The Determinants of Corporate Trade Credit Policies in a Bank‐dominated Financial Environment: the Case of Finnish Small Firms

This paper examines trade credit policies of small firms operating in a bank‐dominated environment (Finland). We find that creditworthiness and access to capital markets are important determinants of trade credit extended by sellers. The level of purchases is positively correlated with the level of accounts payable. Larger and older firms and firms with strong internal financing are less likely to use trade credit, whereas firms with a high ratio of current assets to total assets, and firms subject to loan restructurings use it more. Negative loan decisions by financial intermediaries increase and a close bank‐borrower relationship decreases the probability that a firm does not take advantage of trade credit discounts.     

The erosion of the liberal economic order

Atlantic Economic Journal -     

The Information Content of Cash Flows and the Random Walk: Evidence from the Helsinki Stock Exchange

Using a sample from the Helsinki Stock Exchange, this paper examines whether observed market reactions to unexpected cash flows are sensitive to the random walk assumption of cash flow behaviour. We consider the random walk (with drift) model commonly used in related literature, and we consider cash flow expectations generated with individually estimated parsimonious univariate time series models and an index model. Market reactions to unexpected cash flows are indiscernible under the random walk assumption, while significant market reactions are found when expectations of cash flows are measured with models which better capture their time series properties. Prior studies that rely on the random walk assumption have probably been biased against finding a significant market reaction to cash flow information.     

Earnings cosmetics in a tax-driven accounting environment: evidence from Finnish public firms

Finnish firms are known to manage earnings downwards to avoid income taxes. This study suggests that they simultaneously manage earnings upwards in a smaller scale. The idea behind this behaviour is that humans may perceive a profit of, say, 301 million as abnormally larger than a profit of 298 million. Consequently, firms tend to adjust the second leftmost digit of earnings to exceed nine in order to make the first digit of earnings larger by one. Such corporate behaviour has been previously documented in New Zealand and in the USA. Our study finds a similar phenomenon in Finland. Our results show that although the largest second digits (eight and nine) are fewer than expected, only sixes and sevens are statistically significantly managed upwards.     

The role of information technology in strategic buyer–supplier relationships

Information technology (IT) has long been acknowledged as an integral part of inter-organizational business exchange. The extant research, however, tends to emphasize the focal company perspective and focuses on operational issues, perceiving IT and business relationships as separable. Through a qualitative dyadic case study, our study defines how IT is positioned with regard to various elements of a strategic buyer–supplier relationship and the respective actors' operational and managerial behaviors. The study defines the role of IT regarding the structural, action, and management layers of a relationship and shows how IT can be a strong element around which relationship management activities are implemented to improve the consistency and performance of the relationship. The study prepares the ground for further qualitative and quantitative research to enhance a holistic understanding on IT in relation to the structures and processes in inter-organizational contexts of business relationships and networks.     

Does corporate environmental protection increase or decrease shareholder value? The case of environmental investments

This study examines share price effects of environmental investments using data from the Finnish forest industry from 1970 to 1996. The results indicate that the instantaneous market reaction is negative, and that the larger the investment, the larger the fall in prices. However, contrary to the view that corporate actions have a permanent effect on firm value, we observe rapid price recovery after the instantaneous negative reaction. This may support a hypothesis that environmental investments create goodwill for the investing firms and are thus not negative net present value investments. Unexpectedly, we find that the instantaneous negative market reaction was stronger in the most recent sample years. Explanations for this finding relate to the slowness of institutional change within the financial community as well as to the growing share of international investors seeking short‐term holding gains. In conclusion, it appears that not only finance theory but also notions from institutional theory and corporate environmental management literature are needed to explain stock price behaviour in conjunction with environmental investments. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment     

Clintonomics: Introductory comments

Vice President of the Atlantic Economic Society 1992–93.     

The objectivity of corporate environmental reporting: a study of Finnish listed firms' environmental disclosures

This study examines the objectivity of Finnish listed companies' environmental reporting in their ordinary annual reports during the period 1985–1996. We study the firms' practice to disclose negative versus positive environmental events that are ex ante publicly known. As regards the entire research period, the results show that the environmental reporting of the sample firms cannot be considered objective, since the proportional share of negative events reported was negligible compared to the respective percentage for positive events. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment