Anxiety of dependency in international joint ventures? An empirical study of drivers and consequences of relationship insecurity

This research introduces and delineates the concept of insecurity in IJV relationships. We define relationship insecurity as a parent firm's concerns about the continuance of the alliance arrangement and its partner's future provision of need satisfaction. According to interdependence theory, exchange partners that experience high dependence inevitably experience this ‘anxiety of dependency’, and the emergence of insecurity can destabilize the working relationship from within. We develop a conceptual model of the drivers and consequences of relationship insecurity in IJVs. Our survey results from 125 IJVs indicate that focal firm dependence and partner firm dependence both negatively affect insecurity, though the former is the dominant predictor. This surprising finding implies IJV partners experience ‘anxiety of low dependency’. The results suggest insecurity not only reduces directly IJV performance, but also lowers the quality of interpartner communication, which in turn dampens performance. Implications of these results are discussed.     

Interest rate rules and price determinacy: The role of transactions services of bonds

Interest rate rules have been associated with price indeterminacy when they do not respond aggressively enough to inflation. Price indeterminacy is typically associated with indeterminacy of real bond balances, suggesting that the missing element is a meaningful role for government bonds. We assume that government bonds provide arbitrarily small transactions services and show that this can dramatically change the local and global determinacy conditions. In particular, the specification of fiscal policy affects the aggressiveness with which monetary policy must respond to inflation to deliver local determinacy—a range of passive monetary policies, even an interest rate peg, may yield determinacy.     

THE EFFECTS OF MUTUAL FUNDS ON M&A COMPENSATION

Motivated by shareholders’ interest in combating executive wealth expropriation through the merger and acqusition (M&A) process, we study how mutual funds influence firm behavior around an acquisition through votes against management proposals. We find that mutual funds reduce the chief executive officer's ability to extract rents during the M&A process by voting against management‐sponsored compensation proposals after the acquisition, thus lowering both excess compensation and increasing pay‐for‐performance sensitivity. Furthermore, mutual fund voting magnifies the impact on negatively performing firms and firms with a larger amount of the mutual fund's holdings in the firm.     

Utilising Accounting and Accountants in the Management of Water Efficiency

This paper explores how five Australian organisations utilised accounting techniques and accountants as they developed an increasing focus on water efficiency during a period of drought. In those cases where top management were responsive to developing community logics that argued for the importance of efforts to maximise water efficiency, non‐accountants found space to experiment with a diversity of decision‐useful accounting initiatives. While initially bypassed, accountants ultimately became important for their ability to link evolving initiatives to core organisational concerns. Alternatively, in those organisations where senior responsiveness to evolving community concerns about water efficiency was limited, accountants dominated from the outset, presiding over a limited range of responses that offered an appearance, but little substance, of change.     

Supply chain finance schemes in the procurement of agricultural products

Product, information, and finance flows are all interrelated within the modern supply chain; thus, it is now more than ever of paramount importance for practitioners to integrate procurement and financial decisions. This challenge is exemplified in many agricultural supply chains, where operational risks are significant and access to capital differs sharply across firms. We study three management tactics that some large food/beverage manufacturers – situated downstream in these chains – have used to meet the challenge: ordinary fixed price contracts (or soft tolling) with direct suppliers, hard tolling and contract farming where the manufacturer intervenes upstream, providing capital, and coordinating procurement decisions. We place these upstream intervention schemes in the theoretical context of supply chain finance (SCF) and model their application to a three-echelon agricultural supply chain. We perform a numerical study in order to understand how the structure of capital constraints in the chain may influence the manufacturer's choice of SCF scheme. The numerical study is based on a business case that reflects the barley–malt supply chain of Heineken N.V. Despite greater coordination opportunities, we show that upstream intervention is not necessarily preferable for the manufacturer. Nevertheless, the preferred SCF scheme can be inferred on the basis of relatively simple characterization of the capital constraints in the supply chain.     

Conservation,Discrimination, and Salvation: Investors’ Social Concerns in the Stock Market

Stocks appear to have investor clienteles based on their business practices and products. The variety in expressive benefits each individual receives from owning controversial stocks causes them to modify their portfolio to accommodate their beliefs. We examine the ownership of firms with social concerns and sin stocks (tobacco, alcohol and gambling). Women tilt their portfolios towards stocks with progressive labor policies for women and minorities. Younger investors avoid companies with poor environmental records but seek companies with progressive labor policies. Democratic voters favor stocks with progressive policies regarding women/minorities and gays/lesbians and are less likely to own sin stocks. Christian objections to homosexuality lead their members to invest less in stocks with progressive labor policies for gays and lesbians. The Christian denominations vary, though, in regard to sin stocks. Catholics are more likely while Mormons are less likely to own a sin stock relative to other investors. Socially responsible investors are clearly not all alike. Social characteristics that are important to one investor may not be important to another socially conscious investor.     

The Differential Value Relevance of S&P's Core Earnings Versus GAAP Earnings: The Role of Stock Option Expense

In 2002, Standard & Poor's (S&P) introduced Core Earnings as a proprietary, uniform earnings metric, with the goal of improving financial reporting. The distinguishing feature of Core Earnings is its consistent treatment of seven adjustments to GAAP earnings for which there is no consensus adjustment by managers and analysts. We use stock price and return data to assess whether investors perceive Core Earnings to be more value relevant than GAAP earnings. The implementation of FASB 123R changed the calculation of GAAP and Core Earnings. This change allows us to assess the role of stock option expense in the valuation of earnings numbers by partitioning the sample into pre‐ and post‐FASB 123R periods and creating consistent measures of GAAP and Core Earnings. Our price results indicate that Core Earnings is more value relevant than GAAP earnings in the pre‐period after controlling for stock option expense, and in the post‐FASB 123R periods. The price results provide empirical evidence consistent with S&P's expectation that a uniformly calculated earnings measure is a more consistent and useful indicator of current performance and future earnings.     

The consequences to analyst involvement in the IPO process: Evidence surrounding the JOBS Act

The JOBS Act allows certain analysts to be more involved in the IPO process, but does not relax restrictions on analyst compensation structure. We find that these analysts initiate coverage that is more optimistically biased, less accurate, and generates smaller stock market reactions. Investors purchasing shares following these initiations lose over 3% of their investment by the firm's subsequent earnings release. By contrast, issuers, analysts, and investment banks appear to benefit from this increased bias, as optimism is more positively associated with proxies for firm visibility and investment banking revenues when analysts are involved in the IPO process.