Organizational structure and earnings quality of private and public firms

Review of Accounting Studies - We examine how heterogeneity in organizational structure affects private firm earnings quality in the European Union. Organizational structure refers to whether the...     

Explaining co-movements between equity and CDS bid-ask spreads

In this paper I show that the co-movements between bid-ask spreads of equities and credit default swaps vary over time and increase over crisis periods. The co-movements are strongly related to systematic risk factors and to the theoretical debt-to-equity hedge ratio. I document that hedging and asymmetric information, besides higher funding costs and market volatility risk, are driving factors of the commonality and are significantly priced in CDS bid-ask spreads.     

Modelling the spatiotemporal distribution of the incidence of resident foreign population

Many European countries have recently experienced a substantial increase in the proportion of immigrants in their populations. The incidence of resident foreigners calculated at a national level does not provide information on the local spatial and temporal distribution of the phenomenon. This information may be of crucial importance for planning local policies. In this article, we suggest a tool for practitioners to provide spatiotemporal maps representing the local distribution of the incidence of resident foreigners in the territory, and changes in spatial trends over time. We illustrate this with Italian data at a municipal level, for the period 2003–2008. To account for spatiotemporal interactions in the data, we propose using a generalized additive model incorporating a smoother of the time and space dimensions. Specifically, we set up a tensor product smoother combining a cubic regression spline basis for time and a soap film spline basis for space. This approach provides a consistent framework to produce spatiotemporal maps which could be effectively used by policy makers to decide the allocation of economic resources at a local level.     

Research returns redux: a meta-analysis of the returns to agricultural R&D

A total of 289 studies of returns to agricultural R&D were compiled and these provide 1821 estimates of rates of return. After removing statistical outliers and incomplete observations, across the remaining 1128 observations the estimated annual rates of return averaged 65 per cent overall — 80 per cent for research only, 80 per cent for extension only, and 47 per cent for research and extension combined. These averages reveal little meaningful information from a large body of literature, which provides rate-of-return estimates that are often not directly comparable. This study was aimed at trying to account for the differences. Several features of the methods used by research evaluators matter, in particular assumptions about lag lengths and the nature of the research-induced supply shift.     

A Comparative Study of the Use of Generalized Additive Models and Generalized Linear Models in Tourism Research

In this paper, we investigate the impact that spatial and micro‐economic variables have on the probability that a household goes on holiday. In doing so, we propose two alternative modelling specifications: a classic discrete choice model and a semiparametric logistic model. The semiparametric model extends the classic logistic model, usually employed in studies on participation in tourism, allowing modelling in a flexible manner for continuous predictors without making any a priori assumption. This is achieved via the use of penalized regression splines. A sample of Italian households was considered for our study. Comparing the results of the two approaches, we found that both methods opportunely captured, in terms of signs, the relationships under investigation. However, the use of a more flexible approach has allowed us to uncover some interesting non‐linearities that are usually not assumed a priori, thus improving the interpretation of the results. Copyright © 2011 John Wiley & Sons, Ltd.     

Exploring networks of proximity for partner selection,firms' collaboration and knowledge exchange. The case of clean‐tech industry

Nowadays scholars widely recognize that know‐how, capabilities and knowledge needed to generate innovations often reside outside the firm, start‐ups are a valuable source, and collaborative networks are a fundamental strategy for innovation. This is true especially for the clean‐tech sector, which is characterized by the continuous search for innovative solutions and technological advancements. The purpose of the paper is to provide a methodological support for the screening of potential partners based on network analysis and, then, help firms to select them for collaboration and knowledge exchange. The methodology can be easily adopted by managers and executives to identify firms to monitor with greater attention for future investments. The analysis is on a dataset of 4,782 clean‐tech companies operating worldwide. Results highlight that energy companies looking for external sources could investigate their network of business proximity if they intend to specialize in a defined field and/or collaborate with similar partners, while they could explore their network of strategic proximity if they intend to diversify their businesses, that is cooperating and exchanging knowledge with firms with distant but complementary capabilities and resources.     

ROLLING REGRESSION VERSUS TIME‐VARYING COEFFICIENT MODELLING: AN EMPIRICAL INVESTIGATION OF THE OKUN'S LAW IN SOME EURO AREA COUNTRIES

During the last decade, economists have shown that the inverse relationship between economic growth and unemployment rate varies over time. Rolling regression has been the main tool used to quantify such a relationship. This methodology suffers from several well‐known problems which lead to spurious non‐linear patterns in the Okun's coefficient behaviour over time. Here, we take a penalized regression spline approach to estimate the Okun's time‐varying effects. As a result, spurious non‐linearities are suppressed and hence important time‐varying coefficient features revealed. Our empirical results show that the inverse relationship in some Euro area countries is spatially heterogeneous and time‐varying. The findings are complemented by the calculation of the rate of output growth needed for a stable unemployment rate, as proposed by Knotek.     

Assessing the functional relationship between CO2 emissions and economic development using an additive mixed model approach

Researchers have suggested that the relationship between the emission of carbon dioxide per capita and the real gross domestic product per capita follows an inverted-U-shaped (so-called environmental Kuznets) curve. Studies have generally used polynomial regression (quadratic or cubic form) to investigate this relationship. It has been recognised that polynomials are not that flexible and that, by choosing the degree of the polynomial, researchers make a priori assumptions. In this paper, we investigate the environmental Kuznets curve hypothesis using a flexible approach from additive mixed models. Such models are well-suited to handle nonlinear covariate effects flexibly and to simultaneously deal with temporal error structure. We consider the following countries: Australia, Austria, Canada, Denmark, Finland, France, Italy, Spain and Switzerland. Our results show the existence of the classic environmental Kuznets curve for France and Switzerland, and of a nonlinear (increasing) relationship for Australia, Italy and Spain. For Austria, the evidence reveals a weak N-shaped relationship. New nonlinear shapes are found for Finland (inverted-L-shape relationship), Canada (a special case of the inverted-L-shape relationship), and Denmark (M-shape relationship). Our findings are complemented by the calculation of the elasticity of the carbon dioxide emission per capita as a percentage of each level of real gross domestic product per capita.     

Strategy,Valuation, and Forecast Accuracy: Evidence from Italian Strategic Plan Disclosures

Using a sample of 264 strategic plan presentations by Milan Stock Exchange firms during 2001–2012, we present evidence of both a security price reaction and an increase in the accuracy of analysts’ earnings forecasts pursuant to plan disclosure. In the cross-section, the information content of the plan disclosures and the accuracy increase are incrementally associated with the extent of forward-looking narrative disclosures in the plan, after controlling for other disclosures within and outside the plan presentation and the fact that the firm has self-selected into the sample. Both quantitative and qualitative narrative disclosures are informative to investors and analysts. The results are driven by narrative disclosures about company strategy and action plans rather than about the business environment in which the company operates. Our study informs the current debate on the use of voluntary comprehensive, integrated, long-run-oriented strategic plan disclosure as a potential complement for disclosures such as quarterly earnings forecasts that have been described as an example of ‘short-termism’.     

Board Monitoring and Earnings Management Pre- and Post-IFRS

In this paper, we address the question of whether the board of directors is more effective in constraining earnings management after the mandatory application of IFRS. Specifically, we explore how two board characteristics — board independence and (2) the existence of an audit committee impact earnings management. Our empirical results suggest that board independence and audit committees play an important and effective role in reducing earnings management after the introduction of IFRS and that the accounting regulatory framework significantly contributes to the effectiveness of the two corporate governance mechanisms. Our findings also confirm that a company's corporate governance characteristics remain an important determinant of earnings quality; therefore, an analysis of the effects of new regulations must consider firm-level determinants.