IQ and Audit Quality: Do Smarter Auditors Deliver Better Audits?

This study examines the role of an individual auditor's cognitive ability in delivering high‐quality audits. Our results from analyzing archival data from Sweden show that audit partners' IQ scores obtained from psychological tests are positively associated with going‐concern audit reporting accuracy and audit fee premiums. We also find some, albeit weak, evidence that audit partners' IQ scores are negatively associated with the income‐increasing abnormal accruals of the client. These results suggest that, although audit services are standardized through various control mechanisms and audits are conducted by teams rather than by individual auditors, the cognitive ability of audit partners responsible for an audit remains important in delivering high‐quality audit services.     

Buying Decision Coordination and Monopoly Pricing of Network Goods

We analyze how uncertainty about consumers' preferences affects the pricing of a network device and the interaction usage it enables. A premium device price may give high hardware profits, but adoption will be low reducing the profits from interaction services. The firm internalizing this adjusts its hardware price downward, and prices as if it was getting the maximal interaction usage profits from the full network. Profits decrease in uncertainty, whereas consumer surplus increases in uncertainty, but only if the level of uncertainty is high. Bundling the device and services is profitable if uncertainty relates mostly to consumers' private information.     

Risk perceptions across the current political spectrum in Finland: a study of party members

Political party member perceptions of risk continue to attract a great deal of attention in current public discourse and media coverage, yet little research exists in terms of a comparative analysis of Finnish political parties’ views on the issue. Party members are in many ways a highly significant social group, one that exercises a great deal of decision-making power in modern civil societies. This article provides a novel and up-to-date look into the key areas of perceived risk held by the members of Finland’s political parties, in addition to a comparison of inter-party differences and similarities. The analysis is based on a unique survey data-set of the members of Finland’s six major political parties (N = 12,427). Included are the Finns Party, Centre Party, Left Alliance, Social Democratic Party, Green League and National Coalition Party. Together, these represent the political spectrum in Finland. Risk factors included primary categories dealing with various national, institutional, cultural and economic issues. Also included in the analysis was a look into whether length of party membership affects risk concern for the included issues. Findings showed that national and external risks were more of a concern for the Finns Party, while the Left and the Social Democrats considered economic issues a greater risk than did others. Furthermore, economic risk was most concerning to the left while external risks were generally viewed in line with the current centre-right administration. Some notable differences between old and new party members were also found. Findings emphasize the importance of understanding how political party members differ in their views of various societal risks while providing new points of comparison between those parties toward improved clarity of the national political landscape.     

Stochastic constraints on cost function parameters: Mixed and hierarchical approaches

Symmetry and homogeneity constraints are imposed stochastically in a system of cost share equations. This is done using both mixed information and hierarchical representations. The approaches are compared in a Monte Carlo study and using data from U.S. manufacturing.     

Risk premium,macroeconomic shocks,and information technology: an empirical analysis

This study empirically identifies the impact of various macroeconomic factors on the default risk premium. Using monthly data for the period 1970–2010 for the US, our estimations indicate that the monetary policy aggregates, risk-free interest rate, term structure of interest rates, inflation, and the state of the business cycle influence the risk premium. The results also provide some evidence in support of the hypothesis that the development of information technology has had a decreasing impact on the risk premium. As expected, various financial crises have had substantial and long-lasting effects on the premium. The results suggest that the direct impact of the subprime crisis and Lehman’s collapse on the risk premium was as large as two and a half percentage-points for a sustainable period. Foreign financial crises, in turn, have lowered the risk premium in the US market, suggesting a flight-to-safety phenomenon.     

Working time and labour demand in Finnish manufacturing: short-run and long-run effects

The effect of changes in the standard working time on employment and average hours is studied using pooled data from five Finnish manufacturing industries. The model is an error correction model, which makes it possible to separate short-run, reductions in standard hours increase employment. There is evidence that the long run effect of working time on employment has changed over time. In the 1970s reductions in hours have had positive long-run employment effects, but in the 1980s the positive short-run impact has been neutralized in the long run. Changes in standard hours do not influence the utilization rate of labour, which is defined as the ratio of overtime hours to standard hours. In the short run, the utilization rate is influenced by output changes.     

The Significance of the New Venture's First Sale: The Impact of Founders' Capabilities and Proactive Sales Orientation

Initial sale success in the market with a new product is a critical milestone for a new venture. Failure at the introduction stage of a new product could have lethal consequences for the venture. In the present study, the authors investigate the role of a new venture company's first successful sale in the venture's future commercial success. The authors develop and test a model of the impact of the founders' entrepreneurial and commercial capabilities and proactive sales orientation on the significance of the first sale and sales growth of a new venture. Using survey data and partial least squares estimation, the results reveal that the founders' commercial capabilities have a positive effect on proactive sales orientation, while their entrepreneurial capabilities positively moderate the effect of commercial capabilities. Further, the results reveal that a proactive sales orientation positively affects the significance of the first sale and that value‐based selling approach positively moderates the effect of proactive sales orientation. Finally, the results reveal that the significance of the first sale is positively related to sales growth. Thus, the authors conclude that combining the founders' commercial and entrepreneurial capabilities strengthens proactive sales orientation and that, in turn, a proactive sales orientation particularly increases the significance of the first sale when new venture companies practice value‐based selling. Research has convincingly demonstrated proactive selling behavior to be one of the most powerful predictors of sales performance. Value‐based selling is a sales approach to identify, quantify, communicate, and verify value of a new product to the customer. Our findings suggest that founders who possess both strong commercial and entrepreneurial capabilities engage considerably more in proactive sales practice as compared with founders that only possess strong commercial capabilities. Hence, rather than hiring specific sales expertise, founders should develop their proactive, value‐selling capabilities.