Corporate Finance Commons^™

Ceo Compensation And Us High-Tech And Low-Tech Firms' Corporate Performance, Eunsup Daniel Shim, Jooh Lee, In Ki Joo

WCBT Faculty Publications

Many factors contribute to the determination of top executive compensation. This paper explores and examines the systematic difference of high-tech and low-tech CEO pays. It examines the relationship between top executive compensation and an Organizational factor, a Market factor and an Accounting factor. It tests CEO’s salary, bonus, and long-term compensation with respect to corporate reputation, ROE, Tobin’s Q, CEO shareholding and firm size.

The results show that CEOs’ Salaries at high-tech firms shows a significantly positive relationship with ROE, Tobin’s Q, and corporate reputation, while only corporate reputation shows a significant relationship with CEOs’ salaries at low-tech firms. In …

Futility Of Stimulus Funds In The Middle Of Huge Trade Deficits, Narendra C. Bhandari

Faculty Working Papers and Articles

The U. S. is facing an unprecedented environment of increasing unemployment, declining income, disappearing middleclass, and mounting trade deficit (about $731 billion in 2007). The government is providing stimulus funds to a selected number of organizations to help solve these problems. However, as long as the country continues to have huge trade deficits, these stimulus efforts may not help much, if at all. They may even worsen the economic situation. This could happen if the banking, insurance, construction, transportation, and other companies—receiving the stimulus funds—would offshore part of their production activities. Several American firms send certain number of jobs abroad …

Hdtv Division Of Global Electronics, Inc., Alan J. Kirkpatrick, Leonard K. Gashugi

Faculty Publications

CASE DESCRIPTION: The primary objective of this case is to describe realistic capital budgeting issues within a large organization. The case illustrates ways that staff inside a corporate finance department (and in related departments) position themselves in the capital planning process. The case also stresses steps that a large firm can take to leverage its size to gain the maximum benefit of investment projects. Further,, the case demonstrates sensitivity analyses in the capital budgeting process, and the resulting internal rates of return. We suggest the case be used to follow the related case “HDTV Systems”, which shows the firm as …

Central Bank Communication And Monetary Policy: The Case Of Central Bank Of Nigeria, Egbuna N. E.

Bullion

The importance of concise communication in monetary policy making cannot be over emphasised . A g o o d communication of policy definitely strengthens the institutional independence of central banks and enhances the effectiveness of monetary policy. However, no one single method could fit all when it comes to designing good communication strategies because central banks face different constraints as they try to fine-tune their messages. With current reforms and financial liberalization, there is added impetus for increased communication between the Central Bank of Nigeria (CBN), market operators, stakeholders and the public in general. Monetary policy needs to be explained …

Electronic Banking In Nigeria: Problems And Prospects From The Consumer's Perspective, Agbada A.O

Bullion

This paper explores the adoption of electronic banking [e-banking] in Nigeria. It examines the problems and prospects of e-banking in Nigeria from the consumer's perspective. The research findings show that a number of problems ranging from human, operational and technical constraints hinder the maximum utilization of services provided through e-banking channels in Nigeria. However, the results from the study have also revealed that despite these problems, the rate of adoption of e-banking services in Nigeria is phenomenal as banks have recorded outstanding successes in some areas. Nigeria is a consuming nation and based on the experience from other sectors of …

Nigerian Stock Market Reflection Of The Global Finance Crisis: An Evaluation, Sere- Ejembi A. A.

Bullion

With its roots in banking, the sub-prime mortgage crisis that commenced in the United States in 2007 soon resonated in other sectors of its financial system, and the economy, at large. It spread quickly to the developed economies in Europe, including the United Kingdom, and Asia. In the case of the Nigerian stock market, following initial relative insulation, the speed of contagion and response was comparatively slower. However, the effects began to manifest in the first quarter of 2008. The objective of this paper, therefore, is to review the global financial crisis, in the context of its recent effects on …

Investing Africa's External Reserves In Africa: Issues, Challenges And Prospects, Onwioduokit A. E.

Bullion

The paper underlined the challenges and opportunities for managing Africa's external reserves by Africans after identifying several pre-conditions for an African currency to emerge as international currency and noted that these conditions have not yet crystallized in Africa. Although African external reserves have grown over time the benefits of such growth in terms of facilitation of domestic financial markets and even the earning are not commensurate with the reserves growth rate. The non-convertibility of African currencies, volatile macroeconomic and sometimes volatile political environment coupled with the shallowness of the domestic markets are the main challenges that are faced by the …

Engineering Value Into Enterprise Risk Management; Six Sigma Techniques Can Improve The Quality Of Erm Processes And Enable Organizations To Manage Risks More Successfully, Sridhar Ramamoorti, Marcia Weidenmier Watson, Mark Zabel

Accounting Faculty Publications

Organizations should not only recognize and minimize traditional downside risks, but also embrace upside risks, or opportunities, as a strategy for success. According to a 2005 survey by management consulting firm Booz Allen, 87 percent of the market value lost by large companies with market capitalizations over US $1 billion was the result of strategic and operational blunders. Compliance failure, typically the focus of downside risk, destroyed only 13 percent of market value during the five-year study. Faced with this counter-intuitive finding, companies may wish to pursue a more balanced and positive approach to risk management. Enterprise risk management (ERM) …

After The Acquisition: Here Are Seven Steps To Successfully Integrating Finance And Accounting Functions After A Merger Or Acquisition, Barbara M. Tarasovich, Bridget Lyons, John Gerlach

WCBT Faculty Publications

Although much has been written regarding the factors critical to successful integration after a merger or acquisition, very little research has focused on the particulars of integrating the finance and accounting functions of the companies involved. As with overall business integration, detailed planning, effective communication, and speed of execution are critical. The authors recommend a seven-step process that will help balance the needs of the business during an acquisition as well as ensure financial controls are established. The overall steps provide the key activities to be accomplished and provide specific and explicit guidance. This seven-step process includes: 1. Begin planning, …

Is Nigeria Ready For Inflation Targeting, Mbutor O. Mbutor

Bullion

Inflation Targeting as a framework for monetary policy implementation simply describes a policy framework in which central banks accept and announce the realization of certain forecast targets of inflation, over a given time period, as the measure policy anchor and are accountable for deviations from actual inflation from the said target. The primary goal of the paper was to expose the prospects and challenges facing the implementation of inflation targeting in Nigeria. To put the subject in proper perspective, common terminologies often used in discussing lT were defined. The preconditions for effective lT were also highlighted. The paper has argued …

Duration Measures For Corporate Project Valuation, Tom Arnold, David S. North

Finance Faculty Publications

Sensitivity analysis is a very common exercise performed with the forecasting of project cash flows. In this paper, a duration-type measure is generated that provides a single number for the assessment of project cash flows relative to changes in the discount rate (or adjusted for changes in a particular cash flow model parameter). The calculation is no more difficult than the duration measures that already exist for bonds. Yet, the calculation provides valuable insight that many times is lost when performing sensitivity analysis. Further, at a minimum, the measure provides a gauge for the consequences of mis-specifiying the discount rate …

The Changing Components Of The Corporate Annual Report: An Update, Deborah S. Archambeault, John G. Fulmer Jr., Richard A. Turpin

Accounting Faculty Publications

Recent regulatory changes affect not only the content of annual reports but also the population of companies that are required to comply with these reporting regulations. Lenders need to stay abreast of the information provided in corporate reporting packages. This article provides an update on regulatory changes and discusses how these changes affect the information that can be found in corporate annual reports.

Pre-Acquisition Characteristics Of The Acquirers, Rupendra Paliwal

WCBT Faculty Publications

Existing empirical literature has extensively analyzed post-acquisition performance of the acquirers to evaluate success of the takeover. The academic literature tends to agree that target shareholders benefit from takeovers; however takeovers benefits for acquiring firm’s shareholders have been questioned. A majority of empirical literature indicate acquisition announcements are associated with a decrease in acquiring shareholder’s wealth. While pre-acquisition characteristics of takeover targets have been extensively analyzed, empirical literature has not directly and comprehensively analyzed pre-acquisition financial and operating characteristics of the acquiring firms. In this paper, I examine pre-acquisition operating performance and governance characteristics of acquirers. Results suggest that bidders …

Auditing Management Assertions: The Impact Of Sas No. 106, Deborah S. Archambeault

Accounting Faculty Publications

The Auditing Standards Board (ASB) of the AICPA recently issued eight new statements on auditing standards (SASs), which are effective for audits of financial statement periods beginning on or after Dec. 15, 2006. Included within this new set of audit standards is SAS No. 106: Audit Evidence, which provides guidance on the use of management assertions in obtaining audit evidence.

Information Opacity, Credit Risk, And The Design Of Loan Contracts For Private Firms, Lucy Ackert, Rongbing Huang, Gabriel G. Ramirez

Faculty Articles

This paper examines the structure and cost of a large sample of bank loans to private firms. Compared to public firms, private firms are more informationally opaque and riskier. The results suggest that the design of a loan to a private firm is significantly different from that to a public firm. Bank loans to private firms are more likely to be by a sole lender, collateralized, and have sweep covenants than loans to public firms. The cost of borrowing is higher for a private firm than for a public firm, even after holding constant firm and loan characteristics.

The Effectiveness Of Insider Trading Regulation: International Evidence, Art Durnev, Amrita S. Nain

Finance Faculty Publications

There is a long standing debate in the finance and law literatures about the need for insider trading regulation. Some scholars and practitioners argue that insider trading restrictions should be revoked because insider trading allows private information to be quickly incorporated into stock prices, thereby leading to more informationally efficient stock prices (Carlton and Fischel (1983); Dye (1984)). For example, Milton Friedman, laureate of the Nobel Memorial Prize in Economics, said: “You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public …

Strengthening The Foundations Of The Accountability Profession, Sridhar Ramamoorti, Sam M. Mccall, Relmond P. Van Daniker

Accounting Faculty Publications

Article discusses the conceptual foundations of the accountability profession in government. The role of the Academy for Government Accountability in strengthening the accountability profession and advancing research and education initiatives in government financial management is described. The author suggests that government accountability needs to be about stewardship, transparency, accountability and citizen-centric government.

Number Of Independent Board Directors And Training Hours And Financial Performance Of Tsec [Taiwan Securities Exchange Corporation] Electronic Companies, Fu-Huei Yang

Graduate Student Dissertations, Theses, Capstones, and Portfolios

In February 2002, the regulation of appointing independent directors in the boardroom was set forth in "Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies" (CGBPP). Since the enactment of the amended "Security and Exchange Act" in 2006, all listed companies are required to appoint independent directors, not less than two in number and not less than one-fifth of the total number of directors.

In addition to implementing the independent directors system, in order to enhance director competencies and director behavior, the TSEC announced the "Guideline for Promotion of Advanced Study by Directors and Supervisors of TSEC/GTSM Listed Companies." In this …

Six Levels Of Financial Knowledge, George E. Manners Jr.

Faculty Articles

With the appropriate framework to shape financial knowledge, the management accounting function should become an organization's principal decision-support platform. The framework consists of six levels of financial knowledge, and the word "financial" is most operative here. The Level 1 knowledge base connects a business to the outside world. When you have output volume and variable cost per output unit, you have the basis for Level 2 vocabulary. When a business transitions to Level 3, it has learned that return on assets must be employed as the enterprise's guiding profitability gauge. There is a very distinct increment in knowledge when moving …

Investments And Risk Management Under The New Pension Scheme., Luka A. Dalang

Bullion

Pension today, has become a topical issue. one that has engaged the commitment of government, attention of employers and workers not only in Nigeria but also in many developing and emerging economies of Africa, Asia and Latin America This paper discuss the trend of investments and pension schemes with its risks and challenges in Nigeria. The study however confirmed the non applicability of the financial reform theory hypothesized by McKinnon and Shaw in Nigeria.' . The National pension Commission guidelines as mentioned earlier, are designed to ensure transparency, integrity and objectivity in the vestment process. and to ensure that the …

How To Use The Changing Components Of The Corporate Annual Report, Deborah S. Archambeault, John G. Fulmer Jr., Richard A. Turpin

Accounting Faculty Publications

The amount of information required in a corporate annual report continues to increase. Most recently, additional reporting requirements brought about by the Sarbanes-Oxley Act of 2002 (SOA), the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC) increase the number of component reports that must be included in the annual report package. Lenders need to be familiar with the additional information that these new components provide. Therefore, this article summarizes the required component reports, discusses the information conveyed in each report and gives some examples of the types of significant new information that can be obtained.

Anheuser-Busch And The Eu, Keith Tolbert

Undergraduate Theses and Capstone Projects

The following paper provides analysis of Anheuser-Busch, its current position within the European Union (EU), and its opportunities/threats that exist in the EU. Included is background information about Anheuser-Busch containing its products, financial condition, and major competitors within the EU. I have provided extensive analysis o f the areas of concern for Anheuser-Busch in the EU as well as recommendations for the company to consider. The major market for opportunity covered is Germany. Anheuser-Busch is not a current competitor in Germany, however, possible expansion opportunities into the country is addressed. Additionally, a realistic outlook of Anheuser-Busch’s future other EU countries …

Enhancing Long-Term Savings Culture In Nigeria Through National Savings Certificate., S. O. Alade

Bullion

In Nigeria's economic history, the strides of the last five years, which have been internationally acclaimed, are unprecedented. The many reforms that have engendered the current success have largely included those in the financial sector, particularly, the positive policy shifts in the domestic money market as first steps towards a more robust and enduring face-lift for the sector. Part of the expectations are that the improved enabling environment from the reforms would continue to make more investment funds readily available, as well as attract droves of foreign direct investment. The challenges that remain include the need to deliver on the …

A Note On The Instability Of The Unprojected Individual Level Premium Cost Method, Pierre Devolder, Valerie Goffin

Journal of Actuarial Practice (1993–2006)

We compare the unit credit and the unprojected individual level premium cost methods in a continuous time environment and show that the latter may produce unstable contribution rates in a dynamic environment. Specifically, assuming there are no unfunded liabilities, we prove that the unprojected individual premium cost method may produce non-bounded contributions if benefits change too close to the normal retirement age.

Journal Of Actuarial Practice - Volume 13 (2006) - Contents And Masthead

Journal of Actuarial Practice (1993–2006)

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ …

Estimation Of Large Insurance Losses: A Case Study, Tine Buch-Kromann

Journal of Actuarial Practice (1993–2006)

This paper demonstrates an approach to analyzing liability data recently developed by a Danish insurance company. The approach is based on a Champernowne distribution, which is corrected with a non-parametric estimator. The correction estimator is obtained by transforming the data set with the estimated modified Champernowne cdf and then estimating the density of the transformed data set by using the classical kernel density estimator. Our approach is illustrated by applying it to an actual data set.

Solvency Of Life Insurance Companies: Methodological Issues, Rosa Cocozza, Emilia Di Lorenzo

Journal of Actuarial Practice (1993–2006)

The paper deals with solvency assessment for life insurance business; some methodological issues concerning the solvency of life insurance companies, particularly connected to the investment risk, are suggested. Considerations about the technical equilibrium of an insurance portfolio and the financial regulation lead to a dynamic system involving risk measure and solvency assessment. The formal model is applied to a life annuity cohort in a stochastic context in order to exemplify the potential of the model, especially referred to the need to frame solvency assessment in a dynamic perspective.

On Some Risk-Adjusted Tail-Based Premium Calculation Principles, Edward Furman, Zinoviy Landsman

Journal of Actuarial Practice (1993–2006)

This paper explores two tail-based premium calculation principles, the tail standard deviation (TSD) premium and the tail conditional expectation (TCE) premium, in their risk-adjusted and unadjusted forms. They are risk-adjusted using so-called distortion functions. We prove that the proportional hazard (PH) risk-adjusted TCE premium is larger than the unadjusted TCE premium. Additionally, given a risk distribution with location and scale parameters, we prove that the PH risk-adjusted TCE premium reduces to the unadjusted TSD premium.

Bayesian Analysis Of A Health Insurance Model, Helio S. Migon, Edison M.O. Penna

Journal of Actuarial Practice (1993–2006)

We consider the problem of determining health insurance premiums based on past information on size of loss, number of losses, and size of population at risk. The size of loss and the number of losses are treated as mutually independent random variables. The number of losses is assumed to follow a Poisson process, and the loss sizes are independent and identically distributed non-negative random variables, and the population at risk is assumed to follow a non-linear growth model. An expression for the premium is obtained through maximization of the insurer's expected utility under a Bayesian model. The parameter estimation process …

Analysis Of An Insurance Risk Model With Thinning Dependence And Common Shock, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li

Journal of Actuarial Practice (1993–2006)

We consider a continuous-time insurance risk model with m dependent classes of business with dependent claim number processes due to thinning dependence and a common shock. The impact of the dependence is studied via the adjustment coefficient. The case m = 2 is investigated analytically for exponential claim distributions and via simulation for non-exponential claim distributions.