Business Commons^™

Research Opportunities In Internal Auditing, Douglas F. Prawitt

Faculty Publications

This chapter discusses staffing and managing the internal audit function (IAF) as a component of organizational governance, and has two main purposes. First, it familiarizes interested practitioners and researchers with current trends and issues in staffing and managing the IAF. Second, it suggests questions and topics for future thinking and research among practitioners and academics. Managing and staffing an IAF is a vast and complex undertaking that remains relatively unexplored by rigorous research. The chapter contains several citations to practitioner information and academic research, but it does not attempt to include a comprehensive literature review of all relevant articles or …

Some Loans Are More Equal Than Others: Third-Party Originations And Defaults In The Subprime Mortgage Industry, William P. Alexander, Scott D. Grimshaw, Grant R. Mcqueen, Barrett A. Slade

Faculty Publications

We show how agency problems between lenders (principals) and third-party originators (TPO; agents) imply that TPO-originated loans are more likely to default than similar retail-originated loans. The nature of the agency problem is that TPOs are compensated for writing loans, but are not completely held accountable for the subsequent performance of those loans. Using a hazard model with jointly estimated competing risks and unobserved heterogeneity, we find empirical support for the TPO/default prediction using individual fixedrate subprime loans with first liens secured by residential real estate originated between January 1, 1996, and December 31, 1998. We find that apparently equal …

Parent And Child Perspectives Of Family Leisure Involvement And Satisfaction With Family Life, Ramon B. Zabriskie, Bryan P. Mccormick

Faculty Publications

The purpose of this study was to examine the relationship between family leisure involvement and satisfaction with family life. The sample consisted of 179 families. Data were analyzed at the parent, child, and family level. Findings indicated that family leisure involvement was the strongest multivariate predictor of family satisfaction from the parent perspective, but was not a significant multivariate predictor from the child's perspective. At the family level of measurement, only the block including Core and Balance family leisure variables explained a significant portion of the variance in family satisfaction. History of divorce was a negative multivariate predictor of family …

Efficient Estimation Of Conditional Asset-Pricing Models, Douglas J. Hodgson, Keith Vorkink

Faculty Publications

A semiparametric efficient estimation procedure is developed for the parameters of multivariate generalized autoregressive conditional heteroscedasticity-in-mean models when the disturbances have a conditional distribution assumed to be elliptically symmetric but otherwise unrestricted. Under highlevel assumptions, the resulting estimator achieves the asymptotic semiparametric efficiency bound. The elliptical symmetry assumption allows us to avert the curse of dimensionality problem that would otherwise arise in estimating the unknown error distribution. This framework is suitable for the estimation and testing of conditional asset-pricing models, such as the conditional capital asset-pricing model. We apply our procedure in an empirical study of stock prices, with Monte …

Trust And The Decision To Outsource: Affective Responses And Cognitive Processes, Mark Hansen, J.L. Morrow Jr.

Faculty Publications

Many of the various forms of cooperative strategy that firms are pursuing in today’s economy entail the placing of important business functions in the hands of a partner. This paper examines the role of trust in the decision by a producer to place the marketing function in the hands of another entity, namely a cooperative. Although others have studied the effect of what may be termed general trust on inter-organizational relationships, few have examined the antecedents of that trust. We propose a model in which affective responses and cognitive processes are precursors to a sense of general trust, which, in …

Swift Neighbors And Persistent Strangers: A Cross-Cultural Investigation Of Trust And Reciprocity In Social Exchange, Nancy R. Buchan, Rachel T.A. Croson, Robin M. Dawes

Faculty Publications

In four countries, levels of trust and reciprocity in direct-reciprocal exchange are compared with those in network-generalized exchanges among experimentally manipulated groups’ members (neighbors) or random experimental participants (strangers). Results show that cooperation decreases as social distance increases; and, that identical network-generalized exchanges generate different amounts of trusting behavior due solely to manipulated social identity between the actors.

This study demonstrates the interaction of culture and social identity on the propensity to trust and reciprocate and also reveals differing relationships between trust and reciprocation in each of the four countries, bringing into question the theoretical relationship between these cooperative behaviors.

An Assessment Of Air Force Development Portfolio Management Practices, Michael A. Greiner, Kevin J. Dooley, Dan L. Shunk, Ross T. Mcnutt

Faculty Publications

Selecting and managing development project portfolios is a critical function within the Air Force’s weapon systems development process. Decision makers must weigh benefits, costs, and mission needs for a variety of proposed new initiatives and current weapon systems programs in order to develop an effective portfolio that provides the best value to the User. This research examines current Air Force development portfolio management practices as perceived by those involved with the decision making process. Research findings indicate several gaps between Air Force practices and those commercial best practices as found in the literature. A general approach for bridging the differences …

The Aicpa's 10 Guiding Principles, Annette M. Nellen

Faculty Publications

Explains the ten guiding principles of good tax policy of a framework outlined in American Institute of Certified Public Accountants Tax Policy Concept Statement No. 1. Analysis of the guiding principles; How the principles can be used to analyze proposals; Application of the guiding principles.

Dynamic Co-Existence Of Company-Owned And Franchised Outlets Within A Company: A Framework Of The Franchisor's Perspective, Robert E. Sibley, B. Yoo

Faculty Publications

Why and how do company-owned and franchised outlets simultaneously exist within the same organization? The purpose of this article is to integrate a variety of theories on this interesting retail phenomenon into a broader theoretical framework based on the political-economy paradigm. This paper attempts to integrate the perspectives of several theories that previously have been considered competing models of a single reality--the access-to-capital viewpoint, transaction cost analysis, the population ecology perspective, and power-dependence-conflict arguments--into a broader perspective that utilizes intra-firmfactors and the internal and external economies and polities of the political-economy paradigm. A model depicting this integration is set forth …

Innovate Or Evaporate . . . Business Concept Innovation In The Furniture Industry In The Age Of Information, Steven H. Bullard

Faculty Publications

Introduction The U.S. furniture industry has changed dramatically in recent years. Furniture manufacturers, for example, have recently faced competition from foreign producers that has been particularly intense – resulting in factory closings and job losses in many areas of the country, including the Mid-South. In Mississippi, for example, the number of employees in furniture and fixtures industries dropped by 2,100 (6.8%) in the year 2000 (Center for Policy Research and Planning 2001). Similar job losses have been occurring in Tennessee, Virginia, North Carolina and other important furniture-producing states. Nationwide, employment in furniture and fixtures manufacturing dropped by 40,000 (7.2%) from …

Furniture Manufacturing And Marketing: Eight Strategic Issues For The 21st Century, Steven H. Bullard, C. D. West

Faculty Publications

“Take change by the hand, or it will take you by the throat.” Attributed to Winston Churchill, this brief sentence emphasizes the need to understand and embrace change in general. What important “changes” will impact furniture production and marketing in the 21st century? And what can furniture manufacturers and marketers do to “take change by the hand” today and in the future?

A Methodology Towards Measuring The Strategic Profile Of First-Mover Firms In Industrial Markets, Larry P. Pleshko, Richard A. Heiens, Leanne C. Mcgrath

Faculty Publications

This study goes beyond most previous research on first-mover advantages by examining the broader concept of strategic marketing initiative. Specifically, a measurement scale was developed to assess the full extent of a firm's first-mover efforts. A total of 1200 firms were surveyed, with a response rate of 12.2%. The Strategic Marketing Initiative Scale developed exhibited high reliability, and has application in assisting management in recognizing marketing areas for first mover advantages. This can result in better timing of decisions about the strategy of when to act, contributing to the ability to create a competitive advantage around marketing initiatives.

The Investment Opportunity Set And Capitalization Versus Expensing Methods Of Accounting Choice, Dan S. Dhaliwal, William G. Heninger, K.E. Hughes Ii

Faculty Publications

This paper examines the effects of the investment opportunity set (IOS) on management's decision to capitalize or expense significant costs in two diverse settings: (1) in accounting for exploration and development (E&D) costs by firms in the oil-and-gas industry, and (2) in accounting for research and development (R&D) costs by firms (across industries) prior to 1974. We argue that the relation between the IOS and the decision to capitalize versus to expense is based upon managerial incentives to reduce the variance of accounting earnings. High-growth firms are more likely to have more variable earnings, which therefore creates greater incentives to …

Firm Transparency And The Costs Of Going Public, James S. Ang, James C. Brau

Faculty Publications

We demonstrate that firms that are more transparent pay less, in all components of issuance costs, to go public.We employ a sample of 334 previous leveraged buyouts and a characteristic-matched control sample to test the hypothesis that greater firm transparency before the issue decreases the flotation costs of the initial public offering. These flotation costs are divided into initial underpricing, underwriter discount, administrative expenses, and the overallotment option required to take the firm public. Our results provide further evidence of the asymmetric information hypothesis as it applies to initial public offerings.

A Metropolitan Transaction-Based Commercial Price Index: A Time-Varying Parameter Approach, Henry J. Munneke, Barrett A. Slade

Faculty Publications

This study examines the usefulness of time-varying parameter techniques for constructing reliable transaction-based commercial price indices for metropolitan areas. Time-varying parameter techniques allow the implicit prices of differing quality characteristics to vary intertemporally, overcoming the potential bias imposed by holding implicit prices fixed and simply interpreting time dummy variables as in a conventional hedonic approach. This paper empirically investigates three time-varying parameter methods (Chained, Laspeyres, and Paasche) and considers the potential for sample selection bias. Precision measures are constructed to examine the reliability of the respective indices.

The Role Of Outdoor Recreation In Family Enrichment, Patti A. Freeman, Ramon B. Zabriskie

Faculty Publications

The family is the fundamental unit in society and perhaps the oldest and most important of all human institutions. Several studies have indicated a positive correlation between strong, successful families and family participation in outdoor recreational activities. This paper addresses the role of structured outdoor recreation programming in family enrichment. Findings from two studies based in the United States are presented: one on the effect of a one–day family outdoor adventure program on parental and child perceptions of family functioning and the other from a qualitative inquiry into the meaning of family residential camping experiences. The first study collected both …

Do Tax-Deferred Exchanges Impact Purchase Price? Evidence From The Phoenix Apartment Market, Andrew Holmes, Barrett A. Slade

Faculty Publications

Many authors have commented on the compliance risk associated with taxdeferred exchanges. However, no published studies explicitly address whether the risks associated with the exchange process impact the price at which exchanged assets trade. Using a unique data set that documents transactions for nondirect exchanges, this study examines the price impact of tax-deferred exchanges on apartment transactions in the Phoenix, Arizona, market. Consistent with the price pressure hypothesis originally developed by Scholes (1972) and Kraus and Stoll (1972) and the tax capitalization hypothesis proposed by Oates (1969), the data show that exchange participants pay an economically significant premium to acquire …

Differences Of Opinion And The Cross Section Of Stock Returns, Karl B. Diether, Christopher J. Malloy, Anna Scherbina

Faculty Publications

We provide evidence that stocks with higher dispersion in analysts' earnings forecasts earn lower future returns than otherwise similar stocks. This effect is most pronounced in small stocks and stocks that have performed poorly over the past year. Interpreting dispersion in analysts' forecasts as a proxy for differences in opinion about a stock, we show that this evidence is consistent with the hypothesis that prices will reflect the optimistic view whenever investors with the lowest valuations do not trade. By contrast, our evidence is inconsistent with a view that dispersion in analysts' forecasts proxies for risk.

Testing The Capital Asset Pricing Model Efficiently Under Elliptical Symmetry: A Semiparametric Approach, Douglas J. Hodgson, Oliver Linton, Keith Vorkink

Faculty Publications

We develop new tests of the capital asset pricing model that take account of and are valid under the assumption that the distribution generating returns is elliptically symmetric; this assumption is necessary and sufficient for the validity of the CAPM. Our test is based on semiparametric efficient estimation procedures for a seemingly unrelated regression model where the multivariate error density is elliptically symmetric, but otherwise unrestricted. The elliptical symmetry assumption allows us to avoid the curse of dimensionality problem that typically arises in multivariate semiparametric estimation procedures, because the multivariate elliptically symmetric density function can be written as a function …

Do Banks Price Owner–Manager Agency Costs? An Examination Of Small Business Borrowing, James C. Brau

Faculty Publications

Ang, Cole, and Lin (2000) provide evidence that supports the theoreticalwork of Jensen and Meckling (1976) on agency costs. As a further examination, I conduct a test to determine the economic significance of owner–manager agency conflicts. Using the same data source and empirical framework as Ang, Cole, and Lin (2000), I test to determine if banks chargeapremiumwhenextendingloans tofirmswith variousownership structures. In empirical tests, I find that banks do not require an owner–manager agency premium either through increased interest rates or through the requirement of collateral. Instead, I find that the interest rate is significantly affected by the length of the …

Corporate And Products Identity In The Post-National Economy: Rethinking U.S. Trade Laws, Lan Cao

Faculty Publications

In the global economy, a General Motors automobile may involve South Korean assembly; Japanese engines; German design and style engineering; Taiwanese, Singaporean, and Japanese small components; British advertising and marketing; and Irish and Barbadian data processing. What is the country of origin of this product? How should U.S. trade laws evaluate a product's origin, if it is a global composite with research, assembly, processing, and manufacturing performed in different countries? Similarly, corporations have become increasingly global in orientation and operations. Even "national" corporations have lost their territorial ties to the state of their nationality. Through a phenomenon termed "global outsourcing" …

Defined Contribution Pensions: Plan Rules, Participant Choices, And The Path Of Least Resistance, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick

Faculty Publications

We assess the effect on savings behavior of several different 401(k) plan features, including automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education. We also present new survey evidence on individual savings adequacy. Many of our conclusions are based on an analysis of micro-level administrative data on the 401(k) savings behavior of employees in several large corporations that implemented changes in their 401(k) plan design. Our analysis identifies a key behavioral principle that should partially guide the design of 401(k) plans: employees often follow the path of least resistance. For better or for worse, …

A Cross-Firm Analysis Of The Impact Of Corporate Governance On The East Asian Financial Crisis, Todd Mitton

Faculty Publications

In a sample of 398 firms from Indonesia, Korea, Malaysia, the Philippines, and Thailand, firm-level differences in variables related to corporate governance had a strong impact on firm performance duringthe East Asian financial crisis of 1997–1998. Significantly better stock price performance is associated with firms that had indicators of higher disclosure quality (ADRs and auditors from Big Six accounting firms), with firms that had higher outside ownership concentration, and with firms that were focused rather than diversified. The results suggest that individual firms have some power to preclude expropriation of minority shareholders if legal protection is inadequate.

Like Fine Veggie-Wine: Dating And Marriage After 50, Annetta Gibson

Faculty Publications

No abstract provided.

The Flexible Firm: Capability Management In Network Organizations, C. Annique Un

Faculty Publications

The article reviews the book "The Flexible Firm: Capability Management in Network Organizations," edited by Julian Birkinshaw and Peter Hagström.

An Intraday Examination Of The Federal Funds Market: Implications For The Theories Of The Reverse-J Pattern, Ken B. Cyree, Drew B. Winters

Faculty Publications

The intraday literature suggests that returns, variances, and volume form an intraday reverse-J pattern. Two competing theories explain the observed patterns: private information about future security prices and trading stoppages. The Federal funds market allows a unique opportunity to study the causes of intraday patterns because private information common to most markets does not play a role in setting prices. We find reverse-J variance patterns while accounting for generalized autoregressive conditional heteroskedasticity (GARCH) model effects. Our results support trading stops as an explanation for the reverse-J pattern and suggest that private information is not a necessary condition for the observed …

Consumer Self-Confidence: Refinements In Conceptualization And Measurement, William O. Bearden, David M. Hardesty, Randall L. Rose

Faculty Publications

The development and validation of measures to assess multiple dimensions of consumer self-confidence are described in this article. Scale-development procedures resulted in a six-factor correlated model made up of the following dimensions: information acquisition, consideration-set formation, personal outcomes, social outcomes, persuasion knowledge, and marketplace interfaces. A series of studies demonstrate the psychometric properties of the measures, their discriminant validity with respect to related constructs, their construct validity, and their ability to moderate relationships among other important consumer behavior variables.

Research Summary 6: Analytical Procedures And Audit Planning Decisions, Steven M. Glover, James Jiambalvo, Jane Kennedy

Faculty Publications

Auditors perform analytical procedures in planning the nature, timing and extent of testing. Significant fluctuations between the current year’s unaudited data and expected results signal an increased risk of material error and help auditors focus their planned tests on high-risk areas. This study examined auditors’ decisions to revise preliminary audit plans after analytical procedures performed during planning revealed significant, unexpected fluctuations. Specifically we examined whether the extent of corroboration for management’s explanation for the fluctuation and the presence of an explicit incentive for management to misstate the financial statements influenced auditors’ decisions to revise their audit plans.

The Social Life Of Information (Book Review), Clive Muir

Faculty Publications

No abstract provided.

The Ethics Of Taxation, Fred Foldvary

Faculty Publications

The judgment of taxation by ethical standards requires a universally applicable ethic. Such an ethic, natural moral law, can be derived using the Lockean framework based on equality. By this universal ethic, persons have property rights in their bodies and lives, and thus in their labor. The taxation of wages and of products of labor are therefore morally wrong. The equality premise, combined with the Lockean proviso on land, leads to the conclusion that public revenues may be justly obtained from the rental benefit of natural resources. Voluntary user fees and invasion penalties such as pollution charges are also morally …