Detection of Management Fraud: A Neural Network Approach

The detection of management fraud is an important issue facing the auditing profession. A major contributor to this issue is the Loebbecke and Willingham (1988) conceptual model for the detection of management fraud. A cascaded Logit approach using the Loebbecke and Willingham model was developed in Bell et al. (1993). The present study offers an alternative approach using Artificial Neural Networks (ANNs). This paper develops a successful discriminator of management fraud using both the generalized adaptive neural network architectures (GANNA) and the Adaptive Logic Network (ALN) approaches to designing neural networks. The discriminant functions can distinguish between fraudulent and non-fraudulent companies with superior accuracy to the cascaded Logit results of Bell et al. (1993). Finally, the discriminant function provides a parsimonious set of questions useful for detecting management fraud.     

Does group membership matter? Evidence from the Japanese steel industry

In this study we address criticism that performance differences among strategic groups found in past research may be spurious and attributable to firm effects. The Japanese steel industry provides the setting for the study. Our analysis is based on data from the carbon steel sector of the Japanese steel industry for the periods 1980–87 and 1988–93. A one-way ANOVA indicated that the average performance of firms in the two technology-based groups in this industry—the integrated mills and the minimills—were significantly different during the two periods. Subsequently, we performed a regression analysis to examine the residual group effect after controlling for both environment and firm-specific effects. We found that even after controlling for both environment and firm-specific effects group membership was significantly associated with firm performance. Copyright © 2001 John Wiley & Sons, Ltd.     

Market liberalization and integration of maize markets in Malawi

The paper studies the extent of market integration of maize markets in Malawi in order to understand how it has been affected by market liberalization. Several measures of integration are introduced to analyze both the comovement of prices and the price adjustment process over time. Monthly retail prices of maize at eight main locations over the period January 1984 to December 1991 are considered. The main conclusion is that liberalization has increased market integration.     

The theory of corporate takeover bids: A subgame perfect approach

In this paper I re-examine Grossman & Hart's (1980a) earlier work on corporate takeovers and address three main shortcomings of their theory. First, their theory implies that in the ‘Nash equilibrium’ either all shareholders will decide to tender their shares or all will refuse the raider's tender offer. Hence, they look only at the pure strategy equilibria. Second, there does not exist any free-rider problem in the extreme cases of pure strategy equilbria because everyone sells his or her share and the raider does not have to deal with any minority shareholder in the equilibrium. On the other hand, if the raid fails and no one sells, then there is no question of dilution either. I show some mixed-strategy equilibria using assumptions of Grossman and Hart. Third, Grossman and Hart claim that their theory rules out the possibilities of takeovers by the inefficient raider in which the shareholders who tender their shares are worse off than they would have been otherwise with the incumbent management. It appears from the model that their argument is based on rather arbitrary assumptions.     

When does the share price equal the present value of future dividends?

Summary This paper discusses an explicit necessary and sufficient condition on the dividend stream of a publicly traded company, under which the price of the company's share is equal to the present value of the future dividends that will accrue to it. When it is not, the share price equals the present value of the future per share dividend plus the limiting per share value of the company at infinity. It uses a well-accepted generalization of the Miller-Modigliani framework, and assumes that the firm is an infinite horizon firm which may engage in repurchasing its own shares. It develops a proper dividend approach that can value such a firm for any dividend stream. The paper concludes by clarifying some remarks in the Miller-Modigliani paper.For helpful discussions and comments, I thank Laurence Booth. Mike Gordon, Robert Jarrow, Raymond Kan, Rajnish Mehra, David Quirin, and Rishin Roy. Support from Social Sciences and Humanities Research Council of Canada is greatly appreciated.     

On Lindley-like mean correction in the improved estimation of linear regression models

The risks of estimators incorporating the correction to the sample mean in the spirit of Stein and Lindley are approximated in the case of small disturbances.     

Think exogenous to excel: alternative supply chain data to improve transparency and decisions

Efficient decisions along the supply chain have traditionally demanded sophisticated information sharing processes. Even with decades of research on theoretical and practical developments on integrating systems and stakeholders, in practice, we still seem to struggle to achieve full transparency and mitigate inefficiency challenges. We explore the emerging sentiment analysis technique to augment sales and operations planning with currently unavailable exogenous information. Even though sentiment analysis has gained traction, a comprehensive application in supply chains has not yet been attempted. Relevant topics are reviewed to allow an examination of the key relationships in a process framework, grounded in dual-process and bullwhip effect theory. Our proposed conceptual framework extends our conception of sentiment analysis integration to improve supply chain decisions and performance. The framework addresses managers interested in developing additional analytical capabilities and researchers to initiate further empirical research on the potential held by sentiment analysis in supply chain research.     

Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels

This paper examines the nonlinear impact of real GDP per capita on financial development in a panel of 125 countries. It also determines the moderating effect of inflation on the impact of GDP on financial development. It employs the dynamic panel system generalized method of moments (GMM) and the dynamic common correlated effects (CCE) to do both panel and country‐specific analysis, as well as control for cross‐sectional dependence, heterogeneity and endogeneity. This study shows that GDP has a positive impact on financial development in the entire panel. However, when we split the panel into different income groups, we find a positive impact in the high‐ and middle‐income groups while the impact is insignificant in the low income group. Although we find no evidence of a nonlinear impact of GDP on financial development in the panel, the country‐specific analysis reveals a significant nonlinear relationship between GDP and financial development in 73 countries. We also show that inflation adversely moderates the positive impact of GDP on financial development in middle‐income countries. This study implies that the relationship between GDP and financial development depends on the levels of GDP and inflation rate. We recommend some policy options based on the findings.     

Timely loss recognition and termination of unprofitable projects

Ideally,firms should discontinue projects that become unprofitable.Managers,however,continue to operate such projects because of their limited employment horizo...