The pricing of audit and non-audit services in a regulated environment: a longitudinal study of the UK life insurance industry

This paper studies the relationship between audit and non-audit service fees paid to the statutory auditor by UK life insurance firms, utilising an extensive panel-data sample set for the period 1999–2009. Consistent with a knowledge spillover (impairment of independence) hypothesis, we predict and find that audit fees are positively (negatively) associated with actuarial (tax service) fees. Additionally, our results indicate that regulatory changes enforced after 2004 deterred UK life insurance firms from purchasing non-audit services that are perceived to impair auditor independence. Finally, we find evidence concerning the inter-temporal determination of audit fees.     

To go or stay home and watch: exploring the balance between motives and perceived constraints for major events: a case study of the 2008 Beijing Olympic Games

The current study offers insight into the role of motivation and constraints on behavioural intentions prior to a mega event. The Psychological Continuum Model framework was used to integrate motivation and leisure constraints theory to examine attraction towards the 2008 Olympic Games. Semi‐structured interviews (N = 47) and a questionnaire (N = 235) distributed in Australia and the USA were used to identify and measure three motivational themes: cultural learning, cultural experience and olympic event interest, and three perceived constraints: structural, interpersonal and intrapersonal. Structural Equation Modelling revealed that motives were positively related to behavioural intentions while constraints were negatively related. Analysis further revealed the interaction between motives and perceived constraints led to two different forms of behavioural intentions; intentions to travel and attend the event vs. stay home to watch the event on TV. Policy and marketing implications are discussed that illustrate the benefits of understanding both motives and perceived constraints for tourism travel. Copyright © 2008 John Wiley and Sons, Ltd.     

The dynamics of crop sectors in regional development: The case of tobacco

The importance of specific crop sectors can be better cast in a broader framework to account for intersectoral effects. Input-output analysis can provide this framework to assess the importance of the controversial crop, tobacco. In this respect, employment, income, and output multipliers were estimated to demonstrate the dynamics of the sector at the regional and national levels. Furthermore, the impact of totally eliminating tobacco cultivation was computed. Results clearly demonstrate the significance of the tobacco sector and its interrelation with the rest of the economic sectors.This study was partially financed by the Portuguese Association of Tobacco Producers.     

Large lending and banks performance. Is there any relationship? Empirical evidence from US banks

Large lending in the banking industry has sparked concerns about banks’ efficiency performance, particularly, if it is related to their credit risk, as trade credit, provided by large, creditworthy firms. We provide evidence of a rather neglected issue regarding the impact of large lending on banks’ efficiency using cost and profit stochastic functions. A unique dataset was constructed concerning all US banks collected from the Statistics on Depository Institutions report compiled by the Federal Deposit Insurance Corporation. Our sample contains US banks tracked yearly for the period 2010–2017, creating an unbalanced panel of year observations. An econometric framework based on nested non-neutral frontiers was developed to estimate the influence and the decomposition of large lending on the three banks’ performance aspects. Moreover, different types of frontiers aiming at the cost and profit sides have been investigated, and the associated elasticities have been calculated. We notice that large lending plays a crucial role in banks’ technical efficiency. Variations among different frontier models, type of bank and size, banks’ ownership structure, and macroeconomic conditions appear to be present. By considering all capital adequacy asset quality management earnings liquidity parameters, we notice that banks’ financial strength affects banks’ efficiency.     

CEO Pay Contracts and IFRS Reconciliations

Abstract

We examine whether UK managers exploit the discretion provided in the UK GAAP to IFRS reconciliation process to manage earnings and whether this earnings management is associated with the structure of the managers' compensation contracts. We use a comprehensive data set of mainly hand-collected information from the firms' annual reports to provide evidence that, given the existence of an accounting-related vesting target in their pay schemes, CEOs use UK GAAP to IFRS reconciliations as an earnings management tool. We test our hypotheses under a number of different specifications, including a propensity score matching analysis. Our study contributes to the literature on the relation between earnings management and contractual incentives by focusing on a major structural change in accounting policies.     

Location decisions and welfare under spatial price discrimination

The welfare effects of regulation are of crucial importance to policy makers. To this end, we present a model of n firms with differentiated costs competing in a linear market within the framework of spatial price discrimination. We prove that the Nash equilibrium locations of firms are always socially optimal irrespective of the number of competitors, the distribution of consumers, firms' cost heterogeneity, the level of privatization, and the number and/or the varieties of the produced goods. We also provide an algorithm on how to find the unique Nash equilibrium in the case of uniformly distributed consumers.     

Management earnings forecasts and IPO performance: evidence of a regime change

Companies undertaking initial public offerings (IPOs) in Greece were obliged to include next-year profit forecast in their prospectuses, until the regulation changed in 2001 to voluntary forecasting. Drawing evidence from IPOs issued in the period 1993–2015, this is the first study to investigate the effect of disclosure regime on management earnings forecasts and IPO long-term performance. The findings show mainly positive forecast errors (forecasts are lower than actual earnings) and higher long-term returns during the mandatory period, suggesting that the mandatory disclosure requirement causes issuers to systematically bias profit forecasts downwards as they opt for the safety of accounting conservatism. The mandatory disclosure requirement artificially improves IPO share performance. Overall, our results show that mandatory disclosure of earnings forecasts can impede capital market efficiency once it goes beyond historical financial information to involve compulsory projections of future performance.     

Absorptive capacity, innovation, and financial performance

This study here examines the role of absorptive capacity as both a mechanism to identify and translate external knowledge inflows into tangible benefits, as well as a means of achieving superior innovation and time-lagged financial performance. Using path analysis in a sample of 461 Greek enterprises participating in the third Community Innovation Survey, this study demonstrates that external knowledge inflows are directly related to absorptive capacity and indirectly related to innovation. Absorptive capacity contributes, directly and indirectly, to innovation and financial performance but in different time spans. This study, therefore, contributes to the understanding of absorptive capacity's antecedents and outcomes by providing empirical evidence of longitudinal form that offers important research and practical implications.     

Process Innovation Activity in a Mixed Oligopoly: The Role of Cooperatives

This article develops a sequential game-theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector. The analysis examines an open-membership, input-supplying cooperative (co-op) that maximizes member welfare and finances its innovation activity through retained earnings. Analytical results show that the presence of the co-op can increase the arrival rate of innovations while reducing the price of agricultural inputs. Cooperative involvement in innovation activity can thus be welfare enhancing and socially desirable with its effectiveness being determined by the degree of producer heterogeneity and the size of innovation costs.