Managerial Equity Ownership and the Demand for Outside Directors

This paper examines the linkage between the use of outside directors and managerial ownership. We conjecture there are two linkages: the standard incentive‐alignment demand for monitoring when managers own little stock and an entrenchment‐amelioration demand when managerial stock ownership is high. As a consequence, we predict the association between managerial ownership and board composition will be nonlinear (U‐shaped if the entrenchment effect is sufficiently pronounced). Using UK data, we find that both quadratic and logarithmic models outperform the simple linear relationship assumed in prior research and that the substitution between managerial ownership and board composition is stronger than hitherto supposed.     

Impact of Divergent Consumer Confidence on Option Prices

This paper investigates the impact of divergent consumer confidence on option prices. To model this, we assume that consumers disagree on the expected growth rate of aggregate consumption. With other conditions unchanged in the discrete-time Black–Scholes option-pricing model, we show that the representative consumer will have declining relative risk aversion instead of the assumed constant relative risk aversion. In this case all options will be underpriced by the Black–Scholes model under the assumption of bivariate lognormality. This revised version was published online in June 2006 with corrections to the Cover Date.     

From rationality to hyperreality: paradigm poker

This paper, following McGoun's (1997) seminal article comparing the economy of financial securities to a hyperreal poker game, argues that finance and accounting researchers should take the “linguistic turn” that has rejuvenated theory and research in many, if not most, of the social science and humanities in recent decades. In general terms, this means following Ludwig Wittgenstein's language game paradigm rather than Karl Popper's scientific deductive hypothesis testing methodology. The paper illustrates this by drawing on some of Jean Baudrillard's' ideas, particularly his concept of hyperreality and his phases of the image theoretic.The paper presents a poststructuralist genealogical analysis of the radical ruptures and reformulation of the meaning attributed to the accounting sign of earnings over the feudal, counterfeit, production, and simulation eras. It concludes that, as with many other signs in contemporary society, the earnings sign no longer has any relationship with, nor does it any longer refer to, any real or intrinsic profit but instead floats ungrounded in today's financial economy.The paper recommends that researchers in finance and accounting adopt paradigms from literary theory, semiotics, linguistics, and semiology rather than continue to rely on economics-based theory, which has lost its power for explaining and predicting happenings in today's financial economy of self-referencing models and images.     

Exact Solutions of a Model for Asset Prices by K. Takaoka

We are concerned with a model for asset prices introduced by Koichiro Takaoka, which extends the well known Black-Scholes model. For the pricing of contingent claims, partial differential equation (PDE) is derived in a special case under the typical delta hedging strategy. We present an exact pricing formula by way of solving the equation. Mathematics Subject Classification(2000):91B28,35K15     

Expected Accrual Models: The Impact of Operating Cash Flows and Reversals of Accruals

This paper augments the Jones (1991) model with operating cash flows and lagged accruals to evaluate the impact of (1) the negative association between accruals and concurrent cash flows, (2) the positive association between accruals and lagged cash flows, and (3) the reversal of accruals. I find that operating cash flows greatly improve the explanatory and predictive power of the Jones model; but, lagged accruals do not. A market test of the expected and unexpected components of accruals indicates that unexpected accruals are on average informative with respect to concurrent stock returns; however, the market does not fully understand the implications of accruals anticipated at the beginning of the return period.This paper has benefited from helpful comments and suggestions from Tae Hee Choi, In-Kyu Moon, and two anonymous reviewers on earlier versions of this paper. The author gratefully acknowledges the financial support from the Queens School of Business.     

Generalised Rational Bias in Financial Forecasts

Laster et al. (Q J Econ 114(1):293–318, 1999) built an economic model in which forecasters have incentives to generate forecasts that differ form the consensus. It is shown that the dispersion of the equilibrium distribution of forecasters, depends on the relative importance given on the intensive forecast users’ loss versus the publicity gain from occasional users. These results depend heavily on the assumption of symmetry for the loss and density functions. In this paper we examine the effects of generalising loss preferences and probability densities to allow for asymmetries through the LinEx loss and the Skewed Normal density, respectively. We derive the generalised equilibrium distribution of forecasts which contains the results of Laster et al. as a special case. The presence of asymmetric preferences is shown to cause a movement of the distribution away from the conditional mean, towards the optimal forecast under loss asymmetry. Furthermore, forecasts now tend to cluster around this quantity in an asymmetric way. These effects tend to be further strengthened or partially offset by the presence of skewness in the distribution of data, a result consistent with the conclusions of Christodoulakis (Finan Res Lett 2:227–233, 2005).The author is grateful to an anonymous referee for helpful comments that have improved the paper. The views expressed in the paper are those of the author and should in no part be attributed to the Bank of Greece.     

以科学发展观统领中国城市金融学会工作

本文全面阐述了中国城市金融学会未来几年面临的形势和任务，包括积极应对后过渡期银行业全面对外开放的挑战、主动转变经营模式和增长方式、通过自主创新提升核心竞争力、通过完善公司治理机制提高经营管理效率、建立全面风险管理与内控体系、积极应对利率市场化和金融脱媒化、加速国际化经营步伐等。同时还提出了要加大管理和支持力度，保证学会工作健康顺利开展；用创新精神推动学会理论研究工作的展开；继续发挥学会工作对经营管理决策的参谋支持作用；继续扩大和加深学会对外学术交流的范围与深度；继续加强对团体会员工作的协调和指导。报告对于学会工作具有重要的指导意义。     

论国际金融体系改革与布雷顿森林机构重塑

论文在回顾了国际金融体系改革主要历程的基础上探讨了现存体系的核心缺陷,并对已经进入改革日程的一些议题上存在的分歧意见进行了分析。论文认为,由于发达国家和发展中国家存在着巨大的利益差异,短期内在核心内容的改革上将难以取得突破,但是在已经提上议事日程的改革领域,将有可能取得进展。20国集团对国际金融体系改革的推动是令人鼓舞的信息,中国将为推动改革做出越来越多的贡献。     

Auditors’ decision-making under going-concern uncertainties in low litigation-risk environments: Evidence from Hong Kong

This study examines the audit opinions issued by auditors in a low litigation-risk environment at a time of high economic uncertainty – that of Hong Kong in the period immediately after the Asian financial crisis of 1997. Empirical research using United States data has shown that, contrary to professional guidance which restricts the issue of “disclaimer of opinion” only to situations where existing uncertainties prevent the auditor from forming an opinion, auditors tend to use the “disclaimer” report (in the going concern context) to signal more extreme client firm’s distress. In the high litigation-risk environment of the US, researchers have attributed this tendency to the idea that “disclaimer of opinion” reports are used by auditors to provide some protection against potential legal liability. The results of this study provide evidence that, even in the low litigation-risk environment of Hong Kong, auditors still use “disclaimer” reports to signal more extreme client firm financial distress. Thus, the maintenance of a high litigation-risk environment does not appear to be a necessary pre-requisite for high quality audits.