Earnings dispersion and aggregate stock returns

This paper studies the relation between aggregate stock returns and contemporaneous and future cross-sectional earnings dispersion. We hypothesize that increases in expected earnings dispersion signal increases in uncertainty and increases in unemployment, thereby causing expected returns to rise, which in turn causes prices to decline. We find a positive relation between aggregate stock returns and contemporaneous earnings dispersion because higher earnings dispersion is associated with higher expected returns. Consequently, we also find a negative relation between aggregate stock returns and future (one-year ahead) earnings dispersion, as investors anticipate higher future earnings dispersion and higher expected returns.     

Discussion of “Are Related Party Transactions Red Flags?”

Kohlbeck and Mayhew ( 2017 ) create a new data set featuring two types of related party transactions. They use empirical‐archival methods to investigate the effect of such transactions on the likelihood of restatements and on audit fees. Their findings suggest that related party transactions related to directors, officers and major shareholders are associated with poor “tone at the top” and that this leads management to negotiate for lower‐quality audits to minimize monitoring costs. To offer avenues for future research, we focus our discussion on three aspects of their paper related to causality, definitions of variables, and generalizability to non‐U.S. jurisdictions.     

More reforms,less innovation? The impact of structural reform histories on innovation-oriented cultures in public organizations

The environments of public organizations have become substantially volatile due to economic and societal changes, requiring organizations to continuously adapt and to develop an innovation-oriented culture. In response to the multitude of challenges posed by this volatile environment, politicians in inter alia the executive and parliament impose structural reforms upon public organizations, implying that these organizations might be confronted with a series of structural reforms over their lifetime. This paper advances that a history of repeated and frequent structural reforms, irrespective of the underlying drivers of these reforms, has a negative effect on the innovation-orientedness of the organizational culture. We explore the link between an organization’s history of structural reforms and the degree to which the culture within these organizations is innovation-oriented. Results indicate that organizational turmoil generated by repeated structural reforms reduces innovativeness and suggest that too many structural reforms imposed in a too short time span will have detrimental side effects.     

Strategy as guided evolution

In this paper, we build on a detailed case study and the theories of evolution in social and cultural systems and intraorganizational ecology to develop a model of strategy as guided evolution. Its primary distinctions from earlier models of organizational and intraorganizational ecology lie in (i) the incorporation of an important—yet realistic—role of top management in shaping the direction and outcomes of the evolutionary processes within firms, and (ii) the incorporation of human and social capital as a critical unit of selection within such processes. We describe the model and discuss the evolutionary and ecological processes associated with it. Copyright © 2000 John Wiley & Sons, Ltd.     

Implications of the integral approach and earnings management for alternate annual reporting periods

We compare the last 12 months’ earnings ending in quarter four (i.e., fiscal year earnings), three, two and one. Lipe and Bernard (2000) offer two competing explanations for higher volatility in fourth quarter earnings relative to other quarters. First, under the integral approach, any estimation errors in the earlier quarters are corrected through fourth quarter earnings, which could make them more volatile. Second, earnings management concentrated in the fourth quarter renders fourth quarter earnings more volatile. While both explanations have similar implications for the properties of quarterly earnings, their implications differ for the properties of annual earnings ending in each quarter. Our result comparing earnings variability is more consistent with earnings management than the integral approach. We examine the relative earnings attributes and find that fiscal year earnings attributes rank lower. Finally, we re-investigate the accrual anomaly and find that the accrual anomaly is more pronounced for fiscal year earnings.     

A review of: “PROJECT MANAGEMENT IN MANUFACTURING AND HIGH TECHNOLOGY OPERATIONS” by Adedeji B. Badiru,John Wiley and Sons,Inc., New York, 1988, xxii + 319 pp., ISBN 0471-62892-1, List $44.95.

The conventional approach to considering working capital cash flows in capital budgeting is to omit them or include some ad hoc figures at the initiation and termination of the project. The authors argue for an endogenous system of estimating relevant working capital cash flows on a periodic basis. Otherwise, the present value of working capital cash flows is biased against the project's acceptance. Examples of calculating working capital cash flows as related to changes in annual sales are presented for three time patterns of sales and contrasted to the conventional method. An empirical study of the linear relationship of net working capital and sales revenue of 770 companies is reported, and an alternative cash flow model is offered thai includes working capilal cash flows.     

Empowering by de-depowering: towards an HR strategy for realizing the power of empowerment

Empowerment is still on the agenda as a management concept. The rhetoric around it is very much in line with good old human relations values, and it put forward as a recipe for coping with increasingly rough waters. This paper argues that these recipes are often of the type 'the solution is the problem'. Rather than expose themselves dubious empowering tools, organizations should seek to identify what 'de-powers' their employees. Genuine empowerment is nourished by an empowering organization. Six, fairly general de-powering tendencies are provided as illustration. It is suggested that empowerment efforts should be directed towards creating better grounds for empowerment. A strategy for doing this could be aimed at de-powering the organization. Guidelines for such a strategy are suggested.     

GROWTH OF RURAL US NON‐FARM PROPRIETORS WITH A FOCUS ON AMENITIES

In this research we explore how local amenities relate to proprietorship growth by merging two lines of work: amenities and rural growth and the drivers of proprietorship and small business growth. We do so to examine what role, if any, different types of amenties play in promoting the growth of small businesses in rural USA. Using data for rural US counties we explore the role of natural and built amenities in the growth of rural non‐farm proprietorships between 2000 and 2008 by employing a spatial Durbin model to account for both spatial dependency in the data and to explicitly model spatial spillover effects. The results offer evidence that proprietorship growth is spatially clustered, spatial spillover effects matter, and proprietorship growth is higher in those areas with particular climate attributes. That is, the effect of climate on quality of life may be enough to attract individuals who wish to start new firms.