The Effects of Disclosure and Analyst Regulations on the Relevance of Analyst Characteristics for Explaining Analyst Forecast Accuracy

We posit and find an effect of disclosure and analyst reporting regulations implemented from 2000 through 2003 (including Regulation Fair Disclosure, the Sarbanes‐Oxley Act and the Global Settlement Act) on the importance of analyst and forecast characteristics for analyst forecast accuracy. Following the enactment of these regulations, more experienced analysts and All‐Star analysts do not maintain their superior forecast accuracy, and analysts employed by large brokerage houses perform worse than other analysts. In addition, we find a decrease in the importance of analyst effort, the number of industries and firms followed, days elapsed since the last forecast, and forecast horizon. While the importance of bold upward forecast revisions does not change, bold downward revisions lose their relevance for forecast accuracy after 2003. Finally, we find an increase in the importance of prior forecast accuracy. We find that the importance of these characteristics varies with the precision of publicly available information. Specifically, the decrease in the importance of most analyst and forecast characteristics and the increase in the importance of prior forecast accuracy are greater when the precision of publicly available information is low. Overall, our results suggest that the positive effects of experience, effort, brokerage house size and All‐Star status on forecast accuracy in the pre‐regulation period were because of the information advantages that these analysts enjoyed (rather than their ability to generate private information). In contrast, our results suggest that prior forecast accuracy is related to analysts’ ability to generate private information.     

Exploring Ambiguity and Familiarity Effects in The “Earnings Game” Between Managers and Investors

Prior evidence suggests that managers and investors play an earnings game in which managers bias their earnings forecasts downward as the earnings announcement date approaches. Knowing managers’ incentives to provide biased guidance, investors still revise their expectations downward helping to create “positive earnings surprises.” Using a 2 (ambiguity) × 2 (familiarity) between subject randomized experimental design where MBA students playing the roles of manager and investor answer a series of questions related to earnings guidance, we investigate whether earnings environment ambiguity and manager-investor familiarity influence behavior during the “earnings game.” In general, results from this study suggest that ambiguity contributes to managers’ propensity to mislead and investors’ propensity to follow, and a false sense of familiarity may amplify investors’ reliance on managers’ guidance.     

A Bayesian Approach to Understanding Time Series Data

This paper explores the use of Bayesian models to analyze time series data. The Bayesian approach produces output that can be readily understood by actuaries and included in their own experience studies. We illustrate this Bayesian approach by analyzing U.S. unemployment rates, a macroeconomic time series. Understanding time series of macroeconomic variables can help actuaries in pricing and reserving their products. For example, a change in the level and/or variance of the unemployment series is of interest to actuaries, because its movement can explain a changing pattern of lapse rates of incidence rates. Our Bayesian analysis, based on models developed by McCulloch and Tsay (1993, 1994), allows for shifts in the level and in the error variance of a process. We develop a measure of model fit, based on the Akaike Information Criterion, that can be used in choosing between alternative models. Posterior prediction intervals for the fitted values are also created to pictorially show the range of paths that could result from the choice of a particular model.     

Bank Capital Ratios Across Countries: Why Do They Vary?

This paper extends the literature on bank capital structure by modeling capital structure as a function of important public policy and bank regulatory characteristics of the home country, as well as of bank specific variables, country macro-economic conditions and country level financial characteristics. The model is estimated with annual data for an unbalanced panel of the 78 largest private banks in the world headquartered in 12 industrial countries over the period between 1992 and 2005. The results indicate that bank capital ratios are significantly affected in the hypothesized directions by most of the bank-specific variables. Several of the country characteristic and policy variables are also significant with the predicted sign: banks maintain higher capital ratios in home countries in which the bank sector is relatively smaller and in countries that practice prompt corrective actions more actively, have more stringent capital requirements, and have more effective corporate governance structures.     

Capital changes at large affiliated banks

The federal bank regulators imposed numerical capital guidelines in December 1981. If these guidelines are binding, then banking organizations may respond to the costs of regulation in various ways. If the regulations are not binding, then further reliance may be placed on market discipline. This study develops two models of changes in the equity capital to assets ratio of large banks affiliated with bank holding companies—a regulatory model in which capital regulations are a binding influence and a market model in which financial markets influence capital ratios. The two models are examined empirically through a disequilibrium framework and maximum likelihood estimation techniques. The results suggest that most banks are predominantly influenced by regulatory forces. Federal Reserve Bank of Atlanta Florida State University     

Customer Relationship Management: A Comparative Analysis of Family and Nonfamily Business Practices*

It has been reported that family businesses perceive excellent customer service as critical to the future of their businesses. However, little research into the customer relationship management (CRM) practices of family businesses has been performed. In this study, we examine CRM implementation among 82 family and 370 nonfamily firms. Family and nonfamily businesses report similar attitudes toward the importance of CRM, their knowledge of CRM, and their success when they do implement it. However, using a logit regression model, we find that the actual implementation strategies of family businesses are significantly different from those of nonfamily businesses. These results remain constant when controlling for size and industry sector.     

The influence of individual characteristics,plan characteristics and work-related factors on salaried employees' attitudes towards profit sharing: a Canadian case

We examined the influence of individual and plan characteristics and work-related factors on salaried employees' attitudes towards profit sharing. Employees who were committed to their company, had a high work ethic, did not feel there should be a guaranteed minimum pay-out and who believed that there was a connection between exerting effort and their job performance as well as between their own performance and profit-sharing pay-outs had a more favourable attitude towards profit sharing in general. Employees who were committed to their company, had greater knowledge of their company's profit-sharing plan, preferred the cash bonus distribution scheme and believed there was a connection between their own performance and profit-sharing pay-outs had a more favourable attitude towards their company's profit-sharing plan. The results suggest that individual characteristics and work-related factors are as important to the successful implementation of a profit-sharing plan as the features of the plan itself.     

Business Ethics and E-learning: A contradiction in terms?

In seeking to stimulate the ethical awarenessof first year undergraduates on business andpublic sector courses, the potentialcontribution of e-learning should not beunderestimated. While ethics is traditionallyassociated with more discursive approaches,initially there is much to be gained fromproviding students with an interactiveelectronic facility which they can use at theirconvenience. If designed with due regard to thelimitations of educational technology andmodest aims, it can help students to becomemore ethically aware by familiarising them withthe language and concepts of ethical discourseand to acquire the skills needed to evaluatesituations from an ethical perspective.At Sheffield Hallam University, such afacility, based on the principles ofprogression and interactivity, is beingdeveloped within an action research framework.Involving close collaboration between tutors,those with relevant technical expertise andstudent volunteers, representing the interestsof potential users, all concerned are committedto enhancing the quality and rigour of thefirst year student learning experience.The challenges faced have included workingwithin the constraints imposed by the softwareplatform, Blackboard 5, and ensuring that thefacility is genuinely interactive rather thansimply the replication of a paper based system;is user friendly; enhances learning andencourages users to build on the foundationslaid. While face-to-face tuition must remain akey element in helping undergraduates becomemore aware of the ethical dimension of businesslife in its broadest sense, the projectdemonstrates that business ethics ande-learning are not a contradiction in terms.