Doing business in Poland: What U.S. managers need to know

Poland has been and continues to be the leader of the transition economies of Eastern Europe. This study provides an in‐depth look at the ongoing economic, legal, and administrative policies of the Polish government in laying the ground‐work for a free‐market society. With the smaller business in mind, we first examine how the government of Poland moved decisively to lay the cornerstone for a private‐sector economy. Next, we demonstrate how Poland redirected its political and legal processes for long‐term global business. Finally, we describe what the U.S. government is doing to help Poland become a better trading partner and what this means to interested American firms. While there are many deep‐seated positive changes throughout Poland as it becomes a more significant global business player, there also are many challenges that must be understood by interested U.S. businesses if their investments in Poland are to be successful. © 2004 Wiley Periodicals, Inc.     

(Un)stable vertical collusive agreements

In this paper, we extend the concept of stability to vertical collusive agreements involving downstream and upstream firms, using a setup of successive Cournot oligopolies. We show that a stable vertical agreement, the unanimous vertical agreement involving all downstream and upstream firms, always exists. Thus, stable vertical collusive agreements exist even for market structures in which horizontal cartels would be unstable. We also show that there are economies for which the unanimous agreement is not the only stable one. Furthermore, the Stigler statement according to which the only ones who benefit from a collusive agreement are the outsiders need not be valid in vertical agreements.     

ANTIDUMPING,INTRA‐INDUSTRY TRADE,AND QUALITY REVERSALS

We examine an export game where two (home and foreign) firms produce vertically differentiated products. The foreign firm is more R&D efficient and is based in a larger and richer market. The unique (risk‐dominant) Nash equilibrium exhibits intra‐industry trade, and the foreign producer manufactures a higher‐quality product. When transport costs are low, unilateral dumping by the foreign firm arises; otherwise, reciprocal dumping occurs. For some parameters, a domestic antidumping policy leads to a quality reversal in the international market whereby the home firm becomes the quality leader. This policy is desirable for the implementing country, though world welfare decreases.     

Are User Perceptions of Chairman Addresses Managed through Syntactical Complexity and Rationalisation?

This study assesses whether or not the preparers of chairman addresses of large listed Australian firms manage user perceptions through the syntactical complexity of the provided information and/or the rationalisation of unwanted information. It applies an innovative assessment approach for the rationalisation of unwanted information. The study analyses the chairman addresses of 87 firms included in the Standard & Poor's ASX200 index using the Flesch readability formula, as well as the relative occurrence frequency of sentences with particular connotations within each analysed report. The findings of this study demonstrate that although the comprehension difficulty of chairman addresses is generally high, preparers do not attempt to manage user perceptions through syntactical complexity or rationalisation. Specifically, the study finds no evidence that chairman addresses that contain predominantly negative news are more difficult to comprehend than chairman addresses that contain predominantly positive news. Furthermore, it is concluded that preparers do not use rationalisations to manage user perceptions. Prior literature has thus far failed to investigate the rationalisation of information as a potential perception management tool and no other recent contribution to the literature has investigated the syntactical complexity of Australian chairman addresses that contain predominantly positive or negative news. This study aims to fill that gap.     

Does the “management approach” contribute to segment reporting transparency?

Segment reporting creates an opportunity for companies to add value to the information they disseminate about their industry and geographic operations. This article examines the “management approach” to segment reporting from a user perspective that should be of great interest to corporate financial executives. The management approach to segment reporting requires companies to report segment financial information consistent with the way they manage their businesses. We conclude that, despite more segment data being reported, the potential of the new management approach to significantly benefit users is compromised by uneven compliance among reporting companies. The complicity of external auditors in compliance shortcomings should concern all stakeholders in the financial reporting process. Noting two high-profile examples of accounting fraud, we comment on how the management approach sheds light on Enron's operations, while WorldCom concealed important segment information due to probable auditor malfeasance.     

CEO Incentives and Corporate Social Performance

This paper examines the relationship between CEO incentives and strong and weak corporate social performance. Using the KLD database we find that incentives have no significant relationship with strong social performance. Salary and long-term incentives have a positive association with weak social performance.     

Benefits and Costs of Auditor's Assurance: Evidence from the Review of Quarterly Financial Statements

Even though there is a worldwide consensus as to the necessity of an audit of annual financial statements for public companies, there is divergence of views as to the review of interim financial statements. While some jurisdictions make it mandatory (e.g., Australia, France, United States), others allow the review without requiring it (e.g., Canada, United Kingdom). Using a sample of companies listed in Canada, we examine the costs associated with these reviews and the benefits they generate in terms of improvement in the quality of interim financial statements for the years 2004 and 2005. Controlling for the decision to purchase the reviews, we find that audit fees are 18 percent higher for firms with interim reviews and, contrary to many regulators' assumption, we find no evidence that this cost increase is proportionally higher for smaller firms. Regarding the benefits of interim reviews, we find no significant association between either accruals‐ or nonaccruals‐based measures of earnings management and the fact that the interim statements are reviewed by the auditor, neither in the interim reports nor in those of the fourth quarter. The results suggest that auditors' involvement with interim reports may not be as effective as previously thought at controlling the quality of interim financial statements.