Evaluating Commodity Market Efficiency: Are Cointegration Tests Appropriate?

This paper investigates the claim that the finding of cointegration between commodity spot and lagged futures rates reflects the existence of commodity arbitrage and not, as is generally accepted, long‐run market efficiency. The methodology of Kellard et al. (1999) is employed to match spot and lagged futures rates correctly for the UK wheat futures contract traded at LIFFE. Bi‐variate analysis shows that spot and lagged futures rates are cointegrated with the vector (1, ‐1), a necessary condition for market efficiency. However, at variance with asymptotic theory, in a tri‐variate VECM estimation, the spot rate, lagged futures rate and lagged domestic interest rate are shown to be cointegrated with the vector (1, ?1, 1). The “cointegration” paradox is explained by investigating the relative magnitudes of the forecast error and the domestic interest rate. The small sample results demonstrate that it is impossible to distinguish between the influence of commodity arbitrage and the existence of market efficiency using cointegration‐based tests. In summary, this work implies that such tests are not wholly appropriate for evaluating commodity market efficiency.     

Student performance in tertiary-level accounting: an international student focus

The present paper provides empirical evidence regarding the academic performance of university students studying accounting. In particular, the effect of student origin is investigated by comparing the accounting performance of resident and international students. The present study controls for a number of other key variables, including ability, anxiety, work experience in accounting, accounting study prior to university and enrolment status. The question of whether international student performance improves over time through an acculturation effect is also investigated. Bivariate analyses revealed higher anxiety and lower general ability for international vis‐à‐vis resident students yet no significant difference in accounting performance between the two groups. After controlling for key variables, an association was observed between student origin and accounting performance with superior performance reported for the international student cohort. Statistically significant relationships were also observed between accounting performance and ability, anxiety, employment experience in accounting, enrolment status and accounting study prior to university. An acculturation effect was not clearly evidenced.     

Note on audit fee premiums to client size and industry specialization

This research note examines the impact of client size on the estimation of audit fee premiums in the Australian market for audit services. Previous research suggests that higher audit fees are expected for both larger clients and for industry specialization. We find that in the Australian market for audit services, the fee premium attributed to industry specialist audit firms is concentrated in the audit fees paid by the largest clients in each industry. One reason for higher fees paid by larger clients is the demand for additional audit services. We find higher fees for companies cross‐listed on US exchanges. We also find that fee premiums to auditors that are city‐industry leaders are strongly related to client size.     

Competition for the use of public open space in low-income urban areas: the economic potential of urban gardening in Khayelitsha,Cape Town

Urban agriculture is a contested issue in the larger South African debate on urban poverty alleviation. This paper investigates the economic viability of urban agriculture and informs the debate on the optimal use of open space in Khayelitsha. It compares the economic performance of the Scaga community garden in the low-income township Khayelitsha, predicted in a 1998 study by Fermont et al., with empirical results of a similar study by Fleming in 2003. It concludes that urban agriculture in Khayelitsha is potentially economically viable, subject to certain conditions being satisfied. However, as a land use, urban agriculture competes with housing, ecological corridors, the stormwater management system and nature areas and reserves.     

How do auditors perceive CEO's risk‐taking incentives?

Prior literature documents that executive compensation influences managerial risk preferences through executives’ portfolio sensitivities to changes in stock prices (delta) and stock‐return volatility (vega). Large deltas discourage managerial risk‐taking, while large vegas encourage risk‐taking. Theory suggests that auditors charge higher audit fees when standard audit procedures do not allow auditors to reduce audit risk including the risk arising from higher business risk. We posit and find evidence of a negative (positive) relation between CEO portfolio deltas (vegas) and audit fees. We also find a negative relation between CEO portfolio deltas and the issuance of going‐concern audit opinions (GCO).     

The Development of Accounting Regulation in Iraq and the IFRS Adoption Decision: An Institutional Perspective

This paper reviews the historical development of accounting regulation in Iraq and analyzes, from an institutional perspective, both the decision to adopt International Financial Reporting Standards (IFRS), and the factors likely to impact the expansion of IFRS application beyond listed companies. We find that all three forms of institutional isomorphism (coercive, mimetic, and normative) explain the initial decision to adopt IFRS. The most significant force in the decision to adopt IFRS is coercive pressure, from western forces following the fall of the Ba'ath regime, and from international aid organizations. Further, we find that the accounting system in Iraq is likely to be further advanced due to mimetic and normative pressures from Iraq's trade partners, multinational corporations, and the accounting profession. The paper concludes with a discussion of lessons that can assist other developing nations, and in particular countries in the Middle East in their decision to adopt IFRS. It is important that IFRS adoption is accompanied by reform to governance and investor protection regimes, together with investment in education and training to support ongoing implementation. Otherwise, IFRS adoption may be perceived as merely symbolic.