Abnormal real operations,real earnings management,and subsequent crashes in stock prices

We study the impact of firms’ abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms’ deviation in real operations (DROs) from industry norms is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DAs) and crash risk found by prior studies. Moreover, after Sarbanes–Oxley Act (SOX) of 2002, DRO’s predictive power for crash risk strengthens substantially, while DA’s predictive power essentially dissipates. These results are consistent with the prior finding that managers shift from accrual earnings management to REM after SOX. We further develop a suspect-firm approach to capture firms’ use of DRO for REM purposes. This analysis shows that REM-firms experience a significant increase in crash risk in the following year. These findings suggest that the impact of DRO on crash risk is at least partially through REM.     

Volatility Linkages Among Gold Futures in Emerging Markets

We aim to detect the cross-border volatility linkages among gold futures in emerging markets, which still remain an untapped area. China, India, Japan, Taiwan, Turkey, and U.S. futures markets are included in the sample. The volatility linkage analyses confirm the existence of volatility transmission among the majority of the sample countries’ gold futures. This article carries vital inferences and implications for policy makers and investors. The policy making is particularly important for China, which is a relatively isolated market. From investors’ perspective, the results indicate that the risk diversification and cross-market hedging opportunities in the emerging gold futures markets are quite limited.     

Motivating high‐impact innovation: Evidence from managerial compensation contracts

We investigate the relationship between Chief Executive Officer (CEO) compensation and firm innovation and find that long‐term incentives in the form of options, especially unvested options, and protection from managerial termination in the form of golden parachutes are positively related to corporate innovation, and particularly to high‐impact, exploratory (new knowledge creation) invention. Conversely, non‐equity pay has a detrimental effect on the input, output and impact of innovation. Tests using the passage of an option expensing regulation (FAS 123R) as an exogenous shock to option compensation suggest a causal interpretation for the link between long‐term pay incentives, patents and citations. Furthermore, we find that the decline in option pay following the implementation of FAS 123R has led to a significant reduction in exploratory innovation and therefore had a detrimental effect on innovation output. Overall, our findings support the idea that compensation contracts that protect from early project failure and incentivize long‐term commitment are more suitable for inducing high‐impact corporate innovation.     

The art of retaining seasonal employees: three industry-specific leadership styles

The majority of leadership studies have centered on various leadership approaches, but there is limited research that has focused on seasonal employee leadership (SEL) in the hospitality literature. Hence, there is a need to develop a new leadership model which could help to understand how to retain seasonal employees in the hospitality industry. This study divided seasonal employees into three types by using semi-structured interviews and document analysis. These are suspended employees (Type-A), seasonal trainee (Type-B), and spoon-feeding employees (Type-C). Three different leadership styles were developed according to each type of seasonal employees; suspending leadership for type A, mentor leadership for type B, and spoon-feeding leadership for type C. The study makes an important contribution to the leadership literature by aligning employee types with different leadership styles in the hospitality industry.     

A cross‐cultural comparison of achievement and power orientation as leadership dimensions in three European countries: Britain, Ireland and Turkey

This paper compares attitudes towards achievement and power orientation as between Turkish, British and Irish managers and discusses the issue from a business ethics point of view. The concept of achievement and power orientation and its impacts on business ethics is discussed. This research is part of a larger cross‐cultural study that examines leadership styles and managerial attitudes in Britain, Turkey and Ireland. Intensive structured interviews were conducted for data gathering process. Results revealed that Irish and Turkish managers show a higher achievement orientation level than their British counterparts. On one hand this situation may give some advantages to Turkish and Irish managers in developing leadership qualities, on the other hand, it can also lead to some difficulties in ethical business practices. Therefore, corporate social responsibility becomes a more important issue to be pursued in Turkey and Ireland. British and Irish managers, however, showed a higher power orientation level than Turkish managers. The low level of power orientation of Turkish managers can be explained by cultural and historical conditions that still affect modern Turkish society. Previous cross‐cultural studies support the results of this paper.     

Use of loan loss provisions for capital, earnings management and signalling by Australian banks

This study examines whether and to what extent Australian banks use loan loss provisions (LLPs) for capital, earnings management and signalling. We examine if there were changes in the use of LLPs as a result of the implementation of banking regulations consistent with the Basel Accord of 1988, which made loan loss reserves no longer part of Tier I capital in the numerator of the capital adequacy ratio. We find some evidence to indicate that Australian banks use LLPs for capital management, but we find no evidence of a change in this behaviour after the implementation of the Basel Accord. Our results indicate that banks in Australia use LLPs to manage earnings. Furthermore, listed commercial banks engage more aggressively in earnings management using LLPs than unlisted commercial banks. We also find that earnings management behaviour is more pronounced in the post‐Basel period. Overall, we find a significant understating of LLPs in the post‐Basel period relative to the pre‐Basel period. This indicates that reported earnings might not reflect the true economic reality underlying those numbers. Finally, Australian banks do not appear to use LLPs for signalling future intentions of higher earnings to investors.     

Hedging performance of multiscale hedge ratios

In this study, the wavelet multiscale model is applied to selected assets to hedge time-dependent exposure of an agent with a preference for a certain hedging horizon. Based on the in-sample and out-of-sample portfolio variances, the wavelet-based generalized autoregressive conditional heteroskedasticity (GARCH) model produces the lowest variances. From a utility standpoint, wavelet networks combined with GARCH have the highest utility. Finally, the wavelet-GARCH model has the lowest minimum capital risk requirements. Overall, the wavelet GARCH and wavelet networks offer improvements over traditional hedging models.     

A cross-cultural comparison of British and Turkish managers in terms of Protestant work ethic characteristics

This paper presents a cross-cultural comparison of Protestant work ethic characteristics of practising Protestant British and practising Muslim Turkish managers using Mirels and Garrett's Protestant work ethic scale. Max Weber's Protestant work ethic thesis is used as the conceptual framework in this study. The nature of the Protestant work ethic thesis and its relationship with organisation culture is discussed. Multivariate and univariate analysis of variance were used to analyse the data. The results suggest that there is a significant difference between practising Muslim Turkish managers and practising Protestant British managers: the Turkish group showed relatively higher Protestant work ethic scores than their Protestant counterparts. Possible reasons for the difference between British and Turkish groups are advanced in the light of Turkish economic, social and political developments. It is argued that representative Islamic sources also support the results of this research by pointing to the important role of a work ethic in Islam.