“Sent to Coventry?”

This paper reports on an employment training project undertaken in Coventry with partial funding from the European Social Fund. It involved community organisations, the community education section of the local authority and the university. The approach to training was developed in tandem with community capacity building aims. The partnership achieved a measure of trust, mutual accountability and open decision-making. The two-year project employed a part-time researcher whose role embraced active participation in project processes. There are lessons to be drawn for urban regeneration, whether strengthening local economies, attacking social exclusion or capacity building for people and their communities.     

Earnings Management: Do Firms Play “Follow the Leader”?

In this study we examine whether the reported performance of one firm affects the discretionary reporting behavior of another firm. We do this by identifying the leader within each industry, defined as the first large announcing firm. We find that the discretionary performance of followers (those firms announcing after the leader) relates positively to the leader's reported performance. Specifically, when the leader misses analysts’ expectations, followers report lower discretionary accruals, have fewer income‐decreasing special items, and are less likely to meet analysts’ expectations. In contrast, when leaders report good news, followers report higher discretionary accruals and are more likely to meet expectations (although we do not find evidence of a positive association between leaders’ good news and followers’ income‐decreasing special items). Overall, the results are consistent with managers of followers perceiving that earnings news of the leader will affect investors’ and others’ performance expectations for their firms.     

Discussion of “How Does Intrinsic Motivation Improve Auditor Judgment in Complex Audit Tasks?”

Kadous and Zhou (2018) investigate experimentally how intrinsic motivation improves auditor judgment in complex audit tasks. In my discussion, I elaborate on my comments from the 2016 CAR Conference. Specifically, I comment in the first part of my discussion on the motivation and contribution of the paper, the underlying theory, the experiment and the results. The second part of my discussion is focused on the broader picture of the paper for which I offer some thoughts based on cross‐fertilization of insights from the archival auditing research and I conclude with providing some suggestions for further research.     

The Political Economy of Middle‐Income Traps: Is South Africa in a Long‐Run Growth Trap? The Path to “Bounded Populism”

The current literature on middle‐income traps has been dominated by economists who have relied on economic explanations mainly around stages of development and the structural transformation of economies. But there is an equally vigorous literature from political science which speaks to the political economy of transitions. We look at the dynamics of how economic modernisation triggers structural changes with winners and losers and how this is reflected in the polarisation of the political sphere amongst middle‐income countries. This paper asks the question of whether South Africa is an archetypical example of a country stuck in a trap and how this has affected the policy choices that it has made. South Africa needs to move up the value chain with a viable value proposition, and this requires a very different policy set and human capital plan.     

Discussion of “Are Related Party Transactions Red Flags?”

Kohlbeck and Mayhew ( 2017 ) create a new data set featuring two types of related party transactions. They use empirical‐archival methods to investigate the effect of such transactions on the likelihood of restatements and on audit fees. Their findings suggest that related party transactions related to directors, officers and major shareholders are associated with poor “tone at the top” and that this leads management to negotiate for lower‐quality audits to minimize monitoring costs. To offer avenues for future research, we focus our discussion on three aspects of their paper related to causality, definitions of variables, and generalizability to non‐U.S. jurisdictions.     

Does School Lunch Fill the “SNAP Gap” at the End of the Month?

This article investigates the relationship between the timing of Supplemental Nutrition Assistance Program (SNAP) benefit payments and participation in school lunch and breakfast using the National Household Food Acquisition and Purchase Survey. An event study approach examines participation over the five‐day window before and after the SNAP payment. We find that school lunch participation decreases by 17–23 percentage points immediately after the SNAP payment among 11–18 year olds while breakfast drops by 19–36 percentage points. The decline begins the day prior to payment. We find no effects for 5–10 year olds. Models examining participation over the full SNAP month using individual fixed effects yield similar findings. Among teenagers, participation in school lunch and breakfast decline in the first two weeks of the SNAP month, increasing afterward. Non‐school meals show the opposite pattern. Overall, results indicate SNAP households rely more on school lunch and breakfast toward the end of the SNAP month.     

Inflation-Output Trade-Off in South Africa: Is the Phillips Curve Symmetric?

This study sets out to investigate whether the inflation-output trade-off in South Africa is symmetric or asymmetric; and if asymmetric, whether it is convex or concave. A New Keynesian dynamic stochastic general equilibrium model calibrated on South African data reveals that a negative demand shock reduces inflation and output while a positive demand shock of the same magnitude leads to a smaller increase in inflation and a larger increase in output, indicating that the inflation–output relationship in the country is concave asymmetric. These findings corroborate estimation results of the inflation-expectations augmented Phillips curve conducted using difference GMM on quarterly data.     

Discussion of “Communicated Values as Informal Controls: Promoting Quality While Undermining Productivity?”

Kachelmeier, Thornock, and Williamson ( 2016 ) investigate experimentally whether an employer's value statement can affect the way employees cognitively represent how they should approach a multi‐attribute task, and therefore performance. Counter‐intuitively, but consistent with their theory, they find that the value statement negatively affects performance for piece‐rate incentivized participants. In my discussion, I elaborate on my comments from the 2013 CAR Conference. Specifically, I discuss contexts where a firm's value statement may have positive effects on performance, and the importance of conducting research investigating how the decisions made by management accountants affect learning.     

HOW REVOLUTIONARY IS THE “NERICA REVOLUTION”? EVIDENCE FROM UGANDA

A new high‐yielding upland rice variety known as New Rice for Africa (NERICA) has been widely recognized as a promising technology for addressing the food shortage in sub‐Saharan Africa. However, there has been no on‐farm yield data to support this optimism. The present study attempts to assess the actual and potential yield of NERICA in Uganda where it has been introduced recently. We found that NERICA's yield is higher (2.5 tons) for farmers who had rice‐growing experience than those who had no previous experience (1.7 tons). These findings strongly indicate that strengthening training, extension, and other supporting systems is the key to the success of the “NERICA revolution” in this country.     

Discussion of “Does the Identity of Engagement Partner Matter? An Analysis of Audit Partner Reporting Decisions”

The authors of this provocative study apply commonly used audit quality surrogate measures to a large and unique set of financial and other data on statutory audits of small private companies in Sweden. The paper has received unparalleled attention by the financial press and the PCAOB for its presumed support for regulatory intervention in standards for U.S. public company audits. In this Discussant Comment, I review the paper's content, analyze its predictive validity, and discuss its multiple implications plus, following Conference instructions, I provide constructive suggestions for improvements. Based on predictive validity analysis, I conclude that engagement partner assignment strategy is an important and acknowledged omitted variable that affects the study's internal validity via both the independent variable (partner's prior performance measure) and the dependent variable (borrower's cost of debt capital). The omission also affects construct validities and, if audit firms are applying a plausible assignment strategy, then interpretation of the study's main results would be reversed. Finally, the lack of a standards intervention noted by the authors and the extreme size and other differences between audits of Swedish private companies and U.S. public companies impair external validity and generalization to the U.S. intervention. As to improvements, I suggest that the authors (i) ask Swedish lenders to validate their presumed use of partner performance ratings in determining a borrower's interest rate, and (ii) ask Swedish Big 4 audit firms to provide a few internal partner performance ratings for comparison with the external performance measures used in the study. This two‐pronged, multimethod approach might confirm or deny critical assumptions underlying the present study and may substantively inform standards setters, evidence‐based standards, and fellow researchers about the validity of commonly applied surrogates for audit quality and the study's stated conclusion.     

Broiler production in South Africa: Is there space for smallholders in the commercial chicken coup?

It is agreed that agriculture provides avenues for impoverished households to produce and trade their way out of poverty. However, this requires market access and value chain integration of small-scale farmers. This paper explores the possibilities for integration of small-scale farmers into the mainstream commercial broiler value chain in South Africa. Production costs of small-scale producers are evaluated within the context of their commercial counterparts, with a case study approach. It revealed that small-scale producers pay more for inputs but also receive a substantial premium for sales of live birds in the informal market. This results in attractive gross margins for small-scale producers. There is, however, a production ceiling, due to demand and production considerations, associated with small-scale broiler production. This ultimately results in a dualistic industry with an informal (live sale) value chain at the one end of the spectrum and a sophisticated large-scale commercial value chain at the other. Given the salient production features and investment requirements associated with large-scale broiler production, organic growth from the small-scale value chain into the commercial value chain seems improbable. The dual nature of this industry should therefore be considered when developing policy geared towards development, poverty alleviation and value chain integration.     

Discussion of “Were Information Intermediaries Sensitive to the Financial Statement‐Based Leading Indicators of Bank Distress Prior to the Financial Crisis?”

I discuss Desai, Rajgopal, and Yu ( 2016 ) with the goal of helping readers think carefully about which implications of the study are likely to generalize to future economic downturns and which are likely to be specific to the facts and circumstances of the recent financial crisis, given that the crisis was driven by the expectation and then the realization of a single market variable, national house price depreciation.     

EXPLORING THE IMPACT OF FOREIGN AID ON CORRUPTION: HAS THE “ANTI‐CORRUPTION MOVEMENT” BEEN EFFECTIVE?

Though many studies have referred to an “anti‐corruption movement” beginning in the 1990s by major international organizations, none has empirically tested its effectiveness on corruption. The data show that from 1997 onward, the impact of multilateral aid is strongly and robustly associated with lower corruption levels, while bilateral aid is shown to be an insignificant determinant. An increase in any official development assistance (ODA) pre‐1997 is associated with higher levels of corruption or has no impact at all. Using panel data from 1986 to 2006, this study reveals a more nuanced relationship between ODA and corruption than previous studies and demonstrates that when disaggregating the time periods, there are sensitive temporal effects of ODA's effect on corruption overlooked by earlier studies, and provides initial evidence of the effectiveness of the international organization anti‐corruption movement in the developing world.     

Has the Exchange Rate Pass‐Through changed in South Africa?

This paper uses the two‐stage exchange rate pass‐through (ERPT) framework instead of the direct pass‐through (PT) from the exchange rate to consumer inflation to assess the variation in the ERPT for South Africa from 1994 to 2014. The paper uses rolling‐window estimation to examine the possibility of change in the ERPT over time. In addition, it investigates the asymmetric behaviour of the ERPT over the business cycle. The results indicate that the ERPT for South Africa is complete in the first stage but incomplete in the second stage. It implies that retailers do not pass all the cost to consumers. The first‐stage ERPT has declined slightly since the Global Financial Crisis. Weak domestic demand and possibly the concentration of firms in the manufacturing sector are the main forces behind this low PT. Moreover, there is evidence of asymmetry in the first‐stage ERPT in that it tends to rise in the upturn phase of the economy compared to the downturn. The second‐stage ERPT shows a considerable decline since the adoption of the inflation‐targeting regime. Similar to the first‐stage case, the PT is muted in the downturn but rises in the expansionary phase by about 10%.