The Interaction of the IFRS 9 Expected Loss Approach with Supervisory Rules and Implications for Financial Stability

This paper examines the interaction of the International Financial Reporting Standard (IFRS) 9 expected credit loss (ECL) model with supervisory rules and discusses potential implications for financial stability in the European Union. Compared to the incurred loss approach of IAS 39, the IFRS 9 ECL model incorporates earlier and larger impairment allowances and is more closely aligned with regulatory expected loss. The earlier recognition of credit losses will reduce the build-up of loss overhangs and the overstatement of regulatory capital. In addition, extended disclosure requirements are likely to contribute to more effective market discipline. Through these channels IFRS 9 might enhance financial stability. However, due to the reliance on point-in-time estimates of the main input parameters (probability of default and loss given default) IFRS 9 ECLs will increase the volatility of regulatory capital for some banks. Furthermore, the ECL model provides significant room for managerial discretion. Bank supervisors might play an important role in the implementation of IFRS 9, but too much supervisory intervention bears the risk of introducing a prudential bias into loan loss accounting that compromises the integrity of financial reporting. Overall, the potential benefits of the standard will crucially depend on its proper and consistent application across jurisdictions.     

Examining the Patterns of Goodwill Impairments in Europe and the US

We examine the patterns of goodwill impairments in Europe and in the US over the period from 2006 to 2015, for a sample of more than 35,000 firm-year observations. We define the timeliness of goodwill impairments as the frequency of accounting impairments conditional to indications of economic impairments. We measure indications of economic impairment with three metrics: equity market value minus equity book value less than goodwill, market-to-book smaller than one and negative earnings before interest, tax, depreciation and amortisation (EBITDA). Our research strategy leads us to draw very different conclusions than those in the recent EFRAG (2016) study. While median levels of goodwill on the books between US and European firms are relatively similar, we find several indications that US firms recognise timelier impairments, at least during 2008 and 2009, that is, the early years of the financial crisis. We further document that US impairers write down a much greater percentage of their beginning balance of goodwill than European impairers. During the financial crisis, the median level of impairment by US firms was 63% of opening goodwill in 2008 and 40% in 2009, whereas median European write-downs were only 6% and 7% of opening goodwill, respectively. Even though European firms are more likely to impair over multiple years, the cumulative impairments never come close to the level of US firms, be it in a single year or cumulative over multiple years. We also find that the frequency of accounting impairment is small compared to the number of firms presenting evidence of economic impairment: only 20–25% of firms recognise impairments depending on the measure of economic impairment. This has often been interpreted by academics as a sign of untimely write-offs. Accounting differences between US Generally Accepted Accounting Principles and International Financial Reporting Standards are unlikely to explain our results. One caveat of our analysis is that it does not allow us to draw conclusions on whether the observed differences between US and European firms are driven by differences in conditional conservatism and/or big bath accounting practices.     

Why and How Does Social Responsibility Differ Among SMEs? A Social Capital Systemic Approach

Research suggests that organizational justice (procedural, distributive, and interactional justice) has important impacts on work-related attitudes and behaviors, such as organizational citizenship behavior (OCB). In this article, we explore the extent to which individualism moderates the relationship between organizational justice and OCB (organizational obedience, participation, and loyalty) among citizens in Kyrgyzstan. We make additional contributions to the literature because we know very little about these constructs in this former Soviet Union country, Kyrgyzstan, an under-researched and under-represented region of the world. Results of our data collected from 402 managers and employees in Kyrgyzstan offer the following new discoveries. All three justice constructs are related to OCB. Individualism moderates only the distributive and interactive justice to OCB relationships. We develop an intricate theory with provocative implications: Procedural justice produces obedience. For “individualists,” interactional justice inspires loyalty and, interestingly, distributive justice “can only buy” participation, but “can’t buy” loyalty. Therefore, for individualists, interactional justice outweighs distributive justice for organizational loyalty. Based on Kyrgyz citizens’ justice, OCB, and individualism, our theory reveals novel insights regarding culture, money attitude, and intrinsic motivation and provides critical and practical implications to the field of business ethics.     

Testing Temporal Reliability and Carry-over Effect: The Role of Correlated Responses in Test-retest Reliability Studies

Test-retest studies help establish the reliability of contingent valuation (CV) responses but must confront the problem that the initial response may influence subsequent responses, and thus weaken conclusions. We develop a model that tests the influence of heterogeneous preferences and previous responses. By estimating a model of sportfishing, we show that correlation between answers to a CV question is induced by heterogeneous preferences.     

Efficiency, monotonicity and rationality in public goods economies

Summary. In economies with public goods, we identify a necessary and sufficient condition for the existence of cost monotonic, Pareto optimal and individually rational mechanisms. These exist if and only if the preferences of the agents satisfy what we call the equal ordering property. We also show that when this condition holds the egalitarian equivalent correspondence is the only cost monotonic selection from the core of the economy. Furthermore, it is unambiguous in the sense that the agents are indifferent among all the allocations in it. Received: February 26, 1996; revised version: January 31, 1997     

Relating to marketing? Why relationship marketing works for not-for-profit organisations

Not-for-profit organisations often consider marketing to be inappropriate to their needs. This may well be true if marketing is thought of in its traditional and outdated ‘transactionally’ focused mode. Relationship marketing, with a focus on relationships rather than transactions, and multiple markets, has the ability to meet the unique needs of not-for-profit organisations. Copyright © 1999 Henry Stewart Publications     

The Outlook for the Euro Changeover: A Summary and General Analysis

In this paper, the procedures and problems of the changeover to the euro are reviewed. The legal elements involved are discussed as are the psychological aspects. Various practical problems and proposed solutions are described. The possibility of resistance from the consumers in certain segments of the Member State populations is also addressed. One reason for any such resistance might be that for many citizens, the change of currency appears to have little bearing on their everyday concerns.Particular attention is devoted to the scenario for the period 1 January to 1 July 2002, during which coins and notes in euros and national monetary units can be in circulation at the same time.     

Exploitation or Choice? Exploring the Relative Attractiveness of Employment in the Maquiladoras

This study investigates the relative attractiveness of production level jobs provided by multinational firms in Mexico's maquiladora industry. We take the position that workers themselves are an important and often overlooked source of information relevant to the controversy focusing on the responsibilities of multinational companies to their employees in the developing world. We conducted interviews with 59 maquila production level workers in the Mexican cities of Cd. Juárez and Chihuahua. Using a relative attractiveness framework that compared maquila jobs to other employment available in the local economy, maquila line and technical workers responded to questions addressing why they were working at a maquila, their work history, the attractiveness of maquila jobs compared to both their prior jobs and the jobs held by friends and family, and whether they planned to continue working in the maquilas. While the responses from maquila workers are diverse, they suggest that maquila jobs provide attractive employment for the economically disadvantaged in Northern Mexico.