The impact of accounting restatements on CFO turnover and bonus compensation: Does securities litigation matter?

This paper examines the association between accounting restatements, class-action securities litigation and chief financial officer (CFO) turnover and bonus compensation. We identify income-decreasing earnings restatements that were the result of aggressive accounting policies, and hypothesize that these restatements will result in higher CFO turnover rates, and lower bonus compensation, especially when the firm is the target of a restatement-related class-action securities lawsuit. Our results indicate that CFO turnover and bonus compensation are affected by restatements, but only when the restatement firm is the target of a class-action suit. When we expand the analyses to consider other types of executives (e.g., CEOs and COOs), we continue to find that turnover only occurs in the presence of a class-action suit. However, bonus compensation penalties to other types of executives are not limited to litigation-related restatements.     

Examining the stock performance of acquirers where the acquirer or target hold patents

Review of Quantitative Finance and Accounting - We investigate the stock returns for acquirers of firms holding registered patents (“innovative targets”). We find that acquiring...     

HR's strategic role within MNCs: helping build social capital in Latin America

In this article, we adopt a holistic perspective in considering the impact of the country's environment as well as the multinational corporations (MNCs) strategy on human resource (HR) practices. More importantly, we argue that within MNCs human resource management (HRM) is playing a central role in the process of balancing local and global forces. HR can be critical in helping MNCs' deal with local differences while also helping the company implement practices that are critical for its global strategy. Specifically, we argue that HR plays a key role in developing social capital, which may provide the necessary ‘substitutes’ for formal control that would otherwise be neglected. Our contribution lies primarily in outlining how this new role of creating human capital confers on HR the task of filtering mission-critical practices through a ‘localization mesh’ that ensures success. In addition, given the importance of social capital as an informal mechanism that allows MNCs to coordinate and integrate activities, we suggest ways in which an MNC can build social capital within the context of the Latin American pan-regional cultural values.     

The interaction of expatriate pay differential and expatriate inputs on host country nationals' pay unfairness

This study investigates expatriate compensation from the under-researched perspective of host-country nationals (HCN). HCNs are typically compensated at lower levels than expatriates are, even when they hold similar jobs and possess similar qualifications. Such pay differential may provoke HCN perceptions of pay unfairness, which can in turn affect other HCN outcomes such as performance and turnover. The study identifies a number of factors that may offset or attenuate the negative influence of pay differential on HCN's perceived pay unfairness, namely awareness of expatriate contributions and special needs, expatriate interpersonal sensitivity, HCN pay advantage over other locals, and HCN contact with expatriates. Data from HCNs working with similarly qualified expatriates largely supported the hypotheses. Implications, limitations, and suggestions for future research are discussed.     

MANAGING THE SUPPLY OF SHORT‐LIFE PRODUCTS. A DURATION ANALYSIS APPROACH USING THE UK FILM INDUSTRY

Movies are uncertain products. Nobody knows much about them prior to their screening and their attempt to survive in the risky motion picture market week by week. This paper studies short‐life products using the example of the UK film industry, including high and low‐budget films. Using a clog‐log methodology and a sample of 552 films, the empirical results highlight the importance of the distributor's strategy and word‐of‐mouth for success in experience goods industries. Two strategies, cross‐subsidisation and opportunity cost, not previously addressed are considered. The results show these effects to be especially significant for low budget movies.     

Fiscal policy and default risk in emerging markets

Emerging market economies typically exhibit a procyclical fiscal policy: public expenditures rise (fall) in economic expansions (recessions), whereas tax rates rise (fall) in bad (good) times. Additionally, the business cycle of these economies is characterized by countercyclical default risk. In this paper we develop a quantitative dynamic stochastic small open economy model with incomplete markets, endogenous fiscal policy and sovereign default where public expenditures and tax rates are optimally procyclical. The model also accounts for the dynamics of other key macroeconomic variables in emerging economies.     

Understanding the Relationship between Financial Development and Monetary Policy

In this paper we summarize the results of a broad exploratory empirical analysis where we relate the level of financial development with the effectiveness of monetary policy. The analysis is based on a panel of countries for which we calculate measures both of financial development and of monetary policy effectiveness. We look for statistically significant relationships between the indicators of financial development, the effectiveness coefficients, and other macroeconomic characteristics by estimating dynamic panels and performing a cluster analysis. We present our results in the form of a list of stylized facts that we consider deserve further attention.     

Growth, cycles and convergence in US regional time series

This article reports the results of fitting unobserved components (structural) time series models to data on real income per capita in eight regions of the United States. The aim is to establish stylised facts about cycles and convergence. It appears that while the cycles are highly correlated, the two richest regions have been diverging from the others in recent years. A new model is developed in order to characterise the converging behaviour of the six poorest regions. The model combines convergence components with a common trend and cycles. These convergence components are formulated as a second-order error correction mechanism which allows temporary divergence while imposing eventual convergence. After fitting the model, the implications for forecasting are examined. Finally, the use of unit root tests for testing convergence is critically assessed in the light of the stylised facts obtained from the fitted models.     

Sparkling wine choice from supermarket shelves: the impact of certification of origin and production practices

We report the results of a study based on revealed and stated preference data on choice of Prosecco wines in retail stores close to the origin of production in Northern Italy. Emphasis is placed on ability to reconcile the utility structure of stated preference data with that underlying revealed preference data. We extend the analysis to cover nonattendance of key attributes, such as price and certification of origin, while controlling for the large range of brand effects.