Testing a Model of Cognitive Budgetary Participation Processes in a Latent Variable Structural Equations Framework

Previous accounting research has suggested that subordinate participation in the budgetary process has two cognitive aspects: (1) participation enhances budget quality, and hence the utility of budgets, by allowing subordinates to introduce private knowledge into the budgetary process, and (2) participation enables subordinates to obtain information that is relevant to performing their jobs. This study tests a model that encompasses both cognitive aspects of budgetary participation. Data were gathered with a questionnaire distributed to managers from a variety of different national origins who were working in many different global locations. The data were analysed with latent variable structural equation modelling, which provides several advantages over more conventional analytic methods generally used in budgetary participation and other behavioural accounting research. The results indicated that participation enhances budget quality and that budget quality, in turn, has a positive effect on budget utility. Participation was also found to have a direct and positive effect on job-relevant information. The results failed to support a proposed indirect effect of participation on job-relevant information through the enhancement of budget quality.     

INTERSTATE BANKING DEREGULATION AND THE CHANGING NATURE OF BANK MERGERS

We examine a sample of 443 bank mergers between publicly traded banks announced during the 1990s to investigate empirically the role of full interstate banking deregulation. The pre‐deregulation 1990s are characterized by value creation, with mergers involving a high degree of branch overlap experiencing significant announcement gains. Bank mergers in the post‐deregulation 1990s, however, fail to create value, and mergers with a high degree of branch overlap actually experience significant losses. Consistent with prior research, these valuation consequences are magnified for large bank mergers in the 1990s. Overall, our results are consistent with the broader literature on corporate control, suggesting that an economic shock can materially alter industry structure and the economic rationale for the efficient reallocation of assets through merger activity.     

Information Pricing: The Evidence From Equity Mutual Funds

The theory of information pricing implies that the benefits from obtaining costly information should be offset by the costs. In the case of mutual funds, this theory suggests that trades by fund managers should take place at prices that compensate their clients for the managers' costs of becoming informed. This paper controls for risk, fund size, and age to assess the relationship of a fund's information costs to its performance. The findings show that stock funds charging the highest expenses generally earn returns insignificantly different from funds charging the lowest expenses. This lends support to the theory of information pricing. The findings are also indicative of an efficient market, given that information is costly.     

A Toy Store(y)

This article was used as the starting point for a series of seven analyses that comprise a special issue on entrepreneurial narrative. This article was given to scholars with the title “A Toy Store(y)” with no other identifying characteristics. The story describes the founding and operation of a toy store in Rutland Vermont in 1965. The story describes the process of realizing an opportunity, identifying and acquiring resources to pursue this opportunity, involving and managing others, and adapting to unforeseen circumstances as new competitive conditions are encountered.     

AN EMPIRICAL STUDY OF THE INCREMENTAL PREDICTIVE ABILITY OF BEAVER'S NAIVE OPERATING FLOW MEASURE USING FOUR-STATE ORDINAL MODELS OF FINANCIAL DISTRESS

The purpose of this paper is to determine why net income adjusted for depreciation and amortization (NOF) is a strong predictor of financial distress. This paper develops four-state ordinal financial distress models lagged one, two, and three years before financial distress to test NOF, instead of using dichotomous bankrupt and nonbankrupt models. The results of this paper suggest that NOF is a strong predictor of financial distress because NOF is an alternative measure of economic income, not because NOF is a naive measure of operating cash flow. For this study, NOF is even a better measure of economic income than net income.     

Causes of cross-autocorrelation in security returns: Transaction costs versus information quality

We examine empirically the role of transaction costs and information quality as causes of cross-autocorrelations in security returns. Nonsynchronous trading influences are addressed by forming weekly returns based on averages of closing inside bid and ask quotations for NMS securities. Stock return volatility scaled by the bid-ask spread is employed as a proxy for transaction costs and trading volume is used as a measure of information quality. We find evidence that both transaction costs and information quality may contribute to cross-autocorrelations, but that information quality dominates transaction costs in explaining cross-autocorrelations after controlling for autocorrelation influences.