Are imputation credits capitalised into stock prices?

We investigate whether imputation tax credits are capitalised into Australian stock prices by utilising discounted cash‐flow valuation models and examining the relation between earnings yields and imputation credit yields. While imputation credits are valuable to many investors, the evidence that they are reflected in share prices is at best mixed and largely unconvincing. Our results reveal that imputation credits fail to lower realised returns casting doubts over whether imputation credits are priced from the perspective of longer‐term buy‐and‐hold investors. If so, such investors can expect to fully benefit from their imputation credits, and imputation effects may not impact on the cost of capital.     

The proposed elimination of full cost accounting in the extractive petroleum industry: An empirical assessment of the market consequences

On July 15, 1977, the Financial Accounting Standards Board (FASB) issued an Exposure Draft of Statement 19 in which a proposal was set forth to establish the uniform usage of successful efforts accounting and to eliminate full cost accounting in the extractive petroleum industry. This study addresses the question of whether the proposed elimination of full cost accounting had an adverse effect on the security returns of full cost versus successful efforts firms. The evidence presented in this study suggests that the proposal to eliminate full cost accounting was associated with a significant negative difference in risk-adjusted rates between full cost firms and successful efforts firms whose financial reports remained unaffected by the proposed change. This observed difference was found to be sustained over an eight month period including confirming events and disclosures associated with the initial proposal. We do not attribute this difference to market inefficiencies but, rather, to the anticipated consequences which this mandated accounting change is likely to have on managerial behavior and to increased costs that will have to be borne by the affected companies.     

Consumer Bankruptcy in the United States: A Study of Alleged Abuse and of Local Legal Culture

This paper describes certain central aspects of the operation of the consumer bankruptcy system in the United States. It combines government data with the investigators' empirical data from two large studies done over a decade to explore two types of questions. The first area of investigation relates specifically to bankruptcy policy. The object is to identify the categories of persons principally served by the consumer bankruptcy system and to determine if suggestions of widespread abuse of that system by debtors are well-founded. The paper reports that the system is used primarily by the middle-class. It also reports that there is no evidence of widespread abuse. The second area of investigation is explanation of differences in the operation of the system in different regions of the country, differences that have persisted over twenty years despite major changes in legal rules and economic conditions. The paper argues that these differences are not explicable in terms of formal legal rules or a simple economic model and that a better explanation of the data is that the differences are the product of a "local legal culture" in each region.     

Intercultural Discourse Ethics: Testing Trompenaars' and Hampden-Turner's Conclusions about Americans and the French

Are culture driven ethical conflicts apparent in the discourse of the protagonists? A multi-year, multi-cultural study of managers by Trompenaars and Hampden-Turner resulted in two conclusions relevant to business ethics. The first is that intercultural business conflicts can often be traced to a finite set of cultural differences. The second is that enough similarities exist between cultures to provide the grounds for conflict resolution. The research reported here gives credence to their study when applied to an ethical conflict viewed from French and American perspectives.     

Is Guanxi Ethical? A Normative Analysis of Doing Business in China

This paper extends the discussion of guanxi beyond instrumental evaluations and advances a normative assessment of guanxi. Our discussion departs from previous analyses by not merely asking, “Does guanxi work?” but rather “Should corporations use guanxi?” The analysis begins with a review of traditional guanxi definitions and the changing economic and legal environment in China, both necessary precursors to understanding the role of guanxi in Chinese business transactions. This review leads us to suggest that there are distinct types of, and uses for guanxi. We identify the potentially problematic aspects of certain forms of guanxi from a normative perspective, noting among other things, the close association of particular types of guanxi with corruption and bribery. We conclude that there are many different forms of guanxi that may have distinct impacts on economic efficiency and the well-being of ordinary Chinese citizens. Consistent with Donaldson and Dunfee (1999), we advocate a particularistic analysis of the different forms of guanxi.     

An Ethics of Care or an Ethics of Justice

A conflict within the community of those investigating business ethics is whether decision makers are motivated by an ethics of justice or an ethics of caring. The proposition put forward in this paper is that ethical orientations are strongly related to cultural backgrounds. Specifically, Hofstede's cultural stereotyping using his masculine-feminine dimension may well match a culture's reliance on justice or caring when decisions are made. A study of college graduates from six countries showed that Hofstede's dimension was remarkably accurate in predicating a justice or caring orientation for decision makers from five of the six countries.     

Locals, foreigners, and multi-market trading of equities: Intraday evidence from Thailand

We study stock market orders and trades in a developing country, Thailand, where foreign ownership limits partially segment local and foreign investors into two distinct markets. Some foreigners forgo voting rights and distributions to trade on the “local board”, while some locals forgo such benefits and pay a price premium to trade on the “foreign board”. Regardless of nationality, these cross-market traders typically submit orders when liquidity is high, fill orders at relatively beneficial prices, exploit patterns in stock prices across markets, display profitable holding-period returns, and enhance price discovery. This suggests that skilled, informed trading that affects market quality does not depend on trader nationality.     

Earnings fraud: board control vs CEO control and corporate performance – 1992–2004

The turn of the millennium is associated with increased corporate fraud, largely attributed to the failure of corporate governance. The compensation committee is expected to minimize fraud by rewarding only appropriate CEO behavior. A causal modeling approach, the Directed Acyclic Graph, was used to estimate the structure of corporate fraud. Corporate fraud was measured as illegal earnings statement(s), not all restatements but only those found illegal. A major finding is that the CEO's stock‐option compensation motivates the CEO to commit corporate earnings fraud, while cash salaries and bonuses are only indirectly related to earnings fraud through those stock options. Copyright © 2010 John Wiley & Sons, Ltd.