Corporate Finance Commons^™

2015 Q4 Market Pulse Report, Craig R. Everett

Pepperdine Market Pulse Report

The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors. The IBBA and M&A Source present the Market Pulse Survey with the support of the Pepperdine Private Capital Markets Project and the Graziado School of Business and Management at Pepperdine University.

The Fate Of $15, John S. Spina

Capstones

The Fight for $15 is reinvigorating the labor moment in ways people never thought possible. In just over three years it spanned the nation and won increased minimum wages in major cites across the country. Governor Cuomo now prepares to pass the nation's first state wide $15 minimum wage in New York, but not without strong opposition.

Multilevel Approach To Sustainability Report Assurance Decisions, Belen Fernandez-Feijoo, Silvia Romero, Silvia Ruiz

Department of Accounting and Finance Faculty Scholarship and Creative Works

Using generalised linear mixed models as a statistical tool, this paper analyses the factors that explain the decision of a company to assure their sustainability report and of the choice of a Big 4 auditor as assuror. Specifically, we investigate the variables that affect the two dependent variables, existence of assurance and the profile of the assuror, at two different levels: the characteristics of the reporting company, and the country in which the company is located. Previous literature has explained this relationship as the result of linear regression models, considering only the fixed effects of the factors. Taking into account …

An Examination Of U.S. Restaurant Firms' Internationalization In A Risk Context, Soyeon Jung

UNLV Theses, Dissertations, Professional Papers, and Capstones

The purpose of this dissertation is to advance the theoretical and practical understanding

of the relationship between publicly traded U.S. restaurant firms’ internationalization as a

corporate strategy and risks using a comprehensive set of risk measures: 1) market-based risk (i.e., systematic and unsystematic risk) and 2) accounting-based risk (i.e., standard deviation of return on assets (ROA), return on equity (ROE), and earnings per share (EPS) during the period of 2000-2013. This dissertation further investigates linear, nonlinear, and lagged effects of internationalization on restaurant firms’ risks. In summary, the findings of this dissertation reveal that internationalization tends to mitigate systematic risk, …

A State-Stewardship View On Executive Compensation, Hao Liang, Luc Renneboog, Sunny Li Sun

Research Collection Lee Kong Chian School Of Business

We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible ‘stewards’ rather than ‘agents’ of the state. We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets. Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform. In a social welfare perspective, such compensation stimulates not the maximization of shareholder value but the preservation of the …

Open Market Share Repurchase Programs And Corporate Governance: Company Performance, Gary Caton, Jeremy Goh, Yen Teik Lee, Scott C. Linn

Research Collection Lee Kong Chian School Of Business

Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly-governed companies outperform weakly-governed companies after announcing share repurchase programs. Our findings include positive associations between strong governance and both post-announcement adjusted operating performance and abnormal stock returns. The results are robust to sample selection bias, different sample criteria, governance measurement, and various control variables. In addition, governance strength is associated with larger post-announcement changes in CEO incentive compensation and merger and acquisition activity, both of which we argue are consistent with strongly-governed companies …

Chinese Approach To Exchange Rates And Impact On Trade, Kimberly D. Scott

Kimberly D Scott

The United States and China have embarked on considerable deliberation in the United States trade and the value of the Chinese currency among academics and politicians alike. Over the years, research on the two topics has consistently addressed the subject by investigating the equilibrium real exchange rate between the yuan (CNY) and the dollar (USD), with results exposing the undervaluation in the yuan since the 1990’s.

Cny & Usd: Foreign Exchange Rates, Kimberly D. Scott

Kimberly D Scott

A forward rate is related to a spot rate that is set to take place in the future (Bekaert & Hodrick, 2012). Interestingly, one issue that can be challenging when performing transactions is not knowing what the rate will yield in the future versus at present. Due to market pressures or even policy decisions, either a devaluation or revaluation of domestic currency to foreign currencies can transpire.

Locked In: The Competitive Disadvantage Of Citizen Shareholders, Anne M. Tucker

Anne Tucker

In this Essay, I challenge the conventional corporate law wisdom that unhappy mutual fund investors paying high fees don’t need litigation or regulation to protect their interests because they should simply exit a fund and reinvest elsewhere. The exit solution, advanced by Professors John Morley and Quinn Curtis in Taking Exit Rights Seriously provided an elegantly simply solution to the problem of unhappy indirect investors (e.g., mutual fund investors) given that they are often low-dollar, low-incentive, rationally-apathetic investors facing enormous information asymmetries and collective action problems. According to their view, competition produced by exit, or the threat of exit, is …

External Administration In Corporate Insolvency And Reorganisation: The Insider Alternative, Larelle Chapple, James Routledge

James Routledge

This article considers the merits of alternative policy approaches to management of companies in insolvency administration, in particular from an identity economics theoretical perspective. The use of this perspective provides a novel assessment of the policy alternatives for insolvency administration, which can be characterised as either following the more flexible United States Chapter 11-style debtor-in-possession arrangement, or relying on the appointment of an external administrator or trustee to manage the insolvent company, who automatically displaces incumbent management. This analysis indicates that stigma and reputational damage from automatic removal of managers in voluntary administration leads to “identity loss” and that an …

2015 Q3 Market Pulse Report, Craig R. Everett

Pepperdine Market Pulse Report

The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors. The IBBA and M&A Source present the Market Pulse Survey with the support of the Pepperdine Private Capital Markets Project and the Graziado School of Business and Management at Pepperdine University.

Purchased Goodwill And Its Accounting Treatment, Terence Sheridan

The ITB Journal

When a company decides to purchase another company or enterprise, the consideration paid will, in many cases, exceed the total of the separate valuation of each of the assets and liabilities of the company or enterprise being purchased. The extent of the premium paid is sometimes dependent on the growth potential of the company in question. In other cases, the premium is linked to the possibilities for cost-cutting when synergies between the existing and new companies are exploited. Occasionally, the fact that a company has an established reputation or an established customer base will result in a considerable premium being …

Behavioral Finance: Its History And Its Future, Robert Christopher Hammond

Selected Honors Theses

The field of behavioral finance has attempted to explain a litany of biases, heuristics, and

inefficiencies present in financial markets since its creation in the 1980’s. This paper is structured as a comprehensive literature review of behavioral finance, and includes both the seminal works as well as more recent papers. The various subtopics of behavioral finance will also be analyzed, which include loss aversion, corporate finance, and momentum/contrarian investing. Finally, this paper will draw unique conclusions across behavioral finance and hypothesize about what topics within behavioral finance are likely to yield the most interesting research in the near future.

2015 Q4 Private Capital Access Index Report, Craig R. Everett

Pepperdine Private Capital Access Report

The Pepperdine Private Capital Access Index (PCA) is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University, and with the support of Dun & Bradstreet. The index is designed to measure the demand for, activity, and health of the private capital markets. The purpose of the PCA Index is to gauge the demand of small and mediumsized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets.

Locked In: The Competitive Disadvantage Of Citizen Shareholders, Anne M. Tucker

Faculty Publications By Year

In this Essay, I challenge the conventional corporate law wisdom that unhappy mutual fund investors paying high fees don’t need litigation or regulation to protect their interests because they should simply exit a fund and reinvest elsewhere. The exit solution, advanced by Professors John Morley and Quinn Curtis in Taking Exit Rights Seriously provided an elegantly simply solution to the problem of unhappy indirect investors (e.g., mutual fund investors) given that they are often low-dollar, low-incentive, rationally-apathetic investors facing enormous information asymmetries and collective action problems. According to their view, competition produced by exit, or the threat of exit, is …

Insider Trading Restrictions And Corporate Risk-Taking, Yuanto Kusnadi

Research Collection School Of Accountancy

This paper examines the effect of insider trading restrictions on corporate risk-taking. Using a cross-country sample of 38 countries over the 1990 to 2003 period, we find that corporate risk-taking is positively related to insider trading restrictions. This finding is robust to alternative regression specifications and sample periods, to the use of alternative measures of insider trading restrictions and risk-taking incentives, and to controls for possible endogeneity. Further investigation suggests that the relation between insider trading restrictions and corporate risk-taking is influenced by cross-sectional differences in stock market development and legal origin, and that the increase in risk-taking is beneficial …

The Bright Side Of Political Uncertainty: The Case Of R&D, Julian Atanassov, Brandon Julio, Tiecheng Leng

Research Collection Lee Kong Chian School Of Business

We examine the relationship between political uncertainty and R&D investment by exploiting the timing of U.S. gubernatorial elections as a source of plausibly exogenous variation in uncertainty. In contrast to the literature documenting negative effects of political uncertainty on real investment, we find that uncertainty over government policy encourages firm-level R&D. Firms increase R&D investments by an average of 4.6% in election years relative to non-election years. The uncertainty effect is stronger in hotly contested elections, in politically sensitive and hard-to-innovate industries, and in firms subject to higher growth options and greater product market competition. Our findings suggest that, as …

Water Contamination, Land Prices, And The Statute Of Repose, John F. Chamblee, Carolyn A. Dehring, Craig A. Depken, Joseph Nicholson

Department of Accounting and Finance Faculty Scholarship and Creative Works

We examine how water contamination risk from an inactive hazardous waste site is capitalized into surrounding vacant land prices. After public knowledge of the first instance of off-site contamination, we find that shallow groundwater contamination potential is negatively capitalized into land prices, as is proximity to a known contaminated well. Public knowledge of off-site contamination and associated land price changes occur after the North Carolina’s 10-year statute of repose. Our findings raise questions concerning such statutes when environmental contamination has a long latency period, especially given a recent Supreme Court ruling that Superfund law does not preempt state statutes of …

Segment Disclosures Under Sfas No. 131: Has Business Segment Reporting Improved?, Donna Street, Nancy Nichols, Sidney Gray

Donna L. Street

In response to user concerns regarding segment reporting, the FASB issued SFAS No. 131, Reporting Disaggregated Information about a Business Enterprise, in 1997. SFAS No. 131 became effective for fiscal years beginning on or after January 1, 1998. This research examines the segment disclosures of U.S. Global 1000 companies for both 1997 and 1998 to ascertain the impact and effectiveness of SFAS No. 131 in practice. Specifically, this research considers whether the new requirements have resulted in:

• A greater number of line‐of‐business (LOB) segments for some enterprises, particularly those who claimed to operate in one LOB under SFAS No. …

Compliance With Disclosure Requirements At Germany's New Market: Ias Versus Us Gaap, Martin Glaum, Donna Street

Donna L. Street

This research examines compliance with both International Accounting Standards (IAS) and United States Generally Accepted Accounting Principles (US GAAP) for companies listed on Germany's New Market. Based on a sample of 100 firms that apply IAS and 100 that apply US GAAP, we investigate the extent to which companies comply with IAS and US GAAP disclosure requirements in their year–2000 financial statements. Compliance levels range from 100% to 41.6%, with an average of 83.7%. The average compliance level is significantly lower for companies that apply IAS as compared to companies applying US GAAP. This study provides the first systematic evidence …

Factors Affecting Md&A Disclosures By Sec Registrants: Views Of Practitioners, Ann Tarca, Donna Street, Walter Aerts

Donna L. Street

This study identifies factors influencing the preparation, scope and content of management discussion and analysis (MD&A) reports provided by SEC registrants. We interviewed U.S., Canadian, U.K., and Australian financial executives during the period December 2009 to May 2010 to better understand how the reporting environment affects managers’ ability to provide useful disclosures. Interviewees agree MD&A should be "through the eyes of management"; however, many describe a tension between statutory requirements and providing relevant information for investors. Some believe MD&A is useful for analysts and investors as a summary of the past year and by functioning as a benchmark. Interviewees frequently …

Ifrs Teaching Resources: Available And Rapidly Growing, Robert Larson, Donna Street

Donna L. Street

With the rapid adoption of International Financial Reporting Standards (IFRS) around the world, accounting practitioners, educators, and students are in great need of IFRS instructional materials. This article provides a compilation and review of IFRS teaching resources based primarily on presentations made at a series of IFRS Teaching Workshops sponsored by the IFRS Foundation Teaching Initiative and the International Association for Accounting Education and Research (IAAER). With the purpose of helping those teaching IFRS, especially those with limited prior IFRS teaching experience, we provide detailed information so educators can easily access and use these resources. Several different IFRS teaching strategies …

Besser Pharma: International Accounting For Pensions, K. Geary, Donna Street

Donna L. Street

The purpose of the Besser Pharma case is to bring an international perspective to the coverage of pension accounting. Students are required to read U.S. and international pension accounting standards, complete financial statement research on the pension plans of Besser's competitors, and answer, in a memo to Besser Pharma's CFO, a series of questions about alternative accounting approaches permitted by International Accounting Standard No. 19, Employee Benefits.

The Predictive Ability Of Geographic Segment Disclosures By U.S. Companies: Sfas No. 131 Vs. Sfas No. 14, Bruce Behn, Nancy Nichols, Donna Street

Donna L. Street

This research considers whether recent modifications to segment reporting adequately address analysts' concerns regarding the usefulness of geographic data. Forecast errors for models utilizing SFAS No. 131 geographic sales data are compared to forecast errors for models utilizing SFAS No. 14 geographic sales data. The results indicate a significant improvement in the predictive accuracy of geographic sales disclosures provided under SFAS No. 131. Additional analysis suggests this enhanced predictability may be associated with the revised requirements that companies report sales for the country of domicile and for each individually material country. Overall, our findings appear to support the FASB's argument …

Have ‘European’ And Us Gaap Measures Of Income And Equity Converged Under Ifrs? Evidence From European Companies Listed In The Us, Sidney Gray, Cheryl Linthicum, Donna Street

Donna L. Street

The EU's adoption of IFRS, combined with the SEC's removal of the US GAAP reconciliation requirement for non‐US registrants reporting under IFRS, signifies a major shift toward the acceptance of global standards. Based on 20‐F reconciliations provided by the population of US-listed European companies filing IFRS‐based statements with the SEC in 2005, we examine whether "European" and US GAAP measures of income and equity converged under IFRS. We find that during the period immediately preceding IFRS, for our sample companies, European and US GAAP measures are generally comparable in respect of income and equity. However, as an exception to the …

The Relationship Between Competition And Business Segment Reporting Decisions Under The Management Approach Of Ias 14 Revised, Nancy Nichols, Donna Street

Donna L. Street

This research addresses the relationship between industry competition and managers’ choice regarding whether to separately disclose a business segment following the adoption of International Accounting Standard 14 Revised (IAS 14R) and the management approach to segment determination. Logistic regression reveals a significant negative relationship between disclosure and company returns in excess of the industry average.

Prior research indicated a significant relationship between disclosure and abnormal returns under the industry approach to segmentation. Our results provide evidence that this flexibility persists as managers maintain their ability to aggregate segments to protect excess returns under IAS 14R and the management approach. Our …

The G4'S Role In The Evolution Of The International Accounting Standard Setting Process And Partnership With The Iasb, Donna Street

Donna L. Street

Between 1992 and 2001, representatives of the G4 national accounting standard setting bodies and the International Accounting Standards Committee (IASC) participated in a working group known as the G4+1. Immediately following the formation of the International Accounting Standards Board (IASB), the G4 announced that the working group would no longer meet. Alternatively, the G4 national standard setters would form a partnership with the IASB via liaison representatives.

This paper focuses on the objectives and mission of the G4+1, the G4's relationship with the IASC, the impact of the G4 on the restructuring of the IASC to establish a quality independent …

Large Firms Envision Worldwide Convergence Of Standards, Donna Street

Donna L. Street

Currently, the largest accounting firms1 are working diligently in conjunction with their partners in the International Forum on Accountancy Development (IFAD) to achieve their vision of raising national accounting and auditing standards worldwide to meet or exceed internationally recognized benchmarks. An awareness of the ongoing activities of the firms and their IFAD partners to improve financial reporting, accountability, and transparency worldwide is crucial if other members of the accounting community, including educators, are to support and, more importantly, actively participate in these efforts. IFAD was formed in 1999 on “the premise that the expertise of the accounting profession and the …

Convergence With Ifrs In An Expanding Europe: Progress And Obstacles Identified By Large Accounting Firm's Survey, Robert Larson, Donna Street

Donna L. Street

The International Accounting Standards Board (IASB) acquired greater legitimacy and stature when the European Union (EU) decided to require all listed companies to prepare consolidated accounts based on International Financial Reporting Standards (IFRS) beginning in 2005. This study examines the progress and perceived impediments to convergence in 17 European countries directly affected by the EU's decision. These include: (1) the 10 new EU member countries, (2) EU candidate countries, (3) European Economic Area (EEA) countries, and (4) Switzerland. We utilize data collected by the six largest international accounting firms during their 2002 convergence survey. Additionally, we analyze subsequent events and …

Disclosure Level And Compliance With Iass: A Comparison Of Companies With And Without U.S. Listings And Filings, Donna Street, Stephanie Bryant

Donna L. Street

This research investigates the extent to which the disclosure requirements of the IASC are complied with or exceeded for companies claiming to use International Accounting Standards (IASs). Additionally, the research seeks to identify significant differences between those companies with U.S. listings, U.S. filings, and those with no U.S. listings or filings with regard to (1) compliance with IASC-required disclosures, and (2) level of disclosure (including both mandatory and voluntary items). The findings reveal the overall level of disclosure is greater for companies with U.S. listings. Additionally, greater disclosure is associated with an accounting policies footnote that specifically states that the …