UK mutual fund performance: Skill or luck?

Using a comprehensive data set on (surviving and non-surviving) UK equity mutual funds, we use a cross-section bootstrap methodology to distinguish between ‘skill’ and ‘luck’ for individual funds. This methodology allows for non-normality in the idiosyncratic risk of the funds — a major issue when considering those funds which appear to be either very good or very bad performers, since these are the funds which investors are primarily interested in identifying. Our study points to the existence of stock picking ability among a relatively small number of top performing UK equity mutual funds (i.e. performance which is not solely due to good luck). At the negative end of the performance scale, our analysis strongly rejects the hypothesis that most poor performing funds are merely unlucky. Most of these funds demonstrate ‘bad skill’. Recursive estimation and Kalman ‘smoothed’ coefficients indicate temporal stability in the ex-post performance alpha's of winner and loser portfolios. We also find performance persistence amongst loser but not amongst winner funds.     

The effect of framing and negotiation partner’s objective on judgments about negotiated transfer prices

A common approach to set transfer prices is via intra-firm negotiation. However, Luft and Libby [Luft, J. L., & Libby, R. (1997). Profit comparisons, market prices and managers’ judgments about negotiated transfer prices. The Accounting Review, 72(2), 217–229] found that because of the existence of self-serving biases, negotiating managers have different expectations regarding what constitutes a ‘fair’ transfer price, leading to a less efficient negotiation process. In this study, we examine two factors that are expected to affect managers’ transfer price negotiation judgments, namely, framing as a gain or as a loss and the negotiation partner’s objective (whether the partner’s objective involves high or low concern-for-others). We propose that these two factors affect managers’ perceptions of the negotiation context, and thus the way they interpret the economic and social consequences of accounting information. Our results show that a loss frame (compared to a gain frame) exacerbates managers’ self-serving biases and increases the ‘transfer price expectation gap’ between buyers and sellers. Further, in our experiment where market price is higher than equal-profit price, we find that managers’ transfer price expectations are lower (and deviate more from the prevailing market price) when they are negotiating with a partner with high concern-for-others than with a partner with low concern-for-others. We discuss the broader implications of these results for the design of management accounting systems.     

Monetary policy, ‘dollarization,’ and parallel market exchange rates: The case of the Dominican Republic

Excessive money creation may give rise to inflation tax revenues and to a depreciation of the domestic currency. this in turn leads to a shift away from the domestic currency into a foreign currency (e.g., the US dollar, hence the term ‘dollarization’). From the domestic monetary authority's point of view, ‘dollarization’ is an unwelcomed phenomenomn, thus the monetary authorities will attempt to arrest the ‘dollarization’ phenomenon while maintaining the excessive money growth. This paper develops and tests a model which analyzes the effects of monetary policy on dollarization and the ‘parallel’ market exchange rates.     

Exploring (false) dualisms for environmental accounting praxis

This paper focuses on the political nature of the linguistic dualisms or ‘false antinomies’ that inhere in environmental accounting practice and environmental accounting research. These dualisms, ‘subject–object,’ ‘man–woman,’ ‘mind–body,’ and ‘culture–nature,’ the paper argues, need to be ‘ambiguized’ if the politics inherent in these dualisms are to be resisted. Two strategies for the ‘ambiguization’ of these dualisms are suggested: ‘performative parody,’ which is a strategy intended for environmental accounting practitioners, and ‘democratic reflexivity,’ which is a strategy intended for environmental accounting researchers. In taking this linguistic focus, the paper challenges common sense constructions of the environment and the potentially elitist and anti-democratic nature of environmental accounting research. By offering these two strategies, the paper provides a means of environmental accounting praxis, or means of resisting global ‘environmental’ domination.     

Life in the tube

Douglas Rushkoff, author of Media Virus, Cyberia, and Playing the Future, explains how sensationalism in the media tends to promote our culture's natural, unexpressed agendas. This is an optimistic appraisal of the seemingly banal and exploitative fora of tabloid television, ‘Court TV’ and ‘Cops’. Such low-brow media, when approached from an evolutionary perspective, reveal themselves as the process by which closeted social issues are brought out into the cultural conversation exactly when they need to be.     

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.     

The role of sharing in the circulation of knowledge

One of the points stressed in ‘A new paradigm in the organization of knowledge’, Futures, 26, 1994, pages 781–786, was the determinant role of sharing in the emergence and configuration of the paradigm of the immaterial. We resume the elements suggested then and develop their analysis in three stages: first, by characterizing the operational singularity of sharing; second, by considering its cognitive and disciplinary incidence; and finally, by pointing out its theoretical consequences, namely in what concerns the thematic of rationality.     

Global modelling in the 1990s : A critical evaluation of a new wave

It seems that after a ‘golden decade’ in the 1970s and a period of decay in the 1980s, global modelling is making a comeback. In particular, the report Scanning the Future seems to mark the beginning of a new era in this respect. In this article this ‘new wave’ of the 1990s is compared with the ‘old wave’ of the 1970s. Although there is progress in the scientific realm, these new models lack a deep concern for the burning problems of our time like the poverty gap between the North and the South and the ‘ecological problematique’. In many ways these new models reflect the new mood of the times, which lacks any vision of a new paradigm and which is strongly ‘northern-centric’.     

Virtual geography

Geography and its study are changing in subtle and dramatic ways in the rapid transition to a digital world. Here we present a preliminary discussion of how this new geography, which we call ‘virtual geography’, might be classified. Virtual geography is not merely Cyberspace per se for it comprises many types of place and space in which the digital world finds expression. We define cspace—the space within computers, cyberspace—the use of computers to communicate, and cyberplace—the infrastructure of the digital world, as key components of what Castells¹ refers to as ‘real virtuality’. Virtual geography is all this as well as the study of these worlds from traditional geographic perspectives. Like all classifications, the interesting questions lie at the boundaries between classes—between espace and cyberspace, cyberspace and cyberplace, and between all of these. We illustrate this variety and complexity with examples.     

THE IMPACT OF THE QUALITY OF EARNINGS ON THE VALUATION RELEVANCE OF CASH FLOW DISCLOSURES

This study investigates whether the ‘quality of earnings’, defined as the relationship between profitability and cash generating ability, is a conditioning factor with regard to the valuation relevance of cash flow disclosures. The study is performed on a sample of 197 British firms employing data over a 23-year period. The results of the study support the contention that the valuation relevance of cash flow disclosures is conditional upon the ‘quality of earnings’, as previously defined. Specifically, the decomposition of unexpected earnings into its cash flow and accruals components provides incremental information content to earnings when the firm-specific time-series correlation between earnings and cash flows is low. Furthermore, the cash flow ‘surprise’ is valued more than the accruals ‘surprise’ when the firm-specific time-series correlation between earnings and cash flows is low.     

The end in sight?: Some speculations on environmental trends in the twenty-first century

For a generation there has been unresolved debate between anxious environmentalists and sanguine ‘contrarians’, both of which have been able to amass strong evidence in favour of their positions. This is an important paradox, and the paper attempts to resolve it by means of an elementary but robust model of environmental trends between 1950 and 2100. A crucial feature of the approach is to disaggregate the developed ‘North’ and developing ‘South’, revealing strikingly different patterns. The North's environmental impact will decline steadily, but in the South a rapid increase in environmental impact can be expected in the first half of the 21st century, followed by an equally rapid decline. This dramatic environmental ‘spike’ will be unique in human history and mark a fundament transition to the sustainable state. Its qualities and duration will determine many features of the human and natural world for millennia to come. Many policy implications flow from this analysis. Controversially, it suggests that the ‘spike’ should be embraced and managed rather than avoided or delayed.     

Information and the transnational SME controller

One of the issues that face the small- and medium-sized enterprise (SME) when expanding is the ‘control’ issue and this paper investigates and presents preliminary evidence of ‘controlling’ or ‘management accounting’ practice in a transnational SME. Wibsey, the site of the case, is now a small group of companies that have expanded from a U.K. base into 10 European countries. This expansion has posed complex problems, which have increased the information requirements of the SME. The contextual issues of complexity and resulting challenges for the transnational organization in its management accounting, information and control systems are considered. Wibsey uses traditional management accounting as the basis of supporting decision-making in the group and a lower level of information need is reported, in contrast to Dent (1996) (Dent, J. F., 1996. Global competition: challenges for management accounting and control,Management Accounting Research , 7(2), 247–269), because the group chooses to maintain a traditional ‘accounting-led’ evaluation system in controlling and evaluating its transnational operations.     

A long memory property of stock market returns and a new model

A ‘long memory’ property of stock market returns is investigated in this paper. It is found that not only there is substantially more correlation between absolute returns than returns themselves, but the power transformation of the absolute return ¦r_t¦^d also has quite high autocorrelation for long lags. It is possible to characterize ¦r_t¦^d to be ‘long memory’ and this property is strongest when d is around 1. This result appears to argue against ARCH type specifications based upon squared returns. But our Monte-Carlo study shows that both ARCH type models based on squared returns and those based on absolute return can produce this property. A new general class of models is proposed which allows the power δ of the heteroskedasticity equation to be estimated from the data.     

Wall Street''s contribution to management accounting: the Stern Stewart EVAfinancial management system

EVA^®is a variant of residual income marketed byStern Stewart & Co., a New York consulting firm, with the purpose of promoting value–maximizing behaviour in corporate managers. This paper reviews the EVA system in the light of this purpose. First, it outlines the rationale for the use of residual income in ‘value-based management’, highlighting the potential shortcomings of residual income as a single-period performance indicator. Second, it considers the adjustments to GAAP-based accounting advocated by Stern Stewart in order to produce a more economically meaningful version of residual income (EVA) which might serve as an effective indicator of single-period performance. Third, it examines the Stern Stewart approach to the setting of EVA benchmarks. Finally, it reviews the logic behind the use of the ‘bonus bank’ to separate the award of EVA–based bonuses from the payment of such bonuses.     

Enterprise resource planning systems, management control and the quest for integration

This paper analyses how two companies pursued integration of management and control through enterprise resource planning (ERP) systems. We illustrate how the quest for integration is an unending process and it is produced concurrently and episodically. Integration is not only about ‘mere’ visibility and control at a distance. ERP systems do not define what integration is and how it is to be developed, but they incur a techno-logic that conditions how control can be performed through financial and non-financial representations because they distinguish between an accounting mode and a logistics mode. A primary lesson from our cases is that control cannot be studied apart from technology and context because one will never get to understand the underlying ‘infrastructure’—the meeting point of many technologies and many types of controls. ERP systems are particularly interesting for what they make impossible, and our cases illustrate how the two organizations in the quest for integration mobilized a number of ‘boundary objects’ to overcome systems-based ‘blind spots’ and ‘trading zones’. The paper points out that management control in an ERP-environment is not a property of the accounting function but a collective affair were local control issues in different parts of the organization are used to create notions of global management.     

An empirical analysis of strategic competition and firm values the case of R&D competition

We operationalize a firm's competitive strategy through a new empirical measure, and develop a framework for empirical analysis of the market value of strategic behavior. Using this framework, we study announcement effects of R&D spending. The announcing firm's stock prices are positively influenced by a change in spending, and negatively by our competitive strategy measure (CSM). Competitors' stock prices are positively influenced by the interaction between the market's reaction to the announcing firm and the CSM. Our results are consistent with positive effects of ‘accommodating’ competition with strategic substitutes, and nonpositive effects of ‘tough’ competition with strategic complements.     

Modelling the post-industrial city

A new kind of city is emerging: globalized (connected to other cities in global networks); tertiarized and even quaternarized (dependent almost entirely for its economic existence on advanced services); ‘informationalized’ (using information as a raw material); and polycentric (dispersing residences and decentralizing employment into multiple centres or ‘edge cities’). The question is how we can adapt the urban and transportation models, which originated in the very different world of the 1960s, to these conditions, and what kind of model would then result.     

Smaller business governance: Exploring accountability and enterprise from the margins

Smaller businesses now rank higher upon the corporate governance agenda. This agenda places their accountability and ‘enterprise’ particularly at issue. It is only put at issue because of just one possible problematization however. That problematization firstly assumes judicious accountability to be the crux of good governance with accounting at its hub. It secondly assumes that smaller businesses are the very seedbed of any ‘enterprise economy’, virtually irrespective of what form they take, or ‘enterprise’ they display. By then combining these assumptions together, this finally reproblematizes any relationship between accountability and ‘enterprise’, so that ‘de-regulation’ and decoupled accountability liberates smaller business ‘enterprise’ further. Others might question and challenge the very basis, as well as particular formulation, of this problematization however. A better grasp of the greater fluidity and complexity of smaller businesses would make the boundaries of their accountability and ‘enterprise’ more clear and leave their respective margins more suitably exposed. As a key potential instrument for that purpose managerial accounting research might then better inform the debate by specifically rendering these boundaries more visible while also identifying the precise scope for manoeuvre at/across their margins as well. To that end this paper uses certain enabling frameworks to construct and interpret the particular case of managerially accounting for a grown smaller business working across exactly those margins from the perspective of a ‘reflective practitioner’ acting as a field researcher for these purposes. As well as offering fresh insights into how far the boundaries of accountability and enterprise might legitimately stretch, this case calls for more critical thinking about how they might change.     

No one is perfect: The limits of transparency and an ethic for ‘intelligent’ accountability

This paper draws on the work of Butler [Butler, J. (2005). Giving an account of oneself. New York: Fordham University Press] to develop a critique of the operation and adequacy of transparency as a form of accountability. The paper begins with an exploration of accountability as subjection explored through Lacan’s account of the social dynamics of recognition, and Freud’s account of guilt. This analysis then informs an exploration of what is argued to be our typically ambivalent embrace of transparency as a form of accountability. The final section of the paper investigates the potential for a more ‘intelligent’ form of accountability, grounded in an ethic of humility and generosity, made possible by a conscious acknowledgement of the ways in which I can never quite know what it is that I am doing.     

Maximizing the firm's value to society through ethical business decisions: Incorporating ‘moral debt’ claims

We argue that all three forms of justice (economic, legal, distributive) require to be incorporated into the firm's business decisions in order to protect stakeholders’ alienable and inalienable rights. In addition, the firm has ‘moral debt’ obligations which require to be distributed fairly amongst all stakeholders. We develop a model that demonstrates that just distribution of stakeholders’ ‘moral debt’ and residual claims leads to the maximization of the firm's value to society in the long-run.