Internal control reporting and market liquidity

We investigate the impact of the Sarbanes-Oxley Act of 2002 (SOX) on information asymmetry by analyzing the relation between SOX Sections 302 and 404 control reports and market liquidity using bid-ask spreads. Lower market liquidity indicates higher levels of information asymmetry implying that market participants perceive financial statement misstatement risk is higher. If SOX disclosures contain relevant information, then one would expect firms reporting internal control material weaknesses to have lower market liquidity. Accordingly, we find that market liquidity is lower (i.e., bid-ask spreads are higher) for firms reporting ineffective control compared to firms reporting effective control using either annual SOX 404 internal control reports or quarterly SOX 302 disclosure control reports, which suggests that SOX 302 and 404 reports provide useful information for identifying firms with a higher risk of financial statement misstatement. However, we do not find consistent results using two alternative liquidity measures: trading volume and market quality indices. We then examine whether changes in control reports are associated with changes in market liquidity. We generally do not find that firms with improved (deteriorated) control reports experience a larger decrease (increase) in bid-ask spreads or larger increases (decreases) in trading volume and market quality indices compared to other firms, suggesting that market participants do not discern a change in information asymmetry when the effectiveness of internal controls over financial reporting changes.     

The adoption of outside boards by small private US firms

The research issue motivating the present study is concerned with why some small private firms adopt an ‘outside board’ (i.e. larger boards in which the majority of directors are neither managers of the firm nor relatives of the Chief Executive Officer (CEO)) and others do not. This issue is addressed by investigating whether differing contextual conditions distinguish adopters from non-adopters of outside boards. The authors consider the adoption of an outside board to be one part of a larger organizational life-cycle process in which organizations implement more ‘professional management’ structures and practices in response to their evolving internal and external contexts. The authors examine simultaneously three contextual pressures that commonly confront small private firms as they develop over time- firm growth and larger size, the succession of the CEO, and the diffusion of equity to individuals outside the firm- to determine which of these are salient in explaining the presence of an outside board. Logistic regression results (3070 respondents toa cross-industry mail survey) indicate that outside boards are more likely when more equity is held by individuals outside the firm, CEOs are older and CEOs do not intend to implement an intra-family transition of leadership. The results suggest that firms adopt outside boards primarily to satisfy the desires of external owners, and only secondarily for the service and resource benefits that outside directors provide.     

Responsible Marketing: Can Social Enterprises Show the Way?

In this article, the authors present a new perspective on responsible marketing. We discuss if and how social enterprises can present a new understanding of responsible marketing. Relevant publications (14 on social entrepreneurship, 40 on marketing in non-profit organizations and social enterprises and 41 papers on marketing) are selected and reviewed. The result of the literature analysis and synthesis show that social enterprises can gain from a more formal, systematic approach to marketing. Since social enterprises prioritize social goals over business results, successful adoption of marketing policies and practices can help then create a blueprint for responsible marketing. Marketing of socially relevant products and services by social enterprises thus create a new paradigm of responsible marketing. Such models can also be useful for larger corporations who look at social business and shared value creation as part of their business and marketing strategy.     

Editorial introduction: HRM and performance: confronting theory and reality

This editorial introduction has twin purposes. The first is to make a wide audience aware of the new Dutch HRM Network. The second is to introduce a set of papers which make a contribution to the connections between HR policies/strategies and organizational performance. These purposes are linked by the fact that the papers come from the inaugural conference of the Network that was held in the Rotterdam School of Economics at Erasmus University at the end of 1999.     

Conveying Trustworthiness to Online Consumers: Reactions to Consensus, Physical Store Presence, Brand Familiarity, and Generalized Suspicion

Etailers have been losing market share to brick and mortar retailers that also sell products online. Two related studies investigate means by which etailers can convey trustworthiness to consumers and thereby increase purchase intentions relative to hybrid firms. Study 1 examines whether consensus information (i.e., the extent of satisfaction agreement among previous customers) and brand familiarity exert independent or interactive effects on consumer perceptions across retailers that possess, or lack, a physical presence. Study 2 tests a potential boundary condition of the effects of consensus information and brand familiarity by introducing generalized suspicion, which is a common condition for online buyers. Results suggest that consensus information provides a broad cue that conveys trustworthiness and leads to greater purchase intentions for both familiar and unfamiliar brands, as well as hybrid and etailer firms. In comparison, the effects of physical presence and brand familiarity were somewhat narrower in scope. However, we find that consensus information alone is not sufficient to buffer against active, generalized suspicions online. Instead, a combination of high consensus and brand familiarity is necessary for this purpose. The paper concludes with recommendations on how etailers can convey trustworthiness in online exchanges and how future research can build upon these findings.     

Managed Costs and the Capture of Information

As a result of a pilot study, it was concluded that valuable insight into the industrial application of management accounting principles would be gained by an in depth development of case studies. These would assist in understanding the compilation of knowledge within industrial practice; in return they might condition the future presentation of this knowledge and serve as a pointer to further research and its dissemination. Strong support for the development of case studies has been expressed recently by a number of prominent researchers who emphasise that, for certain purposes, suitably designed studies of this nature are a major means of making progress. The authors have compiled a set of thirteen studies principally dealing with industrial practice relating to cost behaviour analysis and transfer pricing, but covering a number of related issues. The paper outlines the methodology adopted and concentrates on three key areas of analysis: capture and creation of information, managed costs, and information monopolies. Results are illustrated through excerpts taken directly from the studies.     

Budgeting for Equality: The Australian Experience

Gender budgets have now been introduced in varying forms in more than forty countries throughout the world. These exercises emerged out of feminist practical politics initially in Australia and later in a number of other countries. The idea of gender budgets gathered further momentum when the United Nations Beijing Platform for Action called for the integration of a gender perspective into budgetary decision-making. Most of these experiments share three core goals. They seek to: (1) mainstream gender issues within government policies; (2) promote greater accountability for governments' commitment to gender equality; and (3) change budgets and policies. However, very little research has examined their success in achieving these goals. In discussing the lessons learnt from the Australian experience, this paper adopts a feminist political economy perspective on the state as an analytical starting point for discussing the future of gender budgets elsewhere in the world.     

The Economics of a Reduction in VAT*

We explore the effects of a temporary cut in VAT, identifying three possible effects: an income effect as people benefit from a lower cost of living during the period of the reduction, a substitution effect as people bring their consumption forward and an arbitrage effect as people buy non‐perishable goods before the end of the period of low VAT for consumption after the VAT rate has been raised. International evidence suggests a clear overall impact on consumption, although the nature of the pattern depends on the way in which the data are analysed. However, the key policy issue is the impact of the VAT change on output and, to examine that, a simulation model of the whole economy is needed. Evidence from the National Institute's Global Economic Model suggests that the impact of the recent VAT reduction is likely to build up during the course of 2009. The reduction in VAT from 17½ per cent to 15 per cent is likely to result in consumption being augmented by less than 1 per cent by the fourth quarter of 2009. However, GDP is likely to be raised by less than half a per cent relative to what would have happened without the VAT increase. After the temporary reduction is over, both consumption and GDP are depressed as a result of the policy.