national states in Southern Africa. First, the support and establishment of private farmers is generally emphasized in the agricultural development policies of these states. Although no clear‐cut strategies for implementation have emerged, greater attention is being given to research on the small farmer approach which is prominent in the literature on agricultural development. Second, an investigation into the financing of agriculture in the self‐governing and independent national states has recently been concluded within the system for multilateral co‐operation between the SATBVC states. The proposals emanating from this investigation also conform with the principles of the small farmer approach. The purpose of this paper is to motivate the need for a small farmer approach, and to show how the principles of this approach can be transformed into operational policy. In this regard the design of a farmer support programme is discussed.     

The double entry structural constraint on the econometric estimation of accounting variables

ABSTRACT

This paper develops a structural system for estimating accounting variables, within which the deterministic relationships inherent in financial statement articulation are clearly defined in the econometric model. The key proposition of the paper lies in the treatment of the financial statements as a matrix of codetermined information constrained by double entry, where the expected value of each of the individual items that comprise the financial statements will be mirrored elsewhere in the system with a different sign. Given that the change in net operating assets shares the same variation as the change in net financial claims, it is shown, by formally identifying the articulation, that empirical application will yield increased precision and improved efficiency by comparison to the more traditional methods that fail to specify the structural double entry property.     

Legally‐Recognised Group Structures: An Exploratory Analysis

Corporate groups are the dominant vehicle for organising business activity in Australia. For accounting purposes, a corporate group is treated as a single economic entity, and for this reason empirical research largely ignores the underlying legal structures. While the basic position at law is that each company within the corporate group is a separate legal entity, we demonstrate how the regulatory interventions of tax consolidation and the deed of cross‐guarantee may interfere with this fundamental notion. Using hand‐collected observations for the S&P/ASX200, we provide unique insights into individual group composition and identify corporate groups that have achieved optimal reporting efficiencies, as envisaged by the regulator, by adopting these legally‐recognised group structures. We also identify cases that appear to exploit these regimes for more strategic reasons, which may result in legal complications when untangling the complexities of group liability. It is clear from our analysis that there is very little homogeneity in group organisation among the large Australian public companies that we study.     

Audit Fees and Deeds of Cross Guarantee: An Empirical Evaluation

Since 1985, directors of Australian corporate groups have had the opportunity to execute a regulatory financing instrument, currently described as a deed of cross guarantee (DXG), between a holding company and one or more subsidiaries. This unique Australian regulatory intervention was advanced and justified on the basis that relieving subsidiaries from financial reporting requirements with associated cross‐guaranteeing debt obligations would reduce the regulatory burden on groups of companies, and subsequently reduce audit and administration costs. Given the claims of regulators' and others in the business community, this paper examines whether, ceteris paribus, the DXG has a significant mitigating effect on audit fee determination. Specifically, the study evaluates whether a particular engagement attribute decreases audit complexity and subsequently audit risk and audit fees. After controlling for size and group structure complexity of the auditee, the study finds that first‐time adopters of a DXG pay less in audit fees relative to non‐DXG groups, but there is lack of evidence to support ongoing audit fee savings from having a DXG in place. On the contrary, results show that a group with an established DXG pays much higher audit fees, which may be a consequence of the DXG introducing added complexity to the audit. The study also contributes to the methodological development of the standard audit fee model, particularly for the Australian context.     

Brand Lovemarks Scale of Sport Fans

This study developed and tested a new Lovemarks scale that can measure market positions representing love and respect for a sport team or club. Based on exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and nomological network analysis, the research establishes the validity and reliability of the scale for football and basketball teams. This Lovemarks scale for sport teams represents the marketing brand equity for sponsors, advertising, merchandising etc. and provides a new way to classify sport spectators; the “Lovemarks Fans”; “Performance & Quality Fans”; “Fads Spectators”; and “Spectators”.     

Global talent management by multinational enterprises post-COVID-19: The role of enterprise social networking and senior leadership

Multinational enterprises' (MNEs') workforce is made up of people from diverse backgrounds and different locations around the globe. The cross-border transfer of knowledge, skills, and best practices among MNE employees is important to maintain global standards and competitiveness. In the post-COVID-19 period, there is a greater need to exchange knowledge in the changing business environment. The purpose of this study is to examine the issues related to MNEs' global talent management, post-COVID-19. The study investigates the use of enterprise social networking applications for better knowledge exchange and tries to understand the moderating role of senior leadership team support in facilitating the usage of enterprise social networks for cross-border collaboration and talent management. After reviewing the literature and relevant theories, we developed a conceptual model, which is then validated using the SEM technique with 347 respondents from 12 MNEs. The study reveals the importance of using enterprise social networks for cross-border knowledge exchange in the post-COVID-19 period.