Can the academic literature contribute to the debate over mandatory audit firm rotation?

Recently, the Public Company Accounting Oversight Board (PCAOB) issued a concept release soliciting public recommendations to improve auditor independence and audit quality (PCAOB, 2011). The focus of the release is on mandatory audit firm rotation (MAFR) with a request for commentaries addressing the advantages and disadvantages of MAFR. In this paper, we briefly summarize the recent literature on mandatory audit firm rotation and suggest how it can be useful to regulators as they consider the implementation of mandatory rotation. We find that the conclusions reached about the possible effectiveness of MAFR appear to depend on the type of data used (voluntary vs. mandatory auditor changes), suggesting that regulators should exercise care when drawing inferences from past audit firm rotation research.     

Ex Ante Incentives for Earnings Management and the Informativeness of Earnings

This study examines the relation between ex ante incentives of insurance managers to engage in earnings management to meet regulatory standards and the informativeness of earnings. This study extends prior research by simultaneously examining the effects of earnings management and uncertainty about earnings as suggested by Collins and DeAngelo (1990) and Imhoff and Lobo (1992). Results from a sample of 375 quarterly earnings announcements of 41 property and liability insurers during the period 1989 to 1992 support the hypothesis that when managers' incentives for earnings management are high, earnings announcements are less informative to investors (even after controlling for uncertainty associated with exposure to large-scale catastrophes). Robustness tests suggest that our results are not attributable to firm size, time period effects, firm effects, accounting estimation error, or financial distress risk. These results are consistent with investors using publicly available information to predict P-L insurance managers' ex ante incentives to manage earnings to meet regulatory standards, and that they use this information in forming their beliefs about earnings quality.     

领导力技能连续体

尽管对于很多财务专业人士来说,实现财务领导力的想法是一个明确且现实的目标,但是很少有人了解成为一名真正的领导者需要哪些技能。     

The Accuracy of Owner-Provided House Values: The 1978–1991 American Housing Survey

The American Housing Survey (AHS) includes the owner's valuation of the house as a measure of the house's value. If owner-stated values are accurate, the AHS (as well as other survey instruments) can be used by researchers studying a variety of topics. In this study we use the metropolitan version of the AHS for three cities over fourteen years to compare owners' valuations with sales prices of houses that sold in the twelve months prior to an interview. We find that, on average, recent buyers report house values that are 8.4% higher than the stated sales prices. Further analysis indicates that these recent buyers, when compared with owners with longer tenure, overvalue their houses by 3.3%, on average. Thus, we find that the average owner overvalues his house by 5.1%. Also, differences between sales prices and owners' valuations are not related to particular characteristics of the house, occupants (other than length of tenure), or neighborhood. Thus, the use of the owners' valuations will result in accurate estimates of house price indexes and will provide reliable estimates of the prices of house and neighborhood characteristics.     

How to fight against southern pine beetle epidemics: An insurance approach

The southern pine beetle (SPB) is among the leading biological agents killing southern pine species in the eastern United States. In light of recognized spatiotemporal autocorrelation in SPB outbreaks, we devise a spatiotemporal block bootstrapping method that can be applied to analyze spatiotemporally dependent infestations. We also identify the relevant risk determinants and evaluate their impacts on the frequency of SPB outbreaks. For example, we find forest type, climate, and natural disasters like storm and forest management are all significantly associated with SPB risks. Using the results of a statistical model, we design a county-level group index insurance plan that generates estimates of actuarially fair premium rates for timber stands containing southern pine species. Given that no government-provided compensation scheme for SPB epidemics currently exists, application of this new insurance product could reduce forest owners losses. Our study offers an approach to analyzing and protecting against risks of other destructive pests affecting the timber sector.     

The Rights of Employees with Disabilities: Supreme Court Interpretations of the Americans with Disabilities Act and Their Implications for Human Resource Management

The Americans With Disabilites Act (ADA) of 1990 provides broad protection to an estimated 43 million Americans against discrimination in many facets of their lives. Title I of the Act prohibits discrimination in employment. Title III of the Act, which prohibits discrimination in public accommodation, has also impacted the employment relationship. Eight years after the passage of the Act, the U.S. Supreme Court issued its first ruling under the ADA. Two subsequent decisions have been rendered that further interpret the statute and the Court has repeatedly denied to review cases that deal with another key interpretation of the ADA. This paper analyzes these cases and decisions and their implications for management practices.     

What is a strategic acquisition? Decision modeling in support of foreclosed housing redevelopment

This paper describes and develops a model for calculating location-based strategic values of foreclosed properties considered for acquisition and redevelopment by community development corporations (CDCs). A property’s strategic value refers to its proximity to site-specific neighborhood amenities and disamenities (e.g. schools, public transit, distressed properties), given the relative importance of that proximity to CDC organizational and community objectives. We operationalize the concept of strategic value, and apply this concept to a salient public sector decision problem. Using data and value assessments from a CDC engaged in foreclosed housing redevelopment, we compute measures of strategic value for a set of acquisition candidates. We show that strategic values can differ in systematic ways depending on the types of amenities and disamenities identified as relevant for CDC acquisition decisions, the relative importance assigned to those amenities and disamenities, and the utility maximization objectives of the CDC. We conclude by proposing a multi-criteria decision model for foreclosed housing acquisition and redevelopment which incorporates a theory of residential housing impacts for which strategic value measures are a special case.     

Estimating panel data models in the presence of endogeneity and selection

We consider estimation of panel data models with sample selection when the equation of interest contains endogenous explanatory variables as well as unobserved heterogeneity. Assuming that appropriate instruments are available, we propose several tests for selection bias and two estimation procedures that correct for selection in the presence of endogenous regressors. The tests are based on the fixed effects two-stage least squares estimator, thereby permitting arbitrary correlation between unobserved heterogeneity and explanatory variables. The first correction procedure is parametric and is valid under the assumption that the errors in the selection equation are normally distributed. The second procedure estimates the model parameters semiparametrically using series estimators. In the proposed testing and correction procedures, the error terms may be heterogeneously distributed and serially dependent in both selection and primary equations. Because these methods allow for a rather flexible structure of the error variance and do not impose any nonstandard assumptions on the conditional distributions of explanatory variables, they provide a useful alternative to the existing approaches presented in the literature.     

Women rule: potato markets,cellular phones and access to information in the Bolivian highlands

In highland Bolivia, potato markets are widespread and access to market information has entered the digital age. Information networks lubricated by ubiquitous cellular technologies are supplanting traditional means of information‐gathering. We explore the impacts of access to cellular phones on market selection, use of social networks to acquire information, and gendered responsibilities within the potato market chain near Cochabamba. The entire family participates in potato production and marketing, but responsibilities are differentiated by gender. Men take a leading role in potato production and women in marketing. Access to cellular phones affects decisions about where to market potatoes and improves the potato marketing process.     

Estimation of dynamic panel data models with sample selection

We propose a new method for estimating dynamic panel data models with selection. The method uses backward substitution for the lagged dependent variable, which leads to an estimating equation that requires correcting for contemporaneous selection only. The estimator is valid under relatively weak assumptions about errors and permits avoiding the weak instruments problem associated with differencing. We also propose a simple test for selection bias that is based on the addition of a selection term to the first‐difference equation and subsequent testing for significance of this term. The methods are applied to estimating dynamic earnings equations for women. Copyright © 2011 John Wiley & Sons, Ltd.