Over-investment of free cash flow

This paper examines the extent of firm level over-investment of free cash flow. Using an accounting-based framework to measure over-investment and free cash flow, I find evidence that, consistent with agency cost explanations, over-investment is concentrated in firms with the highest levels of free cash flow. Further tests examine whether firms’ governance structures are associated with over-investment of free cash flow. The evidence suggests that certain governance structures, such as the presence of activist shareholders, appear to mitigate over-investment.     

Macro to micro: Country exposures,firm fundamentals and stock returns

We outline a systematic approach to incorporate macroeconomic information into firm level forecasting from the perspective of an equity investor. Using a global sample of 198,315 firm-years over the 1998–2010 time period, we find that combining firm level exposures to countries (via geographic segment data) with forecasts of country level performance, is able to generate superior forecasts for firm fundamentals. This result is particularly evident for purely domestic firms. We further find that this forecasting benefit is associated with future excess stock returns. These relations are stronger after periods of higher dispersion in expected country level performance.     

Attitudes of Malaysian Tourism and Hospitality Students' towards a Career in the Industry

This study explored Malaysian undergraduate tourism and hospitality students' views of the industry as a career choice. Four hundred and twenty-nine tourism and hospitality students, from three Malaysian institutions completed a questionnaire rating the importance of 20 factors in influencing their choice of career, and then the extent to which they believed tourism and hospitality as a career offers these factors. All of the 20 factors tested have been identified as being significantly different. From the results, it is clear that students generally do not believe that a career in tourism and hospitality will offer them the factors that they find important.     

Asset reliability and security prices: evidence from credit markets

We assess the relation between asset reliability and security prices. Concerns about asset reliability are increasing with the move to fair value accounting in general purpose financial reports. We provide pertinent evidence from credit markets. A key benefit of using credit market data to explore the capital market implications of asset reliability is the theoretical basis of Duffie and Lando (Econometrica 69(3):633–664, 2001). They show that asset reliability (measurement) concerns should be concentrated in short-term credit spreads. Thus a focus on credit term structure can facilitate a cleaner identification of the impact of asset reliability on security prices. We find that asset reliability issues, attributable to SFAS 157 disclosures of Level 2 and, especially, Level 3 financial assets for a set of US financial institutions over the period of August 2007 to March 2009, are a significant determinant of short-term credit spreads and the shape of the general credit term structure. Our findings are robust to a variety of control variables and research design choices.     

Value investing in credit markets

We outline a parsimonious empirical model to assess the relative usefulness of accounting- and equity market-based information to explain corporate credit spreads. The primary determinant of corporate credit spreads is the physical default probability. We compare existing accounting-based and market-based models to forecast default. We then assess whether the credit market completely incorporates this default information into credit spreads. We find that credit spreads reflect information about forecasted default rates with a significant lag. This unique evidence suggests a role for value investing in credit markets.     

Undergraduates’ perceptions of tourism and hospitality as a career choice

This study explored undergraduate tourism and hospitality student's views of the industry as a career choice. Three hundred and seventy-nine tourism and hospitality students, from eight Australian institutions, completed a questionnaire rating the importance of 20 factors in influencing their choice of career, and then the extent to which they believed tourism and hospitality, as a career, offers these factors. A number of factors have been identified as being significantly different. From the results it is clear that students generally do not believe that a career in tourism and hospitality will offer them the factors that they find important.     

Barriers to visiting South Africa's national parks in the post-apartheid era: black South African perspectives from Soweto

Almost 80% of South African citizens are of black African origin, yet are significantly underrepresented in numerous leisure activities and especially at national parks: they accounted for only 8.8% of visitors to South African parks’ recreational spaces in 2010/2011. A review of literature on this issue finds a series of research shortcomings. Using a sample of 466 respondents from Soweto (414 self-administered surveys and 52 in-depth interviews), this paper re-examines the significant barriers deterring black South Africans from visiting national parks. Economic impediments to travel were frequently reported but other previously ignored barriers emerged, including lack of paid holidays, leisure “immobilities” fostered under apartheid, transport issues, time constraints, and lack of understanding and knowledge of what to do in national parks. All maintain the perception of parks as unwelcome spaces for many black South Africans. While park management is now largely done by black South Africans, and valuable policy statements now exist, the problems remain. The paper suggests potential actions to reverse the common belief that national parks remain exclusive white South African domains, including deconstructing the parks’ historical relationship with oppression, better promotion, specialised tour development, and work with schools. Links are made to comparable situations elsewhere.     

CARE/CEASA Roundtable on: Liquidity and Capital Management

Five distinguished banking and accounting scholars explore the role of liquidity at not only the “macro” level of the economy, but also at the level of individual companies. The first of the four main speakers, who is the author of the preceding article, restates his argument that the stability of financial systems can be increased by directing bank regulators and executives to find the optimal combination of liquidity and capital requirements. The second of the four speakers shifts the focus to liquidity management by non‐financial companies, with particular emphasis on their use of lines of credit and their role in helping companies weather the financial crisis. The third speaker places liquidity in the context of capital markets, and presents suggestive evidence that improvements in corporate disclosure and transparency have beneficial effects on both the level and volatility of liquidity in those markets. The panel is rounded out by a discussion of liquidity in corporate bond markets and the proposal of a new way to measure such liquidity.