A Behavioral Shift in Earnings Response After Regulation FD

The Regulation Fair Disclosure of 1999 (FD) intends to promote the full and fair disclosure of price information and further prevent insider trading. As a result, the public investors are expected to be empowered with more quality and relevant information. This study examines a behavioral shift in investor reaction to quarterly earnings announcements after the passage of the FD due to the expected improvement in information asymmetry. The empirical findings suggest that investors show a behavioral shift after the FD in response to biased earnings forecasts. Investors become more active in that they place a discount on optimistic earnings forecasts during the earnings announcement period. It is less obvious that they place a premium on pessimistic forecasts. Another coherent finding is that investors attempt to correct for the announcement-period mis-adjustments during the post-announcement period.     

Evaluating spatial and temporal variation in agricultural output elasticities in Turkey

This study evaluates spatial variation in the relationship between agricultural output and input use across Turkey. The potential impact of the national agricultural policy reform introduced in 2001 on the spatial variation in agricultural output elasticities across the country was explored. By applying a spatial production function to the province‐level data in 2000 and 2007, spatial heterogeneity in the variance of provincial total factor productivity and the input factor‐output elasticities was identified across the country. Results show that the disparities in agricultural activities and geographic conditions affected return from input factors. Empirical findings from a spatial spillover model also suggest that changes in the input factor‐output elasticities varied significantly across Turkey between 2000 and 2007, after the policy reform. Results suggest that future policy reform that recognizes regional comparative advantage through understanding the geographic heterogeneity of the agricultural sector is important for enhancing Turkey's agricultural output.     

Market selection with endogenous information revelation

This paper uses the dynamic general equilibrium model developed by Mailath and Sandroni (2003) but allows information revelation to be determined endogenously. The paper establishes sufficient conditions on the exogenous information arrival process that ensure that an investor who receives unique information infinitely often drives out an investor who receives unique information only finitely often.     

Guanxi and organizational dynamics: organizational networking in Chinese firms

This paper focuses on the utilization of guanxi, which is an important cultural and social element in China, and the impact of guanxi on firm performance. Although guanxi is embedded in every aspect of Chinese social life, companies demonstrate different needs and capacity for guanxi cultivation. Chinese firms develop guanxi as a strategic mechanism to overcome competitive and resource disadvantages by cooperating and exchanging favors with competitive forces and government authorities. We develop an integrative framework theorizing guanxi utilization according to institutional, strategic, and organizational factors, and we explore the impact of guanxi on firm performance, primarily sales growth and net profit growth. Our findings, based on a survey of 128 firms in central China, provide strong support that institutional, strategic, and organizational factors are critical determinants of guanxi with competitive forces. However, only institutional and strategic factors are significant for guanxi utilization with government authorities. In general, guanxi leads to higher firm performance, but is limited to increased sales growth, and has little impact on profit growth. Guanxi benefits market expansion and competitive positioning of firms, but does not enhance internal operations. Copyright © 2001 John Wiley & Sons, Ltd.     

The Effect of IPO Risks on Auditors’ Decisions: Auditor Designation Case

This study examines the effect of audit risks in the Korean initial public offering (IPO) market on the designated auditors’ decisions. The Korean External Audit Act requires firms to switch from incumbent to new auditors designated by the Securities and Futures Commission after the firm announces a future IPO. This study shows the effects of audit risks by examining if the quality of reported earnings and audit fees significantly differs between IPO‐eligible and IPO‐ineligible firms. Empirical tests first show that discretionary accruals are significantly lower for IPO‐ineligible firms than for IPO‐eligible firms in both the IPO designation period and the following review period. We interpret this result to mean that designated auditors evaluate the IPO‐ineligible (and eventually failed) firms’ listing possibility as low. Second, audit fees are higher for IPO‐ineligible firms in the auditor designation period. This reflects the fact that designated auditors are exposed to future audit risks associated with firms’ post‐IPO financial market troubles if IPO‐ineligible firms attempt to go public. Our study contributes to IPO‐related research by showing the effects of auditors’ risk evaluation on discretionary accruals and audit fees. This study also contributes to accounting policymaking regarding auditor independence.     

A tool for evaluating advertising concepts: Desirable characteristics as viewed by creative practitioners

Creativity is critical to advertising yet highly subjective. Testing to evaluate alternatives, if done, is often conducted at later stages that are expensive and wasteful. This study examined a set of characteristics about creativity from creative advertising practitioners. These characteristics were subjected to a three-part quantitative analysis that produced a model with four dimensions – novelty, utility, affect, and humor. Further testing showed that the model was useful in predicting the level of creativity in print advertisements, and the tool may be useful for the early evaluation of concepts.     

Panel data models with multiple time-varying individual effects

This paper considers a panel data model with time-varying individual effects. The data are assumed to contain a large number of cross-sectional units repeatedly observed over a fixed number of time periods. The model has a feature of the fixed-effects model in that the effects are assumed to be correlated with the regressors. The unobservable individual effects are assumed to have a factor structure. For consistent estimation of the model, it is important to estimate the true number of individual effects. We propose a generalized methods of moments procedure by which both the number of individual effects and the regression coefficients can be consistently estimated. Some important identification issues are also discussed. Our simulation results indicate that the proposed methods produce reliable estimates.     

Thanatourism or peace tourism: perceived value at a North Korean resort from an indigenous perspective

This paper examines the underlying factors that affected perceived value among South Korean tourists who visited the North Korean Mt Kumgang resort. Results identified emotional, functional and economic values as core elements that directly affected guest satisfaction, which influenced intentions to recommend and revisit. Seen as a peace tourism site when the Sunshine Policy of rapprochement guided inter‐Korean strategy, we argue that the resort project is a heterotopia of comparison combining idealized cultural and contradictory political spaces in one place. Understanding this needs Korean ideas that lead to a thanatourism with an indigenous perspective, which is applicable to other non‐Western thanatourism‐like sites. Copyright © 2011 John Wiley & Sons, Ltd.     

New Auditors’ Decisions for Released Firms from the Mandatory Auditor Designation Rule: Evidence From South Korea

This study examines the effect of the mandatory designation rule on audit fees charged and audit hours rendered by auditors for firms released from the mandatory auditor designation rule in the Korean audit market. Under the mandatory auditor designation rule, which took effect in 1991, problematic firms are assigned new auditors by the Financial Supervisory Service. Previous studies suggest that this regulation positively affects the quality of audits by promoting auditor independence. Thus, this study hypothesises that firms that have been subjected to mandatory auditor designation improve the quality of their financial reporting, and that auditors hired after the mandatory designation period account for reduced audit risks when determining audit fees and audit hours. This study shows that audit fees and audit hours of firms released from the mandatory auditor designation rule are lower than those of other initial audit engagements. Taken together, this study's findings reinforce the notion that auditors’ perceptions of changes in audit risk yield corresponding changes in the audit fees they charge and audit hours they render.