Earnings management and earnings quality

Viewing the detection of earnings management from the perspective of a crime scene investigator sheds new light on prior research on earnings management and its close relative, earnings quality. The works of Ball and Shivakumar [2008. Earnings quality at initial public offerings. Journal of Accounting and Economics, in press.] and Teoh et al. [1998. Earnings management and the subsequent market performance of initial public offerings. Journal of Finance 53, 1935–1974.] are used to illustrate the application of seven components of a crime scene investigation to earnings management research.     

Perceived justice and customer loyalty in the retail banking sector in the UAE

In this study, the impacts of the three dimensions of justice (distributive, interactional, and procedural) on customers’ post-complaint behaviour (ie exit vs loyalty) of both conventional and Islamic banks in the UAE were investigated. The results showed that interactional justice (eg courtesy) and distributive justice (eg refund) play predominant roles, since they impact both positive and negative emotions and the exit-loyalty behaviour of customers regardless of the type of bank (conventional or Islamic). The results show, however, that procedural justice (eg timeliness) has no impact on either negative or positive emotions and the exit-loyalty behaviour of either conventional bank customers or Islamic bank customers. The results were interpreted in terms of cultural context and in terms of managerial implications for conventional and Islamic banks that are mostly dealing with complaint handling and employee training. The limitations of this study are also discussed at the end.     

Foreign direct investment and economic performance in transition economies: evidence from China

Based upon a production function with FDI representing updated technology from more developed, market‐based economies, this study tests the hypothesis that FDI contributes to the economic growth of less developed, transition economies via technology updating, using data for 30 Chinese provinces from 1985 to 2000. It is found that provinces with a higher FDI ratio experienced faster technology updating and more rapid economic growth. The study suggests that less developed, transition economies should encourage FDI from more developed, market‐based economies so as to accelerate technology updating and economic growth.     

Cultural Heritage Assets in China as Sustainable Tourism Products: Case Studies of the Hutongs and the Huanghua Section of the Great Wall

Due to its rich stock of heritage assets, extraordinary pace of market liberalisation, and its political administration, the People’s Republic of China is at a crossroads in terms of the management of its heritage assets. In order to better understand the threats and opportunities that market liberalisation may pose for cultural heritage assets as future tourism products, this study examines two examples in the Beijing municipality; the Hutongs and the section of the Great Wall at Huanghua. These case studies are used to investigate the coordination of policy to balance modernisation and conservation of heritage assets in Beijing, and place it against a general model of stakeholder roles that can drive the sustainable use of heritage assets. Teasing out the nature of these roles has identified where tourism development aids or detracts from existing heritage conservation policies. Without better coordination of roles in policy implementation, the sustainability of many heritage assets as future tourism products is in question.     

Using Interest Rate Derivative Prices to Estimate LIBOR-OIS Spread Dynamics and Systemic Funding Liquidity Shock Probabilities

Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks in particular US dollar funding shortages, prompting central banks around the world to adopt unprecedented policy measures to supply funds to the banks. A better understanding of the forward-looking information content about funding liquidity risk in interest rate derivative prices is therefore necessary to gauge pressures building surrounding systemic liquidity. Using the market prices of the US dollar LIBOR-overnight index swap spread, we estimate the probability of the systemic funding liquidity shock during the crisis period, which deviated from zero on 17 September 2008 to a significant level. This provided an early warning signal of the systemic liquidity shock on 29 September 2008 when the interbank market was totally paralysed.     

A computational view of market efficiency

We study market efficiency from a computational viewpoint. Borrowing from theoretical computer science, we define a market to be efficient with respect to resources S (e.g., time, memory) if no strategy using resources S can make a profit. As a first step, we consider memory-m strategies whose action at time t depends only on the m previous observations at times t???m,?…?,?t???1. We introduce and study a simple model of market evolution, where strategies impact the market by their decision to buy or sell. We show that the effect of optimal strategies using memory m can lead to ‘market conditions’ that were not present initially, such as (1) market spikes and (2) the possibility for a strategy using memory m′?>?m to make a bigger profit than was initially possible. We suggest ours as a framework to rationalize the technological arms race of quantitative trading firms.     

Causes of nonlinearities in low-order models of the real exchange rate

This paper investigates the extent to which modern DSGE models, which feature local currency pricing, home bias, nontraded goods, and incomplete markets, can generate nonlinear real exchange rate dynamics that are consistent with those found in the time series literature using data from the current floating period. Our key findings are as follows. First, if the true model can be appropriately characterized as a set of linear equations, then linearity tests that utilize univariate autoregressions of the real exchange rate suffer from an omitted variables problem, which leads them to overestimate the true incidence of nonlinearity. Consequently, studies that fail to control for this problem may spuriously find evidence of nonlinearities in the data, despite the fact that the data generating process may be linear. Second, we propose a strategy that can largely eliminate this distortion. Finally, we find that DSGE models solved using higher order approximations are capable of generating true structural nonlinearities in real exchange rates both asymptotically and in short samples.     

Sustainable leadership: power of influence in MNCS in Malaysia

Building upon social exchange theory which explains how power is gained and lost in the process of influence between an agent and the target, this article hypothesized the impact of supervisors’ and subordinates’ power bases on the usage of influence tactics by the supervisors. Bases of power of supervisors, subordinates and influence tactics were conceptualized as seven-, seven- and nine-dimensional constructs, respectively. Three hundred and eighty-five pairs of Malaysian managers and executives working in large multinational companies participated. Currently, the manufacturing sector is considered as one of the cornerstone of Malaysia’s economic diversification strategy. The findings suggested that supervisors apply various influence tactics on their subordinates.     

gLucifer: next generation visualization framework for high-performance computational geodynamics

High-performance computing provides unprecedented capabilities to produce higher resolution 4-D models in a fraction of time. Thus, the need exists for a new generation of visualization systems able to maintain parity with the enormous volume of data generated. In attempting to write this much data to disk, each computational step introduces a significant performance bottleneck, yet most existing visualization software packages inherently rely on reading data in from a dump file. Available packages make this assumption of postprocessing at quite a fundamental level and are not very well suited for plotting very large numbers of specialized particles. This necessitates the creation of a new visualization system that meets the needs of large-scale geodynamic modeling. We have developed such a system, gLucifer, using a software framework approach that allows efficient reuse of our efforts in other areas of research. gLucifer is capable of producing movies of a 4-D data set “on the fly” (simultaneously with running the parallel scientific application) without creating a performance bottleneck. By eliminating most of the human efforts involved in visualizing results through postprocessing, gLucifer reconnects the scientist to the numerical experiment as it unfolds. Data sets that were previously very difficult to even manage may be efficiently explored and interrogated without writing to disk, and because this approach is based entirely on memory distributed across as many processors as are being utilized by the scientific application, the visualization solution is scalable into terabytes of data being rendered in real time.