The cost of debt when all-equity firms raise sfinance: The role of investment opportunities, audit quality and debt maturity

This paper investigates the effect of investment opportunities, audit quality and debt maturity on the interest paid by all-equity firms. Debt holders are likely to charge higher interest to price-protect themselves because of the under-investment and asset substitution problems. All-equity firms, however, could reduce interest charge by employing Big 4 auditors to increase the reliability of audited financial statements or using short-term debt to allow more frequent monitoring of their financial condition by lenders and re-pricing of debt. The results show that interest charge is positively related to investment opportunities of all-equity firms. This relationship is weaker when the firms have Big 4 auditors or a higher proportion of debt due in the next year over total debt. In addition, the above results do not hold for highly levered firms since the lenders are constantly monitoring the financial condition of their borrowers.     

Exchange rate expectations and the pricing of Chinese cross-listed stocks

I show that the price discounts of Chinese cross-listed stocks (American Depositary Receipts (ADRs) and H-shares) to their underlying A-shares indicate the expected yuan/US dollar exchange rate. The forecasting models reveal that ADR and H-share discounts predict exchange rate changes more accurately than the random walk and forward exchange rates, particularly at long forecast horizons. Using panel estimations, I find that ADR and H-share investors form their exchange rate expectations according to standard exchange rate theories such as the Harrod-Balassa-Samuelson effect, the risk of competitive devaluations, relative purchasing power parity, uncovered interest rate parity, and the risk of currency crisis.     

Ability of accounting and audit quality variables to predict bank failure during the financial crisis

We examine the ability of selected accounting and audit quality variables measured in a period prior to the financial crisis (i.e., the four quarters of 2006), to predict banks that subsequently failed during the financial crisis. We employ two sets of samples from the US: a troubled banks sample that includes banks that failed in or after 2007 as well as banks classified as being troubled based on profitability, loan quality, and balance sheet position in 2007, and a full sample that includes all banks with available required data. Using the troubled banks sample, we identify six reliable predictors of bank failure: auditor type, auditor industry specialization, Tier 1 capital ratio, proportion of securitized loans, growth in loans, and loan mix. For the larger full sample of banks, we identify the following ten predictors of bank failure: auditor type, Tier 1 capital ratio, proportion of securitized loans, nonperforming loans, loan loss provisions, growth in commercial loans, growth in real estate loans, growth in overall loans, loan mix, and whether the bank is a public bank.     

The impact of cumulative pressure on accounting students’ propensity to commit plagiarism: an experimental approach

Adopting aspects of Jones, T.M., 1991, Academy of Management Review 16 , 366–395 issue‐contingent model of ethical decision‐making to guide our choice of variables, we investigate perceptions of factors that affect student plagiarism. In an experimental setting, time pressure and assessment weighting are manipulated between‐subjects, whilst the severity of plagiarism is examined within‐subjects. Our findings confirm that time pressure and assessment weighting are positively related to perceptions of the likelihood of plagiarism and that plagiarism is perceived as more likely for less severe acts. Further, the likelihood of plagiarism increases as the cumulative pressure of both time deadline and assessment weighting increases.     

Fifty‐year overview of judgment and decision‐making research in accounting

As part of the celebration of the fiftieth anniversary of AFAANZ, we consider the breadth of judgment and decision‐making (JDM) experimental research in accounting over that 50‐year period. Our review is divided by decade and between auditing, financial accounting and management accounting. In four major journals, we found 5745 papers between 1970 and 2009, which we consider impressive and strong support for the opportunity to publish in this field. Our aim is to encourage more JDM research from Australians and New Zealanders, and to allow researchers in particular specialisations to get a better understanding of the JDM research in other specialisations.     

Comprehensive versus partial deferred tax liabilities and equity market values

This study investigates the value relevance of the deferred tax liability recognized using comprehensive versus partial allocation. Our research examines New Zealand firms who, prior to the introduction of International Financial Reporting Standards, were free to choose between comprehensive and partial allocation. We test the joint hypothesis that the partial, as opposed to comprehensive, deferred tax liability is relevant for equity valuation and is sufficiently reliable to be reflected in investors’ valuation assessments. Our results are consistent with this prediction.     

FORECASTING PERFORMANCE OF AN ESTIMATED DSGE MODEL FOR THE SOUTH AFRICAN ECONOMY

We construct a small open‐economy New Keynesian dynamic stochastic general equilibrium (DSGE) model for South Africa with nominal rigidities, incomplete international risk sharing and partial exchange rate pass‐through. The parameters of the model are estimated using Bayesian methods, and its out‐of‐sample forecasting performance is compared with Bayesian vector autoregression (VAR), classical VAR and random‐walk models. Our results indicate that the DSGE model generates forecasts that are competitive with those from other models, and it contributes statistically significant information to combined forecast measures.     

Incentives for cost misrepresentation in supply chains

This paper investigates sequential manufacturer–retailer price determination and channel performance under possible misrepresentation by one member of its privately known cost. To the standard double marginalization game, we add a preliminary stage where the manufacturer (alternately the retailer) announces its privately known constant marginal cost. We prove that the manufacturer has no incentive to misrepresent its cost, and we give respective sufficient conditions on the demand function for the retailer to overreport and to underreport costs. Depending on the shape of the demand function, opportunistic behavior by the retailer may lower or raise the manufacturer’s profit and channel performance.     

A Rationale for the Coexistence of Central and Decentral Marketing in Team Sports

Abstract. In some sports leagues, the sports association sells broadcasting rights centrally in order to create competitive balance. In other ones, the market is decentral. As a result, there is competitive imbalance. In this paper, the preferred kind of marketing of sports associations is analysed. Distinctions are made between three cases. In case one, the sports association is only interested in competitive balance. In the second case, it wishes to create a single high-performing team, and in the third, it maximizes aggregate performance. It is found that, depending on the preferences of the association, both kinds of marketing can be optimal.     

PROSPECTS FOR ‘CLOSING THE GAP’ IN SOCIOECONOMIC OUTCOMES FOR INDIGENOUS AUSTRALIANS?

Practical reconciliation' and more recently 'closing the gap' have been put forward as frameworks on which to base and evaluate policies to address Indigenous disadvantage. This paper analyses national-level census-based data to examine trends in Indigenous wellbeing since 1971. There has been steady improvement in most socioeconomic outcomes in the last 35 years; a finding at odds with the current discourse of failure. Evidence of convergence between Indigenous and non-Indigenous outcomes, however, is not consistent. For some outcomes, relatively rapid convergence is predicted (within 25 years), but for the majority of outcomes, convergence is unlikely to occur within a generation, if at all.