Maidum's challenge,legal and governance issues in dealing with cross-border business enterprise group insolvencies

Maidum was an early Egyptian pyramid, the first attempt to build a true pyramid; but it suffered a spectacular collapse. In many jurisdictions, corporate structures are pyramidal in shape, with related enterprises conducting business in multiple jurisdictions. Where such structures financially collapse, creditors of different entities within a business enterprise group compete for limited assets that may or may not be located in the entity in which they have advanced credit and thus have claims. This article discusses the challenges posed by cross-border business enterprise group insolvency and the range of procedural mechanisms that may be available to protect creditors' claims, articulating broad principles that should be considered in such cases. The choice of cooperation and coordination mechanism is driven in part by whether the particular jurisdiction emphasizes liquidation or restructuring as the objective of the insolvency proceeding. Copyright © 2008 John Wiley & Sons, Ltd.     

Canada's Supreme Court rules no fiduciary obligation towards creditors on insolvency—Peoples Department Stores v. Wise

In Canada, the law is now clear that directors and officers do not owe a fiduciary duty to creditors at the point of insolvency pursuant to corporate and insolvency laws. The Supreme Court of Canada in Peoples Department Stores Inc. v. Wise ruled that the duty of directors and officers under the Canada Business Corporations Act (CBCA) does not change when the corporation is in financial distress and that directors and officers owe their fiduciary duties solely to the corporation at all times. 1 The judgment, which is likely to be the only declaration of Canada's highest court on this issue for some time, leaves a number of unanswered questions for directors and those advising directors of the extent of their obligations both in and outside of insolvency. The Court did find that directors owe a duty of care to creditors, but no fiduciary obligation. The judgment changed the standard of assessment of the duty of care to a purely objective test; enshrined the business judgment rule in Canada; may have provided greater access to the oppression remedy for creditors; and provided direction on the meaning of ‘privy’ with respect to reviewable transactions under the Bankruptcy and Insolvency Act (BIA). 2 These issues are canvassed in this brief case comment. Copyright © 2006 John Wiley & Sons, Ltd.

1 Peoples Department Stores Inc. v. Wise 2004 SCC 68; Canada Business Corporations Act, R.S.C. 1985, c. C‐44, as amended (CBCA).

2 Canada Bankruptcy and Insolvency Act, R.S.C. 1985, c. B‐3, as amended (BIA).

     

The dimensional assessment of personality in drug addicts: a mixed-effects Rasch model approach

Drug abuse results from a series of different factors, such as social and family issues. Subjects more vulnerable to develop an addiction are, for instance, people living in high-stress environments who may resort to addiction in order to cope with their circumstances, such as demanding jobs, family crisis or other situations or people living in low-income households where violence occurs, who may be triggered into addiction as a way to escape negative emotions or ignore any underlying problems or issues. Psychometric research in the field of drug dependence has focused on identifying certain personality characteristics. It is now generally agreed that personality may influence, precipitate or perpetuate substance abuse. The aim of this paper is to perform a dimensional assessment of personality in a sample of drug addicts. To better understand the complexity of addictive behaviours of substance-using individuals, the Cloninger’s temperament and character inventory test is employed while the item response data analysis is performed by mixed-effects Rasch models. These models combine the advantages both of Rasch measurement framework for latent variables and of models with hierarchical data. To evaluate the differences in dimensions of temperament and character inventory test in subjects with drug addiction, we fit and compare a sequence of mixed-effects Rasch models. Results from models fitting are compared and discussed for a data set of 84 participants.     

From subordination to parity: an international comparison of equity securities law claims in insolvency proceedings

Securities law claims in insolvency proceedings raise important questions of allocation of risk and remedies. In the ordinary course of business, equity claims come last in the hierarchy of claims during insolvency. What is less clear is whether this should encompass claims arising from the violation of public statutes designed to protect equity investors. Discerning the optimal allocation of risk is a complex challenge if one is trying to maximize the simultaneous advancement of securities law and insolvency law public policy goals. From a securities law perspective, there must be confidence in meaningful remedies for capital markets violations if investors are to continue to invest. From an insolvency perspective, creditors make their pricing and credit availability choices based on certainty regarding their claims and shifting those priorities may affect the availability of credit. The critical question is the nature of the claim advanced by the securities holder and whether subordination of securities law claims gives rise to inappropriate incentives for corporate officers within the insolvency law regime. A comparative analysis reveals that the U.S. has provided a limited statutory exception to complete subordination through the fair funds provision of the Sarbanes-Oxley Act by allowing SEC claims for penalties and disgorgement to rank equally with unsecured claims even though the funds are distributed to shareholders. The U.K. and Australian schemes permit shareholders to claim directly as unsecured creditors for fraudulent acts and misrepresentation by the issuer. In contrast, Canadian law is underdeveloped in its treatment of such claims. The paper canvasses the policy options available to reconcile securities law and insolvency law claims, including a discussion of the appropriate gatekeeping role for regulatory authorities and the courts, and the need for a framework that offers fair and expeditious resolution of such claims. If the public policy goal of both securities law and insolvency law is to foster efficient and cost-effective capital markets, it seems that the systems need to be better reconciled than currently. The paper also examines the codified response to the time and resources consumed in various common law tracing claims by customers in a securities firm insolvency. Copyright © 2007 John Wiley & Sons, Ltd.     

The interaction between accounting and real earnings management using simultaneous equation model with panel data

Review of Quantitative Finance and Accounting - The aim of this paper is to examine the association between accounting-based earnings management and real activities manipulation in a weaker...     

Mixed Causal–Noncausal Autoregressions: Bimodality Issues in Estimation and Unit Root Testing1

This paper stresses the bimodality of the likelihood function of the Mixed causal–noncausal AutoRegressions (MAR), and it is shown that the bimodality issue becomes more salient as the causal root approaches unity from below. The consequences are important as the roots of the local maxima are typically interchanged, attributing the noncausal component to the causal one and vice‐versa. This severely changes the interpretation of the results, and the properties of unit root tests of the backward root are adversely affected. To circumvent the bimodality issue, this paper proposes an estimation strategy which (i) increases noticeably the probability of attaining the global MLE; and (ii) selects carefully the maximum used for the unit root test against a MAR stationary alternative.     

Aligning ERP systems with companies’ real needs: an ‘Operational Model Based’ method

Enterprise Resource Planning (ERP) systems offer standard functionalities that have to be configured and customised by a specific company depending on its own requirements. A consistent alignment is therefore an essential success factor of ERP projects. To manage this alignment, an ‘Operational Model Based’ method is proposed. It is based on the design and the matching of models, and conforms to the modelling views and constructs of the ISO 19439 and 19440 enterprise-modelling standards. It is characterised by: (1) a predefined design and matching order of the models; (2) the formalisation, in terms of modelling constructs, of alignment and misalignment situations; and (3) their association with a set of decisions in order to mitigate the misalignment risk. Thus, a comprehensive understanding of the alignment management during ERP projects is given. Unlike existing methods, this one includes decisions related to the organisational changes an ERP system can induce, as well as criteria on which the best decision can be based. In this way, it provides effective support and guidance to companies implementing ERP systems, as the alignment process is detailed and structured. The method is applied on the ERP project of a Small and Medium Enterprise, showing that it can be used even in contexts where the ERP project expertise level is low.     

Ethics and conflicts,the role of insolvency professionals in the integrity of the Canadian bankruptcy and insolvency system

Insolvency practice involves a balance between adherence to rules of ethical conduct and the avoidance of conflicts of interest, and the need to find cost effective methods of debt collection or restructuring under the statutory regime. Potential conflicts of interest are inherent in the multiple roles granted to such professionals under the insolvency system, whether the financial distress is personal or commercial. This article begins to explore whether or not these conflicts serve as barriers to the effective administration of the insolvency and bankruptcy system. It also examines whether oversight of professional ethics and avoidance of conflicts is a matter for legislative intervention or best left to the profession, including temporal and materiality issues in disclosure of potential conflicts, and accountability to stateholders through the appointment process. The key issue is how one manages those conflicts while maintaining the integrity of the system. Copyright © 2004 John Wiley & Sons, Ltd.     

Gender fluidity across the world: a Multilevel Item Response Theory approach

The concept of gender identity refers to the intrinsic self-identification of personal femaleness and maleness. Starting from 1970s, in the framework of gender studies, a theoretical and conceptual demarcation between sex and gender has been proposed. The term “gender” starts being referred to social and cultural constructions of masculinities and femininities, not to the state of being male or female. Recent studies on gender identity suggest that the binary notion of gender identity is changing, recognizing that there are different views on how gender may be performed or experienced. The purpose of our research is to provide accounts of gender code transformation around the world and identify differences in feelings, attitudes, beliefs and behaviors associated with gender across different identity profiles. Using a web-based survey, 1,600 respondents were recruited by a snowball sampling procedure. Based on the intersections of the responses given by participants on three basic dimensions (biological sex, gender self-identification and sexual orientation) the individuals have been categorized into nine groups. To comply with the aims of this study, a two-parameter Multilevel Item Response Theory model has been employed as an appropriate statistical tool for considering both person and item effects on the response data and assessing the effect of group membership on the overall variability.