Propping and tunneling: Empirical evidence from Japanese keiretsu

We examine the response of horizontal and vertical keiretsu to the changing economic and regulatory climate in Japan from 1987 to 2001. We find evidence of profit tunneling of more weakly affiliated keiretsu firms during strong economic times. We observe propping of weakly aligned firms during recession. Many horizontal keiretsu firms strengthened their degree of adhesion to the horizontal keiretsu in response to increasingly tightened credit conditions post-1991. The motivation behind strengthened affiliation appears primarily linked to the goal of overcoming financial constraints by accessing the internal capital market of the business group.     

Earnings Management and the Long-Run Underperformance of Firms Following Convertible Bond Offers

Abstract:  This paper examines whether the long-run underperformance of convertible bond issuers can be explained by earnings management, as reflected in discretionary current accruals around the time of the offer. Consistent with the earnings management hypothesis, we find that convertible issuers who adjust their discretionary current accruals to report higher net income in the issue year will generally experience inferior operating and stock return performance over the five-year post-issue period. Our findings indicate that there is some temporary overvaluation of convertible issuers by the stock market, but that the resultant disappointed investors will subsequently correct their valuation errors. The similarity of our results to those reported within the prior literature on initial public offers (IPOs) and seasoned equity offers (SEOs) suggests that the earnings management hypothesis is not unique to stock offers, but that it actually extends to convertible bond offers.     

Liquidity and capital structure

We examine the relation between equity market liquidity and capital structure. We find that firms with more liquid equity have lower leverage and prefer equity financing when raising capital. For example, after sorting firms into size quintiles and then into liquidity quintiles, the average debt-to-asset ratio of the most liquid quintiles is about 38% while the average for the least liquid quintiles is 55%. Similar results are observed in panel analyses with clustered errors and using instrumental variables. Our results are consistent with equity market liquidity lowering the cost of equity and, therefore, inducing a greater reliance on equity financing.     

Media image of the CEO and the impact on auditors' perception of financial reporting reliability and client risk assessments

Regulators and legislators have recently adopted new governance reforms in an attempt to encourage more normative behavior by those in charge of organizations. It should not be surprising, therefore, that the image of the CEO projected by the media has become increasingly salient to decision makers. Still, the impact of CEO image on stakeholders' perceptions and subsequent behavior has received little attention by accounting researchers. In response to this void, we examine the relationship between two important environmental cues: CEO's image as presented in the media and earnings consistency. Our interest is the degree to which these variables influence auditors' perception of the ethics of corporate management, as well as their assessments of the risk of fraudulent financial statements. We document that auditor perceptions are influenced by positive media cues as well as negative cues. These results are inconsistent with auditors exercising professional skepticism which implies no reliance on positive cues, especially “managed media cues”. These results suggest that auditors, similar to others, are not immune to positive media cues about the CEO. This study contributes to the research literature examining factors that affect the perceived reliability of financial information by considering the effect of non-financial information—CEO image.     

特步：非一般亮丽背后

在深受金融危机影响，上市公司年报普遍出现亏损、效益下降等字眼之时，在金融危机爆发时上市的特步却用亮丽的业绩令投资者颇为兴奋。     

Liquidity and firm characteristics: Evidence from mergers and acquisitions

We explore factors affecting liquidity by examining the relation between liquidity changes and changes in firm characteristics around mergers and acquisitions. We find that spreads decline as the number of analysts, number of shareholders, number of market makers, firm size, and volume increase or as volatility decreases. Increased volume and firm size, and decreased volatility, are associated with increased depth. We find no evidence diversifying and non-diversifying mergers affect liquidity differently. We note that mergers and acquisitions are associated with reductions, on average, in spreads but that the reductions are fully explained by the accompanying changes in firm characteristics.     

Income and Health Concentration in Australia

This paper measures the concentration of ill-health among income groups in Australia using health survey data from 1989–90 ( Australian Bureau of Statistics 1991 ) and 1995 ( Australian Bureau of Statistics 1997 ), which contain responses on self-assessed health status and gross personal income. The technique of direct standardisation is used to control for the influence on health status of gender and age. Comparisons of the concentration of ill-health over time and between males and females and persons living in rural and urban areas are reported. For both surveys and all groups, we find that ill-health is concentrated among lower income groups. Concentration measures of ill-health are higher (in absolute terms) for men than for women. In all categories apart from women, the concentration measures fell between 1989–90 and 1995 surveys.     

Environmental strategies in the paint and coatings industry

In general, a proactive strategy entails an anticipatory approach to problems. It is also associated with taking the initiative and doing more than is strictly needed. The nature of proactivity that businesses may display with respect to the environment is considered and also its meaning in terms of strategic behaviour and technological development. A conceptual framework is developed that differentiates between types of proactive strategies. This framework is based on a study of the paint and coatings industry in Great Britain and the Netherlands and is applicable to both countries. Even though the big international paint companies play a decisive role in the development and introduction of cleaner technologies, it is argued that the small- and medium-sized paint companies deserve special attention. Not only is proactive behaviour by the big companies important, but also proactive strategies by the small- and medium-sized companies, even if they are limited in scope, because the latter determine at national and local levels the pace and nature of the transformation that has to take place to produce a sustainable economy. This process is crucial to ecological modernization if it is intended not only to get rid of old-fashioned ways, but also to create new opportunities for economic upgrading and rejuvenation.     

The Unholy Alliance of Business and Science

This paper will build on a recent article appearing in the Harvard Business Review that blamed the alleged crisis in management education on the scientific model that has been adopted as the sole means of gaining knowledge about human behavior and organizations. The solution, they argue, is for business schools to realize that business management is not a scientific discipline but a profession, and deal with the things a professional education requires. We will expand on this article and discuss its implications by looking at the scientific model from a philosophical perspective and dealing with the issue of whether management is a profession. Our discussion of these issues has implications for our understanding of business in society and the design of the business school curriculum. Rogene A. Buchholz is the Legendre-Soule Chair in Business Ethics Emeritus in the College of Business Administration at Loyola University of New Orleans. He has published over seventy-five articles and is the author of ten books in the areas of business and public policy, business ethics, and the environment. He is on the editorial board of several journals and served as chair of the Social Issues in Management Division of the Academy of Management. Sandra B. Rosenthal is Provost Eminent Professor of Philosophy at Loyola University of New Orleans. She has published approximately 200 articles and 11 books on various dimensions of American pragmatism and its relevance for other areas of philosophy, and in both books and articles has applied pragmatism to a wide range of business ethics issues. She is a member of the editorial board of several journals, and has served as president of numerous philosophical societies.