Analysts' Cash Flow Forecasts,Audit Effort,and Audit Opinions on Internal Control

We examine the economic impact of analysts’ cash flow forecasts by looking at how external auditors respond to financial analysts’ issuance of cash flow forecasts. Using a differences‐in‐differences approach, we find that financial analysts’ initiation of cash flow forecasts leads to reduced auditor fees and audit report lags. Moreover, after cash flow forecast initiation, firms report fewer Section 404(b) internal control weakness disclosures. These findings suggest that cash flow forecasts constrain earnings manipulation and improve management accounting behavior, thereby reducing inherent and control risk and strengthening firms’ internal control over financial reporting.     

A Non-parametric Estimation of Productivity with Idiosyncratic and Aggregate Shocks: The Role of Research and Development (R&D) and Corporate Tax

We develop a non-parametric technique framework for estimating firm-level Total Factor Productivity (TFP). Our paper has two major novelties: first, we propose a modelling of productivity with both firm-idiosyncratic factors and aggregate shocks. Second, we apply the Bayesian Markov Chain Monte Carlo (MCMC) technique that offers a numerical integration of productivity outside the posterior overcoming the restrictive assumptions about the relationship between productivity and variable production inputs. We implement our methodology in a group of 4,286 manufacturing firms from France, Germany, Italy, and the UK (2001–14). The results show that: (i) aggregate shocks matter for firm TFP evolution. The global financial crisis of 2008 caused severe, albeit short, adverse effects on TFP; (ii) there is substantial heterogeneity across countries in the way firms react to changes in R&D and taxation. German and UK firms are more sensitive to fiscal changes than R&D, while the opposite is true for Italian firms. R&D and taxation effects are symmetrical for French firms; (iii) the UK productivity handicap continues for years after the financial crisis; and (iv) there are substantial knowledge spillovers among German and Italian firms.     

Demokratische Internet-Öffentlichkeit? Ein Vergleich der öffentlichen Kommunikation im Internet und in den Printmedien am Beispiel der Humangenomforschung

The importance of the internet has increased significantly in recent years. The easy access of this »new« medium sparked many hopes for a democratization of the public sphere and of public debate: Many authors argued that the internet will make actors and interpretations of topics visible to those parts of the broader public who are usually marginalized in »old« mass media. In an empirical analysis, we compared print media coverage and internet communication to assess these claims. For the case of human genome research — i.e. a bioscientific topic that reseived extensive media attention in Germany —, we analyzed which actors were given public standing and which frames came to the fore. In contrast to the claims mentioned above, our findings indicate that the debate in the internet does not differ to a significant extent from the offline debate in print media. We could not find a more egalitarian, democratic communication in the internet.     

How do internal capabilities and external partnerships affect innovativeness?

How do a firm’s internal capabilities and external partnerships contribute to its product and process innovativeness? How do their impacts differ? Based on the theoretical framework of exploitation and exploration, we develop an integrative model linking the impact of both internal capabilities and external partnerships on product and process innovativeness. Survey responses from Taiwanese biotechnology firms indicate that research and development (R&;D), marketing, and manufacturing capabilities have different effects on product and process innovativeness. Of the four types of external partnerships, only partnerships with universities and research institutes seem to add value, whereas partnerships with suppliers, customers, and competitors do not contribute to innovativeness. Moreover, marketing capability and customer partnerships have a positive interaction effect on product innovativeness, while manufacturing capability and supplier partnerships have a positive interaction effect on process innovativeness.     

Safer Guildford

There has been an increasing trend in recent years for public agencies to work in partnership with each other and with commercial organizations, which has presented special managerial issues and problems. The Crime and Disorder Act 1998 gave the police and local authorities a statutory duty to work in partnership in order to promote and improve community safety. One such partnership is Safer Guildford, which was formed before the legislation came into force and which consequently already had a range of community safety initiatives in place. However, the partnership still had to comply with the new legislation and had to conduct an audit of crime and disorder in its area and publish a strategy for dealing with it. By examining the progress of Safer Guildford using a management perspective, a number of lessons can be drawn that will inform the future management of community safety partnerships.     

The integration of fuzzy sets and statistics: toward strict falsification in the social sciences

Whilst statistics take up a prominent place in the social science research toolkit, some old problems that have been associated there with have not been fully resolved. These problems include bias through the inclusion of irrelevant variation and the exclusion of relevant variation, which may lead to hidden and spurious correlations in more extreme—however not at all unthinkable—cases. These issues have been addressed by Ragin by building a case for the usage of fuzzy set theory in social science. In this paper, we take a complementary view, insofar as we incorporate fuzzy set theory in current statistical analyses. Apart from shedding new light on the main issues associated with (population based) statistics, this approach also offers interesting prospects for the falsification of theories—rather than single relations between variables—in the social sciences.     

Multi-product costs and standby capacity derived from queuing theory: the case of Belgian hospitals

Empirical hospital cost function studies can be divided into two categories: studies estimating traditional multi-product cost functions and studies including demand uncertainty (assuming that hospitals provide standby capacity to cope with uncertain demand and stressing that the relationship between the uncertain demand, excess capacity and costs should be investigated). Most studies include (the inverse of) the occupancy rate in a relatively basic cost function. The first contribution of this paper is to incorporate an indicator of reserve capacity into a genuine multi-product cost function. The second contribution is to propose an alternative indicator to proxy the reserve margin. The often used occupancy rate has an important shortcoming: the same occupancy rate can hide different turnaway probabilities and waiting times, obscuring the true degree of reservation quality. Since turnaway probabilities and waiting times are typical queuing theory indicators, an indicator for average waiting time (derived from queuing theory) is incorporated into a proper multi-product cost function to capture the degree of standby capacity into a proper multi-product cost function. The study uses 1997 data on Belgian general care hospitals to estimate a multi-product cost function and calculate cost elasticities, marginal costs and the degree of economies of scale. The results further show that providing standby capacity has a significant impact on total costs.     

Economic modelling of costs associated with outcomes reported for type 2 diabetes mellitus (T2DM) patients in the CANVAS and EMPA-REG cardiovascular outcomes trials

Aims: To model direct medical costs associated with reductions in cardiovascular disease (CVD) events in T2DM patients reported in the CANVAS and EMPA-REG trials, which assessed the cardiovascular safety of canagliflozin and empagliflozin, respectively.

Materials and methods: Costs were modeled from a US managed care organization (MCO) perspective for the CVD outcomes included in both trials: three-point major adverse cardiovascular event (MACE) and its components (cardiovascular-related death, nonfatal myocardial infarction, nonfatal stroke), as well as heart failure requiring hospitalization. The rate of CVD events averted (difference between study drug and placebo) was projected to the portion of an MCO T2DM population matching the respective trial’s inclusion criteria. A targeted literature search for paid amounts directly associated with each CVD event provided the unit costs, which were applied to the projected number of events averted, to calculate costs avoided per member per year (PMPY). One-way sensitivity analyses were performed on events averted, unit costs, and percentages of trial-applicable patients.

Results: Based on three-point MACE events averted, costs avoided PMPY of $6.17 (range: $1.27–$10.94) for CANVAS and $2.75 ($0.19–$4.83) for EMPA-REG were estimated. Costs avoided for individual components of MACE ranged from $0.77 to $3.84 PMPY for CANVAS and from -$0.97 (additional costs) to $1.54 for EMPA-REG. PMPY costs avoided for heart failure were $2.72 for CANVAS and $1.32 for EMPA-REG.

Limitations and conclusions: Models assumed independent, non-recurrent outcomes and were restricted to medical costs directly associated with the trial-reported events. The reductions in CVD events in T2DM patients reported for both CANVAS and EMPA-REG project to a positive cost avoidance for these events in an MCO population. The analysis did not include an assessment of the impact on total cost, as the costs associated with adverse events, drug utilization or other clinical outcomes were not examined.     

Rivaroxaban for non-valvular atrial fibrillation and venous thromboembolism in the Netherlands: a real-world data based cost-effectiveness analysis

Background: Non-vitamin K antagonist oral anticoagulants (NOACs) have been included in international guidelines as important alternatives to vitamin K antagonists (VKAs) for the treatment of venous thromboembolism (VTE) and stroke prevention in non-valvular atrial fibrillation (NVAF). Meanwhile, in the Netherlands, NOACs are widely used next to VKAs. The objective of this study is to estimate the cost-effectiveness of treatment with rivaroxaban compared to VKAs in NVAF and VTE patients in the Netherlands, using data from international prospective observational phase IV studies.

Methods: Two models were developed to represent NVAF and VTE patients, populated with patients from the XANTUS (NCT01606995) and XALIA (NCT01619007) international prospective observational studies. The 1-year cost-effectiveness of rivaroxaban use, compared to VKAs, was explored in a population consisting of NVAF and VTE patients (base case) as well as for four scenarios with sub-populations: NVAF patients only, VTE patients only, NVAF patients with unstable international normalized ratio (INR), and NVAF patients using an INR self-measuring device.

Results: In the base case, rivaroxaban saved €72,350 and gained 21 quality-adjusted life-years (QALYs) in a simulation of 2,000 patients over the use of VKAs. Ergo, rivaroxaban was dominant over VKAs. The probabilistic sensitivity analysis showed a probability of 85% for rivaroxaban being dominant and 100% at a willingness-to-pay threshold of €20,000/QALY. Rivaroxaban appeared to be dominant in all scenarios as well, except for the NVAF-patients-only scenario where the incremental cost-effectiveness ratio (ICER) was €157/QALY.

Conclusions: In patients with NVAF or VTE, rivaroxaban treatment is likely to be cost-effective and a potentially cost-saving alternative to VKA in the Netherlands.