Environmental quality and welfare effects of improving the reporting capability of citizen monitoring schemes

Public participation in environmental monitoring to alert regulators to possible non-compliance events has been credited with improving environmental quality and regulatory efficiency. At the same time, the reporting capability of such citizen monitoring schemes is known to be limited due to technical and organizational deficiencies. Recent enthusiasm for outside interventions that address these deficiencies in order to lower environmental harm and raise overall welfare therefore seems justified. A game-theoretic analysis of a monitoring and enforcement regime with citizen monitoring shows, however, that the effects of such interventions are likely to be subtle. A higher reporting capability of citizens involves substitution effects that have ambiguous effects on the regulator??s monitoring and enforcement costs: Welfare can actually decline and environmental improvements will fall short of expectations. In an extreme scenario we show that improved citizen monitoring can even have adverse effects on environmental quality.     

Voluntary management earnings forecasts and discretionary accruals: evidence from Danish IPOs

This paper seeks to determine whether Danish managers exercise discretionary accruals to reach earnings forecast targets they voluntarily specify in conjunction with initial public offerings (IPOs). Because the Danish accounting and legal environment is more permissive than the US, we use Denmark as a natural laboratory for learning how business would occur without strict rules, enforcement and sanctions. Danish managers often volunteer pro forma financial statements for results that are expected to occur subsequent to the IPO. We examine a sample of 58 Danish firms that issue voluntary management earnings forecasts in connection with IPOs that occur between 1984 and 1996. The evidence we uncover strongly suggests that pre-managed earnings are adjusted toward these targets. In contrast with Kasznik's (1999 Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of Accounting Research, 37: pp. 57–81 [Google Scholar]) results related to voluntarily forecasting American firms, managers of Danish firms exercise discretionary accruals to mitigate earnings forecast errors regardless of whether pre-managed earnings are less, or greater, than the IPO forecast amount.     

Book Review

Book Review

Book Review     

Trust relations in management of change

Trust is essential for the success of change, but transformational change challenges trust. This paper analyses how trust dynamics develop over time in two Danish manufacturing firms affected by major change programmes. The results show that change creates uncertainty among employees, thereby provoking intense scrutiny of management intentions and a tendency to make interpretations that exaggerate management intentions—with the end result of reduced trust. Management then react similarly with negative interpretations of employee reactions, creating a vicious cycle of reduced trust. The paper proposes a model for how change and trust interact and suggests a managerial strategy for trust repair: Strong management actions that symbolise integrity, competence and benevolence may counteract reduced trust, but if low trust turns into distrust, the result may be a deadlock that both parties find difficult to break.     

New institutional economics: what does it have to offer?

This article discusses the empirical relevance of what is considered two prinicipal contributions to the new institutional economics–the contributions of A. Schotter and O. Williamson – and draw three general conclusions. First, it is argued, on the basis of a comparison of the above mentioned two contributions to new institutional economics, their empirical relevance cannot be discussed in general but must be based on separate analyses of the two contributions and will depend on the institutions which are analysed. Secondly, that it is especially within analyses of consequence and design of institutions that the Williamson-approach to new institutional economics presently has something to offer while there seems to be rather limited possibilities for application of the approach of Schotter. Thirdly, that in their future development, the two contributions can probably both mutually benefit each other and benefit from an integration of elements from other institutional theories.     

An environmental performance index for products reflecting damage costs

Several studies have demonstrated how to use DEA (Data Envelopment Analysis) based techniques to estimate environmental performance indices. None of these studies, however, are taking information on the environmental damage costs of the pressure types considered into account. This study is bridging a gap between environmental indices founded in physical pressures and damage costs founded in welfare economics. The aim of the paper is twofold: first, to demonstrate how to implement the information on environmental damage costs within a DEA based environmental performance index, and second, to estimate these indices at product level by using Danish input-output data and environmental data from 1997.     

Ein simulationsbasierter Renditevergleich von fondsgebundenen Altersvorsorgeprodukten

The demographic change and its consequences forces citizens of Germany to realign towards private insurance products. This decision should be based on structured analyses. Most recent studies were inconclusive regarding this decision.As investments are commonly compared using average developments of the underlying, the possibility to switch the underlying during the duration of the investment, they are not represented accordingly and therefore bias the results of the calculation. We perform a thorough simulation analysis to compare two competing investments for retirement provisions while respecting additional costs and tax implications of switching.Without any switching the evaluation of other studies is generally verified (pure investment beats insurance product). But as soon as switching is implemented the tax advantage of insurance products is overcompensating the cost advantage of a pure investment solution. Further research should aim in this direction.     

Hotels and restaurants—are the risks rewarded? Evidence from Norway

The purpose of this paper is to apply accounting-based risk measures to describe and compare the risk involved in accommodation and restaurants to three other industries. It is found that the variation in earnings is particularly high in construction, but also significant in accommodation and restaurants. The volatility in construction is caused by variance in sales. Construction companies experience low profits when the economy is depressed, while earnings boom when the economy progresses. On the other hand, earnings in retail are stable. It appears that retailing provides low risk and steady profits.The sales variance in accommodation and restaurants is fairly low. The high variability in earnings is mainly caused by operational and financial leverage. Despite the high total risk, hotels and restaurants earn less profit than the other industries examined. Apparently, the market does not reward self-inflicted risk induced by high leverage. Perhaps Norwegian accommodation providers and restaurant keepers have concerns other than maximising profit and minimising risk, and owners’ lifestyles are reflected in the financial accounts. An alternative explanation might be that the accommodation/catering sector has had unrealistic expectations in the period covered by the research.