Revealing Corporate Financial Misreporting

This study examines how frequently firms restate when they materially misstate their financial statements using stock option backdating as the setting. Stock option backdating provides a unique opportunity to study this issue because it is possible to estimate misstatements with publicly available information to a high level of confidence, and the extensive media coverage of backdating notified boards of directors of the significant risk of misstatement. After identifying firms that materially misstated earnings due to stock option backdating with 95 percent (99 percent) probability, we find that only 11.5 percent (16.1 percent) of these firms subsequently restated. Restating firms are larger, have greater board independence, higher litigation risk and ROA, a lower market‐to‐book ratio, less discretionary accruals, and are more likely to have a CFO that was not involved in backdating. Restating firms are also more likely to disclose other adverse news, face securities litigation, and turn over the CFO than firms that appear to materially backdate but do not restate. Since nearly 9 of 10 firms failed to restate, our results give pause to researchers who use restatements as an indicator of misreporting, and to regulators who levy penalties on those who do self‐report.     

The block metric and the law of markets

The “Law of Markets” as originally stated by Fetter and amended by Hyson and Hyson is based on the assumption that the transportation of goods is along a line segment from firm to customer. In many situations the assumption that transportation is along a block-like network of roads is a better approximation of reality. In this paper we establish the “law of markets” appropriate to the block metric. We discover that with such a metric there exist significant discontinuities in a firm's demand functions and we argue that these discontinuities have important implications for the types of competitive strategies open to firms.     

What it takes to implement and maintain successful supplier-managed inventory programs

Besieged by global competition and rapid technology changes, manufacturers subsequently have increased pressures on their suppliers to deliver product in less than traditional lead-times. In order to accomplish this goal, the proper selection of suppliers and inventory management programs is paramount. This article will focus on the selection of suppliers, what it takes to make the programs successful, and the most popular types of supplier-managed inventory programs in today's high-technology marketplace.     

The business risk audit – A longitudinal case study of an audit engagement

This study examines the impact of the Business Risk Audit (BRA), a development in audit methodology implemented in the late 1990s, on actual audit practice and on practitioners. Evidence is presented through a longitudinal case study developed from a set of actual audit files over a five year period spanning the implementation of the BRA, together with interviews with audit team members. The study contributes to our understanding of the nature of the audit techniques underlying the BRA and the difficulties experienced in implementing them within the existing organizational structures. In addition, the study illuminates the potentially conflicting roles of audit methodology in its organizational context, both in mediating the complex relationship between the administrators and practitioners in the large accounting firms and as the knowledge management structure used to support delivery of the “audit product”.     

The market viability of European mass tourist destinations. A post-stagnation life-cycle analysis

First generation European mass tourist resorts, defined as those that developed in the north of the continent up to and including the first half of this century, have shown a variety of responses to impending decline within the post-stagnation phase of their life-cycle, much as predicted in the tourist area life-cycle (TALC) model. There have been winners and losers, as some destinations have diversified their local economies and others have accepted gradual contraction, whereas a select few have maintained a competitive edge through product investment and reorientation to new markets. For the second generation of European mass tourist resorts, those high density tourist areas that emerged in the Mediterranean in the 1960s, the evolutionary life-cycle has, to date, been of a much shorter duration. The period from exploration to stagnation has lasted a mere 30 years, sometimes less. The nature of these resorts, whereby rapid development has created a tourism monoculture, means that the onset of decline has far more dramatic implications to local economies when compared with first generation resorts. Unfortunately, although strategic planning initiatives are now (belatedly) being practised, it is likely that rejuvenation will only be short-lived due in most cases to the inherent structural weaknesses of these resorts. Their legacy is one of overdevelopment and environmental scarring, they rely too heavily on price as a marketing tool in an increasingly quality conscious market, and the powers of promotion and distribution remain largely in the hands of northern European mass consolidators (tour operators), with little commerical incentive for customer loyalty. This paper thus predicts a pessimistic post-stagnation scenario for most second generation Mediterranean mass market resorts. Copyright © 1999 John Wiley & Sons, Ltd.     

Trade Costs and Changes in Canada's Trade Pattern

This paper measures the size and composition of non‐tariff trade costs such as transport, wholesale, and network costs incurred in Canada's merchandise trade using Statistics Canada's latest ‘trade margins’ statistics. It examines how changes in these trade costs have influenced Canada's merchandise trade pattern and the course of economic integration. Our results show that as tariffs have been substantially reduced and largely abolished, costs associated with transport and distribution services now appear much larger than remaining customs duties; therefore, liberalisation in services might be the next key step in promoting greater merchandise trade. Further, reducing transport and other trade‐related costs has helped ‘reverse’ the ‘home market effect’, expanding Canada's domestic demand and production for exports of differentiated products.