Disclosure Strategies and Cost of Capital

Theoretically, companies disclosing more voluntary information will benefit from a lower cost of capital, although empirical research provides inconclusive results. Our study aims to analyze the influence of the disclosure of forward‐looking information on the cost of capital, because this information is extremely useful for investors. Results show that only specific information on actions, programs, decisions, and/or quantitative financial information helps toward the reduction of cost of capital. This evidence has direct economic implications, because it enables regulators and managers to focus on those disclosure strategies that are effective in the reduction of cost of capital. Copyright © 2012 John Wiley & Sons, Ltd.     

Ranking participants in tournaments by means of rating functions

In this paper we bring a novel approach to the theory of tournament rankings. We combine two different theories that are widely used to establish rankings of populations after a given tournament. First, we use the statistical approach of paired comparison analysis to define the performance of a player in a natural way. Then, we determine a ranking (and rating) of the players in the given tournament. Finally, we show, among other properties, that the new ranking method is the unique one satisfying a natural consistency requirement.     

The Quasi-split Effect, Active Insiders and the Italian Market Reaction to Equity Rights Issues

The positive market reaction at the announcement of most European rights issues can be explained by two major factors which distinguish them from a US public offering: active insiders, and a quasi-split effect which signals a large increase in the dividend yield. An analysis of 428 Italian rights offerings and an event study involving 82 observations in the 1980–94 period show that Italian insiders are completely 'active', and almost 85 % of the equity rights issues result in a dividend yield increase, which corresponds to the quasi-split effect in approximately 40 % of the issues. The dividend yield rises, on average, by a significant +61 % after a combined rights offering and by a significantly lower +20 % following a fully-paid rights issue. The market reaction to the announcement is significantly positive for combined rights offerings (+ 2.77 %) and positive, but not significant, for the whole sample (+ 0.79 %). The dividend increase signalled by the quasi-split effect explains almost 30 % of the abnormal returns' cross-sectional variation and it is the only significant explanatory variable.     

ELECTIONS AND EXCHANGE RATE POLICY CYCLES

This paper presents a theoretical model based on the distributive effects of real exchange rate (RER) changes that generates RER electoral cycles of the type identified in Latin American countries: more appreciated RER before elections and more depreciated after elections. Typically, a RER depreciation favors exporters and import-competing domestic industries, to the detriment of consumers. These RER cycles are generated by imperfect information on policy-makers' preferences, which are concealed from voters with the help of an unstable macroeconomic environment. Exchange rate cycles result from the interplay between the electoral power of the non-tradable sector and the tradable sector's ability to lobby the government.     

Inefficiency in the Spanish Cooperative Banking Sector

This paper researches X-inefficiency and scale economies in Spanish cooperative banking between 1988 and 1996, using the stochastic cost frontier methodology. The Translog cost function, with three outputs and three inputs, is used to measure X-inefficiencies across time and size. During this period of time there is no important reduction in inefficiency levels, so deregulation and internationalization has little effect on the Spanish cooperative banking market. We can see that large cooperative banks are less inefficient than small ones, indicating that it would be convenient to increase the size of these kinds of banks in order to reduce inefficiencies in this sector. We also find scale economies during this period.     

Resale and bundling in auctions

The possibility of resale increases bidders' incentives to jointly reduce demand in multi-object auctions, because resale increases low-value bidders' willingness to pay and reduces high-value bidders' willingness to pay. Therefore, resale may reduce the seller's revenue. In a simple model with complete information, however, allowing resale and bundling the objects on sale are “complement strategies” for the seller (under reasonable conditions)—by bundling and allowing resale the seller earns a higher revenue than by selling the objects separately and/or forbidding resale. We also show why allowing resale may reduce efficiency.     

On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system

The widespread acceptance of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) makes it timely to examine their technical determinants as well as their implications for the accounting profession and the process of accounting harmonization. In this respect, we suggest that the principles-based approach to the standards and its inner flexibility enables the application of IAS/IFRS to countries with diverse accounting traditions and varying institutional conditions. Furthermore, the principles-based approach involves major changes in the expertise held by accountants and, hence, in their educational background, training programs, and in the organizational and business models of accounting firms. Finally, we submit that the standards set by the IAS/IFRS constitute a step forward in the process of accounting harmonization, although there is still far to go in the comparability of accounting measures across countries and regions.     

Family succession and firm performance: Evidence from Italian family firms

This article contributes to the growing empirical literature on family firms by studying the impact of the founder–chief executive officer (CEO) succession in a sample of Italian firms. We contrast firms that continue to be managed within the family by the heirs to the founders with firms in which the management is passed on to outsiders. Family successions, that is, successions by the founder's heirs, are further analyzed by assessing the impact of the sectoral intensity of competition on the post-succession performance. This analysis also addresses the endogeneity in the timing of the CEO succession by controlling for a pure mean-reversion effect in the firm's performance. We find that the maintenance of management within the family has a negative impact on the firm's performance, and this effect is largely borne by the good performers, especially in the more competitive sectors. These results indicate that there is no inherent superiority of the family-firm structure and emphasize the importance of conducting an analysis of governance in a variety of institutional settings.     

Employer preferences,collective agreements and the Australian resources sector: a paradox of limited commodification?

There is a commonly held view that firms in high‐wage/skill‐intensive sectors will tend to provide wages and working conditions that are above market‐clearing levels. This article empirically examines this claim by analysing the content of all collective agreements concluded in the resource sector in Australia after the enactment in 2006 of the Workplace Relations Amendment (Workchoices) Act. This legislation gave employers unprecedented ability to place downwards pressure on employee entitlements. In the resource sector, however, the quantitative results indicate that firms maintained, in the main, substantive standards but used extensively key regulatory provisions to gain an unprecedented level of control over both functional and numerical flexibility.     

Does a Hospital’s Profit Status Affect its Operational Scope?

We empirically evaluate whether a hospital’s organizational form (for-profit vs. not-for-profit or public) affects its operational scope (distribution of supplied medical procedures). Our results suggest that scope depends more on local demographics than causal forces from organizational form. This suggestion is consistent with differences in objectives (e.g., altruistic motives) ultimately exerting a stronger influence on operational scope than does the organizational advantage of not-for-profits in producing higher levels of non-contractible quality. It also offers information about how the availability of different medical services might change if the hospital sector continues its trend toward for-profit organization. Here, hospital conversions to for-profit status appear less likely to alter the mix of available services than do outright exits of not-for-profits.