Comparative dynamics in a productive asset oligopoly

We build a subgame perfect Nash equilibrium of a common property productive asset oligopoly and analyze separately the impact of a change in the implicit growth rate of the asset and a change in the number of firms exploiting the asset. We show that the steady state level of asset can be a decreasing function of the asset's implicit growth rate. This phenomenon arises when the initial stock of asset is below a certain threshold. In the short-run we show that firms’ exploitation rate can be a decreasing function of the implicit growth rate. We study the impact of a change in the number of firms that share access to the asset. Reducing the number of firms can result, in the long-run, in higher industry production. In the short-run, it can result in an increase of the industry's exploitation and a decrease of the level of the asset's stock.     

Corporate governance and pay-for-performance: The impact of earnings management

We ask whether the apparent impact of governance structure and incentive-based compensation on firm performance stands up when measured performance is adjusted for the effects of earnings management. Institutional ownership of shares, institutional investor representation on the board of directors, and the presence of independent outside directors on the board all reduce the use of discretionary accruals. These factors largely offset the impact of option compensation, which strongly encourages earnings management. Adjusting for the impact of earnings management substantially increases the measured importance of governance variables and dramatically decreases the impact of incentive-based compensation on corporate performance.     

Financing behaviour of R&D investment in the emerging markets: the role of alliance and financial system

This paper examines the financing behaviour of research and development (R&D) investments in emerging markets. Drawing on institutional theory and using panel data of generalized methods of moment estimation for a sample of 302 firms from 20 countries during the period 2003–2015, we find that emerging market firms tend to use internal funds for financing R&D investments. Interesting results emerged when the sample was divided as alliance and non‐alliance firms, and bank‐based and market‐based financial systems. The results show that R&D financing behaves differently for alliance and non‐alliance firms. Alliance firms use both internal and external funds for R&D investments, while non‐alliance firms do not use external funds. We also document that a country's financial system influences the choice of available sources of finance. Firms from countries that follow a bank‐based financial system tend to rely on external funds while firms from countries that follow a market‐based financial system depend more on internal funds for financing R&D investments. This study is important as it provides new evidence on financing R&D investments in emerging countries taking into account the institutional arguments of financing choices, and so should guide stakeholders about appropriate sources of R&D financing.     

The behavior of MENA oil and non-oil producing countries in international portfolio optimization

It is well documented in developed economies that portfolio investment across national borders brings benefits of increasing returns and/or reducing risk. Dividing MENA stock markets into two main groups (oil producing and non-oil producing countries), this study examines the potential role of each group in providing diversification benefits for international investors. In addition, the behavior of the long and the short-run Efficient Frontiers (EFs) constructed by each of the sub-groups and the combined MENA markets is explored. Multi-objective international portfolio models are proposed under Mean-Variance and Mean-Lower Partial Moment frameworks, and the Multiple Fitness Function Genetic Algorithm (MFFGA) is used to find the EFs of optimal portfolios. The findings indicate that the stock markets of oil producing countries can be considered as a potential avenue for international portfolio diversification for investors not only from the same countries but also from the other MENA markets. It was also found that international portfolios constructed from the combination of MENA equity markets are more stable compared to the portfolios of sub-group markets. Further, the findings indicate that the behavior of short-term EFs in the MENA region cannot be predicted by the behavior of long-term EFs.     

Modeling the factors affecting rural consumers’ purchase of organic and free-range produce: A case study of consumers’ from the Island of Arran in Scotland,UK

This paper investigates the roles of personal, product related and economic factors in predicting rural consumers’ attitudes and purchase intentions towards organic and free-range produce. A conceptual model is derived and tested via structural equation modeling on a sample of 222 rural consumers. The results show that attitude is explained by consumers’ food safety concern, ethical lifestyle and price perceptions. Attitude partially mediates the effects of ethical lifestyle and price on intention to purchase organic produce as well as the effect of ethical lifestyle on intention to purchase free-range produce. Attitude assumes a more central role in fully mediating the effect of food safety concern on intention to purchase organic produce, as well as the effect of price on intention to purchase free-range produce. Overall the conceptual model of consumer decision making performs well in both organic and free-range contexts yielding similar results.     

Unconditional conservatism under the Chinese version of IFRS

This study explores the level of unconditional conservatism (UNCC) in accounting after China’s convergence with International Financial Reporting Standards (IFRS). Using the intercept of the Basu (1997) model, an overall reduction is found in UNCC under the Chinese version of IFRS. This study is the first attempt to conduct a comprehensive theoretical comparison between old and new Chinese accounting standards (CAS) in terms of UNCC. Additionally, it is the first study on the impact of convergence with IFRS, not the full adoption of IFRS, on UNCC. Finally, the study covers a relatively more extended period than most previous studies, from 1996 to 2017.     

Discretionary loan loss provision behavior in the US banking industry

Review of Quantitative Finance and Accounting - Earnings management can be opportunistic and add noise to earnings, or informative about a firm’s underlying economic performance and add...     

ACTIVITY STRATEGIES,AGENCY PROBLEMS,AND BANK RISK

We investigate whether diversification affects bank risk taking in the U.S. banking industry, and whether this relation is partially explained by agency theory. Our results show that U.S. banks with a relatively high share of noninterest income become riskier when moving toward non-interest-income-generating activities, especially activities from investment banking, proprietary trading, and so on. Diversification not only affects conditional average risk, but also the dispersion of risk. Moreover, diversified banks that received assistance from the Troubled Asset Relief Program (TARP) become riskier than diversified nonrecipients after TARP capital injections. Our main findings are robust to a battery of robustness tests. The results are partially explained under agency frameworks related to poor corporate governance.