A CONCEPTUAL APPROACH TO THE PROBLEM OF INCORPORATING THE PHENOMENON OF DEBT INTER DEPENDENCIES UPON LIQUIDATION

Where there exists a set of companies with debt interdependencies, the ability of one of the companies to repay its debts partly depends, either directly or indirectly, upon the ability of the other companies in the set to repay their debts. Theoretically, if the debt owing to a company is to be valued accurately [i.e. in terms of its realizable value] the valuation should take into account the financial consequences of the corporate debt interdependencies. The purpose of the paper is to explain and illustrate two methods which could be used to overcome this problem. One of the methods involving matrix algebra, although its use results in an equitable solution to the problem, (i) is found to be inefficient where the number of companies having cross debts is large and (ii) has only partial applicability. The second method employing linear programming techniques provides a solution that (i) is efficient and (ii) has general applicability to the problem of recognizing debt interdependencies upon liquidation.     

Objectives and impact of economic activity zones — Some evidence from Asia

Zusammenfassung Funktion und Auswirkung von Zonen freier wirtschaftlicher Aktivit?ten — Erfahrungen in einigen asiatischen L?ndern. — Zonen freier wirtschaftlicher Aktivit?ten in der Form von Exportveredelungszonen gewinnen in Entwicklungsl?ndern als eine “second best” Industrialisierungsma\nahme zunehmend an Bedeutung. Wurde ihre Effektivit?t bislang h?ufig angezweifelt, so wird in diesem Aufsatz gezeigt, da\ die über reine Besch?ftigungs- und Einkommenseffekte hinausgehenden Auswirkungen vom Entwicklungsniveau und von der ?konomischen Umwelt abh?ngen. Trotz der r?umlichen Trennung vom Binnenmarkt entwickeln sich “linkages”, vor allem in den F?llen, in denen Grundbedingungen beachtet werden. Die Faktorintensit?t der Produktion in den Zonen entspricht weitgehend der Faktorausstattung des Gastlandes — Ausnahmen lassen sich meistens auf wirtschaftspolitische Investitionsanreize zurückführen. Bei der insgesamt positiven Interpretation werden allerdings zwei Einschr?nkungen gemacht. Zum einen haben exogene Faktoren im Welthandel den Ausbau solcher Zonen begünstigt. Zum anderen besteht die latente Gefahr, da\ eine solche Zone lediglich als Freihandelsalibi fungiert, w?hrend protektionistische Ma\nahmen im Binnenmarkt noch beibehalten oder gar verst?rkt werden.

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Résumé Les buts et les effects des zones d’activité économique — quelque évidence de l’Asie. — Les zones d’activité économique en forme des zones manufacturières d’exportation sont de plus en plus favorisées par des PVD comme seconde mesure d’industrialisation. Tandis qu’on a souvent douté de leur efficacité, cette étude démontre que leur succès d’excéder la génération de l’emploi et du revenu direct dépend du niveau de développement et des environs économiques. Maigre de la séparation du pays récepteur l’interpénétration se développe et la technologie est transférée au pays récepteur, si quelques conditions sont réalisées. L’intensité du facteur de la production dans la zone correspond à la dotation des facteurs présumée excepté en cas où elle était déformée par les incitations d’investissement. Il faut tempérer l’interprétation en considérant que les paramètres changeants du commerce mondial ont contribué que les zones pouvaient jouer leur r?le et qu’elles ne remplacent que temporaire un commerce plus libre et qu’elles ne sont pas un alibi pour maintenir la protection.

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Resumen Objetivos e Impacto de las Zonas de Actividad Económica: Evidencia en Asia. — Zonas de actividad económica donde manufacturas se procesan con fines de exportación están aumentando en la estima de países en desarrollo como la segunda mejor alternativa para industrializarse. Mientras que su efectividad ha sido a menudo puesta en entredicho, el artículo muestra como el nivel de desarrollo y el entorno económico determinan si el éxito de tal alternativa puede ir mas alla de generar empleo y renta de forma directa. Conexiones se desarrollan y tecnología es transferida al país en cuestión, a pesar de su delimitatión, siempre que se asuma que determinados requisitos se cumplen. La intensidad de los factores productivos en las zonas concuerda en el estudio con las supuestas dotaciones de factores productivos excepto en los casos donde se encuentran distorsionadas a causa de incentivos a la inversión. La interpretación de la evidencia debe considerar que el cambio en los parámetros del comercio internacional ayudó a las zonas a desempe?ar su cometido y que el establecimiento de zonas debe ser tan solo una sustitución temporal del comercio libre y no una coartada para perpetuar el proteccionismo.

     

A reexamination of the consumption function using frequency domain regressions

This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. In contrast to some time domain tests, our frequency domain approach provides an explicit and natural test ofboth the permanentand transitory implications of the PIH for jointly nonstationary consumption and income data. Using a simple theoretical model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIHalso implies that the theoretical MPC out of transitory (or high frequency) income is smaller than the long-run MPC. These theoretical restrictions are natural implications of Friedman's hypothesis that agents consume out of permanent or low frequency income and (dis)save out of transitory or high frequency income. We test this full set of restrictions directly using spectral regression techniques. Under our set of assumptions, the derived disposable income process is shown to have a unit root and to be cointegrated with consumption. We therefore employ a systems spectral regression procedure that accommodates stochastic trends in the consumption and income series as well as the joint dependence in these series. In view of the relatively recent development of these systems spectral estimators, we also conduct Monte Carlo simulations across both low and high frequencies to assess properties of the estimator relative to established single equation techniques. New empirical estimates of the consumption function and tests of the PIH based on systems spectral regression methods are reported for U.S. aggregate consumption and income data over the period 1948–1993. The empirical results provide some evidence for the theoretical implications of the PIH.     

Cooperative Goals,Leader People and Productivity Values: Their Contribution to Top Management Teams in China*

abstract This study proposes that when top management team members are convinced that their leader is committed to people and productivity, they conclude that their leader is effective and contribute to making their organization innovative. Cooperative goals among top management team members may be credible evidence that their leader has people and production values. Executives from over 100 organizations in China completed measures of their cooperative, competitive, and independent goals, their leader's people and production values, and their leader's effectiveness. CEOs from these firms rated their organization's innovativeness. Structural equation analysis suggested that cooperative goals among top management teams convince them that their leader values people and production and that these values in turn result in leader effectiveness and organizational innovation. Results, coupled with previous research, were interpreted as suggesting that cooperative goals and leader people and production values are foundations for leader and top management team effectiveness in China.     

The influence of business strategy on annual report readability

Concerns about the complexity of firm disclosures have prompted regulators to initiate projects to improve the readability of annual reports. We investigate business strategy as a determinant of annual report readability. As business strategy fundamentally determines a firm’s product and market domain, technology, and organizational structure, it influences a firm’s operating complexity, environmental uncertainty and information asymmetry. Consequently, business strategy frames the level, wording, and complexity of disclosures. We capture a firm’s business strategy based on the Miles and Snow (1978) strategic typology and measure 10-K readability with Li’s (2008) Fog index. We find that firms pursuing an innovation-oriented prospector strategy have less readable 10-Ks relative to firms pursuing an efficiency-oriented defender strategy. We also find that prospectors display more negative and uncertainty tones while defenders exhibit more litigious tone in their 10-Ks. Our study provides useful insights to policy makers as it suggests that efforts to improve annual report readability may be limited for some firms given that business strategy is a fundamental determinant of readability and pronouncements accommodating different strategic orientations are not feasible.     

Beck’s creative challenge to class analysis: from the rejection of class to the discovery of risk-class

Abstract

Beck’s rejection of the relevance of class in Risk Society has had an immense impact on both the fields of class analysis and the sociology of risk. In outlining a novel theory of the systemic importance of risks as side-effects and in making bold claims about how the production and distribution of risks are undermining class inequalities, Beck posed a highly influential challenge to both risk and class studies. Beck’s impact on class analysis however has not been mainly due to widespread acceptance of his original claims about risk and class; rather, it has been research building upon Beck’s work so as to critically depart from his conclusions through which Beck has made his contributions to the study of class. In seeking to identify the impact of Beck’s work on the study of risk and class, this paper, firstly, outlines Beck’s challenge to class analysis. It then proceeds to identify three key areas of research whose development was motivated by their critical engagement with Beck’s work: the literature on risk and the continuity of class; the critical theory of the individualization of class inequality; and the political economy of risk-class. This paper then concludes by critically evaluating Beck’s more recent, partial acknowledgement of risk inequalities by arguing that there are significant limitations in his account of class, but that his work continues to offer a valuable opportunity to inspire future work on class and inequality.     

Can digital innovations help reduce suffering? A crowd-based digital innovation framework of compassion venturing

The Coronavirus disease (COVID-19) pandemic has been a devastating crisis affecting the physical, social, and financial well-being of people the world over. Unlike business-as-usual, crises create unique context conditions in which to study digital innovation. Crises can create widespread suffering. Crises can also trigger the creation of “compassionate ventures” started by emergent entrepreneurs, who, by being themselves victims of adversity, are driven to start ventures to alleviate people's suffering. In this essay, we appropriate the literature from management and entrepreneurship on compassionate venturing to suggest a framework for helping to clarify distinctions in the ways in which digital innovation may emerge during crises.     

The information content in implied idiosyncratic volatility and the cross‐section of stock returns: Evidence from the option markets

Current literature is inconclusive as to whether idiosyncratic risk influences future stock returns and the direction of the impact. Earlier studies are based on historical realized volatility. Implied volatilities from option prices represent the market's assessment of future risk and are likely a superior measure to historical realized volatility. Implied idiosyncratic volatilities on firms with traded options are used to examine the relationship between idiosyncratic volatility and future returns. A strong positive link was found between implied idiosyncratic risk and future returns. After considering the impact of implied idiosyncratic volatility, historical realized idiosyncratic volatility is unimportant. This performance is strongly tied to small size and high book‐to‐market equity firms. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28: 1013–1039, 2008     

The dominant senior manager and the reasonably careful, skilful, and cautious auditor

This paper examines a paradox in corporate audit history that threatens the credibility of the current audit as a means of protecting stakeholders from corrupt senior managers. Using a historical analysis of legal cases of fraudulent reporting and subsequent public accountancy responses, the study reveals the paradox of a corporate auditor denying or limiting responsibility to detect material accounting misstatement (MAM) facilitated by dominant senior managers (DSM), while relying on the honesty of senior managers. The primary finding of the legal case analysis is the persistent presence of a DSM or team of DSM in the context of various contributing features, and the creation by Victorian lawyers of a model of excuses for the corporate auditor. The primary finding from the responses of public accountants is, within the context of the model of excuses and the assumption of managerial honesty, continuous denial, or limitation of auditor responsibility for detecting MAM facilitated by DSM. The consequence of this history is that DSM intent on MAM currently face corporate auditors generally untrained to assess the audit risk of managerial domination facilitating MAM. The paper's single recommendation is that corporate auditors be educated and trained to assess the audit risk associated with DSM facilitating MAM. The paper's contribution to corporate auditing is its use of historical analysis to bring together previously known but relatively disparate matters into a coherent whole that signals a fatal flaw in existing practice.