University Accounting Programs and Professional Accountancy Training: Can UK Pragmatism Inform the Australian Debate?

Professional accountancy training and academic accounting programs in the United Kingdom (UK) have remained resolutely separate, despite attempts at partial integration through a system of accreditation and exemptions. This is in contrast with the situation in some other countries, notably the United States (US) and until recently Australia. This paper identifies some historical reasons for their having developed in this way and for their continuing distinctiveness. We conclude that the approach is both workable and adaptable, albeit idiosyncratic, with changes occurring over time that reflect the shifting sands of market and political pressures. With six recognised accounting bodies in the UK, this ability to respond to change is important and we surmise that it would take some fundamental shift in circumstance, such as a move towards European standardisation, for a different model to prevail in the UK.     

Why do (or did?) banks securitize their loans? Evidence from Italy

This paper investigates the ex ante determinants of bank loan securitization by using different econometric methods on Italian individual bank data from 2000 to 2006. Our results show that bank loan securitization is a composite decision. Banks that are less capitalized, less profitable, less liquid and burdened with troubled loans are more likely to perform securitization, for a larger amount and earlier.     

The Consequences of Issuing Convertible Bonds: Dilution and/or Financial Restructuring?

Historically, most convertible bond (CB) issues have been converted to equity sooner or later. The announcement of a CB issue will bring about a future dilution of the firm's capital, and is often followed by a drop in share price. However, a CB issue by itself creates future value for the shareholders if it enables the firm to make profitable investments. It can also issue a positive signal regarding the restructuring of the firm's financial liabilities and its attempts to optimise its financial structure. These positive effects, if they occur, will develop gradually after the issue, and cannot be identified by a simple short‐term event analysis of a CB issue announcement. In this paper, we test the significance of the dilution effect, coupled with a possible value creation effect, using data from the French stock market. We introduce a comparison between dilutive convertibles and non‐dilutive exchangeable bonds. By integrating different corrections and by selecting a window of analysis over a longer period after the announcement of the issue, we show that the negative cumulative average abnormal returns generally observed in previous studies become non‐significant. This absence of global incidence is indicative of large differences in individual behaviour by issuers of CBs, and leads us to take into account the strategic choices linked to the issue of a CB. Two goals, often described as ‘investment financing’ or ‘financial restructuring’, may exist when issuing, and may appear to explain the size of the abnormal returns.     

Whose rights? Professional discipline and the incorporation of a (human) rights framework: The case of ICAS

Professions typically develop disciplinary systems that allow them to caution, fine or expel members whose conduct falls below expected standards. The Institute of Chartered Accountants of Scotland (ICAS) has amended its disciplinary procedures following challenge under the UK's Human Rights Act 1998. This paper aims to explore the implications of the incorporation of a (human) rights’ framework on ICAS's professional discipline. Disciplinary procedures are located in the context of the nature of professions and professionalism. Human rights legislation relevant to professional discipline is examined and its impact in the context of the nature of rights in general, and human rights in particular, is explored. The ICAS disciplinary changes are discussed in the context of a Hohfeldian-type framework of a range of types of rights. ICAS's procedures are shown to be multifaceted and, when examined in terms of rights (and, where relevant, duties) provide added insight into the nature of accountancy's professional discipline, but deficiencies remain, with the public interest continuing to be subservient to the private interest of accountants and their professional body.     

The future (and the now) according to Jacques Ellul: Deterministic or mindful?

Across a point–counterpoint interpretation, we argue that Ellul's thesis of the technological society is perhaps not as deterministic or fatalistic as some of his critics may claim. At once, divergent and similar to Touraine's more optimistic message of the transformative subject, Ellul proposes a dialectical approach, which in many ways reminds us of Weick's own call towards mindfulness. It is a way forward for mankind that is far from easy: one that involves self-critique, humility and overcoming our passions of greed, coercive power as well as our fear of authentic freedom.     

Gold and the US dollar: Hedge or haven?

Using a model of dynamic conditional correlations covering 23 years of weekly data for 16 major dollar-paired exchange rates, this paper addresses a practical investment question: Does gold act as a hedge against the US dollar, as a safe haven, or neither? Key findings are as follows. (i) During the past 23 years gold has behaved as a hedge against the US dollar. (ii) Gold has been a poor safe haven. (iii) In recent years gold has acted, increasingly, as an effective hedge against currency risk associated with the US dollar.     

Accounting and taxation: Conjoined twins or separate siblings?

This paper explores the relationship between accounting and taxation through the recent proposals for curbing corporate tax avoidance advanced by the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU). The OECD is content to tweak pricing and fails to address the faultlines of accounting. The EU is promoting ‘unitary taxation’ and advocates a major reform of the way taxable profits are to be calculated. As IFRSs have reduced the usefulness of accounting numbers for taxation purposes, the EU has sought to recalibrate basic elements of accounting. This has considerable implications for the development of accounting.     

Neoliberalism and work-related risks: individual or collective responsibilization?

Based on a representative sample of the Dutch population (N?=?2467), we test four hypotheses about how utilitarian individualism influences the responsibilization of work-related risks (i.e. the risk of dropping out of work because of unemployment, disability, or sickness). The risk society hypothesis understands utilitarian individualism as a laissez-faire ideological orientation and assumes it to lead to individual responsibilization. The blame culture hypothesis conceives utilitarian individualists as consumer citizens and predicts the reverse – that those concerned expect to be protected by the government. The resentment hypothesis assumes that particularly utilitarian individualists with a vulnerable labor-market position individualize responsibility, because they distrust those who share their fate more than others do. The narcissism hypothesis reverses this logic, because it assumes that utilitarian individualists’ narcissistic self-centeredness entices them to make others responsible for their own risks. The two hypotheses predicting an individualization of work-related risk due to utilitarian individualism are both confirmed, whereas the two hypotheses predicting it to result in their collectivization are both rejected.     

A Commentary on ‘Professionalizing Claims and the State of UK Professional Accounting Education: Some Evidence’

This paper describes and allows interaction with the issues involved in a major investment decision. In the summer of 1997, UKH faced major decisions concerning the purchase and funding of new plant and equipment. The authors were given excellent access to the company and were able to document key steps in the decision process. The issues are set out in a case study format which allows the reader to retrace the analyses carried out within UKH. A number of tasks are suggested which should test, develop and enhance a range of analytical, social and negotiation skills. The case can be handled in a variety of ways and most of the suggested tasks can be undertaken or omitted depending on the pedagogical objectives of the course/instructor.     

REIT Returns and Inflation: Perverse or Reverse Causality Effects?

Contrary to the Fisherian theory of interest, previous studies document a negative relationship between REIT (Real Estate Investment Trust) returns and inflation. In this research, we re-examine this perverse inflation behavior by testing for the causal relationships among REIT returns, real activity, monetary policy, and inflation through a vector error correction model. Our results indicate that the observations of REIT returns as perverse inflation hedges are spurious. The observed negative relationship between REIT returns and inflation is in fact a manifestation of the effects of changes in monetary policies. These findings are consistent with Darrat and Glascocks (1989) evidence of monetary effects on REIT returns.     

Fiscal Fan Charts: A Tool for Assessing Member States' (Likely?) Compliance with EU Fiscal Rules

This paper sets out a methodology for constructing fan charts for the government deficit and debt ratios over the medium term. It relies on information contained in Stability/Convergence Programme Updates, a model of the relevant stochastic process (for example, that of real GDP) or processes, and a parameter estimate of the sensitivity of the primary budget balance to the output gap for the member state under consideration. A model of the dynamic deficit–debt relationship allows the impact of random output growth to work its way through the fiscal arithmetic in a consistent and traceable way to produce fan charts over a five‐year forecast horizon. The initial set of fiscal fan charts included here for Ireland use the indicative public finance projections set out in its 2011 Update. The methodology makes the standard assumption of no fiscal policy response to any change in the budgetary position over the period such as could arise from changes in growth rates. Governments will, however, generally be in a position to adjust fiscal policy towards meeting a specific target, such as the 3 per cent Maastricht Treaty deficit target. A second set of fan charts is included that indicates how the probabilistic range of fiscal outcomes could be affected by a tightening of fiscal policy in 2013–15.     

Is integration I(d) applicable to observed economics and finance time series?

The method of cointegration in regression analysis is based on an assumption of stationary increments. Stationary increments with fixed time lag are called ‘integration I(d)’. A class of regression models where cointegration works was identified by Granger and yields the ergodic behavior required for equilibrium expectations in standard economics. Detrended finance market returns are martingales, and martingales do not satisfy regression equations. We ask if there exist detrended processes beyond standard regression models that satisfy integration I(d). We show that stationary increment martingales are confined to the Wiener process, and observe that martingales describing finance data admit neither the integration I(d) nor the ergodicity required for long time equilibrium relationships. In particular, the martingales derived from finance data do not admit the time (or ‘space’) translational invariance required for increment stationarity. Our analysis explains the lack of equilibrium observed earlier between FX rates and relative price levels.     

Keeping up or Falling behind? The Impact of Benefit and Tax Uprating on Incomes and Poverty*

Each year, the government decides how much to raise benefits and tax allowances. In the UK, the basis for these upratings is rarely debated, yet has major long‐term consequences for the relative living standards of different groups as well as for the public finances. This paper considers the medium‐term implications of present uprating policies, which vary across parameters of the tax–benefit system. Continuing these policies for 20 years, other things staying the same, would result in a near doubling of the child poverty rate alongside a substantial gain to the public finances. At the same time, pensioners are largely protected by the earnings indexation of pensioner benefits including, in time, the basic state pension. We show how difficult it will be to meet the UK child poverty targets unless the greater inequality inherent in the current regime for uprating payments and allowances is redressed.     

Asian financial integration: Global or regional? Evidence from money and bond markets

This paper investigates the degree of global versus regional financial integration in Southeast Asia during the period 2004–2012. We examine integration in the money and bond markets in Asia by employing a covered-interest-parity-based measure of financial integration. The impact of the 2008 financial crisis as well as the recent regional bond initiatives on the integration process of Asian money and bond markets respectively are specifically investigated. Empirically, we adopt the Phillips and Sul (2007) convergence methodology that has not been previously employed to examine the integration process in Asian money and bond markets. We find evidence of both global and regional integration in the money market pre 2008 but once the crisis hit, the process of global integration comes to an abrupt halt. However, regional integration, albeit at a slower pace, is still clearly evident in the post-crisis period. As for the Asian bond market, evidence of both global and regional integration is found but, in comparison, the latter is more convergent post 2008. Regional integration is stronger when interest rates with longer maturity are considered. In addition, we identify some convergent subgroups of countries and this suggests that a multi-tiered style of convergence is present.     

Risk as feelings or risk and feelings? A cross‐lagged panel analysis

This article focuses on affective and cognitive processes underlying the perception of risk. A limitation with most process models of affect/cognition is that they include only concurrent emotions. By following a group (n?=?129) of military sailors prospectively during an international operation, we explored longitudinal relations between perceived risk and related feelings.

Longitudinal cross‐lagged path models were estimated to explore the relationships between perceived risk, worry, and emotional distress. Results gave support to earlier studies by showing that cross‐sectional measures of risk and worry were weakly related. Across time, worry and emotional distress were reciprocally related. Perceived risk had impact on worry but not on emotional distress. Neither worry nor emotional distress influenced perceived risk.

The risk‐as‐feelings hypothesis postulates a direct effect of feelings onto behavioural choice, and a reciprocal relation between cognitive evaluations and feelings.

Our findings do not support a reciprocal relation between judgements of risk and feelings, but an impact from risk on to worry. Between various measures of feelings reciprocity seems to exist. Further replications, including also behavioural measures, are needed.     

The US financial crisis and corporate dividend reactions: for better or for worse?

Review of Quantitative Finance and Accounting - We examine how changes in dividend policy in 2008 as the financial crisis was unfolding influenced firm risk-adjusted returns in the following years....     

SME financing and the choice of lending technology in Italy: Complementarity or substitutability?

This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that the use of soft information decreases the probability of firms being credit rationed. Finally, we find that more soft information is produced when the bank uses relationship LT as primary technology individually or coupled with transactional LT. Our results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.