Managing Earnings with Intercorporate Investments

Abstract:  We explore to what extent firms deliberately manage their financial reports by exploiting the flexibility of generally accepted accounting principles. Using a sample of Oslo Stock Exchange-listed firms with 20–50% equity holdings in other firms, we find that firms with high financial leverage tend to maximize reported earnings from these investments through their choice between the cost method and the equity method, possibly in an attempt to reduce debt renegotiation costs or to avoid regulatory attention. In contrast, managers do not systematically bias reported earnings to extract private benefits or to signal revised expectations about future cash flows. Firms use different earnings management tools in a consistent way, as the earnings effect of the cost/equity choice is not offset by discretionary accruals.     

Asian options with zero cost-of-carry: EEX options on freight and iron ore futures

Decisions in Economics and Finance - The Turnbull–Wakeman (J Financ Quant Anal 26:377, 2003) formula is a well-known formula for continuous arithmetic average rate options. However, the...     

Undergraduate business students’ perceptions about engagement

Student perceived engagement and student perceived learning are important concepts in today’s higher education classroom environment. Examining engagement from the students’ perspective is an important aspect to understand more about this multidimensional construct as a tool for active learning. A survey was administered to undergraduate business students to gain insight into multiple factors influencing perceived engagement. Students felt that engagement was enhanced by discussion of current events, positive instructor demeanor, and putting effort into course content. The survey revealed four groups of variables: student connection, pedagogical methods, classroom environment, and student motivation. Multidimensionality of this construct was supported, as well as the need to understand engagement from the learners’ perspective.     

Local Linear Impulse Responses for a Small Open Economy*

Traditional vector autoregressions derive impulse responses using iterative techniques that may compound specification errors. Local projection techniques are more robust to this problem, and Monte Carlo evidence has suggested they provide reliable estimates of the true impulse responses. We use local linear projections to investigate the dynamic properties of a model for a small open economy, New Zealand. We compare impulse responses from projections to those from standard techniques, and consider the implications for monetary policy. We pay careful attention to the dimensionality of the model, and focus on effects of policy on gross domestic product, interest rates, prices and exchange rates.     

Currency Invoicing in International Trade: an Empirical Investigation

The authors investigate the choice of currency of invoicing in international trade under exchange rate fluctuations. Predictions derived from a model developed by Donnenfeld and Zilcha in 1991, and others, regarding the optimal choice of currency of invoice are tested for imports into Canada. The authors employ a unique dataset from Customs Canada that covers a six-year period and lists all currencies used for invoicing by industry. The empirical results support the hypothesis that there is a positive relationship between the extent of invoicing in the importer's national currency and exchange rate risk, and a negative relationship between invoicing in the exporter's currency as well as invoicing in a third currency and exchange rate risk. The empirical results further indicate that relative size of a country plays a role in determining the currency of invoicing.     

A typology of graziers to inform a more targeted approach for developing natural resource management policies and agricultural extension programs

The use of landholder typologies to assist in the development of natural resource management (NRM) policies and agricultural extension programs has increased considerably in the past decade. In this paper we explore the potential of developing a typology of graziers to more effectively tailor policies and programs with the aim of improving land management outcomes. This is of particular importance since growing public concern about the environmental performance of the beef industry has led to increasing pressures on graziers to change their land management practices to decrease off-property impacts. To gain a better understanding of graziers’ land management practices and the factors that inform their decisions on how they manage their land we first developed a conceptual model of the relationship between grazier and grazing land where both can, ideally, thrive through conscious and timely land management decisions made and implemented by the grazier. A successful grazier land relationship is likely to be consistent with value systems and social and economic factors, although the particulars of any individual approach may vary spatially and temporally. These factors, in particular graziers’ values and motivations to follow a particular management strategy, guided the development of our typology of graziers. Australia's Bowen-Broken basin, which has been identified as a major contributor of sediment and nutrients that enter the Great Barrier Reef lagoon, served as a case study for this research. Three broad types of graziers emerged: (1) traditionalists, (2) diversifiers, and (3) innovators. The authors argue that by understanding graziers’ values and motivations underlying each of the grazier types, government agencies and NRM organisations can more effectively tailor their policy and extension programs towards specific types of graziers and can work with specific groups to achieve reductions in sediment and nutrient runoff from grazing properties.     

Contextual Determinants of Strategic Planning Processes

This paper extends the study of contextual determinants of planning processes in three important directions. First, we present a comprehensive conceptualization of planning processes along six design dimensions. Second, in addition to examining the effects of environments, technology, and organizational complexity, we assess the effects of the organization's strategic orientation on the design of planning processes. Third, we move towards a configurational approach and explore the effects of concurrent presence of multiple contingencies. The study uses data from a large sample of North American corporations. The results suggest that the forces of context govern the design of planning processes. Furthermore, exploration of the effects of concurrent presence of multiple contingencies provides interesting illustrations of situations where the forces of context are aligned in the same direction as well as situations where the forces pull in opposite directions.     

The effect of U.K. incentives on R&D activities in U.S.-owned electronics companies in Scotland

The British Government provides numerous financial assistance programmes to assist electronics companies in funding investment projects, R&D activities, and applications of new technology. Interviews were conducted at fifteen U.S. electronics subsidiaries in Scotland to determine the effect of these government incentives in promoting technology and innovation. Results indicate that capital investment grants were widely used, but that financial aid schemes to encourage R&D and the adoption of advanced technology have no bearing on technical characteristics and decisions at the affiliates.