PERHAPS EVA DOES BEAT EARNINGS—REVISITING PREVIOUS EVIDENCE

In two articles, the first published in 1997 in the Journal of Accounting and Economics and the second in 1999 in this journal, Gary Biddle, Robert Bowen, and James Wallace presented evidence that reported earnings are more closely related than EVA to marketadjusted stock returns– in other words, that earnings are more “value relevant” than EVA. These papers, which are among the most widely cited in finance and accounting, fundamentally affected perceptions about the importance of EVA as a measure of corporate performance. The current article addresses a simple question: Do the Biddle, Bowen, and Wallace results continue to hold for a different set of companies, a different time period, and a different market? The authors first examined updated EVA information for different companies in the same time period examined in the Biddle, Bowen, and Wallace study. They then looked at a more recent time period (1995–1999) and a different market (the Canadian stock market), and found in all cases that “EVA has greater power than earnings in explaining marketadjusted stock returns.” Their findings validate the widespread corporate acceptance of EVA as a management tool.     

Sustainable supply chains: An introduction

Consideration is given to the convergence of supply chains and sustainability. In doing so, the focus on environmental management and operations is moved from local optimization of environmental factors to consideration of the entire supply chain during the production, consumption, customer service and post-disposal disposition of products. This is a critical and timely topic that captures increasing concerns over sustainability, whether driven by current legislation, public interest, or competitive opportunity. As such, sustainable development is a rich area for academic research that is still in its infancy and has the potential to affect future government policy, current production operations, and identify new business models. This paper provides a background to better understand current trends in this multidisciplinary field that intersect with operations management, and the research opportunities and challenges it presents.     

What (if any) are the returns to computer use?

Using North American data, we revisit the question first broached by Krueger (1993 Krueger, AB. 1993. How computers have changed the wage structure: evidence from microdata. Quarterly Journal of Economics, 108: 33–60. [Crossref], [Web of Science ®] , [Google Scholar]) and re-examined by DiNardo and Pischke (1997 DiNardo, JE and Pischke, J-S. 1997. The returns to computer use revisited: have pencils changed the wage structure too?. Quarterly Journal of Economics, 112: 291–303. [Crossref], [Web of Science ®] , [Google Scholar]) of whether there exists a real wage differential associated with computer use. Employing a mixed effects model with matched employer–employee data to correct for the fact that workers and workplaces that use computers are self-selected, we find that computer users enjoy an almost 4% wage premium over nonusers. Failure to correct for worker and workplace selection effect leads to a more than twofold overestimate of this premium.     

LABOR MARKET CONSEQUENCES FOR BUSY DIRECTORS: EVIDENCE FROM INTERNATIONAL MERGERS AND ACQUISITIONS

Using 13,233 acquisitions from 57 countries, we examine merger and acquisition (M&A) decisions made by busy boards. We find that few busy acquirers originate from emerging markets and that they tend to undertake cross‐border mergers, favor public targets, finance with cash and equity, pursue nondiversifying mergers, avoid targets with multiple bidders, and long‐term underperform relative to nonbusy acquirers. Importantly, we discover a nonlinear relation between an acquirer's board busyness and merger announcement returns. We find that the labor market penalizes directors who approve bad acquisitions but does not reward them for good mergers. We find a similar nonlinear relation between an acquirer's board busyness and its long‐term performance along with a suggestion of an optimal board busyness.     

Is There a Link Between Money Illusion and Homeowners’ Expectations of Housing Prices?

Money illusion is a behavioral bias in which a person thinks in terms of nominal rather than real values. This article reports homeowners’ responses to a survey designed to measure the extent of money illusion as well as homeowners’ expectations regarding home valuations. Our survey respondents suffer from money illusion, yet they have reasonable expectations of home prices. Our analysis did not identify any unique individual characteristic that correlates with homeowners’ choices and suggests that the relationship between money illusion and mispricing is subtle and multifaceted.     

The Evolution of Poverty and Inequality in Indian Villages

This paper examines the evolution of poverty and inequalityin rural India by reviewing longitudinal village studies. Itexplores the main forces of economic change—agriculturalintensification, changing land relations, and occupational diversification—froma wide range of disciplinary perspectives, and it considersthe roles of various institutions as conduits of change. Althoughmost village studies support the survey-based judgment thatrural poverty declined in India during the 1970s and 1980s,they find that progress has been slow and irregular and thatinequalities within villages have persisted. These continuedinequalities may constrain both the scope for further povertyreduction from economic growth and the impact of policy interventions.      

Growth Constraints and Determinants of a South Pacific Island in a Global Economy: A Study of Fiji

Abstract

In a global economy, the South Pacific islands face unique constraints to growth. The study investigates whether Fiji was benefited by three-decade old open trade policies. Through a multivariate cointegration analysis, the study establishes the existence of a long-run relationship between open trade policy and physical and human capital resources. Although physical capital had a positive impact on growth, the existing complementary relationship between two kinds of capital requires that a threshold between physical and human capital needs to be attained before any negative influence on growth can be transformed into positive impact.     

Do Country Specific Bankruptcy Codes Determine Long‐term Financial Performance? The Case of Metallgesellschaft AG and Columbia Gas System

In this paper, we examine the impact of financial distress, the bankruptcy code, and related procedures on the long-term performance of two companies engaged in similar businesses across two countries. Both the companies were driven into bankruptcy as a result of unanticipated changes in energy prices. Though the resolution of bankruptcy of the US firm took a longer time, the post-reorganization performance of the firm has been excellent. In contrast, the post-reorganization performance of the German firm, which emerged out of bankruptcy in 2 weeks, has been poor. These results are consistent with the view that one of the important determinants of post-bankruptcy performance of a firm is more likely to be the underlying economic fundamentals rather than the country specific bankruptcy code through which the firm reorganizes.     

Type IV error in marketing research: The investigation of ANOVA interactions

Considerable attention is typically given to Type I and Type II errors when conducting empirical research. This article presents an error, often ignored in marketing and consumer behavior research, termed Type IV error. This error results from the improper investigation of interactions in an analysis of variance. A review of research published inJournal of Marketing Research andJournal of Consumer Research found widespread occurrence of Type IV errors. Illustrative improper interpretations of interactions are discussed and approaches for properly investigating interactions are presented. Situations where interactions need to be tested and interpreted are noted. These situations are contrasted with those where it is more appropriate to examine cell mean differences. The correct use of graphs of cell means is also discussed. Guidelines are presented for avoiding Type IV errors. He has previously been a visiting associate professor at the Wharton School and visiting research fellow at the IC² Institute, University of Texas at Austin, where he has also taught at the marketing department. He has published in theJournal of Marketing Research, Journal of Marketing, Psychometrika, Marketing Letters, Sociological Methods & Research, Decision Sciences, and other journals. He has won a number of teaching awards. A former editor of theJournal of the Academy of Marketing Science and theJournal of Marketing Research, he is currently working on a book on the direct selling industry. She has published in theJournal of Current Issues and Research in Advertising, theJournal of Professional Services Marketing, and in many national and international conference proceedings. He received his Ph.D. from Washington State University. His research interests include the examination of how consumers perceive prices and evaluate advertised deals. He has published in the proceedings of several national and international conferences.