Accounting Earnings Processes,Inter-temporal Incentives and Their Implications for Valuation

Accounting measures such as levels and changes in residual earnings are widely used for performance evaluation and executive compensation (Healy, 1985). Quite often, these compensation contracts are of the linear form. In a multiperiod agency setting with hidden actions, where the agent's effort influences the random evolution of a general model of residual earnings, we show that linear compensation contracts based on weighted sum of the levels and changes of residual earnings are indeed optimal. We characterize the contract explicitly and show that the weights are determined by the earnings persistence parameter. Residual earnings are known to be important for valuation too (Ohlson, 1995; Easton and Harris, 1991). In our setting, we demonstrate that residual earnings are also sufficient for valuation. This implies that residual earnings can be used to align incentive goals with valuation objectives. In essence, our paper provides the theoretical underpinnings for linear contracts based on residual earnings and their implications for valuation.     

Public-Interest Arguments in Privatising Government Audit

The privatisation of the state audit office of Victoria in 1996–97 engendered a widespread debate that was joined by the two main accounting bodies in Australia. Although the accounting bodies adopted divergent positions, both rationalised their arguments in terms of public interest. An analysis of this paradox shows that the accountants pursued their commercial interests through intra-professional conflict and cooperation behind the cloak of public-interest arguments, showing little concern for the public accountability function of public-sector audits and reporting requirements.     

Validation of Expert Systems for Innovation Management: Issues, Methodology, and Empirical Assessment

Faced with the complexities of managing new product development, most of us would welcome the support of a computer-based system that captures the knowledge and the reasoning capabilities of experts in our field. Considerable effort has been focused on the design and development of expert systems for applications such as new product management. However, design and development are only two steps on the path to successful implementation of a useful expert system. A rigorous validation process is essential for ensuring that the expert system performs as intended. Using the INNOVATOR expert system as an example, Sundaresan Ram and Sudha Ram propose and test a framework for validating expert systems designed for new product management. The proposed validation framework considers three aspects of the expert system: its knowledge acquisition methodology, its performance, and its utility. Validation of an expert system's knowledge acquisition methodology involves assessment of the knowledge sources used, the criteria for selecting human experts, and the methods used for knowledge acquisition. Using multiple sources improves the likelihood that the expert system will capture the necessary core knowledge. Similarly, selection of the experts who are to supply the knowledge used by the expert system should be based on reliable measures of new product expertise rather than ad hoc measures. The system's performance is evaluated through formal tests of the accuracy and the completeness of the knowledge base, the consistency and the accuracy of the decisions made by the system, and the reasoning process by which the system reaches its decisions. Such tests may involve direct examination of the system by experts, and Turing tests, which compare both the recommendations and the reasoning process of the system with those of selected experts. Both types of tests may involve experts from whom knowledge was acquired during the development of the system as well as experts who were not involved in the design and development of the system. Assessment of an expert system's utility focuses on user perceptions of system performance and utility as well as the design of the user interface. First, end-users must evaluate the relevance of the chosen problem domain. In other words, the validation process must verify that the expert system addresses an important problem that requires decision support tools. Second, the expert system must provide a logical, systematic approach to solving the problem. Finally, the expert system must provide a consistent, intuitive user interface.     

Ammonia synthesis enhancement through heat-mass-exchange

The HME Ammonia Synthesis Enhancement is a simple process modification enhancing synthesis productivity by reducing energy consumption and/or increasing plant capacity as compared to conventional alternatives. In this paper, it is presented as an attractive alternative to low temperature ammonia separation in low pressure plants. Some HME performance sensitivities and their implications on the design of a unit are studied. Typical HME enhancement economics is summarized in comparison with a typical conventional alternative. This indicates a potential 25% reduction in refrigeration power consumption, paying out the HME unit in a relatively short time. The application of the HME enhancement is expected to promote synthesis at lower pressures.     

Growth and internationalisation strategies in the airline industry

This paper analyses the international growth of the global air transport sector to identify factors that determine the emergence of transnational companies and different forms of international expansion in the airline industry. An analysis of the market structure is conducted to understand why traditional, full service airlines have adopted alliances and code sharing to internationalise their business, while low-cost carriers prefer more direct methods to enter new foreign markets.     

Comparison of cross-country measures of sigma-convergence in per-capita income, 1960–2010

The evidence on sigma-convergence in income indicated by (a) coefficient of variation (CV) and (b) SD of logarithms (SDLOG) is considered for a large cross-country sample covering the period 1960–2010. Three main points are noted. First, the two measures yield qualitatively similar scenarios, and both indicate sigma-divergence in income over the period. Second, however, they do show large differences in the rate of change in income inequality, and SDLOG indicates divergence at a much higher rate than CV. It seems likely that SDLOG would indicate greater divergence, or weaker convergence, than CV in many cases. Third, therefore, researchers are urged not to rely too heavily on one or the other measure for an inference on sigma-convergence, and it seems appropriate to consider both for drawing reasonable conclusions on convergence in income and many other variables studied by scholars.     

The interplay between the Bayesian and frequentist approaches: a general nesting spatial panel data model

The interplay between the Bayesian and Frequentist approaches: a general nesting spatial panel-data model. Spatial Economic Analysis. An econometric framework mixing the Frequentist and Bayesian approaches is proposed in order to estimate a general nesting spatial model. First, it avoids specific dependency structures between unobserved heterogeneity and regressors, which improves mixing properties of Markov chain Monte Carlo (MCMC) procedures in the presence of unobserved heterogeneity. Second, it allows model selection based on a strong statistical framework, characteristics that are not easily introduced using a Frequentist approach. We perform some simulation exercises, finding good performance of the properties of our approach, and apply the methodology to analyse the relation between productivity and public investment in the United States.     

More than energy transformations: a historical transition from organic to industrialized farm systems in a Mediterranean village (Les Oluges,Catalonia, 1860–1959–1999)

The analysis of energy efficiency of agroecosystems from a sociometabolic perspective is a useful way to assess the sustainability of farm systems. In this paper we examine the transition of a Mediterranean agroecosystem from an organic farm system in the mid nineteenth century to an industrialized one at the end of the twentieth century by means of the technologies and ideology of the Green Revolution. Given that many of the world’s agricultural systems have experienced, or are currently experiencing this transformation, our results are relevant for building more sustainable agricultural systems in future. Our results highlight the relevance of livestock density, and the flows of biomass reused and unharvested biomass as key elements affecting the sustainability of the agroecosystem not only from a socioeconomic perspective, but also from an agroecological point of view. Additionally, from a biocultural perspective our investigation sustains the relevance of the study of traditional farm systems for the development of a sustainable agriculture.     

Should corporate debt include a rating trigger?

Recent corporate debt offerings have included a covenant specifying a pre-determined payment to debtholders when the debt is downgraded. We examine the incentive for equityholders to increase firm risk (and the associated costs) when debt includes a “rating trigger.” Equityholders of firms with a low-risk profile and operating flexibility choose debt with a trigger, while equityholders of firms with a high-risk profile and less flexibility choose regular debt. A trigger that requires an equity infusion better mitigates conflicts between equityholders and debtholders than a trigger paid by liquidating assets. A trigger that increases the coupon rate is not optimal.     

Conserving biodiversity of community forests and rangelands of a hot arid region of India

Community forests/rangelands, called Orans and Gauchars in the western arid part of India, constitute a significant proportion of the total geographical area of the region. Given the economic importance of these areas from time immemorial, the local people took special care to protect and sustainably utilize these common property resources. However, these forests and rangelands have suffered severe degradation in the recent past. Rehabilitation of Orans and Gauchars needs proper planning and execution of a technically feasible package, tailored to suit their unique edaphic, climatic, vegetation, social and legal status. Keeping in view the vast potential of these areas to sustain large scale livestock farming for overall economic upliftment of the local population, there is an urgent need to rehabilitate these degraded areas in an efficient and cost-effective manner. Salient problems faced by these natural assets of western Rajasthan and strategies for their rehabilitation have been discussed in the paper.