Preference for output price uncertainty by the non-renewable resource extracting firm

We establish a general preference for price uncertainty by the price-taking, risk-neutral, non-renewable resource extracting firm with orthodox convex extraction costs. We prove that the relevant value function for profits over an interval is convex in output price.     

Coupons and 'everyday low prices': price competition with multiple instruments

Abstract A simple two‐stage game is examined, where firms compete in prices by chosen pricing instruments. Those considered include a simple, uniform pricing technology and a promotional pricing technology like an advertised discount coupon. Consumers are separated by types, informed and uninformed. Therefore, a motive for price competition exists for the purpose of separating the two types of consumers. It is shown that the sustainability of an asymmetric choice of pricing instrument between the two firms will prevail in a duopoly market in equilibrium. Consequently, the coexistence of two different pricing schemes is viable even when firms are otherwise symmetric. JEL Classification: L1, L13
Coupons et « bas prix tous les jours >> : concurrence par les prix à l'aide de multiples instruments Ce mémoire examine un simple jeu à deux étapes dans lequel des entreprises se concurrencent par les prix à l'aide d'un instrument particulier. Les instruments considérés incluent une simple technologie de prix uniforme, et une technologie de prix de promotion sous la forme de l'annonce d'un coupon d'escompte. On divise les consommateurs en deux groupes – ceux qui sont informés et ceux qui ne le sont pas. Un des motifs pour ce genre de concurrence est de séparer les deux types de consommateurs. On montre qu'on peut soutenir un choix asymétrique d'instrument de tarification entre les deux entreprises dans un marché de duopole en équilibre. En conséquence, la coexistence de deux stratégies de prix différentes est viable quand les entreprises sont symétriques sous tous les autres rapports.     

Stock price crash risk and internal control weakness: presence vs. disclosure effect

This study examines the stock price crash risk for a sample of firms that disclosed internal control weaknesses (ICW) under Section 404 of the Sarbanes‐Oxley Act (SOX). We find that in the year prior to the initial disclosures, ICW firms are more crash‐prone than firms with effective internal controls. This positive relation is more pronounced when weakness problems are associated with a firm's financial reporting process. More importantly, we find that stock price crash risk reduces significantly after the disclosures of ICWs, despite the disclosure itself signalling bad news. The above results hold after controlling for various firm‐specific determinants of crash risk and ICWs. Using an ICW disclosure as a natural experiment, our study attempts to isolate the presence effect of undisclosed ICWs from the initial disclosure effect of internal control weakness on stock price crash risk. In so doing, we provide more direct evidence on the causal relation between the quality of financial reporting and stock price crash risk.     

Commonalities Between Added Value Ratios and Traditional Return on Capital Employed

This paper provides an empirical comparison between two versions of a new accounting ratio devised by Kay and Davis (1990a, 1990b) and Kay (1993) and the traditional capital employed (ROCE) ratio. The new measures, ‘added value on inputs employed’ (AVIE) and ‘added value on net output’ (AVNO), are both based on a version of residual income they label ‘added value’, but differ in choice of scaling variable. Empirical evidence is provided in this paper on AVIE and AVNO, including cross-sectional patterns, distributional properties, sensitivity to alternative specifications, and rank-ordering and serial-correlation performance compared with ROCE. AVIE and AVNO differ markedly from ROCE in terms of absolute levels and account for at most half of the latter's cross-sectional variation. On the other hand, the results indicate that both the rank orderings and rank predictions of the different measures are very similar. The distributional properties of the added value ratios are sensitive to choice of scaling variable, suggesting that considerable care has to be exercised in drawing conclusions from the absolute rankings of these measures. The new added value ratios provide signals about firm rankings that differ only to a limited degree from those rendered by the traditional ROCE ratio.     

Work‐to‐Family Spillover Effects of Workplace Ostracism: The Role of Work‐Home Segmentation Preferences

This study considers workplace ostracism as a source of stress and examines its spillover effects on the family. By integrating the work‐family interface model with boundary theory, we investigate the impact of workplace ostracism as perceived by employees on their family satisfaction by examining the mediating role of work‐to‐family conflict and the moderating role of work‐home segmentation preferences. The results from a three‐wave field survey of 233 employees in China indicate that workplace ostracism is negatively related to family satisfaction; this relationship is also mediated by work‐to‐family conflict. In addition, work‐home segmentation preferences attenuate the mediating effect of work‐to‐family conflict on the relationship between workplace ostracism and family satisfaction. The theoretical and managerial implications of these findings are discussed.     

Market uncertainty,market sentiment,and the post-earnings announcement drift

Post-earnings announcement drift (PEAD) which was first identified over 40 years ago seems to be as much alive today as it ever was. Numerous attempts have been made to explain its continued existence. In this paper we provide evidence to support a new explanation: that the PEAD is a reflection of the level of market uncertainty and sentiment that prevails during the post-announcement period. The overriding conclusion from our analysis is that both uncertainty and sentiment play a central role in determining investor behaviour and it is this behaviour that ultimately determines the pricing that is observed in financial markets.     

Financial reporting of cash flow： Arbitrary items and management preferences

The international financial reporting standard for cash flow statement （IAS 7） provides options for the classification of certain cash flow items （arbitrary items）. Therefore, business firms may classify the arbitrary items using the option that would maximize their own interest. This reduces the comparability of financial statements amongst business firms. This study aims to investigate the factors explaining management preferences in the selection of financial reporting practices on the arbitrary cash flow items. It concludes that managers tend to magnify the CFO reported in order to maximize the shareholders＇ wealth, which in turn would maximize their compensation. Managers of business firms with a relatively smaller size of CFO tend to classify interest paid and dividends paid as non-CFO in order to magnify their CFO. They also tend to classify interest received as CFO in order to inflate their relatively smaller size of CFO up to expectation. Similarly, managers of business firms with a relative larger size of dividends paid would classify the dividends paid outside CFO.     

刍议跨国并购交易中的几个关注因素

在全球经历了五次并购浪潮后，越来越多的中国公司希望通过跨国并购的形式寻求海外投资机会，实现跨越式发展。有鉴于此．中华咨询与美国波士顿商学院联合进行了跨国并购领域的专项研究，     

How do investors react under uncertainty?

It has long been accepted that risk plays an important role in determining valuation where risk reflects that investors are unsure of future returns but are able to express their prior expectations by a probability distribution of these returns. Knight (1921) introduced the concept of uncertainty where investors possess incomplete knowledge about this distribution and so are unable to formulate priors over all possible outcomes. One common approach for making uncertainty tractable is to assume that investors faced with uncertainty will base their decisions on the worst case scenario (i.e. follow maxmin expected utility). As a consequence it is postulated that investors will become more pessimistic as uncertainty increases, upgrading bad news and downgrading good news. Using Australian data, we find evidence that investors react to bad news at times of high market uncertainty but largely ignore good news which is consistent with them taking on a pessimistic bias. However, we also find evidence of the reverse when market uncertainty is low with investors taking on an optimistic stance by ignoring bad news but reacting to good news. We also find that the impact that market uncertainty has on the reaction of investors to new information is modified by the prevailing market sentiment at the time of the announcement. Besides throwing light on the question of how uncertainty impacts on investor behaviour, our findings seriously challenge the common assumption made that investors consistently deal with uncertainty by applying maxmin expected utility.     

The effect of own-firm and other-firm experience on foreign direct investment survival in the United States, 1987–92

We argue that foreign firms operating in a host country generate information spillovers that have potential value for later foreign direct investment. We test two predictions. First, we expect foreign direct investments by firms with experience in a host country to be more likely to survive than investments made by first-time entrants. Second, foreign direct investments will be more likely to survive the greater the foreign presence in the target industry at the time of investment, subject to two contingencies. The first contingency is that the relationship will be weak or nonexistent among firms with no experience in the host country, because these firms have difficulty evaluating and taking advantage of the information spillovers. The second contingency is that the presence of other foreign firms will not affect investment survival among firms that already have a presence in the target industry and undertake expansion. These firms already possess general information about the target industries and are unlikely to gain additional benefit from information spillovers. We find supportive evidence based on the survival to 1992 among 354 U.S. investments undertaken by foreign firms in manufacturing industries during 1987. © 1997 John Wiley & Sons, Ltd.