Business Commons^™

Market Reaction Test On Banks & Brokers Based On Bitcoin Price History. A Look At National Commercial Banks And Security Broker, Exchanges, And Service Stocks Following The Most Volatile Swings In Bitcoin’S Price., Payton Earl

CMC Senior Theses

This paper examines if there is an inverse correlation between Bitcoin’s most volatile price swings and national commercial banks and security brokers, exchanges and service companies performance. Company performance in the dataset is measured by Cumulative Abnormal Returns during 2021 within a two-day period where Bitcoin has had the most significant uptick and downtick events. Using a market-adjusted model for my regression, it is concluded that Bitcoin’s largest uptick event did indeed have an inversely negative effect on traditional banks and trading securities companies, as the Cumulative Abnormal Returns were negative for my 107 observations and the event was statistically …

The Effects Of Ai On Recruiting In The Accounting Field, Reina Tain

CMC Senior Theses

This work investigated the impact of AI in accounting firms, particularly on the hiring scene. As AI use increases in the accounting industry, it would have a significant impact on what types of accountants firms are starting to hire, which this paper examines. This work incorporates research found through various accounting and business-related articles that discusses the impact of AI on recruiting in accounting firms. This paper found that candidates with high knowledge of technology with excellent communication and critical thinking skills are more likely to be hired by firms. The results indicate that recruiters prefer accountants that are curious …

The Merchant And The Mathematician: Commerce And Accounting, Graziano Gentili, Luisa Simonutti, Daniele C. Struppa

Journal of Humanistic Mathematics

In this article we describe the invention of double-entry bookkeeping (or partita doppiaas it was called in Italian), as a fertile intersection between mathematics and early commerce. We focus our attention on this seemingly simple technique that requires only minimal mathematical expertise, but whose discovery is clearly the result of a mathematical way of thinking, in order to make a conceptual point about the role of mathematics as the humus from which disciplines as different as operations research, computer science, and data science have evolved.

Listed Private Equity Returns: The Forecasting Power Of Premiums And Discounts, Daniel Krasemann

CMC Senior Theses

In this paper, I assess the ability of premiums and discounts to predict future listed private equity returns. I hypothesize that the premiums and discounts of the net asset value of the listed private equity funds with monthly lags hold forecasting power. I use four distinct listed private equity indices and their respective NAV P/D values for my research. To ensure my analysis is realistic in scope, I incorporate a variety of macroeconomic variables that have been proven to influence listed private equity returns. I structure my time-period analysis around the 2008-09 financial crisis. I generally find that a two-month …

Executive Option Mix And Firm Litigation Risk, Andrew Cohen

CMC Senior Theses

Compensating executives with stock options creates incentives for executives and aligns their goals with shareholders. When examining specific components of equity-based compensation, stock options have a larger incentive effect on executives compared to stock awards as options are priced as a function of stock volatility. Since the option incentive effect is more profound than the stock incentive effect, executives may take on more risk. The relationship between firm risk and litigation can be demonstrated by the pricing of directors’ and officers’ liability insurance, which protects them from the costs of litigation. The purpose of this study is to examine the …

Esg Scores As A Measure Of Risk: The Relationship Between Environmental, Social, And Corporate Governance Ratings And The Financial Performance Of U.S. Oil And Gas Companies, Lauren Kim

Scripps Senior Theses

This study investigates the association between ESG (environmental, social, corporate governance) scores on the financial performance of U.S. oil and gas companies, an industry facing significant ESG-related pressures. ESG scores evaluate a firm’s environmental impacts, social responsibility, and corporate governance practices and can be used as a form of evaluating a firm’s risk mitigation efforts. However, there is not sufficient evidence to conclude that there exists a relationship, positive or negative, between ESG scores and firm performance in this industry. Overall, the findings of this study highlight the growing interest in ESG investing and is useful for investors and firms …

Balance Sheet Strength: A Retrospective Analysis Of Corporate Liquidity And Solvency And Firm Stock Returns, Andrew Wraith

CMC Senior Theses

The onset COVID-19 Pandemic caused rippling effects throughout the global economy. Social distancing and stay at home orders shifted consumer demand, as the firmwide impact of these same policies led to supply chain shortages. The COVID-19 Pandemic induced a recession in 2020 that was unique from all others in US history. Throughout the beginning months of the Pandemic, firms rushed to raise debt, equity, and lines of credit, as public financing markets experienced increased volatility. How did the markets adapt to this sudden change? I examine the effect on stock returns of firmwide Balance Sheet strength as it changed throughout …

Intellectual Capital's Impact On Corporate Performance During The Age Of Digitalization And The Covid-19 Pandemic, Chance Sears

CMC Senior Theses

The purpose of this paper is to examine the relationship between intellectual capital and firms’ financial and market performance during the peak levels of digitalization, focusing on the COVID-19 Pandemic. Utilizing the recently validated Value Added Intellectual Coefficient (VAIC), alongside its necessary controls, I conduct an empirical analysis on North American firms over the period of 2010-2020 using fixed effects and pooled ordinary least squares analysis. Findings from the empirical analysis provide evidence that intellectual capital is a driving factor in enhancing firms’ financial and market performance. Additionally, results indicate that the COVID-19 pandemic increased the impact of intellectual capital …

Analyst Non-Gaap Reporting: When Do Equity Analysts Adjust Gaap Earnings – An Application Of Text Based Firm Complexity, Patrick Chen

CMC Senior Theses

Equity analysts adjust GAAP earnings to report non-GAAP figures that they believe better represent a firm’s current and future performance. The importance of such non-GAAP(street) figures has been determined and accepted by the literature, but the process in which analysts arrive at such figures is less understood. I apply a newly defined measure of firm complexity using text based analysis of firm annual reports and investigate its effect. When complexity increases, it becomes harder to individuate different components of a system. When that system is a firm, complexity then increases the difficulty in determining an accurate measure of performance. The …

Corporate Social Responsibility And Corporate Financial Performance: An Examination Into Fortune 500 And Djsi Firms Within Consumer-Facing Industries, Samantha Lee

CMC Senior Theses

This paper examines the relationship between a firm’s Corporate Social Responsibility (CSR) and its Corporate Financial Performance (CFP) in nine consumer-facing industries classified by the Fortune 500. Unlike prior research on the matter, the firms investigated in this study consist only of firms on both the Fortune 500 for the year 2018 and the Dow Jones Sustainability Index (DJSI) between the years 2005-2018 in order to define a clear measurement of CSR. In order to gauge investor and market sentiment, CFP is measured primarily by the firm’s stock performance in comparison to the S&P 500 as a basis. The results …

The Fall Of The 10-K Report: Measuring The Impact Of Accounting Ratios On Financial Performance, Matthew Daruty

CMC Senior Theses

The annual 10-K report has historically been the most important aspect in assessing the position of a publicly held company. However, as the flow of information has increased with the dawn of new technologies, less and less attention has been paid to these audited financial statements. In order to assess if investors are still reacting to the information contained in the annual report, this paper examines the relationship between accounting ratios and stock price in banks traded on United States stock exchanges. By examining accounting ratios instead of simply looking at Earnings Per Share, new information was revealed regarding what …

Accounting For Goodwill: The Effectiveness Of Amortization And Impairments Before And After Asc 350, Jessica Cruz

CMC Senior Theses

Prior to the implementation of FAS 142 in 2002, goodwill was amortized annually. Now, companies with goodwill on their books must test it annually for impairment. This paper examines the effectiveness of goodwill amortization and impairment of goodwill both before and after the adoption of FAS 142 by analyzing their effect on abnormal stock returns. My results regarding the effect of goodwill amortization on stock returns are inconsistent, suggesting that goodwill amortization is not useful in determining the value of a company. My results also suggest that the stock market anticipates goodwill impairments before they are announced.

The Transition Tax: Why It Was Created And How It Could Be Altered, Ryan Motter

CMC Senior Theses

In this paper, I talk about Section 965, also known as the transition tax, enacted in the Tax Cuts and Jobs Act (TCJA). First, I examine loopholes under the old tax regime that allowed for the accumulation of offshore earnings and how the TCJA closes those loopholes. After detailing the legislation of the transition tax and a comparison with Section 965 included in the American Jobs Creation Act in 2004, I compare firms’ recorded provisions of the transition tax with an estimation based on the past disclosures of firms’ permanently reinvested earnings and finds that the transition tax will generate …

Institutional Ownership In Relation To The Mandatory Audit Firm Rotation Rule And Its Effect On Audit Quality, Latisha Shah

CMC Senior Theses

Previous studies have concluded that mandatory audit firm rotation (MAFR) has not been successful in controlling the outcomes of the auditor-client relationship. Additionally, the literature concludes that high institutional ownership enhances audit quality through monitoring the management-auditor relationship. This paper hypothesizes that better corporate governance in terms of high institutional ownership percentage will enhance audit quality during a MAFR regime. Since countries that have implemented MAFR in the past have their data in their local languages, I use the special case of Arthur Andersen clients based in the US as my treatment group. I carry out a descriptive statistical analysis …

Is The Accruals Anomaly More Persistent In Firms With Weak Internal Controls?, Kanishk Kapur

CMC Senior Theses

In 1996, Sloan identified the accruals anomaly, in which the negative relationship between the accruals component of current earnings and subsequent stock returns can be exploited to generate excess returns. One would expect the accruals anomaly to dissipate and ultimately disappear as investors take advantage of the now-public information. However, nearly two decades later, it persists as one of the most prominent and contentious anomalies; its magnitude of current and future excess returns still remain controversial. The main reason for its persistence is that extreme accrual firms possess characteristics that are unappealing to most investors. These characteristics, which include insufficient …

The Balance Between Financial And Quality Performance In For-Profit Hospitals Versus Non-Profit Hospitals, Blake Seidner

CMC Senior Theses

Recent trends of financial distress for non-profit hospitals and the uptick in acquisition of these hospitals by for-profit entities indicate different focuses from the management of each type of hospital. Using data on hospital quality and basic financial measures, this study examines shift in the balance of financial and quality performance. The dataset focuses on private non-profit and for-profit hospitals with low bed counts, ranging from 50-200 total beds. Results indicate a positive relationship between for-profit status and basic financial performance measures, such as profitability, and a negative relationship with patient experience, cost reduction for the patient, and overall quality. …

Blockchain And The Future Of The Audit, Connor Ortman

CMC Senior Theses

“In the future, virtually every function in the world of financial services will be displaced, disintermediated and decentralized. The Internet gave us a powerful way to share and access information. Blockchain now gives us a powerful way to share and access value.”

During a February 2017 AICPA roundtable, Chairman of the Wall Street Blockchain Alliance and previous Global Head of Trading Analytics at Thomson Reuters, Ron Quarantana spoke to the revolutionary scale of blockchain. Quaranta, viewed by many as an expert in financial technology, predicts that the adoption of blockchain, both by the Big Four accounting firms and their clients, …

The Effect Of Mandatory Adoption Of Ifrs On Transparency For Investors, Crystal Anderson

CMC Senior Theses

This paper examines the effect of the mandatory adoption of the International Financial Reporting Standards (IFRS) on transparency for investors by measuring the increase in earnings management during the post-adoption period of IFRS. One sign of earnings management is current year earnings being only slightly higher than the previous year’s earnings. An increase in earnings management means a decrease in accounting quality and a decrease of transparency for investors. By comparing firms that mandatorily adopted IFRS to similar benchmark firms in terms of strength of legal enforcement, book-to-market ratios, market values and net incomes, I am able to run empirical …

Optimize Your Fitness, Optimize Your Business: The Balanced Scorecard, Analysis And Application For The Crossfit Affiliate, Jordan G. Aronowitz

CMC Senior Theses

The Balanced Scorecard for the CrossFit Affiliate will provide unprepared or inexperienced managers with the necessary information to make informed operational decisions. The Balanced Scorecard incorporates financial data, customer satisfaction, internal operations, and future growth to create a series of cause-and-effect relationships that illustrate how decisions in one aspect of a business affect others. The Balanced Scorecard particularly benefits inexperienced managers leading small businesses. As overall small business growth increased, the boutique fitness industry expanded. The CrossFit brand rose in conjunction, but because corporate leaders insist on a hands-off licensing model, affiliate owners do not receive assistance from CrossFit corporate …

The Effect Of Increased Regulation On Option Use Within The Information Technology Industry, Ahmed H. Eltamami

CMC Senior Theses

Exorbitant executive compensation packages have drawn large criticism from the public eye and with the recent financial crisis and the previous tech bubble opinion on executive incentives has forced government institutions to respond. Over the past two decades the SEC and FASB have aimed to respond to the public and with three large regulation changes in the 2000s, pay for performance compensation has gone through many changes. In this study I build on previous work in an attempt to answer whether or not executives within the Information Technology industry have seen a larger decline in option compensation when compared to …

Obscure U: Complexity And Complicity In For-Profit University Financial Statements, Caroline R. Counts

CMC Senior Theses

The prominence and size of For Profit Universities (FPUs) today has led to increased regulation and oversight. One important regulation is the 90/10 rule which states that FPUs cannot receive more than 90% of their revenue from government Title IV funds. The regulations require publicly traded For Profit Universities to not only comply with the 90/10 rule but also to disclose their score on their financial statements. There however, is little research studying the quality of these disclosures. My paper studies the readability and complexity of the 90/10 score disclosure in relation to the 90/10 score. My findings suggest that …

10b5-1 Plans And Earnings Management By High-Level Executives, Joshua A. Thomas

CMC Senior Theses

Using historical firm financial and insider trading information, this paper examines whether high-level insiders manipulate earnings ahead of their own 10b5-1 equity transactions. The empirical evidence suggests that high-level executives appear to manipulate earnings through real activities such as abnormal discretionary expenditures and abnormal cash flows from operations to influence equity prices ahead of their own transactions under Rule 10b5-1. Evidence also suggests that executives appear to be unlikely to engage in earnings management through highly scrutinized means such as accruals. An interpretation of these results is that high-level executives may be using 10b5-1 plans as an offensive tool to …

Player Compensation And Team Performance: Salary Cap Allocation Strategies Across The Nfl, Max Winsberg

CMC Senior Theses

The National Football League’s salary cap constrains the available resources each franchise is allotted to spend on player personnel. I examine the effects of executive management’s compensation allocation strategies on team performance from 2006 to 2013. The findings suggest that spending more than the league-average on offensive lineman hurts overall team performance. Spending above the league average on both the offensive line and quarterback positions negatively affects offensive performance as well. This supports previous research stating that taking a superstar-approach to cap distribution negatively affects team performance. Furthermore, I find evidence of increased compensation inequality among players under the Collective …

Better Measurement Of Governments Through The Application Of Accrual Accounting For Government-Wide Financial Statements, Caleb D. Cunha

CMC Senior Theses

In this paper, we will look at and discuss the differences and similarities between governmental entities and for-profit business. We will mainly discuss the different goals, purposes, users, and issues between government and for-profit accounting in order to show that changes to governmental accounting standards would lead to more transparency and accountability, which in turn would help determine the success of an individual governmental entity. We will conclude by looking at countries that have implemented accrual accounting for government-wide financial statements, and we will explain how the adoption of accrual accounting for government-wide financial statements in the United States will …

From Legally Confidential To Financially Confident: Resolving The Tension Between Lawyers And Auditors Over Contingent Liability Disclosure, Samantha Nicole Kunz

CMC Senior Theses

Auditors review documented financial figures to test for their accuracy and materiality. Lawyers analyze evidential facts and records to build sound legal arguments. These parties work toward a mutual purpose: to present their clients as legitimate and compliant businesses. But what happens when the concrete facts upon which lawyers and auditors base their work are obscured by their inability to see into the future? In other words, how can these professions conjunctively handle potential future obligations brought about by contingent liabilities?

This study will attempt to resolve the tensions that emerge between lawyers and auditors when tasked with estimating the …

The Value Of Luxury Brand Names In The Fashion Industry, Tricia Wang

CMC Senior Theses

Brand names in the Fashion industry are often times perceived as overpriced and unreasonable. Nevertheless, the success of well-known luxury brands in the industry has been growing domestically and internationally at a breakneck pace. Forbes publishes an annual list on the top 100 most valuable brands annually using a formula of their own making. 8 out of these 100 brands are luxury fashion brands. Why are luxury fashion brands so coveted? It can’t only be because of humans’ desires to own superior goods or even for the sake of their egos. In this paper I will delve into the hidden …

Why Does The U.S. Continue To Use Gaap And Will It Ever Converge To Ifrs?, Hester Lam

CMC Senior Theses

The United States has a long history of doing things differently than other countries. Its accounting standards are no different; to date, it continues to use its own Generally Accepted Accounting Principles and have yet to converge to the International Financial Reporting Standards ("IFRS") as set by the International Accounting Standards Board. In 2008, the U.S. Securities and Exchange Commission ("SEC") Chairman Christopher Cox published a press release in which the SEC published for public comment a roadmap towards convergence by 2014. However, in subsequent years, Memorandum of Understandings published by the IASB and the United States' Financial Accounting Standards …

Differences Between Ind As And Ifrs: Can Full Convergence Ever Occur Between The Two?, Shoubhik Pal

CMC Senior Theses

Since the turn of the millennium, there have been various attempts by Indian regulators as well as the government to converge the current accounting system in India (tentatively called Indian GAAP) to a system similar to IFRS, considered today to be the prevalent worldwide set of accounting standards. Indian GAAP has had its fair share of criticism, the most telling being that it avoids the principle of substance over form in various topics in its literature. The first announcement of a plan to converge came in July 2007. While suffering various setbacks through delays in recent years, the current roadmap …

Friends In High Places: Measuring The Effects Of Compensation Committee Characteristics On Ceo Pay Packages In 2013, Danielle M. Knott

CMC Senior Theses

In the past decade, public scrutiny surrounding rising levels of executive compensation has led to more stringent independence requirements for compensation committees. However, there is little research studying the effects of compensation committees on executive pay from the time these new requirements were implemented. My paper studies the effects of compensation committee chair personal ties to the CEO, economic interests, and group committee characteristics on both the level and structure of CEO compensation. My findings suggest that certain committee chair personal ties to the CEO are associated with both a higher level of CEO compensation and a higher percentage of …

Credit Ratings And Firm Litigation Risk, Huixian Xie

CMC Senior Theses

This paper looks at whether firms’ credit ratings are negatively affected by litigation risk after controlling for known factors that affect credit ratings. The conventional wisdom is that litigation risk and credit ratings have an inverse relationship. However, my hypothesis is that the inverse relationship will not be stable if the model of credit ratings has taken other factors into account. The methodology first constructs a model of litigation risk, and then regress the credit ratings on the measurement of litigation risk. Previous empirical research on litigation risk measurement uses industry proxies as indicators for litigation risk. In this paper, …