A Statement of Accounting Concepts for Level 1 of the Conceptual Framework?

The type of reporting found in corporate governance includes financial reporting, but over time various arguments have developed regarding a tension found between conventional and financial type reporting, especially as to the role of financial statements. Further tensions follow from the introduction of economic and social issues within both conventional accounting and financial reports.
This article argues that distinct, though related, frameworks at particular levels are required. The mingling of conventional accounting with financial and economic ideas and issues is evident in the conceptual framework (CF) project where there is reference to economic benefits and costs in making economic decisions for the allocation of resources. This results in a misconception of the function of these distinct types of information. An unravelling of particular issues will require a Statement of Accounting Concepts (SAC) for Level 1 of the CF.     

Introducing Time‐to‐Educate in a Job‐Search Model

Transition patterns from school to work differ considerably across OECD countries. Some countries exhibit high youth unemployment rates, which can be considered an indicator of the difficulty facing young people trying to integrate into the labour market. At the same time, education is a time‐consuming process, and enrolment and dropout decisions depend on expected duration of studies as well as on job prospects with and without completed degrees. One way to model entry into the labour market is by means of job‐search models, where the job arrival hazard is a key parameter in capturing the ease or difficulty in finding a job. Standard models of job search and education assume that skills can be upgraded instantaneously (and mostly in the form of on‐the‐job training) at a fixed cost. This paper models education as a time‐consuming process, a concept which we call time‐to‐educate, during which an individual faces the trade‐off between continuing education and taking up a job.     

Discussion of “Earnings Surprises,Growth Expectations,and Stock Returns,or, Don't Let an Earnings Torpedo Sink Your Portfolio”

Review of Accounting Studies -     

A comparison of Ad valorem and per unit taxes in regulated monopolies

This paper compares the output and revenue effects in the rate-of-return regulated monopoly model. Both the ad valorem and the unit tax generally decrease the use of capital, and as such, reduce the output and raise the price. In addition, it is shown that Suits and Musgrave's conclusion of higher revenue of an ad valorem tax at a given output can apply to a regulated monopolist if the marginal product of labor under the ad valorem tax is greater than or equal to that under the unit tax. Similarly, their second conclusion, that for a given tax revenue an ad valorem tax has a larger output than a unit tax rate before the revenue-maximizing tax rate, can also apply to the regulated monopolist.     

Towards a complete real-time electricity market design

The general design for the real-time electricity market presented in this paper optimizes and prices both real and reactive power simultaneously in an AC setting, where all assets—generation, load and transmission—are allowed to bid and are financially settled at the locational price times energy consumed or produced. The result is that transmission lines are compensated for both capacity and admittance, providing incentives for efficient operation of transmission-related assets such as FACTS devices, if price-taking behavior is assumed. Losses are incorporated into the design and become an operating cost for transmission. The market design is shown to be revenue neutral and, under some assumptions, nonconfiscatory.      

AN EMPIRICAL EXAMINATION OF RELATIONSHIP MAGNITUDE

Based upon a review of the extant literature, it is proposed that the structure of an interorganizational relationship is composed of relationship type and the under‐researched construct of relationship magnitude. Specifically, it is hypothesized that relationship magnitude, a second order construct composed of trust, commitment, and dependence, affects relationship type, which affects the perception of value of the relationship. The results of a survey analyzed through structural equation modeling support these hypotheses.     

Spatial determinants of Japanese FDI in China

Research on foreign direct investment in China has spawned an increasingly large literature. Whilst regional cleavages with respect to the distribution of foreign direct investment (FDI) are acknowledged, empirical research on the spatial determinants of FDI in China has been limited. Furthermore, research on the spatial determinants of home country FDI in China has thus far been neglected due to difficulties in accessing the appropriate data. The objective of this paper is to examine the spatial determinants of Japanese direct investment in China by using an econometric model. To that purpose, a dataset is created from the Toyo Keizai directory on the overseas activities of Japanese companies. The results show that tertiary education, inland waterways, as well as coastal location are positive and significant determinants of Japanese investment in China.     

Comparative Advantage in Demand: Experimental Evidence of Preferences for Genetically Modified Food in the United States and European Union

The United States (US) exports more than US$6 billion in agricultural commodities to the European Union(EU) each year, but one issue carries the potential to diminish this trade: use of biotechnology in food production. The EU has adopted more stringent policies towards biotechnology than the US. Understanding differences in European and American policies towards genetically modified (GM) foods requires a greater understanding of consumers’ attitudes and preferences. This paper reports results from the first large‐scale, cross‐Atlantic study to analyse consumer demand for genetically modified food in a non‐hypothetical market environment. We strongly reject the frequent if convenient assumption in trade theory that consumer preferences are identical across countries: the median level of compensation demanded by English and French consumers to consume a GM food is found to be more than twice that in any of the US locations. Results have important implications for trade theory, which typically focuses on differences in specialization, comparative advantage and factor endowments across countries, and for on‐going trade disputes at the World Trade Organization.     

Managerial Opportunism? Evidence from Directors' and Officers' Insurance Purchases

We analyze a sample of 72 IPO firms that went public between 1992 and 1996 for which we have detailed proprietary information about the amount and cost of D&O liability insurance. If managers of IPO firms are exploiting superior inside information, we hypothesize that the amount of insurance coverage chosen will be related to the post-offering performance of the issuing firm's shares. Consistent with the hypothesis, we find a significant negative relation between the three-year post-IPO stock price performance and the insurance coverage purchased in conjunction with the IPO. One plausible interpretation is that, like insider securities transactions, D&O insurance decisions reveal opportunistic behavior by managers. This provides some motivation to argue that disclosure of the details of D&O insurance decisions, as is required in some other countries, is valuable.     

Long-Term Performance Following Rights Issues and Open Offers in the UK

Abstract:  This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used.