Are employers pursuing value-based purchasing?

Some employers have begun to undertake a variety of initiatives, collectively termed value-based purchasing (VBP), which aim at factoring quality into the purchasing decision-making process when negotiating costs with providers and insurers. There is evidence that the VBP movement has begun gaining momentum; yet it is unclear whether employers are firmly committed to VBP principles. By surveying a national sample of employers, this study investigates the extent to which employers are currently engaged in VBP activities and also increases our understanding of barriers hampering the broader implementation of these activities.     

Developing Dividend and Financing Policies with a Computer Terminal

This study examines the value relevance of mandated disclosures by UK firms of the investor‐firm share of liabilities of equity‐accounted associate and joint venture investees. It does so for the six years following the introduction of FRS 9: Associates and Joint Ventures, which forced a substantial increase in such disclosures by UK firms. Since the increased disclosure requirements were partly motivated by concern that single‐line equity accounting concealed the level of group gearing, and in light of previous US results, it is predicted that the mandated investee‐liability disclosures have a negative coefficient in a value‐relevance regression. The study also examines whether value‐relevance regression coefficients on investee‐liability disclosures are more negative for joint ventures than for associates and whether they are more negative in the presence of investor‐firm guarantees of investee‐firm obligations than in the absence of such guarantees. The study reports that the coefficient on all investee‐liability disclosures taken together has the predicted negative sign, and is significantly different from zero. It finds little evidence that the negative valuation impact of liability disclosures is stronger for joint venture investees overall than for associate investees overall, or stronger for guarantee cases overall than for non‐guarantee cases overall. There is, however, some evidence that the impact for joint venture guarantee cases is stronger than that for joint venture non‐guarantee cases and stronger than that for associate guarantee cases.     

The Effect of Substitute Assets on Yields in Financial Markets

We examine the link between volume and liquidity in money markets where there are close substitutes. We find that the size of the market, as a proxy for trading volume, affects yield spreads over T-bill rates. We examine the bankers acceptances market, when market size declined by half over the decade of the 1990s. Controlling for interest-rate levels, day-of-the-week, calendar, term structure, credit spread, time-series, and cross-equation effects, we find that the substitution effect does not eliminate the impact of market-size changes on rates, but it does preserve the hierarchy of rates across instruments.     

Student Perceptions of the Insurance Profession

To attract students to the risk management and insurance profession, strategies need to be developed to overcome biases in their perceptions of the profession. This study attempts to determine some of those perceptions of students—specifically a group of business career high school students and a group of college students enrolled in an introduction to business course—about the personality traits of insurance professionals. A Personality Factor Questionnaire previously used extensively in other research was used to measure differences in student perceptions of personality profiles of different professions. We also measured how student characteristics such as age, sex, and expected college major influence student perceptions of these traits. The overall general conclusion was that perceptions of the profession are not as negative as many imagine, but do require some substantive work to improve, even among students seeking business careers.     

The use of efficient estimates in multiple tests for goodness of fit

Abstract

Let be Pearson's statistics for testing goodness of fit in various marginal distributions associated with a categorized array of N objects. This study is concerned with disturbances in the limiting joint distribution of when maximum likelihood estimates from the original ungrouped data are used instead of the usual estimates from the cell frequencies after grouping. Under regularity conditions the limiting distributions of , and are shown to satisfy for each positive {c^b1 x ... x c^bT }, where A(c) is the Cartesian product set A(c) = (0, c^b1 ] x ... x (0, c^bT ]. The limiting distributions are characterized in terms of partitioned Wishart matrices having unit rank and parameters as appropriate. These results are extensions of work by Chernoff and Lehmann (1954) and Jensen (1974).     

Three discount methods for valuing projects and the required return on equity

In this paper we discuss the required return on equity for a simple project with a finite life. To determine a project’s cost of equity, it is quite common to use Modigliani and Miller’s Proposition II (1963). However, if the assumptions of MM do not hold, Proposition II will lead to wrong required returns and project values. This paper gives an example of how the cost of equity should be determined in order to obtain correct valuations. The methods we apply are the Adjusted Present Value method, the Cash Flow to Equity method and the WACC method.     

Retention through redemption

Corporate America and the U.S. Navy share one big problem: employee retention. Today's knowledge workers hop from start-up to start-up. And 40% of the navy's new recruits leave the service before their four-year tours of duty are up. D. Michael Abrashoff came face to face with the navy's retention problem when he took command of the USS Benfold. Before he became captain, sailors couldn't get away from the ship fast enough. Today the vessel is the pride of the Pacific fleet, and sailors from other ships are clamoring to join its crew. In this firsthand account, Abrashoff explains how he got the ship and its crew back on course by breaking bad habits--personal and professional ones--and jettisoning old attitudes. During his 21 months aboard the Benfold, Abrashoff came to realize that in today's technology-intensive U.S. Navy, the traditional command-and-control style wouldn't work. And it hadn't--the Benfold's 310 sailors had cheered derisively when Abrashoff's predecessor had left the ship. So he defied 225 years of navy tradition in his quest to engage the sailors in their work, increase their performance, and keep them around for their entire tours of duty. He retained his crew by redeeming them--showing them how to be not just better sailors but better people, too. That meant breaking them down when they were at their worst and then building them up to reach their best. It also meant personal redemption for Abrashoff; he resolved to really listen to what his sailors were saying. The result? Cost-saving ideas for the entire navy and surging confidence and commitment among crew members.     

Misstatement Direction, Litigation Risk, and Planned Audit Investment

This study reports the results of an experiment showing that auditor assessments of litigation risk and planned audit investments are higher when potential errors overstate financial performance than when those errors understate performance. This result is much stronger in the presence of high levels of litigation risk in the client's industry. These results suggest that in industries where litigation risk is high audited financial statements may contain more unintentional material understatement errors than overstatement errors. Thus, litigation risk—through its effect on auditors—may encourage financial statements that understate firm performance