Framing public governance in Malaysia: Rhetorical appeals through accrual accounting

In government, the challenges of governance and anti-corruption are exacerbated by accounting not being fit for purpose. In developing countries, many governments adopt accrual accounting as a panacea. Drawing on Goffman's frame analysis, and rhetorical appeals to logic, credibility and emotion, this paper examines the adoption of accrual accounting in Malaysia. It was found accrual accounting has potential for keying governance and anti-corruption. However, rhetorical appeals that attempt to legitimate neo-liberalism and engender public support in the name of progress were hindered by perceptions of endemic corruption and relatively weak democratic institutions of ‘good’ governance common to developing countries.     

Innovation,growth and financial markets

We review some of the literature at the intersection of innovation, financial markets, and economic growth. We explore two key questions: (i) How financial markets interact with innovation; (ii) what type of quality transformations are brought about by innovation. A special emphasis is given to questions that stem from the 2008 economic and financial crisis, and to subjects further developed in the articles collected in this issue.     

HOW DO CONSUMERS MAKE CHOICES? A SURVEY OF EVIDENCE

Abstract In this paper, we review the evidence about the purchase behaviour of consumers. We concentrate on the characteristics of the choice process, choice of the external information source and nature of the information obtained from these sources. The impact of important systematic differences among consumers and products on choice behaviour is also discussed.     

Assessing the impact of unilateral trade policies EBA and AGOA on African beneficiaries' exports using matching econometrics

The existing literature studying the impact of non‐reciprocal preferential trade agreements (NRPTAs) assumes implicitly NRPTAs are non‐randomly assigned without showing the evidence of that. Using a matching methodology, this paper investigates whether the “African Growth and Opportunity Act” (AGOA) and the “Everything But Arms” (EBA) unilateral trade concessions have had an impact, and in what magnitude, on the exports of African beneficiary countries in the light of the evidence of the non‐random nature (endogeneity) of NRPTAs. Methodologically, previous studies using the matching procedure focused on bi or multilateral trade agreements. Our work focuses on NRPTAs that depend only on donors' conditions. Accordingly, we show that for NRPTAs, gravity covariates cannot be used for the matching procedure. We propose to use political variables as determinants for obtaining non‐reciprocal trade preferences in order to address the endogenous nature of NRPTA assignment. Our main results confirm that a country becomes eligible for a NRPTA only when it meets certain conditions, defined by their donors, such as political stability and economic regulation (for AGOA), and freedom of expression and human development (for EBA). Results also show that both AGOA and EBA policies have had a positive impact on African beneficiary countries' exports to NRPTA's providers, even if the magnitude impact of EBA is significantly lower than that of AGOA.     

Showing or telling? Local interaction and organization of behavior

We present a choice model based on agent interaction. Interaction is modeled as face-to-face communication that takes place on a regular periodic lattice with decision-makers exchanging information only with immediate neighbors. We investigate the long-run (equilibrium) behavior of the resulting system and show that for a large range of initial conditions clustering in economic behavior emerges and persists indefinitely. Unlike many models in the literature, our model allows for the analysis of multi-option environments. Therefore, we add to existing results by deriving the equilibrium distribution of option popularity and thus, implicitly, of market shares. Additionally, the model sheds new light on the emergence of the novel behavior in societies.     

Informal institutions and managers’ earnings management choices: Evidence from IFRS-adopting countries

In this study, we investigate the role of informal institutions (religiosity and culture) in determining managers’ choices of earnings management methods (accruals vs. real activities), after controlling for formal institutions (investor protection, enforcement quality and equity market development). Using an ethical perspective, we find that managers tend to choose an earnings management strategy that meets the prevailing social (informal) norms of the environment where the firm is headquartered. Specifically, our analysis shows that firms domiciled in countries with strong religious adherence and high-power-distance cultures prefer to manage their earnings ‘upwards’ through real activities rather than accruals. Overall, our results suggest that informal institutions determine managers’ earnings management choices at least as strongly as formal institutions do. It would therefore be misleading to analyze managers’ choices in managing earnings solely from the formal rules perspective without considering the role of informal constraints or vice versa.     

Does female human capital constrain earning management: The case of the United Kingdom

This paper examines how the presence of female directors on corporate boards influences the practice of real and accrual earning management in U.K. firms. We account for the endogeneity of a range of corporate governance measures, including female board representation, with regards to earning management and demonstrate that ignoring this problem may lead to perverse results. We find that female board representation constrains both forms of earning management. Our results provide evidence that female directors bring considerable and diverse human capital, enhance board monitoring and contribute to a qualitative shift in the decision-making process in the boardroom. We suggest that boards’ gender diversity and earning management is an overlooked area in the United Kingdom and globally and may require the attention of regulators.