Numerical methods for Lévy processes

We survey the use and limitations of some numerical methods for pricing derivative contracts in multidimensional geometric Lévy models.      

Does audit report information improve financial distress prediction over Altman's traditional Z‐Score model?

We analyze empirically the usefulness of combining accounting and auditing data in order to predict corporate financial distress. Concretely, we examine whether audit report information incrementally predicts distress over a traditional accounting model: the Altman's Z‐Score model. Although the audit report seems to play a critical part in financial distress prediction because auditors should warn investors about any default risks, this is the first study that uses audit report disclosures for predicting purposes. From a dataset of 1,821 Spanish distressed private firms, we analyze a sample of distressed and non‐distressed firms and develop logit prediction models. Our results show that while the only accounting model registers a classification accuracy of 77%, combined models of accounting and auditing data exhibit considerably higher accuracy (about 87%). Specifically, our findings indicate that the number of disclosures included in the audit report, as well as disclosures related to a firm's going concern status, firms’ assets, and firms’ recognition of revenues and expenses contribute the most to the prediction. Our empirical evidence has implications for financial distress practice. For managers, our study highlights the importance of audit report disclosures for anticipating a financial distress situation. For regulators and auditors, our study underscores the importance of recent changes in regulation worldwide intended to increase auditor's transparency through a more informative audit report.     

Consumer perceptions of compatibility in cause-related marketing messages

• Consumers respond more positively to marketing efforts, like celebrity endorsements and sponsorships, when the image of the sponsoring company or brand is compatible with the celebrity or sponsored event.
• The authors explore the concept of compatibility within a cause-related marketing context. The results of an experiment confirm the role of sponsor/cause compatibility for the creation of positive consumer perceptions of the donor, and highlight the importance of individual characteristics that affect perceptions of the cause and its compatibility with a donor. Theoretical and strategic implications and future research directions are discussed.

Copyright © 2006 John Wiley & Sons, Ltd.