Business Commons^™

Managers’ Incentives To Manipulate Earnings In Management Buyout Contests: An Examination Of How Corporate Governance And Market Mechanisms Mitigate Earnings Management, Joy Begley, Tim V. Eaton, Sarah Peck

Finance Faculty Research and Publications

In an MBO contest, managers offer to buy the firm from public shareholders at a premium to the current market price and thus have incentives to buy the firm “cheap.” Prior studies have found evidence that managers, on average, manipulate earnings downward prior to an MBO offer in an attempt to convince shareholders that their offer is fair. We extend this finding by attempting to explain the substantial cross sectional variation in the degree of manipulation across firms reported in these earlier studies. We find that boards with more independent directors and higher levels of incentive based compensation for the …

Term Default, Balloon Risk, And Credit Risk In Commercial Mortgages, Charles C. Tu, Mark Eppli

Finance Faculty Research and Publications

Term default and balloon risk play an interactive role in the pricing of credit risk in commercial mortgages. Most commercial mortgage pricing studies assume a borrower's default decision is based solely on the property value; the mortgage valuation model here also incorporates a property income trigger. The model considers both the risk of default during the term of the loan and the risk of loss at maturity (balloon risk). Monte Carlo simulation analyses reveal that pricing models based solely on property value overestimate the probability of term default and the resulting credit risk premium. Adding a property income default trigger …

Inter-Center Retail Externalities, Luis C. Mejia, Mark Eppli

Finance Faculty Research and Publications

This paper empirically examines inter-center externalities in regional shopping centers. Specifically, we use a non-linear retail share model to measure the impact that department store size and image in subject and competitive centers have on subject center in-line retail sales. Our findings reveal that department store size and image attributes have a significant and non-linear impact on subject center sales. More importantly, the results show that the effect of department store fashion image dominates that of department store size.

Credit History And The Performance Of Prime And Nonprime Mortgages, Anthony Pennington-Cross

Finance Faculty Research and Publications

Although nonprime lending has experienced steady or even explosive growth over the last decade very little is known about the performance characteristics of these mortgages. Using data from national secondary market institutions, this paper estimates a competing risks proportional hazard model, which includes unobserved heterogeneity. The analysis examines the performance of 30-year fixed rate owner occupied home purchase mortgages from February 1995 to the end of 1999 and compares nonprime and prime loan default and prepayment behavior. Nonprime loans are identified by mortgage interest rates that are substantially higher than the prevailing prime rate. Results indicate that nonprime mortgages differ …

The Power Of Interfacing Departments In Shaping B2b Customer Satisfaction, Srinivas Durvasula, Steven Lysonski, Subhash C. Mehta

Marketing Faculty Research and Publications

Extant research identifies service quality and service encounter perceptions as the key determinants of satisfaction. However, no study in a business-to-business environment has examined the simultaneous effect of these two determinants on overall satisfaction. Hence, we do not know which of these two determinants has a stronger impact on service satisfaction. We investigated this issue by collecting data from shipping managers of several firms in Singapore that used the services of ocean freight shipping companies. Results of path analysis indicate that perceptions of service encounters have a relatively stronger impact compared to service quality. Implications of these results are discussed.

Going-Concern Opinions: Broadening The Expectations Gap, Michael D. Akers, Meredith A. Maher, Don Giacomino

Accounting Faculty Research and Publications

A rash of high-profile bankruptcies has led to a search for answers. Many hold auditors responsible for not detecting the potential for bankruptcy during the most recent audit. The Weiss Report, a study of several dozen bankrupt companies submitted to the U.S. Senate during its deliberations on the Sarbanes-Oxley Act, found a "broad and massive failure" on the part of auditors to raise "yellow flags" that indicate potential bankruptcy. The authors examined Weiss' methodology and found that, applied to a broader group of companies, Weiss' criteria would have incorrectly predicted bankruptcy for nearly half of the non-bankrupt companies studied. This …

The Effect Of Firm Characteristics On The Use Of Percentage Retail Leases, Gregory H. Chun, Mark Eppli, James D. Shilling

Finance Faculty Research and Publications

Choice of lease payments has been widely studied in the literature. There are three—not necessarily exclusive—explanations that have received attention. The first attributes the choice of fixed versus percentage lease payments to risk-sharing preferences. The second explanation views percentage-of-sales lease agreements as a way discriminating monopolists can appropriate economic rents. The third attributes percentage-of-sales lease agreements to a metering and bonding argument. This paper examines the proposition that the choice of percentage retail leases is driven in part by managements' desire to circumvent the cost of violating debt covenant restrictions. The evidence presented here supports the prediction that retail firms …

Help One Another, Use One Another: Toward An Anthropology Of Family Business, Alex Stewart

Management Faculty Research and Publications

Anthropological kinship theory is explored for potential contributions to a theory of family business. This paper considers the costs and benefits of a role for kinship in business. Both derive from the discrepancy between the normative orders of kinship and markets; respectively, long-term generalized reciprocity and short-term balanced reciprocity. Because the former reflects the morality of society as a whole, kinship integrates social fields more readily than more specialized orders like markets.

Investigating The Integration Of Acquired Firms In High-Technology Industries: Implications For Industrial Policy, David R. King, John D. Driessnack

Management Faculty Research and Publications

Acquisition activity persists despite evidence that acquisitions do not improve firm performance. Further, government policy toward the defense industry has advocated consolidation in the name of nominal cost savings. We explore the role acquisitions play toward technology transfer and begin to identify factors associated with acquisition success through a review of existing research on post-acquisition performance that primarily considers acquiring firm stock performance. Using this research as a foundation, we build a model to analyze post-acquisition performance using a sample of high-technology firms. Results suggest critical success factors associated with post-acquisition stock performance are poorly understood. We conclude that proactive …

The Impact Of Situational Constraints, Role Stressors, And Commitment On Employee Altruism, Steve M. Jex, Gary A. Adams, Daniel G. Bachrach, Sarah Sorenson

Management Faculty Research and Publications

This study investigated relations between 3 work-related stressors (role ambiguity, role conflict, and organizational constraints) and altruistic behavior in the workplace. It was predicted that each stressor would be negatively related to altruism and that these relations would be moderated by affective commitment (AC). Data from 144 incumbent-supervisor dyads revealed that all 3 stressors; were weakly and negatively related to altruism. Two of these relationships were moderated by AC, although not as predicted. Organizational constraints were positively related to altruism among those reporting high levels of AC but negatively related among those reporting low levels of AC. The pattern was …

Digital Divide And Purchase Intention: Why Demographic Psychology Matters, Syed H. Akhter

Marketing Faculty Research and Publications

The author examines the issue of digital divide from a demographic perspective. The influence of gender, age, education, and income on the likelihood to purchase over the Internet is empirically examined. Hypotheses are framed in the context of psychological correlates of the demographic variables. Findings show that these variables significantly influence the likelihood to purchase over the Internet and can be used to profile, segment, and target markets and develop public policies to bridge the digital divide.

Health Risks, Past Usage, And Intention To Use Weight Loss Products In Normal Weight Women With High And Low Body Dysphoria, B. L. Whisenhunt, D. A. Williamson, Richard G. Netemeyer, J. Craig Andrews

Marketing Faculty Research and Publications

Objective: There are many health risks involved with the use of weight loss products by normal weight women. The mass media may compound this problem through the promotion of weight loss products and a thin body size. This study tested women's perceptions of different weight loss product ads to determine if body dysphoria (i.e., an over concern with body size and shape in normal weight people) was associated with risk beliefs, past behaviors, and intention toward using weight loss products.

Method: Normal weight women (age range = 18-41 yr), who were classified as either high (n=45) …

Rapid, Low Level Determination Of Silver(I) In Drinking Water By Colorimetric–Solid-Phase Extraction, Matteo P. Arena, Marc D. Porter, James S. Fritz

Finance Faculty Research and Publications

A rapid, highly sensitive two-step procedure for the trace analysis of silver(I) is described. The method is based on: (1) the solid-phase extraction (SPE) of silver(I) from a water sample onto a disk impregnated with a silver-selective colorimetric reagent, and (2) the determination of the amount of complexed analyte extracted by the disk by diffuse reflectance spectroscopy (DRS). This method, called colorimetric–solid-phase extraction (C–SPE), was recently shown effective in determining low concentrations (0.1–5.0 mg/ml) of iodine and iodide in drinking water. This report extends C–SPE to the trace (∼4 μg/l) level monitoring of silver(I) which is a biocide used on …

Mapping Mutual Fund Investor Characteristics And Modeling Switching Behavior, Mary Jane Lenard, Syed H. Akhter, Pervaiz Alam

Marketing Faculty Research and Publications

Securing a mutual fund that meets investment goals is an important reason why some investors exclusively stay with a particular mutual fund and others switch funds within their fund family. This paper empirically investigates investor attitudes toward mutual funds. Our model, based on investor responses, develops an investor's "risk profile" variable. Results indicate that regardless of whether the investors invest in nonemployer plans or in both employer and nonemployer plans, they consider their investment risk, fund performance, investment mix, and the capital base of the fund before switching funds. The model developed in this study can also assist in predicting …

Underreporting Of Chargeable Time: The Impact Of Gender And Characteristics Of Underreporters, Michael D. Akers, Tim V. Eaton

Accounting Faculty Research and Publications

No abstract provided.

Internal Auditor Participation In Systems Development Projects, Meredith Maher, Michael D. Akers

Accounting Faculty Research and Publications

There are differing viewpoints in the internal auditing literature regarding the role of internal audit in systems development projects. One argument is that internal audit should act as consultants for such projects. A counter argument is that if internal auditors act as consultants this could impair in dependence. This study surveyed chief audit executives to determine their perceptions of the role of internal audit in systems development projects as well as the actual involvement of their departments in such projects. The findings show that chief audit executives place more importance on internal audit acting as consultants and less importance on …

Your Eq Skills: Got What It Takes?, Michael D. Akers, Grover L. Porter

Accounting Faculty Research and Publications

Your EQ skills: got what it takes? So you thought the CPA exam was your last test? Read on.

Question: Is success in life and career determined primarily by rational intelligence (the IQ or intelligence quotient) or emotional intelligence (the EQ or emotional quotient)? In other words, what's more important: intelligence or intuition? Historically the professional accounting literature has placed little emphasis on behavioral issues such as EQ, although human behavior underlies most of what is written and taught about professional accounting. Now managers place increased value on behavioral skills that help people in the workplace. Look at this statistic: …

Strategic Planning, Hypercompetition, And Knowledge Management, Syed H. Akhter

Marketing Faculty Research and Publications

When both product and
resource markets are turbulent
and disruptive, competitive
advantage has to be continually
renewed. But a firm can do this only
by managing its knowledge. Using two
elements of strategic planning—scenario
building and internal situation analysis—
managers can map and integrate knowledge to
gain a sustainable competitive edge in today’s
hypercompetitive markets.

Should Marketing Managers Be Concerned About Attitudes Towards Marketing And Consumerism In New Zealand: A Longitudinal View, Steven Lysonski, Srinivas Durvasula, John Watson

Marketing Faculty Research and Publications

New Zealand has gone through a radical metamorphosis since free market economics were introduced in the mid-1980s. Marketing managers are particularly interested in the views of consumers about issues dealing with marketing activities. Negative views could signal consumer backlash against free market activities. This study examines the views of consumers from 1986 to 2001 on a range of issues dealing with marketing and consumerism. The results clearly show that consumers are less negative about marketing and consumerism issues since 1986. It seems likely that New Zealand has evolved in terms of the consumerism life cycle over the last 15 years. …

Complementary Resources And The Exploitation Of Technological Innovations, David R. King, Jeffrey G. Covin, W. Harv Hegarty

Management Faculty Research and Publications

Technological innovation often results when the resources of a small firm are combined with those of a large one. This is because small and large firms characteristically possess complementary resources whose combination can facilitate innovation success. The possession of complementary innovation-producing resources by small and large firms helps explain patterns of interaction among firms in dynamic, technology-based industries. Propositions are developed that outline how typical resources of small and large firms can be used to explain industry-level phenomena surrounding technological change.

The Impact Of Government Policy On Technology Transfer: An Aircraft Industry Case Study, David King, Mark L. Nowack

Management Faculty Research and Publications

This case study explores the interaction between domestic and foreign governmental policy on technology transfer with the goal of exploring the long-term impacts of technology transfer. Specifically, the impact of successive licensing of fighter aircraft manufacturing and design to Japan in the development of Japan’s aircraft industry is reviewed. Results indicate Japan has built a domestic aircraft industry through sequential learning with foreign technology transfers from the United States, and design and production on domestic fighter aircraft. This process was facilitated by governmental policies in both Japan and the United States.

Japanese Attitudes Toward American Business Involvement In Japan: An Empirical Investigation Revisited, Syed H. Akhter, Toshikazu Hamada

Marketing Faculty Research and Publications

Generation Xers in Japan continue to draw increasing attention not only because they constitute a promising segment for many products and services but also because they are expected to play a critical role in shaping their country’s political and economic relations with other countries. This paper examines their attitudes toward US products, businesses, and government. It also examines their behavioral intentions and their expectations of their government in terms of managing American business involvement in Japan. Findings and implications are presented.

An Empirical Examination Of The Usefulness Of The Motley Fool's "Flow Ratio", Don Giacomino, Michael D. Akers

Accounting Faculty Research and Publications

An item in the Motley Fool recently caught our attention. The article “Cisco vs. Lucent: The Flow Ratio Tells All” (by Matt Richey, June 6, 2000, in The Motley Fool.fool.com), introduced a new ratio that Richey claimed to be useful for measuring the investment worthiness of a company. Since our Financial Statement Analysis course covers traditional ratio analysis and since we were exploring some research ideas on measuring liquidity, the Fool Ratio seemed worthy of investigation