Cash balance pension plans: A case of standard-setting inadequacy

Accounting for and ownership of U.S. private employee pensions has long been a controversial and politically contested terrain. The uniqueness in the U.S. of using employers as the principal provider of pensions makes the reporting of pensions more problematic since the corporate employers providing pensions are not strictly accountable to only the pensioners. Over the last quarter century there has been a marked swing in power toward management and away from employees making it possible for increasing numbers of U.S. companies to switch from conventional defined benefit plans to cash balance plans. This paper provides a “case” study of how accounting standard-setters framed the pension reporting problem vis-à-vis how they frame the “reporting problem” in general. Utilizing various sources of commentary about the phenomenon of cash-balance conversions, we triangulate on the pension problem to demonstrate how current FASB disclosure rules fail to satisfy the condition of neutrality and how those rules have facilitated the shifting of economic risk from shareholders to employees.     

Strategic choice during economic crisis: Domestic market position,organizational capabilities and export flexibility

This study examines how sudden shrinkage of domestic demand affects firm-level export performance. Using the Asian economic crisis as a natural experiment, we show that while the industrial organization (IO) economics and resource-based view (RBV) apply well in the pre-crisis period, the real options perspective does a better job in explaining firms’ efforts to increase exports in the post-crisis period. Specifically, using a real options perspective, we show how sudden change in domestic demand provides benefits to those firms that have invested in flexible capabilities while those firms that are locked in with inflexible resources fail to change. We find that the positive relationship between a firm's domestic market position and export intensity becomes stronger in the post-crisis than the pre-crisis period. Further, we find a positive relationship between non-location-bound flexible capabilities such as R&D and export intensity and a negative relationship between location-bound inflexible capabilities such as advertising and export intensity. These relationships become more pronounced in the post-crisis period.     

Organizational Structure and Managerial Decisions

We investigate how the organizational structure of a firm influences the decision making of its top management. Different organizational structures lead information to be processed in different ways by the individual decision makers, potentially creating an informational cascade within the organization. We analyze two organizational structures: the first inducing sequential information processing, the second inducing batch information processing. In particular, we characterize the optimal organizational structure using the signal precision of the top manager, i.e., the value of his private information.     

International market selection strategies of manufacturing and services firms

This paper discusses the entrepreneurial landscape in Africa and locates a new generation of African entrepreneurs and their business networks within it. Unlike others in that landscape (i.e. micro- or small-scale informal sector vendors, and traditional or multinational large-scale formal sector firms), the ‘new generation’ entrepreneurs are business globalists who organized a system of business enterprise networks consisting of national, regional, and pan-African organizations. The study analyses interview data from 57 men and women network members from 10 countries (Botswana, Ethiopia, Ghana, Kenya, Mali, Senegal, South Africa, Uganda, Zambia, and Zimbabwe). Some defining characteristics of these entrepreneurs are interactive social and business relationships, use of modern management methods and information technology, trust among fellow members, transparent business practices, advocacy on behalf of the private sector, and commitment to increasing intra-African commerce. Their mission is to improve the climate for private sector business in Africa and to promote regional economic integration. They pursue cross-national commercial ventures, maintain official observer status at established regional economic organizations, sign memoranda of understanding with multilateral agencies, establish venture capital funds, and help to change government policies. The paper identifies characteristics of the ‘new generation’ entrepreneurs, evaluates goals and achievements of their networks, and concludes that despite limitations, these entrepreneurs and their organizations have created intra- and cross-national networks that strengthen private-sector-led economic growth in Africa.     

Integrating expected coverage and local reliability for emergency medical services location problems

Daskin's MEXCLP model [Daskin M. A maximum expected covering location model: formulation, properties, and heuristic solution. Transportation Science 1983;17:48-70] was one of the first efforts to capture the stochastic nature of emergency medical services (EMS) location problems within a mixed-integer formulation. With their subsequent introduction of MALP, ReVelle and Hogan [The maximum availability location problem. Transportation Science 1989;23:192-200] offered two key advances, local vehicle busyness estimates and the α-reliability objective. While these constructs have influenced many subsequent EMS location models, they have been subjected to relatively little empirical analysis. To address this, we introduce the LR-MEXCLP, a hybrid model combining the local busyness estimates of MALP with the maximum coverage objective of MEXCLP. We then solve a series of problems with all three models and employ simulation to estimate aggregate service levels. We find that LR-MEXCLP leads to modest but consistent service gains over both MALP and MEXCLP. These results support the merits of local busyness estimates, but they also suggest that the α-reliability objective may be inappropriate when seeking to maximize aggregate system response capabilities. More generally, our research underscores the utility of (a) linking modeling assumptions and goals with real-world application contexts, and (b) employing simulation or other techniques to validate theoretical results.     

顺流而动并非上策

正在市场环境瞬息万变的今天,为改变而改变一定是最优选择么?怎样调整才能既保留公司核心竞争力,又开拓新的领域?商海行舟,不进则退。不变革便衰败,只有挣脱束缚自己的枷锁才能更好地前行。当今世界日新月异,组织必须与时俱进以保证利润和市场份额的观念已深入人心,并被奉为金句。从百事达(Blockbuster)到柯达,从纸质报业到投币电话制造商,更给了我们"不变则死"的惨痛教训。各行各业也都有公司为自己的因循守旧埋了单。     

THE IRREDUCIBLE ROLE OF DERIVED MARGINAL UTILITY IN DYNAMIC STOCHASTIC PROGRAMMING

Abstract. Using the important case of multi-period investing between a safe asset with a low mean return and an equity basket with a higher total return but a riskier one, this analysis demonstrates that the relevant stochastic programming involves irreducibly recursive variational relations. The "direct" Lagrange-Chow procedure is related to the derivatives of the Bellman "indirect"'algorithms and shown to require essentially the same computations save only for standard integrations or taking of first derivatives. To demonstrate that the comparison is unchanged when a vector of control variables must be optimized in a many-period stochastic scenario, the problem is solved for a rentier to both decide how much to save in each period and how much to put of each period's investment into risky securities.     

The Effect of Accounting Restatements on Earnings Revisions and the Estimated Cost of Capital

This paper examines the effect of accounting restatements on a firm's cost of equity capital. We show that, on average, accounting restatements lead to both decreases in expected future earnings and increases in the firm's cost of equity capital. Depending on the model used, relative percentage increases in the cost of equity capital average between 7 and 19% in the month immediately following a restatement. The relative increase in the cost of capital dissipates as time passes and after controlling for analyst forecast biases, but continues to average between 6 and 15% in the most conservative setting. We also show that restatements initiated by auditors are associated with the largest increase in the cost of capital, and that firms with greater leverage experience greater increases in their cost of capital. Overall, our evidence is consistent with accounting restatements lowering the perceived earnings quality of the firm and increasing investors' required rates of return.