The effect of differential accounting conservatism on the “over-valuation” of high-tech firms relative to low-tech firms

This paper examines systematic differences in the level of accounting conservatism between high-tech and low-tech firms. Relying on the recent development in theoretical models and empirical measures of conservatism, we investigate conservative accounting practices and earnings management behavior in high-tech and low-tech firms. The results based on comparisons of cumulative nonoperating accruals, regression coefficients from the income timeliness models in Basu (1997), the distribution of earnings, and discretionary accruals between the two groups are consistent with a higher level of accounting conservatism in high-tech firms vis-à-vis low-tech firms. Additional analyses show that the effect of conservatism cannot be used as a defense for the over-valuation of high-tech firms.     

Relative accuracy and predictive ability of direct valuation methods, price to aggregate earnings method and a hybrid approach

In this paper, we assess the relative performance of the direct valuation method and industry multiplier models using 41 435 firm‐quarter Value Line observations over an 11 year (1990–2000) period. Results from both pricing‐error and return‐prediction analyses indicate that direct valuation yields lower percentage pricing errors and greater return prediction ability than the forward price to aggregated forecasted earnings multiplier model. However, a simple hybrid combination of these two methods leads to more accurate intrinsic value estimates, compared to either method used in isolation. It would appear that fundamental analysis could benefit from using one approach as a check on the other.     

Resource‐seeking agglomeration: a study of market entry in the lodging industry

We analyze whether firms prefer collocating with incumbent firms when choosing among markets to enter, highlighting the role of resource‐seeking as a motivation for collocation. We propose that entrants will locate near others possessing resources that can spill over, but will avoid locations where existing firms will exploit spillovers without contributing. To test these propositions, we analyze the location decisions of 570 new hotels in Texas between 1992 and 2000. We find that hotels are attracted to markets with branded upscale hotels. Further, we find that owners of upscale hotels avoid markets with hotels without similar resources. Copyright © 2004 John Wiley & Sons, Ltd.     

Ownership structure and the pricing of discretionary accruals in Japan

This paper examines the valuation effect of discretionary accruals for Japanese firms, taking into account the book value of equity. Consistent with US evidence, the Japanese market prices discretionary accruals, indicating that discretionary accruals enhance the value relevance of reported earnings. This value relevance is lower for cross-held firms, consistent with the view that cross-business shareholding aggravates tunneling or managerial opportunism through discretionary accounting choices. On the other hand, foreign shareholding and bond financing provide effective monitoring on managerial discretion of profit firms to enhance the valuation of discretionary accruals.     

Automatic balancing mechanisms for notional defined contribution accounts in the presence of uncertainty

The notional defined contribution model combines pay-as-you-go financing and a defined contribution pension formula. This paper aims to demonstrate the extent to which liquidity and solvency indicators are affected by fluctuations in economic and demographic conditions and to explore the introduction of an automatic balancing mechanism (ABM) into the pension scheme. We demonstrate that the introduction of an ABM reduces the volatility of the buffer fund and that, in most cases, the automatic mechanism that re-establishes solvency produces the highest value of the risk-adjusted notional factor.     

Board of Directors and CSR in Banking: The Moderating Role of Bank Regulation and Investor Protection Strength

This paper brings together research on boards of directors as the backbone of corporate governance and corporate social responsibility (CSR) practices in the banking industry. The underlying idea is that some characteristics of bank boards, in particular independence and gender diversity, may impact the CSR commitments of banks. By making use of a sample of 159 banks in nine countries during the period 2004–2010, our empirical evidence suggests that banks with more independent directors and more female members on their boards incline toward socially responsible behaviour. Our results also suggest that institutional factors play a significant role in these effects. They show that in greater regulatory and stronger investor protection environments, board independence and gender diversity have more influence on the social behaviour of banks.     

Business cycles,financial cycles and capital structure

We perform peridogram based cycle analysis of firm capital structure and find evidence that firms’ leverage is both persistent and cyclical. The cyclicality of leverage is supported by the trade-off, pecking order and market timing capital structure theories (Korajczyk and Levy in J Financ Econ 68:75–109, 2003; Bhamra et al. in Rev Financ Stud 23:645–703, 2010). Although market timing theory research supports persistence, previous literature dictates that the trade-off and pecking order theories may predict either persistent or mean reverting leverage. Our tests reject mean reversion in favor of persistent and cyclical leverage. We corroborate pecking order theory literature that predicts leverage is persistent. In these models, when firms’ investment spending is below earnings, leverage decreases. In addition, we examine whether firms change their capital structure as a result of business and financial cycles. Since financial cycles last longer than business cycles, financial cycles should have a long term effect on leverage. Our findings confirm the persistent leverage business cycle models that suggest firms change their capital structure due to financial and credit cycles (Jermann and Quadrini in Am Econ Rev 102:238–271, 2012; Azariadis et al. in Rev Econ Stud 83:1364–1405, 2016). We conclude that leverage is persistent due to the cyclicality of the financing decision.     

Relationship Between Sustainable Development and Financial Performance: International Empirical Research

The aim of this paper is to clarify the relationship between companies' sustainable behavior and their financial performance (FP), which has been studied for several years without reaching a consensus on the effect and the direction of it. Hypotheses are tested for an unbalanced sample of 1960 multinational non‐financial listed companies from 25 countries and one administrative region for the period between 2002 and 2010. Due to the use of an international database and the differences among countries, it is possible to observe divergence between institutional settings. For this reason, a corporate governance system (Anglo‐Saxon, Germanic, Latin and Asian) is used as characteristic of the macro‐environment. Results obtained via the generalized method of moments estimator allow us to support the existence of a positive bidirectional relationship between corporate social responsibility and FP, evidencing the existence of a synergistic circle. The use of market value indicated that investors are able to identify economic, social and environmental practices generating a positive effect on FP. These relationships differ between corporate governance systems, due to the specific characteristics of each system. Findings are robust for each sustainable sub‐index (society, human rights, environmental and board). Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

A membership pricing policy to facilitate service scale-expansion

This paper proposes a multi-year membership pricing policy for a service business like a gym chain. In the pricing policy, the equivalent membership price per year is relatively low to attract customers, and the multi-year membership fees must be prepaid in full. The prepaid cash provides resources for scale-expansion by opening new stores. We develop a nonlinear mixed integer programming model to formulate the pricing decisions. Numerical experiments reveal that the multi-year membership pricing policy, from a long-term perspective, is substantially better than the business-as-usual pricing policy (1-year membership) in cash balance, profit, and market share. Yet, the performances of the two pricing policies do not differ much from a short-term perspective. These findings indicate that the multi-year pricing policy may be a good strategy, because it initially attracts less attention of competitors; suddenly it emerges and substantially outperforms its competitors in cash balance, profit, and market share.     

Development and transformation of collaborative networks in events

This study examines the mechanisms by which and the reasons that leaders of non-profit organizations transform interorganizational collaborative networks through event attendance. Drawing from a two-wave survey, this study examines the interorganizational networks of 30 individuals who participated in both waves, along with the reported activities of 121 individuals who participated in the second wave of the survey. This mixed methods study found that events transformed participants’ weak ties into strong ties and promoted development of collaborative networks. Further, the study found that participants’ motivations for attending the event and following up with contacts afterward focused on sharing resources and deepening connections. Implications for understanding how events promote formation and transformation of collaborative networks are discussed.