Substance, Form and PFI Contracts

The Private Finance Initiative (PFI) was launched by the United Kingdom Government in 1992 in order to encourage the private sector in the UK to become more involved in public sector development projects. A key theme of the initiative was that the public should receive 'value for money'. This article investigates the accounting issue as to whether or not the private or the public sector should record any property related to PFI projects on balance sheet. It argues that although both HM Treasury and the Accounting Standards Board (ASB) might agree on the accounting principles, the practical impact is that in order for related properties to stay off the public sector's balance sheet, substantial risk needs to be transferred to the private sector. As a consequence of this, the objective of providing value for money to the public may not be achieved.     

Shredded Reputation: The Cost of Audit Failure

In this article we investigate the impact of the Enron audit failure on auditor reputation. Specifically, we examine Arthur Andersen's clients' stock market impact surrounding various dates on which Andersen's audit procedures and independence were under severe scrutiny. On the three days following Andersen's admission that a significant number of documents had been shredded, we find that Andersen's other clients experienced a statistically negative market reaction, suggesting that investors downgraded the quality of the audits performed by Andersen. We also find that audits performed by Andersen's Houston office suffered a more severe decline in abnormal returns on this date. We are not able to show that Andersen's independence was questioned by the amount of non–audit fees charged to its clients.     

An empirical investigation of the effectiveness of an integrated service recovery system

Although service recovery has become an increasingly-studied topic in the operations management literature, robust theories and accompanying empirical studies have only begun to emerge. For example, while many authors have identified and measured the specific activities that are perceived by consumers as effective ways to recover from failure, much less attention has been directed at the systematic structuring of recovery efforts to consistently ensure customer satisfaction and achieve improved, long-term organizational outcomes. Building on recent research that identified the principal constructs of service recovery, this study seeks to explore the relative effectiveness of an integrated service recovery system. Data from 158 service organizations are used to explore the relationship between the system and its associated recovery outcomes. Results indicate that a complete recovery system defined by seven distinct dimensions (formalization, decentralization, comprehensiveness, accessibility, influence, human intensity, and system intensity,) significantly impacts internal capability improvements as well as externally-perceived outcomes (i.e., speed, employee empathy, and recovery effectiveness) while both of these outcomes have a significant impact on customer satisfaction and market performance attributed to service recovery     

Different but Similar: Social Comparison of Travel Motives Among Tourists

Although previous research suggests that people prefer to think of themselves as being authentic (or individualistic) travellers rather than stereotyped tourists, there have been few studies investigating the external validity of such claim. This paper addresses this research gap by investigating tendencies to dissociate the self from typical tourists in terms of travel motivation. Findings suggest that people perceive their own travel motives to be different from those who they perceive as typical tourists and that these tendencies generalize across people involved in different forms of tourism. This paper discusses the results from a social psychological perspective and provides implications for future research and destination management alike. © 2014 The Authors. International Journal of Tourism Research published by John Wiley & Sons, Ltd.     

Raising the bar (6)

Raising the bar (6). Spatial Economic Analysis. This editorial summarizes and comments on the papers published in issue 12(4) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper addresses the question of whether ‘jobs follow people’ or ‘people follow jobs’. The second paper develops a new methodology to determine functional regions. The third paper is a major contribution to the growing literature on new modelling approaches and applications of disaster impact models. The fourth paper focuses on the costs and benefits of higher education. The fifth paper develops a two-step procedure to identify endogenously spatial regimes in the first step using geographically weighted regression, and to account for spatial dependence in the second step. Finally, the sixth paper estimates a dynamic spatial panel data model to explain house prices and to show that restricted housing supply in the city of Cambridge, UK, has some undesirable labour market effects.     

Effective tax and subsidy rates on human capital in Canada

Abstract. Effective tax and subsidy rates (ETRs and ESRs) on human capital investment via post‐secondary education are estimated for Canada in the years 2000 and 2006. The flattening of the federal personal income tax structure in 2001 substantially reduced the tax disincentive for investment in human capital. Effective subsidy rates also declined as public spending did not keep pace with rising tuition fees. The change on the tax side was strong enough to dominate the subsidy reduction according to our main results, but disaggregation shows that this result did not hold in all cases. Results are shown for College, Master's, and PhD programs, in addition to Bachelor's degrees. They are also broken down by gender, and are shown for the 25th and 75th percentiles as well as the median. Provincial detail and 1997 results are provided in the case of Bachelor's graduates.     

Asymmetric pricing of implied systematic volatility in the cross‐section of expected returns

Assuming a symmetric relation between returns and innovations in implied market volatility, Ang, A., Hodrick, R., Xing, Y., and Zhang, X. (2006) find that sensitivities to changes in implied market volatility have a cross‐sectional effect on firm returns. Dennis, P., Mayhew, S., and Stivers, C. (2006), however, find an asymmetric relation between firm‐level returns and implied market volatility innovations. We incorporate this asymmetry into the cross‐sectional relation between sensitivity to volatility innovations and returns. Using both portfolio sorting and firm‐level regressions, we find that sensitivity to VIX innovations is negatively related to returns when volatility is rising, but is unrelated when it is falling. The negative relation is robust to controls for other variables, suggesting only the increase in implied market volatility is a priced risk factor. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:34–54, 2011     

Oil-Price Shocks: Beyond Standard Aggregate Demand/Aggregate Supply Analysis

The author explores the problems of portraying oil-price shocks using the aggregate demand/aggregate supply model. Although oil-price shocks are the most commonly cited examples of aggregate supply shocks, they violate the model's assumption of constant relative prices (as acknowledged by the label, “oil-price shocks”). The resulting problems are effectively masked in textbook presentations by implicitly assuming that the supply shocks occur in a closed economy. However, the typical discussion is glaringly inaccurate when discussing the effects of oil-price shocks on oil-rich countries. Thus, the cogency of the standard model's representation of oil-price shocks on open economies is compromised. A simple modification of the model that differentiates between production and absorption goods enables it to better reflect the effects of oil-price shocks on open economies.