Information Revelation, Lock-In, and Bank Loan Commitments

This paper considers the extent to which loan commitments mitigate the problems of information monopolies that arise when the firm contracts with a private lender. Loan commitments in conjunction with short-term debt often provide the firm with superior investment incentives by influencing both the states in which bargaining occurs as well as the outcomes from bargaining. Commitment contracts are particularly valuable when there is a high likelihood that information about the firm will be publicly revealed ex post. We also identify circumstances under which the firm foregoes commitment financing, relying on short-term debt instead. Journal of Economic Literature Classification Numbers G21, G32, D82.     

Quantum information and accounting information: Exploring conceptual applications of topology

Our previous attempt resulted in a paper by the same five authors, “Quantum information and accounting information: their salient features and conceptual applications,” published in the July–August 2006 issue of the Journal of Accounting and Public Policy. We now extend the previous paper to examine topological quantum computation, a remarkably innovative approach to decoherence and imprecise quantum computation. In this approach, exotic topological states are created for a natural medium to store and manipulate quantum information globally throughout the entire system. The process is intrinsically protected against imprecision and decoherence. We also explore conceptual, if not technical, applications of topological quantum computation to accounting. This is done by introducing topology’s inherent emphasis of qualitative characteristics to traditional accounting which has been dominated by quantitative characteristics. Here, financial statements’ monetary amounts may be contrasted to internal controls’ error frequencies. Part I of the paper deals with applications of topology to quantum information, after a brief introduction to basic tools. In particular the use of Fibonacci anyon and its powerful results are explained. Part II deals with applications of topology to accounting information. Part III deals with applications of topology to other potential fields.     

Understanding accounting through conceptual metaphor: ACCOUNTING IS AN INSTRUMENT?

This paper extends the conversation about metaphors in accounting that were presented in this journal by McGoun et al. [McGoun EG, Bettner MS, Coyne MP. Pedagogic metaphors and the nature of accounting signification. Critical Perspectives on Accounting 2007a;18:213–30; McGoun EG, Bettner MS, Coyne MP. Money n’ motion—born to be wild. Critical Perspectives on Accounting;2007b;18:343–61.]. Our aim is to promote further critical conversations about how metaphor is implicated in accounting. We assemble and review some of the empirical evidence we have gathered from close readings of discourse about accounting over the past decade. Based on this empirical grounding, we propose that the fundamental conceptual metaphor, ACCOUNTING IS AN INSTRUMENT, has been deployed commonly to describe the essence of accounting. We contend that such deployment has insidious, distortive and confounding outcomes because it encourages belief that accounting is incapable of reporting other than with representational faithfulness; and that it confounds the (alleged) primary qualitative characteristics of accounting information (relevance and reliability) outlined in the Financial Accounting Standards Board's SFAC 2 Qualitative Characteristics of Accounting.     

Cross-country evidence on the value of corporate industrial and international diversification

We provide evidence on the value of industrial and international diversification for more than 3000 firms from Germany, the U.K., and the U.S. Consistent with prior studies, we find that industrial diversification reduces firm value in the U.K. and the U.S. Furthermore, similar to the recent findings of Denis et al. [J. Finance 57 (2002)], we find that U.S. multinationals trade at a discount relative to firms operating only in the domestic market. This result is robust to different benchmarks used to measure the value of diversification. By contrast, we find that international diversification has no effect on the value of firms headquartered in either Germany or the U.K.     

Modeling US inflation dynamics: persistence and monetary policy regimes

This paper employs the recently developed structural stability test with multiple regime shifts and grid bootstrapping methods to model US inflation dynamics over the past half century. Our empirical results suggest that the persistence of inflation has witnessed significant declines over the most recent period of low inflation and this helps to embed a low inflation environment. The finding is robust to a variety of measures of the inflation series and offers new insight on understanding the stationarity issue of the US inflation series. The authors gratefully acknowledge the two anonymous referees for helpful comments and suggestions, which have led to substantial improvements in the paper. They also wish to thank participants at the 3rd Symposium on Econometric Theory and Applications, and seminar participants at the University of Manchester and Renmin University of China, for useful comments, with particular thanks to Denise Osborn and Jushan Bai for their constructive suggestions. Chengsi Zhang acknowledges support from the China National Social Science Research Fund, Grant No. 08CJY048.