The purpose of this study is to examine how lenders alter their behavior when faced with real earnings management.
Abstract
Purpose
The purpose of this study is to examine how lenders alter their behavior when faced with real earnings management.
Design/methodology/approach
This study uses the incremental R-square approach as in Kim and Kross (2005) to examine how much lenders rely on income statement and balance sheet ratios as the degree of real earnings management increases.
Findings
As real earnings management affects mostly the income statement, the authors find that lenders rely less on income statement ratios in making credit decisions in the presence of real earnings management. The authors also find that lenders do not alter their reliance on balance sheet ratios when faced with real earnings management.
Originality/value
This paper is the first to study how lenders alter their reliance on financial statements in making credit decisions in the presence of real earnings management. The findings of this paper could help the regulators set standards to improve the usefulness of financial statements. The findings of this paper could also help practitioners (borrowers and lenders) understand how real earnings management affects credit decisions.
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This paper examines whether increased director workloads are benefiting firms or are causing directors to become too busy, resulting in lower director attendance and weaker firm…
Abstract
Purpose
This paper examines whether increased director workloads are benefiting firms or are causing directors to become too busy, resulting in lower director attendance and weaker firm performance.
Design/methodology/approach
This paper conducts empirical analysis of the relationships between meeting frequency, director attendance rates and firm performance using archival data from Australia.
Findings
Attendance rates for both outside and inside directors decrease as they are required to attend more meetings. The benefits firms obtain from holding additional meetings are significantly eroded by lower director attendance.
Originality/value
This study brings together the literatures on meeting frequency, director busyness and firm performance to show that increased director workloads are only beneficial to firms if directors do not become too busy to fulfill their obligations to shareholders.
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Stephen Gray, Jason Hall, Grant Pollard and Damien Cannavan
In the context of public-private partnerships (PPPs), it has been argued that the standard valuation framework produces a paradox whereby government appears to be made better off…
Abstract
Purpose
In the context of public-private partnerships (PPPs), it has been argued that the standard valuation framework produces a paradox whereby government appears to be made better off by taking on more systematic risk. This has led to a range of approaches being applied in practice, none of which are consistent with the standard valuation approach. The purpose of this paper is to demonstrate that these approaches are flawed and unnecessary.
Design/methodology/approach
The authors step through the proposed alternative valuation approaches and demonstrate their inconsistencies and illogical outcomes, using theory, logic and mathematical proof.
Findings
In this paper, the authors demonstrate that the proposed (alternative) approaches suffer from internal inconsistencies and produce illogical outcomes in some cases. The authors also show that there is no problem with the current accepted theory and that the apparent paradox is not the result of a deficiency in the current theory but is rather caused by its misapplication in practice. In particular, the authors show that the systematic risk of cash flows is frequently mis-estimated, and the correction of this error solves the apparent paradox.
Practical implications
Over the past 20 years, PPP activity around the globe amounts to many billions of dollars. Decisions on major infrastructure funding are of enormous social and economic importance.
Originality/value
To the best of the authors’ knowledge, this study is the first to demonstrate the flaws and internal inconsistencies with proposed valuation framework alternatives for the purposes of evaluating PPPs.
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This study examines how lenders modify their behavior and their use of traditional, transaction-based lending models in credit decisions when faced with low earnings quality.
Abstract
Purpose
This study examines how lenders modify their behavior and their use of traditional, transaction-based lending models in credit decisions when faced with low earnings quality.
Design/methodology/approach
To measure the earnings quality, following Bharath, Sunder and Sunder (2008), the authors use three measures of accrual quality and combine them into a simple parsimonious measure of accrual quality. Subsequently, the authors apply the incremental R-square approach used by Kim and Kross (2005) to determine the degree to which lenders modify their reliance on financial statement ratios when faced with low accrual quality.
Findings
Consistent with prior literature, this study shows that the cost of debt is higher when accrual quality is low. In addition, this study extends prior literature by showing that lenders decrease their reliance on income statement data to make credit decisions as accrual quality decreases.
Originality/value
This paper broadens existing literature on the pricing of information risk in capital markets by being the first to show that lenders modify their reliance on financial statement data when faced with low-quality accruals. In addition, this paper extends the findings of Billings and Morton (2002) and demonstrates to managers the futility of using accrual manipulations to obtain more favorable credit terms. Lastly, this paper aids regulators and standard setters who seek to improve the usefulness of financial statements by showing that creditors do not appear to be misled by reporting choices that lower the quality of accruals.
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The article, based on an interview with their new MD, describes the market position and strategy of Talis Information Ltd. Talis claim to be market leaders in the combined market…
Abstract
The article, based on an interview with their new MD, describes the market position and strategy of Talis Information Ltd. Talis claim to be market leaders in the combined market for library management systems in academic and public libraries. Some of the Talis library system’s key features are described. As are the company’s attitudes to product development, project work and standards development.
Stephen Gray, Jason Hall, Drew Klease and Alan McCrystal
Estimates of systematic risk or beta are an important determinant of the cost of capital. The standard technique used to compile beta estimates is an ordinary least squares…
Abstract
Purpose
Estimates of systematic risk or beta are an important determinant of the cost of capital. The standard technique used to compile beta estimates is an ordinary least squares regression of stock returns on market returns using four to five years of monthly data. This convention assumes that a longer time series of data will not adequately capture risks associated with existing assets. This paper seeks to address this issue.
Design/methodology/approach
Each year from 1980 to 2004, equity betas are estimated for 1,717 Australian firms over periods of four to 45 years, and form equal value portfolios of high, medium and low beta stocks. The paper compares expected returns – derived from the capital asset pricing model (CAPM) and subsequent realised market returns – and actual returns over subsequent annual and four‐year periods.
Findings
The paper shows that the ability of beta estimates to predict future stock returns systematically increases with the length of the estimation window and when the Vasicek bias correction is applied. However, estimation error is insignificantly different from that associated with a naïve assumption that beta equals one for all stocks.
Research limitations/implications
The implication is that using all available returns data in beta estimation, along with the Vasicek bias correction, reduces the imprecision of expected returns estimates derived from the CAPM. A limitation of the method is the use of conditional realised returns as a proxy for expected returns, given that it is not possible directly to observe expected returns incorporated into share prices.
Originality/value
The paper contributes to the understanding of corporate finance practitioners and academics, who routinely use beta estimates derived from ordinary least squares regression.
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Stephen Vickers and David N Wood
IFLA's Universal Availability of Publications programme is concerned with highlighting and solving problems concerned with the widest possible availability of recorded knowledge…
Abstract
IFLA's Universal Availability of Publications programme is concerned with highlighting and solving problems concerned with the widest possible availability of recorded knowledge. Its concern includes the improvement of access to grey literature (material not available through normal bookselling channels) at both national and international levels. At the national level centralization linking bibliographic control and availability is advocated. A centralized approach has already been adopted in the UK where the British Library Lending Division has developed a fairly comprehensive collection of report literature, translations, theses, conference proceedings and back up documents to synopsis journals etc. Through its monthly publication, British Reports Translations and Theses, it is also involved with the bibliographic control of grey literature.
Debra Hiom, Dom Fripp, Stephen Gray, Kellie Snow and Damian Steer
The purpose of this paper is to chart the development of research data management services within the University of Bristol, from the initial Jisc-funded project, through to pilot…
Abstract
Purpose
The purpose of this paper is to chart the development of research data management services within the University of Bristol, from the initial Jisc-funded project, through to pilot service and planned core funding of the service.
Design/methodology/approach
The paper provides a case study of the approach of the University of Bristol Library service to develop a sustainable Research Data Service.
Findings
It outlines the services developed during the project and pilot phases of the service. In particular it focuses on the sustainability planning to ensure that research data management is embedded as a core university service.
Originality/value
The case study provides practical advice and valuable insights into the issues and experiences of ensuring that research data management is properly valued and supported within universities.
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This paper aims to clarify whether J. Walter Thompson (JWT)’s planning and research tradition gave rise to the concept of Account Planning. In addition, it seeks to analyse the…
Abstract
Purpose
This paper aims to clarify whether J. Walter Thompson (JWT)’s planning and research tradition gave rise to the concept of Account Planning. In addition, it seeks to analyse the different planning methodologies that preceded Account Planning to highlight how it emerged at JWT London. A further goal is to understand the impact of Account Planning, which sought to achieve effective advertising through detailed consumer insight and has transformed the multinational JWT as a whole and the advertising sector in general.
Design/methodology/approach
The methodology is based mainly on the analysis of primary research conducted on original files donated to Duke University Library (North Carolina, USA) by the multinational J. Walter Thompson.
Findings
Account Planning emerged in 1968 in London as a consequence of the research and planning tradition that already existed at JWT. JWT’s corporate culture established the importance of the Account Planning approach that was valued by advertisers and spread to all offices. The planning tools used by the multinational today are updated versions of those that were designed from 1960 onwards.
Research limitations/implications
The historical approach taken here precludes an analysis of the current reality of Account Planning. In future research, it would be useful to carry out in-depth interviews with professionals to explore how they apply planning tools that represent updated versions of those that were developed 50 years ago.
Originality/value
This paper’s main interest lies in the fact that it is based on original, unpublished sources, an approach that makes it possible to reassess previous findings.