Dividend policy,creditor rights,and the agency costs of debt

We show that country-level creditor rights influence dividend policies around the world by establishing the balance of power between debt and equity claimants. Creditors demand and managers consent to a more restrictive payout policy as a substitute for weak creditor rights in an effort to minimize the firm's agency costs of debt. Using a sample of 120,507 firm-years from 52 countries, we find that both the probability and amount of dividend payouts are significantly lower in countries with poor creditor rights. A reduction in the creditor rights index from its highest value to its lowest value implies a 41% reduction in the probability of paying a dividend, and a 60% reduction in dividend payout ratios. These results are robust to numerous control variables, sample variations, model specifications, and alternative hypotheses. We also show that the agency costs of debt play a more decisive role in determining dividend policies than the previously documented agency costs of equity. Overall, our findings contribute to the growing literature arguing that creditors exert significant influence over corporate decision-making outside of bankruptcy.     

Accounting-based versus market-based cross-sectional models of CDS spreads

Models of financial distress rely primarily on accounting-based information (e.g. [Altman, E., 1968. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 23, 589–609; Ohlson, J., 1980. Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research 19, 109–131]) or market-based information (e.g. [Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance 29, 449–470]). In this paper, we provide evidence on the relative performance of these two classes of models. Using a sample of 2860 quarterly CDS spreads we find that a model of distress using accounting metrics performs comparably to market-based structural models of default. Moreover, a model using both sources of information performs better than either of the two models. Overall, our results suggest that both sources of information (accounting- and market-based) are complementary in pricing distress.     

An assessment of the learning benefits of using a Web-based Learning Environment when teaching accounting

The impact and use of information and communication technology on learning outcomes for accounting students is not well understood. This study investigates the impact of design features of Blackboard¹ used as a Web-based Learning Environment (WBLE) in teaching undergraduate accounting students. Specifically, this investigation reports on a number of Blackboard design features (e.g. delivery of lecture notes, announcements, online assessment and model answers) used to deliver learning materials regarded as necessary to enhance learning outcomes. Responses from 369 on-campus students provided data to develop a regression model that seeks to explain enhanced participation and mental effort. The final regression shows that student satisfaction with the use of a WBLE is associated with five design features or variables. These include usefulness and availability of lecture notes, online assessment, model answers, and online chat.     

GOVERNANCE AND CHARITIES: AN EXPLORATION OF KEY THEMES AND THE DEVELOPMENT OF A RESEARCH AGENDA

The concept of governance has been widely discussed in both the business and non-business sectors. The debate has also been entered into within the charity sector, which comprises over 169,000 organizations in the UK. The UK-based Charity Commission, which describes itself as existing to 'promote sound governance and accountability', has taken a lead in this debate by promoting greater regulation and producing numerous recommendations with regard to the proper governance of charitable organizations. However, the concept of what is meant by governance is unclear and a myriad of ideas are placed under the umbrella of 'good governance'. This paper explores the major themes that form the basis of much of this discussion, examining both the theoretical underpinnings and empirical investigations relating to this area (looking from the perspective of the key stakeholders in the charity sector). Based on an analysis of the extant literature, this paper presents a broad definition of governance with respect to charities and outlines a future research agenda for those interested in adding to knowledge in this area     

Explaining regional variation in business births and deaths: U.S. 1976–88

Linear models are developed to determine the relative impact of 15 start-up processes on the annual regional birth rate of new business organizations for all industry sectors in the U.S. over 6 two-year periods. These stable linear models explained from 50–70|X% of the variation in regional firm birth and death rates up to 16 years into the future. Start-up processes that have the most impact involve regional economic diversity; population growth; greater personal wealth; presence of mid-career adults; low unemployment; and greater flexibility in employment relationships. There was a complete absence of any impact of regional variation associated with higher densities of customers, suppliers, workers, R&;D resources; costs of production; or access to national transportation facilities.     

Risk arbitrage opportunities in petroleum futures spreads

This article investigates the long-term pricing relationship among crude oil, unleaded gasoline, and heating oil futures prices, and finds that these commodities futures prices are cointegrated. The study finds that the spreads between crude oil and its end products are stationary. Furthermore, this article investigates the risk arbitrage opportunities in three types of popularly traded petroleum futures spreads and finds that historically profitable risk arbitrage opportunities existed and were statistically significant. However, one cannot be certain that these opportunities still exist. The research also finds that moving averages are valid test variables for measuring spreads. Statistical and tabular constructions are used to illustrate findings. © 1999 John Wiley & Sons, Inc., Jrl Fut Mark 19: 931–955, 1999     

The relative efficiency of commodity futures markets

The ability of futures markets to predict subsequent spot prices has been a controversial topic for a number of years. Empirical evidence to date is mixed; for any given market, some studies find evidence of efficiency, others of inefficiency. In part, these apparently conflicting findings reflect differences in the time periods analyzed and the methods chosen for testing. A limitation of existing tests is the classification of markets as either efficient or inefficient with no assessment of the degree to which efficiency is present. This article presents tests for unbiasedness and efficiency across a range of commodity and financial futures markets, using a cointegration methodology, and develops a measure of relative efficiency. In general, the findings suggest that spot and futures prices are cointegrated with a slope coefficient that is close to unity, so that the postulated long-run relationship is accepted. However, there is evidence that the long-run relationship does not hold in the short run; specifically, changes in the spot price are explained by lagged differences in spot and futures prices as well as by the basis. This suggests that market inefficiencies exist in the sense that past information can be used by agents to predict spot price movements. A measure of the relative degree of inefficiency (based on forecast error variances) is then used to compare the performance of different markets. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 413–432, 1999     

Case Studies of Farmers' Use of Information Systems

Exploratory case study research was initiated to study the evolution of management information systems and their use in operational and strategic decisions. The unit of analysis was the management team on farms with innovative or successful information systems. Human factors, such as an analytical nature and commitment to lifelong learning, were perceived to be the most important common elements. Production variables often were critical success factors. Managers annually developed financial statements; enterprise and "what if" analyses were conducted regularly. Learning about questions that innovative producers have difficulty addressing was time-consuming but instructive with respect to research and educational needs.     

Response to haar's comment— and the beat goes on: Corporate downsizing in the twenty‐first century

Corporate downsizing continues to be a major strategy used by organizations to cope with a dynamic and turbulent global marketplace. A fundamental assumption made by executives is that this strategy improves the financial health of the corporation. De Meuse, Vanderheiden, and Bergmann (1994) examined several indices of financial performance over a five‐year period and found that firms employing downsizing experienced a deterioration in financial performance rather than an improvement. Haar (1999) questioned the findings of this study, asserting that if a company's risk level would have been included in the analysis, their results could have been different. In the present investigation, risk was incorporated in the original analysis. Again, the findings strongly indicate that downsizing was not an effective corporate strategy for enhancing the financial performance of corporations. © 1999 John Wiley & Sons, Inc.     

The robustness of the asymmetrically dominated effect: Buying frames,phantom alternatives,and in‐store purchases

Given a choice set of two alternatives, the addition of a third alternative that is clearly inferior to one of the existing alternatives (but not the other), can result in a shift of preference to the alternative that dominates the new alternative. The basic asymmetrically dominated effect, as it is called, is first demonstrated under two different buying frames of mind (“What would you buy?” and “What would most people buy?”). It is then shown that the third alternative may be recognized as an unavailable option, yet still cause a preference shift. Finally, the asymmetrically dominated effect is demonstrated for real, in‐store purchases. It is concluded that the effect is robust, has a wide scope, is quite sizeable, and is of practical significance. © 1999 John Wiley & Sons, Inc.