International Support for NGOs in Bangladesh: Some Unintended Consequences

Based on the experience of donors in Bangladesh over the past 10 years, we can conclude that efforts to strengthen civil society and thereby democratization by providing resources to NGOs in the developing world are likely to have some unintended and negative results. From the pluralist perspective, the “Civil Society Empowerment” initiative is likely to increase antagonism and noncooperation between NGOs and mainline civil society actors, while from a radical point of view, support for NGOs is likely to undermine their willingness to serve as social mobilizers. Suggested remedies are offered to mitigate these dual tendencies.     

The Circumstances and Legal Consequences of Non‐GAAP Reporting: Evidence from Restatements*

Our study examines the circumstances of non‐GAAP financial reporting by 492 U.S. companies that announced restatements from 1995 to 1999. We focus on income statements to analyze the occurrence and resolution of litigation over restatements and explore the role of accounting items in bringing and resolving this litigation. We provide evidence on the pervasiveness of accounting misstatements, describe their nature, and show how, if at all, they affect litigation. We assess the nature of restatements by determining whether regular, recurring earnings from primary operations (core) or other components of earnings (noncore) are misstated, and we assess their pervasiveness by estimating the number of primary accounts misstated. In our sample, companies with core restatements have higher frequencies of intentional misstatements (fraud) and subsequent bankruptcy or delisting. Likewise, these companies have, on average, more material misstatements, more negative security price reactions to restatement announcements, and more negative security price changes over the six months preceding and following restatement announcements. However, controlling for these and other factors, we find a significant association between accounting items and litigation, whether occurrences or resolutions. Specifically, core restatements — driven primarily by misstatements of revenue, a component of core earnings — and more pervasive restatements each play a role, while misstatements of noncore earnings alone do not.     

The Determinants of Corruption: Cross‐Country‐Panel‐Data Analysis

This study explores the determinants of corruption, utilizing the Hausman and Taylor's technique to estimate a random effects model that incorporates both the effects of corruption determinants that vary over time and those that are time‐invariant, and using a larger panel dataset and a comprehensive set of corruption determinants. The first interesting result is that perception of strong support for rule of law is strongly correlated with reduced corruption, suggesting that a better quality of law enforcement reduces corruption. Rich countries have lower corruption, and the perception of free expression and accountability strongly decreases corruption, indicating that providing greater opportunities for citizens to participate in selecting their government, more freedom of expression, and free media are effective ways of curbing corruption. Conversely, natural resource abundance, country population size, country's dominant religious tradition, ethnic fractionalization, and political stability are unimportant determinants of corruption, while previous research has suggested they are important.     

Compensation in the Post‐FIN 48 Period: The Case of Contracting on Tax Performance and Uncertainty

Academic and anecdotal evidence indicates that incentive systems often provide short‐term payouts without regard for long‐term consequences. New detailed disclosures mandated by FIN No. 48, Accounting for Uncertainty in Income Taxes, enable us to use a tax setting to investigate whether boards adjust performance‐based pay for uncertainty. We find managers’ bonus payouts are positively associated with tax performance; however, bonus payouts are lower when measures of ex ante tax uncertainty are higher. Our results are robust to tests of alternative explanations including financial reporting aggressiveness, overall firm risk, and other forms of compensation. Further, we document that the relation between bonus compensation and tax performance has changed in the post‐FIN No. 48 period. Specifically, we identify a significant association between bonus payout and GAAP ETR only in the pre‐FIN No. 48 period and a significant association between bonus payout and cash ETR only in the post‐FIN No. 48 period, suggesting that the relation between compensation and tax avoidance should be examined carefully with particular attention to the post‐FIN No. 48 period.     

持续上升动力不足,下调风险加大——2010中国经济预测

本文采用奥地利学派商业周期的理论框架,解释我国宏观经济波动的原因,从外部环境、宏观调控政策导向以及启动民间投资三个方面,分析了影响2010年宏观经济走势的因素,认为2010年我国经济持续上升动力不足,下调风险加大,政府刺激经济政策的操作空间缩小.本文预测2010年经济增长率为7.5%左右,CPI可控制在3%左右.     

Biased data revisions: Unintended consequences of China's energy-saving mandates

In China energy-saving mandates issued by the central government can trigger a trade-off between faithful implementation and kinds of strategic responses at the local level. This paper examines the biased data revision pattern of Chinese provinces under incentives created by energy-saving mandates. The data revisions conducted by provinces in the treatment group are evaluated against those carried out by their counterparts in the control group. Empirical evidence is provided that some provinces in the treatment group conducted biased data revisions by taking advantage of benchmark revisions of historical data following the 2008 Economic Census. These provinces adjusted their base-year energy consumption figure upward in seeking to reach the 2010 energy intensity reduction targets numerically. In institutional terms, strong political incentives are formed by assigning energy-saving indicators a veto power in cadre performance assessment. In a self-reported statistical regime, checks and balances are particularly weak regarding benchmark revisions of historical data. The findings of this paper suggest that the data quality of associated official statistics at the local level is undermined by energy-saving mandates. To improve the data quality of the official statistics, new checks and balances should be installed for local statistics.     

‘Thailand‐plus‐one’: a GVC‐led development strategy for Cambodia

This paper discusses the location choices of export‐oriented firms in the context of a global value chain‐led development strategy. The results of a firm survey are used to examine, for the case of Cambodia, how less developed countries can participate in global value chains by specialising in a niche segment of the value chain. The survey results, which focus on the location choices of Cambodian firms that have mother factories in Thailand, show that the border region has advantages for access to suppliers and markets, while there are disadvantages for recruiting and retaining workers. Metropolitan areas, on the other hand, have advantages in the pooling of human resources, expatriates' living conditions, and access to government services, while inland transport costs are a burden for firms located in metropolitan areas. Policy implications are developed.     

Bagehot for beginners: the making of lender‐of‐last‐resort operations in the mid‐nineteenth century1

In this article we develop new tools to survey the development of lending‐of‐last‐resort operations in the mid‐nineteenth century. One finding is that free lending and extensive liquidity support against good collateral developed gradually after 1847, and was already a fact of life before Bagehot published Lombard Street. Another is that the extension of the Bank of England's lender‐of‐last‐resort function went along with a reduction of its exposure to default risks, in contrast with accounts that have associated lending of last resort with moral hazard. Finally, we provide a new interpretation of the ‘high rates’ advocated by Bagehot. We suggest they were meant to prevent banks from free‐riding on the safety offered by the central bank, and were aimed at forcing them to keep lending during crises so as to maintain a critical degree of liquidity in the money market.     

Significance of Forecast Precision: The Importance of Investors’ Expectations

I investigate whether the alignment between individual investors’ expectations about forecast precision and actual forecast precision affects their estimates of firm value, and whether this relationship is mediated by individual investors’ perceptions of management credibility and future firm growth. Experimental results confirm that when expected and actual forecast precision align, individual investors estimate higher firm stock prices than when expected and actual forecast precision do not align. I also provide evidence of a mediation path through which the misalignment between expected and actual forecast precision affects individual investors’ perceptions of management credibility, future firm growth, and estimates of firm stock price. My findings help reconcile inconsistencies in prior earnings forecast literature and inform managers and researchers about strategies that lead to higher perceptions of management credibility and firm value.     

Learning the “Craft” of Auditing: A Dynamic View of Auditors' On‐the‐Job Learning

We investigate how auditors learn the technical aspects of their professional role while performing client engagements, and how that learning process has been shaped by changes in societal, economic, and regulatory forces. Prior studies explicitly recognize that auditors need social skills and demeanor consistent with professional norms as well as requisite knowledge, but those studies generally focus on the processes through which new auditors are molded toward consistency with social norms. In contrast, we focus on forces affecting the transfer of technical knowledge from supervisor (guide) to subordinate (learner) in the everyday work setting. Our evidence derives from semi‐structured interviews with 30 relatively new and more experienced audit partners at one Big 4 firm, thus spanning multiple “generations” of experience. Results confirm that auditors primarily acquire technical knowledge on the job, through the interactions among individual engagement team members. However, partners express concern about changes in the practice environment that may limit effectiveness of on‐the‐job learning, including characteristics of personnel, the approach to formal training at induction, supervisors' reluctance to provide candid feedback, regulatory and economic pressures, and the increased distraction, and reduced interpersonal contact associated with the use of information technology. At the end of the day, our findings raise implications for practice regarding the difficulty of developing effective learning conditions for auditors in the face of these challenges.