Predicting credit card fraud with Sarbanes‐Oxley assessments and Fama‐French risk factors

This research developed and tested machine learning models to predict significant credit card fraud in corporate systems using Sarbanes‐Oxley (SOX) reports, news reports of breaches and Fama‐French risk factors (FF). Exploratory analysis found that SOX information predicted several types of security breaches, with the strongest performance in predicting credit card fraud. A systematic tuning of hyperparamters for a suite of machine learning models, starting with a random forest, an extremely‐randomized forest, a random grid of gradient boosting machines (GBMs), a random grid of deep neural nets, a fixed grid of general linear models where assembled into two trained stacked ensemble models optimized for F1 performance; an ensemble that contained all the models, and an ensemble containing just the best performing model from each algorithm class. Tuned GBMs performed best under all conditions. Without FF, models yielded an AUC of 99.3% and closeness of the training and validation matrices confirm that the model is robust. The most important predictors were firm specific, as would be expected, since control weaknesses vary at the firm level. Audit firm fees were the most important non‐firm‐specific predictors. Adding FF to the model rendered perfect prediction (100%) in the trained confusion matrix and AUC of 99.8%. The most important predictors of credit card fraud were the FF coefficient for the High book‐to‐market ratio Minus Low factor. The second most influential variable was the year of reporting, and third most important was the Fama‐French 3‐factor model R² – together these described most of the variance in credit card fraud occurrence. In all cases the four major SOX specific opinions rendered by auditors and the signed SOX report had little predictive influence.     

Outside versus inside bonds: A Modigliani–Miller type result for liquidity constrained economies

When agents are liquidity constrained, two options exist – sell assets or borrow. We compare the allocations arising in two economies: in one, agents can sell government (outside) bonds and in the other they can borrow by issuing (inside) bonds. All transactions are voluntary, implying no taxation or forced redemption of private debt. We show that any allocation in the economy with inside bonds can be replicated in the economy with outside bonds but that the converse is not true. However, the optimal policy in each economy makes the allocations equivalent.     

Public knowledge,private knowledge: the intellectual capital of entrepreneurs

This paper focuses on the innovative actions of entrepreneurs, namely their tendency to reveal the intellectual capital that results from their research efforts either in the form of public knowledge (publications) or private knowledge (patents). Using data collected by the National Research Council within the US National Academies from their survey of firm’s that received National Institutes of Health phase II Small Business Innovation Research awards between 1992 and 2001, we find that entrepreneurs with academic backgrounds are more likely to publish their intellectual capital compared with entrepreneurs with business backgrounds, who are more likely to patent their intellectual capital. We also find that, when universities are research partners, their presence complements the tendencies of academic entrepreneurs but does not offset those of business entrepreneurs.     

What Determines the Size of Aid Projects?

Over the last few years, considerable attention has focused on aid fragmentation, the proliferation of donors and projects in developing countries. Aid fragmentation has continued to increase despite international efforts to foster donor coordination. One possible implication of fragmentation is smaller aid projects, potentially with the result of more administrative work for overtaxed recipient governments per dollar of aid received.This paper makes use of AidData data on bilateral aid commitments, sector, and funding agencies to explore the determinants of project size and to better understand the forces driving aid fragmentation. To the extent that project size is driven by the sectoral composition or purpose of aid, the associated administrative costs may be justified. Variations due to other factors, e.g. a donor’s administrative structure or bureaucratic interests, provide a stronger case for reforms.     

Incomplete Credit Markets and Commodity Marketing Behaviour

We use a simple theoretical model of seasonal market participation in the presence of liquidity constraints and transaction costs to explain the ‘sell low, buy high’ puzzle in which some households do not take advantage of inter‐temporal price arbitrage through storage and sell output postharvest at prices lower than observed prices for purchases in the subsequent lean season. We test our model with data from western Kenya using maximum likelihood estimation of a multivariate sample selection model of market participation. Access to off‐farm income and credit indeed seem to influence crop sales and purchase behaviours in a manner consistent with the hypothesised patterns.     

Perspective: Understanding the Nature and Measurement of the Lead User Construct

The lead user concept has attracted a lot of attention from scholars and practitioners alike. However, different studies apply different conceptualizations and measures of the lead user construct. Such variation in measurement of the construct make it almost impossible to consolidate findings from prior lead user research, which in turn hampers the accumulation of insights on the concept itself. This is also a challenge with respect to managerial practice: due to different interpretations of the concept, managers and R&D staff find it difficult to identify lead users for workshops and cooperation, and companies are often unable to transfer results from lead user projects to new product and business development. As a result, they only rarely repeat their work with lead users. The aim of this article is therefore to provide some thoughts and guidance on the conceptualization and measurement of the lead user construct.     

MONOPOLISTIC LOCATION CHOICE IN A TWO‐SIDED HOTELLING MODEL

We analyse the optimal location choice of a monopolistic firm that operates two arbitrarily located platforms on a two‐sided market. By extending the traditional Hotelling framework, we show that the optimal platform locations are equivalent to the one‐sided benchmark if both sides are either restricted to single‐ or multi‐homing. In the mixed case (one side single‐homes, the other one multi‐homes), the optimal platform locations are in line with the respective symmetric case. If the monopolist is restricted to choosing the same location on either side of the market, the optimal locations are determined by the relative profitability of the market sides.     

Managing five paradoxes of knowledge exchange in networked organizations: new priorities for HRM?

The life‐blood of most organizations is knowledge. Too often, the very mechanisms set up to facilitate knowledge flow militate against it. This is because they are instituted in a top‐down way, they are cumbersome to manage and the bridges of trust fail to get built. In their thirst for innovation, the tendency is for firms to set up elaborate transmission channels and governance systems. As a result, staff are drowned in a deluge of mundane intranet messages and bewildered by matrix structures, while off‐the‐wall ideas and mould‐breaking insights are routinely missed. Added to this is the challenge of operating across professional, cultural, regional and linguistic boundaries, where ways of sharing knowledge differ markedly, even within the same project team. Drawing upon extensive research with scientists in the ATLAS collaboration (a high‐energy particle physics experiment comprising 3,500 scientists from 38 countries), we explore five paradoxes associated with knowledge exchange in global networks. Each paradox leads to a proposition which takes the theory and practice of knowledge management in a fresh direction. We conclude by outlining a number of HRM priorities for international knowledge‐intensive organizations.     

Medical Malpractice Liability and Physician Migration

This paper uses national data on individual physicians and two control groups to provide evidence on the extent to which each of five medical malpractice reforms impacts the decision to move one's medical practice to another state. We find robust evidence that states that have implemented noneconomic damage caps experience less out-migration of physicians than states that do not have these reforms. In addition, we find some evidence that joint and several liability reforms and patient compensation funds also impact the migration decisions of physicians.