Given their prevalence in recent years, earnings management and financial restatements have been at the center of much of the discussion surrounding corporate malfeasance. This study builds a probability model for predicting the likelihood of earnings restatements by analyzing the trends in and the deviations from the industry averages of the return on assets, accounts receivable turnover, net profit margin, and operating cash flow to net income measures. Data are obtained for a sample of 104 firms (restating as well as non-restating) for the 2000 to 2001 period. The results suggest that deviations from the industry average of the accounts receivable turnover and the variability in the cash flow to net income provide good barometers for detecting fraudulent accounting. Potential restating firms have higher accounts receivable turnover rates than their industry counterparts and downward trends in their cash flow to net income, so an increase (decrease) in the accounts receivable turnover (operating cash flow to net income) significantly increases (decreases) the likelihood of a restatement, at least in the current study.
This paper examines the location of innovations within solar technology, using U.S. patent citation data to trace their diffusion over time. Knowledge clustering is clearly present. We employ multivariate left-censored Tobit regression analysis to control for identifiable factors, to examine whether the distance between successive innovators has changed over time. We find the distance to be increasing slightly over time, both when considering all citations and only inter-city transfers.
This paper examines the evidence on the clustering of innovators within the telecommunications sector, using U.S. patent citation data to trace their locations over time. While clustering is clearly evident, we use multivariate left-censored Tobit regression analysis to control for identifiable factors, showing that the distance between successive innovators has been rising over time, perhaps even exponentially.
Seventeen years after 10 USC 654 banned openly gay service members on the grounds of negative impacts to unit cohesion, military effectiveness, morale, good order and discipline, the United States officially military ended "don't ask, don't tell." During this period, significant evidence emerged from the actions of other western US allies revealing that the biggest story of repeal was no story at all. Remaining quietly behind the public discourse, many political and senior military leaders refused to acknowledge the evidence that ran contrary to the fundamental arguments set forth in the current policy. The most notable effect is a persistent gap between the martial masculine values inherent in military culture and the evolving attitudes towards the society that pays the bills. Although DADT repeal has been treated as a policy issue, the reality is that until military leaders acknowledge it as a leadership issue, inequity between the demographics within the armed forces will persist.
This study shows how social capital affects the outreach and operational self-sufficiency of microfinance institutions (MFIs) around the world. Defining social capital as social networks, social norms, and trustworthiness, this research merges quantitative data from the Microfinance Information Exchange and World Values Survey to empirically test a which aspects of social capital have the greatest influence on MFI performance in the presence of an endogenous peer effect between MFIs. Regression results show that aspects of social capital have a direct influence on MFI performance, suggesting a tradeoff between outreach and sustainability, and display a strong endogenous peer effect.
The current study investigates the recent mortgage crisis to determine whether deteriorating aggregate loan-to-value (LTV) ratios resulted in more acute default responses to depreciating home prices. We find evidence that default rates did not behave erratically or disproportionately to falling housing values during the subprime crisis, but we found some proof that the aggregate LTV ratio was associated with increased foreclosure rate volatility.
This paper estimates the association between HIV knowledge and risky sexual behavior in India. Using data from the third wave of the national demographic survey, we find that better HIV related knowledge does not always promote safer sexual practices. While, better HIV knowledge increases the likelihood of condom use, it also increases the likelihood of premarital sex, and reduces the likelihood of abstinence. These effects are much stronger for males when compared to females. These results also suggest, albeit indirectly, that informational and condom distribution campaigns are not necessarily promoting safer sexual practices in India.
Using over 200,000 U.S. patent citations, we test whether knowledge transfers in the transportation sector are sensitive to distance, and whether that sensitivity has changed over time. Controlling for self-citation by inventor, assignee and examiner, multivariate regression analysis shows that physical distance is becoming less important for spillovers with time, albeit in a nonlinear fashion.
We report results from a simultaneous bilateral bargaining experiment with attention to the effects of a settlement bonus on strategic decision-making behavior. In instances with a sufficiently large settlement bonus, truthful revelation emerges as the dominant strategy. However previous work (Parco and Rapoport, 2004) has experimentally tested this ―Bonus Effect‖ and found that although the presence of a settlement bonus improves efficiency, behavior falls drastically short of the normative predictions. This finding illustrates the persistent tendency of decision makers to bid strategically, i.e. shading their bids, even when truthful revelation is a strictly dominant strategy. Herein we investigate the influence of the framing of information and look for ways to nudge decision makers toward making better choices in these strategic environments. Additional results from an adaptive reinforcement-based learning model are discussed as they relate to a potential innate bias for strategic misrepresentation even when contrary to self-interest and collective-interest.
The most recent financial crisis has spurred a number of mergers and acquisitions in the financial industry, specifically banks. This study examines the hypothesis that mergers and acquisitions did not produce better performing institutions and industries during the 2006 to 2008 period. Data were compiled for six accounting-based ratios for 105 firms directly involved in mergers or acquisitions during this period. An empirical comparison of both firm-to-firm and firm-to-industry performance shows that firms did not benefit from the mergers for the majority of ratios tested. On the whole, these results reveal the inefficiencies of mergers and acquisitions, supporting the hypothesis of this study.
This paper examines the location of innovations within pharmaceutical technology, using U.S. patent citation data to trace the knowledge flows over time. It is clear that knowledge clustering is certainly present. Our study utilizes multivariate left-censored Tobit regression analysis to control for identifiable factors, to examine whether over time the distance between successive innovators has changed. We find the distance to be increasing significantly over time, both when considering all citations and only inter-city transfers.
The final topic in a series looking at financial management from a theoretical perspective, working capital management provides the focus of the current article. We investigate how three key axioms—the risk-return tradeoff, agency conflicts, and stockholder wealth maximization—relate to this activity that occupies much of the financial manager’s time.
This paper examines the location of innovations within green technology, using U.S. patent citation data to trace their inter-generational knowledge flows over time. Clustering is clearly evident, and we use multivariate left-censored Tobit regression analysis to control for identifiable factors, to show that the distance between successive innovators has not been rising over time. The interesting exception is nuclear energy in which distance appears to be decreasing over time. If we consider only inter-city transfers, the waste management also becomes more concentrated over time, while transportation declusters.