The Effect of Accounting Restatements on Earnings Revisions and the Estimated Cost of Capital

This paper examines the effect of accounting restatements on a firm's cost of equity capital. We show that, on average, accounting restatements lead to both decreases in expected future earnings and increases in the firm's cost of equity capital. Depending on the model used, relative percentage increases in the cost of equity capital average between 7 and 19% in the month immediately following a restatement. The relative increase in the cost of capital dissipates as time passes and after controlling for analyst forecast biases, but continues to average between 6 and 15% in the most conservative setting. We also show that restatements initiated by auditors are associated with the largest increase in the cost of capital, and that firms with greater leverage experience greater increases in their cost of capital. Overall, our evidence is consistent with accounting restatements lowering the perceived earnings quality of the firm and increasing investors' required rates of return.     

Business Ethics: The Bottom Line

Teaching Business Ethics -     

Me,Myself, and Future Generations: The Role of Affinity and Effectiveness in the Creation of Consumer Environmental Stewardship (CENS)

Policymakers, consumer advocate groups, and researchers agree that consumers need to increase their proenvironmental behaviors if a decent standard of living is to be ensured for future generations. Despite high levels of environmental concern, consumers still refrain from large‐scale adoption of proenvironmental behaviors. Social marketers agree that a change in attitudes is not enough to stimulate the necessary behavioral change and are looking for ways to help consumers overcome the costs (e.g., price premiums, inconvenience) that are often associated with proenvironmental behaviors. Currently, consumers often see proenvironmental behavior as a trade‐off between short‐term personal benefits and longer term collective benefits. The authors contribute to the social marketing literature on proenvironmental behavior by introducing the concept of Consumer Environmental Stewardship (CENS), which centers on the use of intrinsic motivation to stimulate a personal sense of responsibility for the environment. The findings, based on a survey and three experiments, show that the stimulation of consumers’ affinity with future generations (AFGs) and perceived consumer effectiveness (PCE) can help to promote CENS, which in turn raises proenvironmental behaviors. However, this research also shows that increasing levels of AFGs can backfire and result in lower levels of CENS, if consumers experience low levels of PCE.     

Realized extreme quantile: A joint model for conditional quantiles and measures of volatility with EVT refinements

We propose a new framework exploiting realized measures of volatility to estimate and forecast extreme quantiles. Our realized extreme quantile (REQ) combines quantile regression with extreme value theory and uses a measurement equation that relates the realized measure to the latent conditional quantile. Model estimation is performed by quasi maximum likelihood, and a simulation experiment validates this estimator in finite samples. An extensive empirical analysis shows that high‐frequency measures are particularly informative of the dynamic quantiles. Finally, an out‐of‐sample forecast analysis of quantile‐based risk measures confirms the merit of the REQ.     

Augmenting the eye of the beholder: exploring the strategic potential of augmented reality to enhance online service experiences

Driven by the proliferation of augmented reality (AR) technologies, many firms are pursuing a strategy of service augmentation to enhance customers’ online service experiences. Drawing on situated cognition theory, the authors show that AR-based service augmentation enhances customer value perceptions by simultaneously providing simulated physical control and environmental embedding. The resulting authentic situated experience, manifested in a feeling of spatial presence, functions as a mediator and also predicts customer decision comfort. Furthermore, the effect of spatial presence on utilitarian value perceptions is greater for customers who are disposed toward verbal rather than visual information processing, and the positive effect on decision comfort is attenuated by customers’ privacy concerns.     

Segmenting a market in the making: Industrial market segmentation as construction

This paper takes an empirical starting point in a claim that Biacore, a pioneering Swedish producer of affinity biosensors, was “in the enviable position of creating its own market” (Abelin, 1997). An in-depth case study traces how Biacore undertook segmentation activities while shaping the market for its new product technology, affinity biosensors. This involved stabilising the modes of exchange with customers, the product and the identity of the company. The efforts of Biacore highlight a constructive dimension of market segmentation that hitherto has received little attention. Rather than a process of describing, deciding and taking action, Biacore engaged in the gradual construction of market segments through an interactive and iterative process involving close collaboration with early users. Simultaneously, the market for the new technology gained shaped. Thus, the paper reports a ‘markets from networks’ story illustrating how the practice of segmenting a market may have consequences for that market.     

Contents of Volume 35

Volume Contents

Contents of Volume 35     

A macro-framework for successful development banks

The large-scale failures of development banks in the 1970s and 1980s meant that they all but disappeared from the development agenda. However, there are still a large number of development banks worldwide that operate with various degrees of success. Some governments are also looking to re-establish such banks to address the shortage of finance for higher-risk market segments. To avoid a repeat of the earlier failures, government policy needs to be informed by an objective framework for the success of these banks. This article, based on economic theory and informed by case studies, outlines such a framework. It addresses the following six dimensions of these banks: enabling environment, mandate, regulation and supervision, governance and management, financial sustainability and performance assessment. Development banking remains a risky initiative but, managed appropriately, and using this framework, it can help achieve development objectives.     

Will the people united in cyberspace never be defeated? Reflections on the global multitude in the epoch of American Empire

This paper examines Hardt and Negri's (Empire, 2000, and Multitude, 2004) approach to the genealogy of modern resistance. It critically examines their three guiding principles for successful resistance. The first principle involves using a simple measure of efficacy regarding the specific historical situation. According to this principle every organisation must somehow grasp the possibilities offered by the current arrangement of opposing forces. The second principle requires all “forms” of political and military organization to equate with the current forms of economic and social production. According to this principle all forms of resistance movements must evolve in coordination with the evolution of economic forms. The third principle requires that democracy and freedom act as guides to the development of organizational forms of resistance.Hardt and Negri were certain that the most evolved, emblematic form of technocratic, cyberspace Empire contains “swarm intelligence” the instrument of its own destruction: “[T]he distributed networked structure provides the model for an absolutely democratic organisation that corresponds to the dominant forms of economic and social production and is also the most powerful weapon against the ruling power structure” [Hardt M, Negri A. Multitude: war and democracy in the age of empire. New York: Penguin Press; 2004, p. 88]. This paper proposes that such a sanguine appraisal of the forms and strategies of contemporary capitalism belies (or forecloses) hope for any type of resistance. The flexible, distributed “perfect union” expressed in the presumed symbiotic relationship between Empire and the Global Multitude has no clothes [see Passavant P, Dean J, editors. Empire's new clothes: reading Hardt and Negri. NewYork: Routledge; 2004] and resistance, especially the resistance involving the integration of the political and the economic, requires not integrative “swarm intelligence” but the relentless destruction of the enveloping falsifications and futile illusions of dis–embodied, virtual, networked, “global” capitalism and its uncivil appropriation of democracy and the commons.     

Building a patient-focused unit: the nurse manager's challenge

Developing a patient-focused unit is necessary to attain the highest standards of patient care. It is only when we can view our unit through the eyes of a patient that we will be able to see ourselves as others see us. Professionally, we have committed ourselves to creating caring environments that promote healing. We cannot meet this goal until we make a commitment to be patient-focused and give up being nurse-focused or facility-focused.