Schmidt's Betriebswirtschaft Theory

Those only speking English are confronted with considerable confusion regarding the precise nature of Fritz Schmidt's contribution to the German Betriebswirschaft (business economics) movement during the 1920s. The similarity between his theory and the Bedrijfseconomie theory attributed to Theodore Limperg has also been less than clear. The primary cause is that their repective works have not been translated from the original German and Dutch and published in English. This paper draws upon translations to illustrate the substantial similarity between the accounting content of Schmidt's Betriebswirtschaft and that of Limperg's Bedrijfseconomie . Translatio of the 1951 biography of Schmidt by his student and then colleague, publications are contained in Appendix B. Contrary to some perceptions of Schmidt's work, he did address the general price level problem in his theory. And contrary to Limperg's criticism that Schmidt's mechanism for adiusting accounts for prifce and brice level changes was'incident specific', it was an integral part of a theory of business economics which appears to have been at least as comprehensive as Limperg's theory of Bedrijfseconomie .     

How Does Household Portfolio Diversification Vary with Financial Literacy and Financial Advice?

Household investment mistakes are an important concern for researchers and policymakers alike. Portfolio underdiversification ranks among those mistakes that are potentially most costly. However, its roots and empirical importance are poorly understood. I estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables. Nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes. Compared to these groups, households with below‐median financial literacy that trust their own decision‐making capabilities lose an expected 50 bps on average. All group differences stem from the top of the loss distribution.     

Housing Collateral and Entrepreneurship

We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross‐sectional variation in local house‐price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France) cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.     

Do IFRS Reconciliations Convey Information? The Effect of Debt Contracting

We examine whether earnings reconciliation from U.K. generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS) convey information. As a result of debt contracting, mandatory accounting changes are expected to affect the likelihood of violating existing covenants based on rolling GAAP, leading to a redistribution of wealth between shareholders and lenders. Consistent with this prediction, we find significant market reactions to IFRS reconciliation announcements. These market reactions are more pronounced among firms that face a greater likelihood and costs of covenant violation and early announcements. While the association between later announcements and weaker market reactions is consistent with contractual implications of technical changes to earnings, which investors quickly learn to predict, it is inconsistent with IFRS forcing all firms in the sample to reveal firm-specific information through accruals. Thus, by showing that mandatory IFRS also affects debt contracting, we expand on existing IFRS research that focuses on how accounting quality and cost of capital are impacted.     

Incentives for Non‐Disclosure by Corporate Groups

A regulatory approved deed of cross guarantee (the deed) was introduced into Australia in December 1991, relieving participating companies within a group from having to prepare, have audited, and file financial statements. We examine the characteristics of firms that obtain relief from filing (and therefore disclosing) separate financial statements of closed‐group companies by adopting the deed. This is the first attempt to analyse adoption using large‐scale archival data. The results support the survey evidence in Dean and Clarke (2005 ), thus providing triangulation on their work. In particular they support the view that the decision to adopt the deed is a function of strategic factors as well as accounting and auditing cost savings. Those strategic factors were not in focus when regulators first introduced a deed of indemnity in 1985, nor when the original indemnity was modified to become a deed of cross guarantee in 1991 or when it was further modified in 1998. Further, evidence is provided to test the conflicting ideas arising from the analytical literature and the mixed results in the empirical, voluntary disclosure literatures. That evidence suggests that non‐disclosure arises when firms are in a more competitive industry and, in particular, when there is ability to retain non‐disclosure at the consolidated level (i.e., where the number of segments is high). Other factors supporting non‐disclosure are leverage and the proportion of foreign operations (proxying for deed complexity). The proportion of outside directors (a proxy for legal liability) and the number of shares outstanding (a proxy for agency costs of equity) are not associated with the decision to adopt the deed.     

Mature Consumer Awareness and Attitudes Toward Retirement Housing and Long-Term Care Alternatives

The retirement housing and long-term care industries have been responding to the needs of aging consumers by developing a wide range of housing facilities and personal care services. The increasing variety of long-term care options is expected to better satisfy the heterogeneous needs of older consumers. Results of a national study and qualitative research suggest that many present and potential consumers of supportive housing and long-term care services do not have a good understanding of these offerings. Many are unaware of the alternatives available. Mature consumers often perceive all long-term care negatively as nursing homes. The proliferation in the variety of housing and long-term care services and the lack of standardization in labeling products may be contributing to the misunderstanding of various options. This misunderstanding leads to consumers not obtaining the housing and long-term care services best suited to their needs. Government agencies, consumer interest groups, and housing and long-term care providers can help to differentiate products and educate consumers to better serve their needs.