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The decisions marketing managers make on advertising expenditures are vital to maintaining the sales and profitability of a firm. However, these decisions have not been taken into account to a great enough extent when determining a firm’s performance. The purpose of this paper is to better understand the marketing-finance interface and to reveal the effect marketers’ discretionary advertising expenditures can have on firm performance. In particular, the real activities method of managed earnings (ME) will be used to study this phenomenon.

The initial sample consisted of all the companies that appear in the North American COMPUSTAT files over the period 1970-2014. Since the focus here is on the effect of discretionary advertising expenses on firm performance, the authors restricted the samples to only include observations with advertising expenses. Therefore, the sample included 14,732 firms.

OLS regressions revealed a negative relationship between marketers’ discretionary advertising expenditures and firm performance using return on assets as a proxy for firm performance. Additional regressions displayed similar results for return on sale and return on cash adjusted asset proxies. Fixed effect and Tobit regressions also confirmed these findings. Finally, this effect was especially true for low performing firms. The economic significance of these findings on firm performance is also discussed.

The decisions made by marketing managers on advertising promotional efforts impact sales directly and brand equity indirectly, but they can also have an impact on firm performance. Therefore, it is important for investors to understand the level of ME in relation to marketing and advertising decisions that are taking place at their firm.

The purpose of this paper is to investigate the influence of executive compensation on the propensity to manage earnings. In particular, the authors examine an executive contractual clause known as a golden parachute (hereafter GP is interchangeably used). Usually, the triggering of a GP occurs for the following reasons: in a takeover, in termination of employment, and if the executive remains with the company through a recessionary cycle. Specifically, the authors ask the following questions: for firms that their CEO have a GP, do these firms manage earnings more? Does the age of the CEO matter for firms that have adopted a GP concerning the managing earnings?

The sample is based on a review of the literature on GPs and managed earnings. the authors’ data come from COMPUSTAT, CRSP, EXECUCOMP and Risk Metrics, and consist of 1,184 US firms from 1992 to 2011. A GP is binary, whereas the authors represent managed earnings through accruals and real activity.

The authors find that the propensity to manage earnings varies on the type of methods strategically used. However, controlling for the effect of SOX reveals that GP firms are more likely to manage earnings. Younger CEOs are less likely to exacerbate earnings upward.

The authors are limited to small sample based on when the data were collected.

The evidence shows that GP alleviates CEOs’ concerns on short-term profits. However, it entrenches CEOs. Particularly, CEOs with a GP are more likely to exacerbate earnings. Thus, there is a need for compensation committees to give considerable attention to how GPs are assigned.

To the authors’ knowledge, this is the first study that explores the effect of a GP on a firm’s propensity to manage earnings.

This paper aims to examine the impact of national culture on private credit availability. The authors particularly focus on the masculinity dimension, as previous studies have not been able to reconcile this dimension in terms of results aligning with expectations.

Least-squares regression with country-cluster standard errors is used to estimate the impact of a nation’s cultural dimensions. Culture is assessed using Hofstede’s six cultural dimensions: masculinity, power distance, uncertainty avoidance, individualism, long-term orientation and indulgence. Estimation controls for country-level measures of economic growth and development, inflation, financial market development and the institutional, legal and bank environments. Data on more than 70 countries were collected from 2005 to 2014.

The authors find the masculinity dimension of culture has a significant negative impact on private credit access. Moreover, this result is driven by middle-income versus high-income countries. Interestingly, the authors also find the power distance dimension has a significant negative impact; however, this result is driven by high-income versus middle-income countries. Overall, these results are consistent with the authors’ argument that masculinity may be capturing traditionally defined gender roles, that masculinity (as the authors define it) is different from what power distance is capturing and that the impact of masculinity is influenced by a country’s economic stage.

The authors’ interpretation of masculinity, coupled with their results, presents researchers with an alternative perspective of a cultural dimension that previous studies have not been able to reconcile in terms of results aligning with expectations. Moreover, the authors show that the impact of the cultural dimensions on private credit differs for high- and middle-income countries, and thus has important implications.

This paper aims to revisit the extant evidence on gender bias in the market. Specifically, it revisits reaction to CEO announcements. Also, it explores whether the development of the bias over time and by firm size aligns with existing theory.

The paper examines cumulative abnormal returns around CEO announcements from 1992 through 2016 using a modified event study methodology. This evidence shown examines market reactions over time and by firm size.

Financial markets react more favorably to male CEO announcements, with a cumulative abnormal return of 49 basis points above the reaction to their female counterparts. Moreover, the paper finds that market reaction varies over time, which may be because of the increasing proportion of female CEOs, and by firm size, which may be due to the differences in new information available to investors.

Limitations include sample size due to the paucity of female CEO announcements. This paper does not examine the effect of industry, detailed CEO characteristics or announcement content on market reaction. In addition, using an extended event window may increase the likelihood of capturing confounding events, such as mergers or earnings announcements, which limits the interpretability of the results.

Gender bias in financial markets creates another institutional barrier for the advancement of female professionals, as well as implies inefficient capital allocation in markets.

The literature in this field is still inconclusive. Furthermore, bias development over time and the effect of information on bias remain unexplored. This study aims to fill that gap; furthermore, it introduces an extended event-window approach.

The purpose of this paper is to examine the influence of bank structure and earnings management on bank performance in international markets. Specifically, the authors empirically examine non-foreign banks in the following emerging countries: Brazil, China, India, Mexico, Nigeria, Russia, and South Africa.

A review of loan loss portfolio and bank’s power structure is examined to formulate testable conjectures. The authors used data collected from Bankscope for the aforementioned countries. The data range is from 1997 to 2009.

The results suggest that: first, bank market structure and earnings management have a significantly negative influence on bank performance. Second, the negative influence is more pronounced in banks with higher level of concentration and earnings management.

The evidence suggest that banks with monopoly power have a greater incentive to establish lending relationships, and monopoly enhancing regulation in the financial sector at the time of the Civil War contributed to industrialization in the USA. The evidence in the emerging market suggest that monopoly power (bank structure) and propensity to manage earnings leads to lower bank performance. As such, helping bankers in understanding the effect of their bank structure in relation to their performance.

To the author’s knowledge, this is the first study that explores the determinants of managed earnings and bank structure on bank performance in emerging markets.

Talented managers arguably remain quintessential to firm value and performance. While the literature offers evidence for the long-term orientation of talented managers, there is a paucity of evidence on the short-term performance of managers. Here, we examine the relationship between managerial talent and working capital management (WCM).

This study primarily employs a panel fixed-effect method controlling for firm-year and firm-industry for non-financial and non-utility firms for the years 1980 through 2016. Also, the authors control of potential bias that may impact the result. These controls include social capital, financial constraints and tests for endogeneity and spurious correlation.

The authors find the association between managerial talent and WCM to be positive and significant. The results indicate that talented managers have a higher cash conversion cycle. The empirical evidence still holds after controlling for social capital, religiosity and financial constraints. Also, the evidence still holds by employing an interaction term between Tobin's Q as a proxy for investment opportunities and talented managers.

The finding may lend credence to executive contracts. Human nature, by default, is only vested on a net benefit for self-aggrandization. Self-aggrandization can be evident through structures in managerial contracts. These contracts usually tie consequences to long-term growths. If a benefit is offered based on short-term operational goals, talented managers may do more to the management of working capital.

In the managerial talent literature, talents reflect a holistic picture of one that can succeed in both the short-term and long-term goals of a company. Here, the authors show that talented managers are inefficient in meeting short-term goal – working capital management. Thus, the authors add to the research by providing evidence that talented managers are myopic.

This study examines the efficacy of compensation in encouraging corporate executives to promote corporate social responsibility (CSR). In particular, it closely examines the effect of a golden parachute (GP) on an executive's behavior toward CSR.

This study uses longitudinal data on 1,301 US firms for the period from 1993 to 2013. The data comes from Compustat, MSCI ESG STATS, RiskMetrics and ExecuComp.

We find an inverse association between current and long-term compensations and GP on firms' CSR. However, a test on the moderating effect discloses that a GP and long-term compensation jointly and positively increase the firms' CSR performance. This increase supports the idea that executives with a GP seek to maximize their long-term wealth by approving CSR projects that add value. The results also show that female executives are more likely to promote CSR than their male counterparts, and older executives are less willing to engage in CSR projects.

Adding a GP contractual clause to the executive compensation package could encourage greater engagement in CSR projects. The CEO with a GP will ensure that the firm engages in only value-enhancing CSR projects; this should align the interest of the society (greater firm engagement in CSR) with the interest of the firm (value maximization).

This study contributes to the literature by examining the moderating effect of a GP on the association between CSR and executive compensation.

A seemingly certain commonality in the extant literature is that firms that engage in the practice of managing earnings do so to massage their performance. The purpose of this paper is to examine the pecuniary effect of the prior cost of capital and a firm’s location on the propensity for firms to manage earnings.

This study uses longitudinal data for US firms from COMPUSTAT and Center for Research in Security Prices from 1980 to 2010 for an average of 1,627 firms. The authors apply several regression methods – namely: least squares regressions, quantile, interaction-terms, seemingly unrelated and endogeneity test – and come to similar conclusions.

The authors find that managed earnings behavior varies depending on the prior cost of capital. Managers positively exacerbate earnings when the firms’ prior cost of debt is high. Managers inverse its exacerbation of earnings when the firms’ prior cost of equity is high. This effect remains the same in all regression techniques applied in this paper.

The authors contribute to the literature primarily in three areas. First, by considering the effect of a firm’s location jointly on a firm’s prior cost of capital, the authors show that a firm’s environment amplifies the managers’ discretionary actions. Second, by showing that the prior cost of capital which a firm pursues can inundate the managers to pursue and exacerbate earnings. Finally, the evidence suggests that adjustment in previous years for debt obligated firms and that location affects managed earnings behavior.