Auditor quality effects on the relationship between accruals,cash flows and equity returns: a variance decomposition analysis

In this paper, we examine the relative importance of the cash flow and accruals components of earnings in explaining the variation in UK company equity returns, together with the extent to which these relationships vary by auditor quality. We use a multivariate time-series approach that can be reconciled to a log-linear theoretical valuation model and, unlike the standard linear regression of returns on earnings components, accommodates time-varying discount rates. Based on a decomposition of the variance of equity returns, cash flows and accruals, our results indicate that both cash flow news and accruals news are important drivers of UK equity returns, although cash flows are more influential than accruals. We also find that variation in both earnings components has a more significant effect on returns for clients of large auditors. Finally, our results provide mixed evidence on the question of whether the impact of auditor quality is highest for the accruals component of earnings.     

AN AXIOMATIZATION OF QUANTILES ON THE DOMAIN OF DISTRIBUTION FUNCTIONS

In an environment in which the primitive is the space of distribution functions, we characterize the quantile functions by the axioms ordinal covariance, monotonicity with respect to first-order stochastic dominance, and upper semicontinuity. We show how to characterize the VaR in a similar manner.     

Global instability in experimental general equilibrium: the Scarf example

Scarf (Int. Econ. Rev. 1 (1960) 157) proposed a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around, rather than converges to, the competitive equilibrium. Hirota (Int. Econ. Rev. 22 (1981) 461) characterized the price paths. We explore the predictions of Scarf's model in a non-tatonnement experimental double auction. The average transaction prices in each period do follow the path predicted by the Scarf and Hirota models. When the model predicts convergence the data converge; when the model predicts orbits, the data orbit in the direction predicted by the model. Moreover, we observe a weak tendency for prices within a period to follow the path predicted by the model.     

Antecedents of Service Innovation in SMEs: Comparing the Effects of External and Internal Factors

Increasing attention has been paid of late to the importance of effectively developing both exploratory and exploitative innovation in firms. Small and medium‐sized enterprises (SMEs) play a significant role in the growth of economies and in job creation, yet at the same time they can differ significantly from larger firms with respect to effective management. Recent research has examined the effects of environmental and organizational characteristics on the effective development of exploratory and exploitative innovation. SMEs differ from larger firms in many ways, such as the availability of resources, and it is unclear whether findings based on studies in larger firms will also hold true for SMEs. As such, it is important to explore and understand the extent to which SMEs differ from large firms in this important area. Specifically, this paper empirically examines the extent to which organizational factors (connectedness, centralization, formalization) and business environment (dynamism and hostility) are associated with different types of innovation orientations (exploratory and exploitative) among SMEs.     

Post-Communist Consumer Ethics: The Case of Romania

In this paper we theorize that cognitive ethical orientations play an influential role in the beliefs of consumers when faced with different ranges of moral dilemmas. We examine this proposition in transitional Eastern Europe and results from a sample of 210 Romanian consumers suggest that Romanians are faced with a moral situation where low levels of Machiavellianism and high levels of idealism appear to relate to a higher ethical concern about passively benefiting at the expense of others.     

The role of foreign currency debt in financial crises: 1880–1913 versus 1972–1997

We show that exposure to foreign currency debt does not necessarily increase the risk of having a financial crisis. Some countries do not suffer from financial fragility despite original sin. Before 1913 British offshoots and Scandinavia afflicted with it avoided financial meltdowns. Today many advanced countries have original sin, but few have had crises. In both periods, aggregate balance sheet mismatches are associated with a greater likelihood of a crisis. The evidence suggests that foreign currency debt is dangerous when mis-managed. This is part of the difference between developed countries and emerging markets both of which borrow in foreign currency.     

Public market finance for growth‐stage companies in emerging markets: The U.S. alternative IPO moves to fill the gap

Lacking from the options currently available to most growth‐stage companies located in the emerging markets of the world is effective access to public finance. Unlike the United States, these companies are shut off from access to their local public markets. Fortunately a solution exists in the form of an alternative initial public offering (AIPO) onto the over‐the‐counter bulletin board market of the United States (OTC BB). As the name implies, an AIPO is an alternative form of listing that allows companies in emerging markets to gain access to the deepest and most liquid capital market in the world. © 2008 Wiley Periodicals, Inc.     

Still in democratic deficit

The rejection of the Lisbon Treaty by the Irish electorate has given new vigour to the debate on the European Union’s widely perceived democratic deficit. Does the EU indeed have a serious democracy problem? What are the options open to the European political leadership and which of these should be acted upon?     

The relationship between ethics and firm practices in Russia and the United States

One of the fundamental objectives of corporate governance is to promote a climate that fosters ethical decision-making. As transitioning economies move toward more transparent and democratic systems the existence of policies, such as codes of ethics, that attempt to monitor and control moral behavior will become increasingly important. The establishment of ethical standards not only encourages trust with potential trade partners but also is likely to cultivate foreign direct investment. In this study, data collected from 112 U.S. and 74 Russian respondents reveal some intriguing patterns across these two diverse economies. Managerial implications and future research directions are also discussed.