A Framework for Evaluating Process Quality for Audit Engagements

Audit quality has been researched from several perspectives. Most recent research has been oriented toward end user surrogates for audit quality. This study, on the other hand, focuses on the development of a more objective and comprehensive measure of audit quality based on an evaluation of the actual audit processes completed for a unique engagement. To achieve this objective, over 200 audit practitioners participated in a series of structured group processes designed to elicit group consensus, first on the factors affecting audit process quality and subsequently on objective measures of deviations in each of the identified factors. A separate group of approximately 100 practitioners provided relative weights for each identified factor's effect on overall audit quality. The combination of measures and corresponding weighting factors is used as the foundation for a comprehensive framework for evaluating audit process quality.     

Real Options, International Entry Mode Choice and Performance

abstract    Recent scholarship suggests that combining insights from real option theory with transaction cost economics may improve decision-making models. In response to this suggestion we develop and test a model of international entry mode choice that draws from both perspectives. Examining samples of Dutch and Greek firms entering Central and Eastern European markets, we found that adding real option variables to a transaction cost model significantly improved its explanatory power. Additionally, firms that used the combined real option/transaction cost predicted choices had significantly higher levels of subsidiary performance satisfaction than firms that did not. Our results suggest that effective managerial decision-making may involve more than mere transaction cost minimization considerations; real option value creation insights also appear to influence the success of decision outcomes.     

Biases in option prices : Evidence from the foreign currency option market

This paper examines a European call model of option pricing over a data set which does not suffer from the early exercise problems that have plagued earlier studies of call options on common stocks. We specifically examine a data set of American call prices on spot foreign exchange for which it is plausible to apply an adjusted version of the Garman-Kohlhagen (1983) and Grabbe (1983) European call option model. We make adjustments for interest rate risk and find that the model is nearly unbiased in the valuation of foreign currency options. We conclude that the Geske-Roll (1984) conjecture about dividend uncertainty creating biases in stock option prices holds analogously in the foreign currency option market. Interest rate differential risk (analogous to risky dividends) thus appears to be an important element in the valuation of foreign currency options.     

A PANEL DATA APPROACH FOR PROGRAM EVALUATION: MEASURING THE BENEFITS OF POLITICAL AND ECONOMIC INTEGRATION OF HONG KONG WITH MAINLAND CHINA

We propose a simple‐to‐implement panel data method to evaluate the impacts of social policy. The basic idea is to exploit the dependence among cross‐sectional units to construct the counterfactuals. The cross‐sectional correlations are attributed to the presence of some (unobserved) common factors. However, instead of trying to estimate the unobserved factors, we propose to use observed data. We use a panel of 24 countries to evaluate the impact of political and economic integration of Hong Kong with mainland China. We find that the political integration hardly had any impact on the growth of the Hong Kong economy. However, the economic integration has raised Hong Kong's annual real GDP by about 4%. Copyright © 2011 John Wiley & Sons, Ltd.     

Time-consistency in managing a commodity portfolio: A dynamic risk measure approach

We address the problem of managing a storable commodity portfolio, that includes physical assets and positions in spot and forward markets. The vast amount of capital involved in the acquisition of a power plant or storage facility implies that the financing period stretches over a period of several quarters or years. Hence, an intertemporally consistent way of optimizing the portfolio over the planning horizon is required. We demonstrate the temporal inconsistency of static risk objectives based on final wealth and advocate the validity in our setting of a new class of recursive risk measures introduced by Epstein and Zin [Epstein, G., Zin, S., 1989. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework. Econometrica, 57 (4) 937–969] and Wang [Wang, T., 2000. A class of dynamic risk measures University of British Columbia]. These risk measures provide important insights on the trade-offs between date-specific risks (i.e., losses occurring at a point in time) and time-duration risks represented by the pair (return, risk) over a planning horizon; in a number of situations, they dramatically improve the efficiency of static risk objectives, as exhibited in numerical examples.     

Business Model Innovation for Sustainability: Towards a Unified Perspective for Creation of Sustainable Business Models

Business model innovation has seen a recent surge in academic research and business practice. Changes to business models are recognized as a fundamental approach to realize innovations for sustainability. However, little is known about the successful adoption of sustainable business models (SBMs). The purpose of this paper is to develop a unified theoretical perspective for understanding business model innovations that lead to better organizational economic, environmental and social performance. The paper examines bodies of literature on business model innovation, sustainability innovation, networks theory, stakeholder theory and product–service systems. We develop five propositions that support the creation of SBMs in a unified perspective, which lays a foundation to support organizations in investigating and experimenting with alternative new business models. This article contributes to the emerging field of SBMs, which embed economic, environmental and social flows of value that are created, delivered and captured in a value network. It highlights gaps for addressing the challenges of business model innovation for sustainability and suggests avenues for future research. © 2017 The Authors. Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd     

Think-tanks,policy formation,and the ‘revival’ of classical liberal economics

The Review of Austrian Economics - There is a widespread view that the ‘rise of neo-liberalism’ was a deliberate and designed phenomenon, brought about by ideologically motivated...     

The relationship between rents and prices of owner-occupied housing in Taiwan

This article analyzes the changes of equilibrium rent and equilibrium price of owner-occupied housing in Taiwan, and also computes the rent multiplier and its trend in the past ten years in Taiwan to show how the housing consumption and housing investment change. A hedonic rent equation and a hedonic housing price equation are built first. Then, we apply the Housing Survey Report data from 1979 to 1989, and employ ordinary-least squares method to estimate the two equations. Using estimated coefficients of the two equations, we compute the market rents for owner-occupied housing and the market prices for rental housing. Finally, the rent multipliers are calculated from the market rents and market prices. The article finds that (1) changes of housing prices in Taipei lead to price changes in Kaoshung, and the latter leads Taiwan province; (2) changes of rent are much smaller than the changes of housing price; and (3) housing prices in Taiwan increased drastically. We also find: (1) at the peak of the housing market cycle, the rent multiplier is extremely high; (2) the rent multiplier drops in the year after the peak year because the rent catches up; (3) the rent multiplier in Taipei is greater than that of Kaoshung, and the multiplier in Kaoshung is greater than that of Taiwan province; and (4) overall, the rent multiplier in Taiwan is much greater than that of the United States.