The Information Content of Bank Examinations

We identify three types of information from bank examinations—auditing information from verifying the honesty and accuracy of the bank's books, regulatory discipline information about the treatment of the bank by regulators, and private information about bank condition. We estimate these information effects by comparing the cumulative abnormal market returns associated with examinations in which the CAMEL rating remained unchanged, improved, and worsened. All three information effects are found to be greater for banks entering the examination process with unsatisfactory ratings from prior examinations. The only consistently strong effect found is that examination downgrades appear to reveal unfavorable private information about bank condition. The evidence also suggests that the information may reach the market in part through loan quality data released in quarterly financial statements.     

Are Academics Committed to Accounting Ethics Education?

This paper reviews the current commitment of accounting academics to teaching accounting ethics. In the course of the review it assesses the recent initiative of the American Accounting Association; namely, Ethics in the Accounting Curriculum: Cases and Readings, 1994. This collection of cases has not been widely adopted despite an identified lack of case materials available to those teaching accounting ethics. The question becomes whether the lack of adoption suggests that accounting academics are not particularly interested in incorporating ethical issues in the classroom or whether there are difficulties with the quality of the collection. The paper continues by examining the current state of research in accounting ethics and again asks what this tells us about commitment to teaching accounting ethics. While the conclusions of this examination are far from definitive, there are signs that all is not well with the accounting ethics discipline.     

Rethinking a National Innovation System: The Small Country as 'SME'

Most debates and discussions regarding trends towards globalization and localization, occur in the over-arching context of the knowledge economy, and focus on the impact of these trends on innovation and competitiveness in the 'Triad' of Europe, Japan and the USA. However, in the knowledge economy, competitiveness is increasingly based upon access to knowledge, in the form of skills and capabilities, wherever it is located in the world including the smaller industrialized countries. This paper extends the discussion of the impacts of globalization and localization to encompass other nations and their 'national innovation systems'. Policy underpinning national systems to encourage innovation is increasingly being called into question by the general move towards globalization and localization. Multi-national enterprises (MNEs) and localized clusters in the emerging technologies determine and control technological paths beyond and through national borders. Small industrialized nations which have neither a broad technological base, extensive science and technology infrastructure or resources, nor MNEs based in the country, run the risk of being marginalized when competing globally, through an inability to become involved in these international economic networks. A traditional policy response by small countries to the impact of globalization is to metaphorically 'batten down the hatches' against the invasion of MNEs and the exploitation of local resources. However, an exploration of the drivers of both globalization and localization in the knowledge economy, and the observed impacts of globalization on New Zealand, suggests that a suitable strategy for small nations might be the reverse scenario. By using the analogy of the small country as a small and medium sized enterprise (SME) in the global economy dominated by large nations and MNEs, SME advantages and disadvantages are mapped onto potential small country advantages and disadvantages. The simile is extended to propose a small-country strategy based on exploiting the documented advantages of SMEs, such as flexibility and use of external networks, for an outward-looking, supplier-orientated innovation policy. Such a policy has to be designed for rapid communication and flexibility, and has to encourage committed technological accumulation and networking, to maximize national absorptive and transformative capacities.     

Research collaboration and behavioural additionality: A New Zealand case study

Generating the greatest benefit from public research programmes is a major aim for industry managers and policy administrators alike. However, how to measure whether benefit has occurred createsf a considerable dilemma for managers and policy-makers. One approach centres upon the concept of 'additionality' or 'what difference the policy has made'. Traditional 'input additionality' measures of subsequent research and development activity, for example, neither incorporate all impacts nor give adequate signals about adequate signals about aspects of 'output additionality', such as the impact on increased competitiveness at the level of the firm, or national competitiveness, the ultimate goal for the majority of research policies. An intermediate form of impact, 'behavioural additionality', centred upon changes in a firm's subsequent managerial behaviour, is considered to provide an alternative, yet compelling perspective on the impact of public support on the conduct of research. This study outlines empirical eveidence found for the various forms of additionality in a New Zealand collaborative research programme. It discusses how managers and policy administrators can exploit the occrrence of behavioural additionality to maximize the impact of a research policy, on the basis that modified behaviour is likely to strengthen a policy' latent abilityto influence the creation of output additionality. In such circumstances, the study suggests that managers and policy-makers should be identifying those interventions that lead to sustained improvements in mangerial practice, and in competitiveness, and should be managing their diffusion within firms and throughout industries.     

Increasing Corporate Social Responsibility Through an Employee-centered Approach

As the Corporate Social Responsibility (CSR) literature has developed, it appears that a dominant paradigm has emerged. Both scholars who study CSR and those who write about its organizational application have largely converged on CSR as an organizational strategy issue. Viewing CSR as a matter of top-level strategy unwittingly links it to a particular conceptualization of organizational change—a top-down perspective. We suggest that the dominance of this traditional view of organizational change is limiting the study of CSR. Thus, we seek to increase awareness of an alternative model, one that complements the strategic view. Specifically, we describe a model of CSR organizational change that suggests two things. First we assert that significant change can be initiated at lower organizational levels as well as from the top. And second, we suggest that the change can be accomplished in small steps and involve only a portion of the organization, as opposed to an overarching organizational strategy. We present our employee-centered approach to CSR change as an addition to the traditional top-down view.     

Unpacking the interplay between organisational factors and the economic environment in the creation of consumer vulnerability

ABSTRACT

Access to credit is a key enabler of modern life. Yet many consumers face factors beyond their control which sometimes render them unable to borrow from mainstream lenders. This paper documents how firm-related factors determine lending thresholds and shape who is, or is not, a creditworthy customer. The impact of the 2008 economic recession on lending decisions is explored, an aspect that has been insufficiently discussed even though recessions are cyclical events. Drawing on semiotics and using multiple case studies, the study captures not only the groups that were excluded but also the reasons for exclusion. Empirical support is offered for the notion of vulnerability as a fluid state and the role of the timing of decisions as a source of vulnerability is described.     

Some unresolved ethical issues in auditing

Independence is a fundamental concept to the audit. There is a clear relationship between independence and conflict of interest in all professions. This paper examines this relationship in the auditing profession and in the context of three specific practices. The paper analyses these practices by using the Davis model of conflict of interest. The results of this analysis give rise to some interesting questions for the ethical practices of the auditing profession.Sally Gunz teaches business law at the School of Accountancy, University of Waterloo, Waterloo Ontario. She is a former legal practitioner whose research interests include ethical and legal issues of concern to auditors and studies of the corporate counsel profession.John McCutcheon teaches accounting at the School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario. His research interests include analyses of alternate approaches to the liability of auditors for negligence and various issues in management accounting.