Business Commons^™

Does The Presence Of Foreign Investors Affect Financial Reporting Quality In Philippine Publicly Listed Firms?, Natasha Amber Y. Cabiltes, Megan Justine Siao Beltran, John Miguel Roger Dela Cruz Benito, Gianna Zenovia Domingo Agaton, Mariel Monica R. Sauler, Angelo A. Unite

Angelo King Institute for Economic and Business Studies (AKI)

Reinstate accounting conservatism in the Conceptual Framework – Our findings should be of interest to accounting standard setters, given the ongoing debate on the necessity for accounting conservatism as a characteristic for useful financial statements after its initial removal from the conceptual framework in 2010. While there are arguments that conservatism violates the neutrality of financial reports, further discussions show that conservatism can give a more faithful representation of firm performance (Cooper, 2015; International Accounting Standards Board, 2018).

Side Letter Governance, Elisabeth De Fontenay, Yaron Nili

Faculty Scholarship

A standard feature of the private equity industry, “side letters” are confidential agreements between the sponsor and individual investors that give the latter special rights, beyond those that apply to other investors in the private equity fund. Yet side letters have become a flashpoint for prominent critics of the industry, who argue that they allow private equity sponsors to benefit their favored investors at the expense of smaller, less sophisticated ones. Others have argued that, to the contrary, side letters are merely an efficient means of price discrimination—charging different prices to different investors, according to their willingness to pay—a practice …

How Much Do Investors Care About Social Responsibility?, Scott Hirst, Kobi Kastiel, Tamar Kricheli-Katz

Faculty Scholarship

Perhaps the most important corporate law debate over the last several years concerns whether directors and executives should manage the corporation to maximize value for investors or also take into account the interests of other stakeholders and society. But, do investors themselves wish to maximize returns, or are they willing to forgo returns for social purposes? And more broadly, do market participants, such as investors and consumers, differ from donors in the ways in which they prioritize monetary gains and the promotion of social goals?

This project attempts to answer these questions with evidence from an experiment conducted with 279 …

Why Should Christians Care About Bitcoin?, Jesse L. Veenstra

Faculty Work Comprehensive List

"Given the strong stances and opinions on Bitcoin and the religious language often attached to it, it’s clear we should continue to analyze Bitcoin from a particularly Christian perspective."

Posting about ­­­­­­­­handling cryptocurrencies responsibly from In All Things - an online journal for critical reflection on faith, culture, art, and every ordinary-yet-graced square inch of God’s creation.

https://inallthings.org/why-should-christians-care-about-bitcoin/

Cryptocurrencies: A Craze Or Crazed?, Jesse L. Veenstra

Faculty Work Comprehensive List

"The craze of Bitcoin and the headlines of massive gains test the diligence and patience of investors."

Posting about ­­­­­­­­the benefits and pitfalls of cryptocurrencies from In All Things - an online journal for critical reflection on faith, culture, art, and every ordinary-yet-graced square inch of God’s creation.

https://inallthings.org/cryptocurrencies-a-craze-or-crazed/

Monte Carlo And Bootstrapping Carry Trade Simulations In Excel, Tom Arnold, C. Mitchell Conover, Joseph Farizo

Finance Faculty Publications

In a currency carry trade, an investor borrows money in a low interest rate currency and invests in a high interest rate currency. The trade is profitable if the future exchange rate does not adjust to the interest rate differential. After downloading exchange rate data, a Monte Carlo simulation of a carry trade is performed in Excel based on a normal distribution and the data’s mean and standard deviation. A bootstrapping carry trade simulation exercise is also generated by randomly selecting observations from the historical data. In contrast to the Monte Carlo simulation, the bootstrapping exercise preserves the skewness within …

Making Money From Cryptocurrency? The Taxman May Call On You, Hern Kuan Liu, Vincent Ooi

Research Collection Yong Pung How School Of Law

Miners, forgers, hobbyists, traders – different rules apply. Just don’t assume crypto investment is somehow immune to taxation.

Investment Patterns In Mountain West States, Counties, And Nevada Cities 2005-2019, Peter Grema, Zachary Walusek, Katie M. Gilbertson, William E. Brown Jr.

Economic Development & Workforce

The purpose of this fact sheet is to summarize findings on capital flows across Mountain West states and counties, and within Nevada cities. The “Gauging Investment Patterns across the US” report by the Urban Institute present findings of overall volume of capital deployed, racial equity of investments, and income equity for each respective geographic area. The full report further breaks down these three main categories into 18 other metrics.

Conjectures Of English And Uk Economic Surplus, Investment, Tax Revenues And Deficit Amounts From The 13th To The 19th Century, Thomas E. Lambert

Faculty Scholarship

This paper attempts to estimate trends in the levels of economic surplus, public and private investment, and national government surpluses and deficits from accumulated capital income, taxation, and rents estimated by different economic historians for England and the UK. The data support historical accounts that income per capita growth begins to increase around the 1600s in Britain perhaps due to the level of capital, tax, and land income achieving an adequate threshold amount. According to some historians, this would also be about the time of capitalism’s ascent as the dominant economic system in England. Even then, dramatic increases in investment …

The Value Perspective: The Case Of Warren Buffet And His Investment Behavior Towards Apple, Walmart And Amazon, Shanhong Wu, Kermit Kuehn, Jing Jiang

WCBT Faculty Publications

In this paper, we use metrics of Ben Graham’s value investing principle to examine the actions taken by Warren Buffet toward three prominent stocks: Amazon, Apple and Walmart. We find that decisions of investment/dis-investment and not-investment by Buffet toward the stocks are largely in line with Graham’s view on value investing. This paper provides in-depth analysis of value for three stocks and relates to research on the book-to-market anomaly in the finance literature.

The Opportunity Zones Program Provides High Returns On Investments, Kane Moran

Honors Program Theses and Projects

The Opportunity Zones Program is a new tax incentive established in the Tax Cuts and Jobs Act of 2017. The program aims to direct investors towards low-income communities in the United States by providing more attractive investment prospects. The end goal of the program is to disrupt the unhealthy trend of geographic inequality caused by a disproportionate number of investments being funneled to a select few areas of the U.S. On a large scale, the benefits include a more balanced economy across the entire nation, while also providing tax benefits for investors, which can contribute to a higher return on …

Study Of The Impact Of The Great Recession On The Relation Between Earnings Surprises And Stock Returns, Benjamin Anderson, Stoyu Ivanov

Faculty Publications

This paper examines the impact of the Great Recession on the relation between earnings surprises and stock returns and examines the role that informed and uninformed investors play in the formation of the post-earnings announcement drift (PEAD). We use quarterly earnings surprises (SUE), firms' standardized unexpected returns, calculated as actual earnings minus expected earnings, scaled by stock price one day prior to the earnings announcement, and one-year future stock returns, the subsequent twelve-month abnormal stock returns, calculated as the difference between the firm's buy-and-hold return and the value-weighted market buy-and-hold return, to test whether the Great Recession had an impact …

Benefits Of Relationship Banking: Evidence From Consumer Credit Markets, Sumit Agarwal, Souphala Chomsisengphet, Chunlin Liu, Changcheng Song, Nicholas S. Souleles

Research Collection Lee Kong Chian School Of Business

Using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers, we show that relationship accounts exhibit lower probabilities of default and attrition, and have higher utilization rates, than non-relationship accounts. Dynamic information about changes in the behavior of a customer's other accounts at the same bank helps predict the behavior of the credit card account over time. These results imply that relationship banking offers significant potential benefits to banks: information the lender has at its disposal can be used to mitigate credit risk on the credit card account.

An Investment Guide For Millennials, Joshua Perkins

Senior Honors Projects

While almost a majority of Gen Xers and Baby Boomers invest in the stock market, only a mere one-third of Millennials invest. In today’s economy, Millennials experience a range of financial challenges, including student debt, rising rents, and lower starting salaries. A recent study has found that the average retirement age for Millennials will be 75 years old, 10 years older than the average retirement age today. Most young adults do not realize the importance of saving, investing early, and the power of compounding returns in order to be more financially stable in the future.

Over the course of my …

Director Networks And Credit Ratings, Bradley W. Benson, Subramanian R. Iyer, Kristopher Kemper, Jing Zhao

Business Faculty Publications and Presentations

We explore the effect of director social capital, directors with large and influential networks, on credit ratings. Using a sample of 11,172 firm‐year observations from 1999 to 2011, we find that larger board networks are associated with higher credit ratings than both firm financial data and probabilities of default predict. Near‐investment grade firms improve their forward‐looking ratings when their board is more connected. Last, we find that larger director networks are more beneficial during recessions, and times of increased financial uncertainty. Our results are robust to controls for endogeneity. Tests confirm that causality runs from connected boards to credit ratings.

What You Need To Think About Before Investing In Bitcoin And Other Cryptocurrencies, John Visser

Faculty Work Comprehensive List

Since lots of techies got excited about Bitcoin and began to both use and accept it as an alternative form of money, we need to evaluate its suitability as money to determine if it is likely to have lasting value.

“Optimizing The Performance Of Mean-Variance Portfolios In Various Markets: An “Old-School” Approach”, Roberto Stein, Orlando E. Contreras-Pacheco

Department of Management: Faculty Publications

The authors study the performance of mean-variance optimized (MVO) equity portfolios for retail investors in various markets in the U.S. and around the world. Actively managed equity mutual funds have relatively high fees and tend to underperform their benchmark. Index funds such as exchange traded funds still charge appreciable fees, and only deliver the performance of the benchmark. The authors find that MVO portfolios are relatively easy to manage by a retail investor, and that they tend to outperform their benchmark or, at worst, equal its performance, even after adjusting for risk. Moreover, they show that the performance of these …

Anticipation And Reaction To Going Concern Modified Audit Opinions By Sophisticated Investors, Marshall A. Geiger, Abdullah Kumas

Accounting Faculty Publications

The purpose of this paper is to examine whether institutional investors (i) anticipate a distressed firm's receipt of a first‐time going‐concern modified audit opinion, and (ii) react to a first‐time going‐concern modified opinion by engaging in abnormal net selling of firm shares. Using a proprietary database of US institutional investor trades, we find that institutional investors are net sellers of first‐time going‐concern opinion firms beginning 6 months before the release of the report and remain net sellers through the subsequent 3 months. We also find that the severity of the reasons auditors modify their opinions is associated with increased trading …

Additional Evidence On The Impact Of The International Financial Reporting Standards On Earnings Quality: Evidence From Latin America, Mauricio Melgarejo

Scholarship and Professional Work - Business

The purpose of this paper is to explore whether the adoption of the International Financial Reporting Standards (IFRS) has an impact on the quality of earnings in Latin America. Studying a sample offirms from Argentina, Brazil, Chile, Mexico, and Peru, I find that management reports a lower level of discretionary accruals after the implementation of the IFRS. In addition, this study provides evidence that earnings are more persistent and stock prices are more associated with earning numbers after the application of IFRS. This paper provides evidence that earnings quality has increased after the adoption of IFRS in Latin America.

Fixed Costs, Audit Production, And Audit Markets: Theory And Evidence, Tracy Gu, Dan A. Simunic, Michael T. Stein

Accounting Faculty Publications

We analyze the role of discretionary joint fixed costs in audit production. Given such costs, the investment decision and production of audit services must be analyzed over a client portfolio. We model this problem, and use monotone comparative statics (Milgrom and Shannon [1994]) to show the implications of variations in client-specific losses and the number of clients for the optimum level of fixed investment and auditassurance. We develop four hypotheses concerning the relations between audit quality and (1) the magnitude of potential client-specific losses; (2) average client losses in a portfolio; (3) the number of clients in a portfolio; and …

Lotteries And Gambling Vs. Investing, John Visser

Faculty Work Comprehensive List

"Gambling and lotteries feed the human tendency to want to get rich quickly with minimal effort – perpetuating both unrealistic fantasies and counterproductive values and behaviors."

Posting about the stewardly use of money­­­­­­­­ from In All Things - an online hub committed to the claim that the life, death, and resurrection of Jesus Christ has implications for the entire world.

http://inallthings.org/lotteries-and-gambling-vs-investing/

Cultural Influnces On Risk Tolerance And Portfolio Creation, Mark K. Pyles, Yongping Li, Shifang Wu, Steven D. Dolvin

Scholarship and Professional Work - Business

We extend existing research that examines the impact of culture on risk tolerance. Using surveys completed by Chinese and American students, we find, consistent with previous studies, that Chinese students perceive themselves as more risk tolerant. However, we find that Chinese students are less consistent in matching their perceived tolerance levels with actual scores from a standard risk tolerance assessment. Further, we also examine mock portfolios created by the respondents and find no evidence that Chinese students create portfolios that are riskier than their American counterparts. Our findings suggest that differences in risk tolerance are at least partially a product …

Key Flaws In The European Commission’S Proposals For Foreign Investor Protection In Ttip, Gus Van Harten

Osgoode Legal Studies Research Paper Series

In November 2015, the European Commission released a proposed text on foreign investor protection in the EU-US Transatlantic Trade and Investment Partnership (TTIP). In this paper, I outline key flaws in this proposal, including language buried in the text that significantly undermines the EC's proposed provisions on the investment court system (ICS) and on the right to regulate.

Enterprise Risk Management: Review, Critique, And Research Directions, Philip Bromily, Michael Mcshane, Anil Nair, Elzotbek Rustambekov

Finance Faculty Publications

Many regulators, rating agencies, executives and academics have advocated a new approach to risk management: Enterprise Risk Management (ERM). ERM proposes the integrated management of all the risks an organization faces, which inherently requires alignment of risk management with corporate governance and strategy. Academic research on ERM is still in its infancy, with articles largely in accounting and finance journals but rarely in management journals. We argue that ERM offers an important new research domain for management scholars. A critical review of ERM research allows us to identify limitations and gaps that management scholars are best equipped to address. This …

How Large Are The Benefits Of Emerging Market Equities?, C. Mitchell Conover, Gerald R. Jensen, Robert R. Johnson

Finance Faculty Publications

We perform a comprehensive evaluation of the benefits of emerging market equities by extending previous research in four fundamental ways. The contribution of this study is that it 1) evaluates a more complete sample; 2) examines performance measures that account for asymmetric return distributions; 3) separates emerging markets by region; and 4) considers the influence that the market environment has on the benefits of emerging market investments. Our results suggest that previous research has understated the benefits associated with investing in emerging markets. We find that broad emerging market indices have relatively low downside risk, which results in Sortino ratios …

Investment Timing For Mobile Payment Systems, Robert J. Kauffman, Jun Liu, Dan Ma

Research Collection School Of Computing and Information Systems

The recent launch of Google Wallet has brought the issue of technology solutions in the mobile payment (m-payment) area to the forefront. In deciding whether and when to adopt m-payment technology, senior managers in banks are naturally concerned about uncertainties regarding future market conditions, technology standards, and consumer and merchant responses, especially their willingness to adopt. This study applies economic theory and modeling for decision-making under uncertainty to bank investments in mobile payment technology. We assess the projected benefits and costs of investment as a continuous-time stochastic process to determine optimal investment timing. We find that the value of waiting …

Determinants Of Dow Jones Returns, Cory Sloan

Honors Projects

As of 2010, there was $14 trillion invested in the New York Stock Exchange (NYSE) and $55 trillion invested in stock markets worldwide. In this study, we use the Arbitrage Pricing Theory (APT) to identify the main determinants of the returns of the stocks that compose the Dow Jones for the period 1990-2011. We test several hypotheses on the relationship between firm specific variables such as Dividend Yield, Earnings Yield, Book-Market ratio, previous returns and the stock returns. We also document the relationship between several macroeconomic factors including T-bill rate, Default Spread, Term Spread, Unemployment, Real GDP and Inflation and …

Wisdom From Warren Buffett, Todd A. Finkle, Paul F. Buller

Marketing Faculty Scholarship

This article documents a trip that was made by students from a U.S. University to visit Warren Buffett, chairman and CEO of Berkshire Hathaway and the third richest man in the world at his Global Headquarters in Omaha, Nebraska. Every year, Buffett invites students from a select number of schools to Omaha to visit with him. In 2011, students from Gonzaga University were fortunate to be invited by Buffett based on new products that they created in an entrepreneurship course. This article discusses the strategy that this university used to get invited to visit Buffett, the activities that occurred throughout …

Perceptions From Academia On The Use Of Current Marketing Metric, Shane Smith

Faculty Articles

As a great source of generating revenue to the organization, it is agreed that marketing not only drives customer's actions but also can be measured in terms of financial equity. Yet, many often view marketing as an expense rather than that of an investment. This paper looks to evaluate the common methods of measuring marketing's role within the firm. A study was performed to investigate the perceptions of marketing metrics from faculties in four major business degree disciplines. These beliefs in use today demonstrate the difficulty that marketing managers have in building credibility within their departments.

Is There A Link Between Money Illusion And Homeowners' Expectations Of Housing Prices?, Lucy F. Ackert, Bryan K. Church, Narayanan Jayaraman

Faculty Articles

Money illusion is a behavioral bias in which a person thinks in terms of nominal rather than real values. This article reports homeowners' responses to a survey designed to measure the extent of money illusion as well as homeowners' expectations regarding home valuations. Our survey respondents suffer from money illusion, yet they have reasonable expectations of home prices. Our analysis did not identify any unique individual characteristic that correlates with homeowners' choices and suggests that the relationship between money illusion and mispricing is subtle and multifaceted.