In empirical corporate finance, firm size is commonly used as an important, fundamental firm characteristic. However, no research comprehensively assesses the sensitivity of empirical results in ...corporate finance to different measures of firm size. This paper fills this hole by providing empirical evidence for a “measurement effect” in the “size effect”. In particular, we examine the influences of employing different proxies (total assets, total sales, and market capitalization) of firm size in 20 prominent areas in empirical corporate finance research. We highlight several empirical implications. First, in most areas of corporate finance the coefficients of firm size measures are robust in sign and statistical significance. Second, the coefficients on regressors other than firm size often change sign and significance when different size measures are used. Unfortunately, this suggests that some previous studies are not robust to different firm size proxies. Third, the goodness of fit measured by R-squared also varies with different size measures, suggesting that some measures are more relevant than others in different situations. Fourth, different proxies capture different aspects of “firm size”, and thus have different implications. Therefore, the choice of size measures needs both theoretical and empirical justification. Finally, our empirical assessment provides guidance to empirical corporate finance researchers who must use firm size measures in their work.
International business is not immune to science's reproducibility and replicability crisis. We argue that this crisis is not entirely surprising given the methodological practices that enhance ...systematic capitalization on chance. This occurs when researchers search for a maximally predictive statistical model based on a particular dataset and engage in several trial-and-error steps that are rarely disclosed in published articles. We describe systematic capitalization on chance, distinguish it from unsystematic capitalization on chance, address five common practices that capitalize on chance, and offer actionable strategies to minimize the capitalization on chance and improve the reproducibility and replicability of future IB research.
Measurement of market Kvålseth, Tarald O
PloS one,
07/2022, Volume:
17, Issue:
7
Journal Article
Peer reviewed
As measures of concentration, especially for market (industry) concentration based on market shares, a variety of different measures or indices have been proposed. However, the various indices, ...including the two most widely used ones, the concentration ratio and the Herfindahl-Hirschman index (HHI), lack an important property: the value-validity property. An alternative index with this and other desirable properties is introduced. The new index makes it permissible to properly assess the extent of the concentration and make order and difference comparisons between index values as being true representations of the real concentration characteristic (attribute). Computer simulation data and real market-share data are used in the analysis. It is shown that the new index has a close functional relationship with the HHI index and has a firm theoretical relationship with market power as measured by the price-cost margin. Corresponding modifications to existing merger guidelines are presented.
The aim of this study is to establish a theoretical model to investigate the incentives of firms for choosing R&D capitalization. We focus on a monopoly firm managed by a typically myopic manager. In ...a two-stage setting, the manager determines the level of R&D prior to its output decision. Our model indicates that capitalizing some R&D costs yields higher profitability than fully expensing such investments. Moreover, we show that a longer useful life of capitalized assets is favorable for both consumer surplus and social welfare; thus, policy-makers should encourage policies that support extended lifespans of these assets.
•We are the first to establish a theoretical model of R&D capitalization from an IO perspective.•Our analytical tool allows to investigate the incentives of firms for choosing R&D capitalization.•We focus on a monopoly firm led by a typically myopic manager.•We show that R&D capitalization is more profitable than R&D expensing in the short term.•A longer (useful) life of capitalized assets is favorable for both consumer surplus and social welfare.
ABSTRACT
Accounting rules require that certain R&D expenditures be capitalized, but academic research often states that all R&D expenditures must be immediately expensed. An accurate understanding of ...actual R&D accounting practices is critical because that understanding influences research questions and design choices. To examine the competing R&D accounting perspectives, we survey 184 experienced financial officers. Our survey reveals that R&D capitalization is common and extensive in practice. Over 90% of respondents indicate that their firm capitalizes at least some R&D expenditures, and our evidence shows that about 22% of annual R&D expenditures are capitalized. When facing an earnings shortfall, respondents indicate that firms are often willing to cut R&D expense. However, respondents also indicate an unwillingness to cut types of R&D expenses that cause long‐term harm—for example, laying off scientists or delaying the execution of trials—and they often redirect the freed‐up R&D resources to R&D expenditures that are capitalized. Using archival data, we also corroborate our survey finding about the pervasiveness of capitalized R&D, and we demonstrate its empirical implications. Our study helps to align the characterization of R&D accounting rules in the academic literature with the authoritative professional literature and provides a more nuanced understanding of firms’ R&D response to an earnings shortfall.
RÉSUMÉ
Comptabilisation de la R‐D : données probantes et implications
Les règles comptables exigent que certaines dépenses de R‐D soient capitalisées, mais la recherche universitaire affirme souvent que toutes les dépenses de R‐D doivent être immédiatement passées en charges. Il est essentiel de bien comprendre les pratiques comptables réelles en matière de R‐D, car cette compréhension influence les questions de recherche et les choix de conception. Afin d'examiner les perspectives comptables concurrentielles de la R‐D, les auteurs ont interrogé 184 responsables financiers expérimentés. Leur étude révèle que la capitalisation de la R‐D est courante et étendue dans la pratique. Plus de 90 % des répondants mentionnent que leur entreprise capitalise au moins une partie des dépenses de R‐D, et les données de l'étude révèlent qu'environ 22 % des dépenses annuelles de R‐D sont capitalisées. Lorsqu'ils se trouvent devant un déficit de recettes, les répondants indiquent que les entreprises sont souvent prêtes à réduire les dépenses de R‐D. Cependant, les répondants indiquent également qu'ils ne sont pas disposés à réduire les types de dépenses de R‐D qui causent des dommages à long terme — par exemple, licencier des scientifiques ou retarder l'exécution des essais — et qu'ils redirigent souvent les ressources dégagées par la R‐D vers les dépenses de R‐D capitalisées. À l'aide de données d'archives, les auteurs corroborent également les résultats de leur étude sur l'omniprésence de la R‐D capitalisée, et démontrent ses implications empiriques. Cette étude permet d'aligner la caractérisation des règles de comptabilisation de la R‐D dans la littérature académique avec la littérature professionnelle faisant autorité et fournit une compréhension plus nuancée de la réponse des entreprises en matière de R‐D face à un déficit de recettes.
In this paper, we examine convergence of stock markets. Our empirical exercise is based on 11 different panels, which together consist of 120 countries. The richness of the dataset allows us to ...disaggregate countries into panels, such as high income, middle income, low income, OECD, CSI, and developing country panels. In addition, we construct regional panels, such as those representing the Arab States, East Asia and the Pacific, South Asia, Latin America and the Caribbean, and Sub-Saharan Africa. Our main finding is that, based on the conditional convergence model, convergence of stock market capitalization and stocks traded is found for four panels, namely the high and low-income panels, the OECD panel, and the Sub-Saharan African panel. The speed of convergence is high, in most cases between 20% and 30%.
•Investigate the relationship between ESG ratings and stock price crash risk.•Statistically and economically significant negative relationship for Chinese firms.•Results consistent with agency-theory ...based explanations.
While several studies evidence that firm social responsibility lowers stock crash risk, few investigate this for China. Further, few studies investigate the aggregate role of environmental, social, and corporate governance responsibilities, rather than just social responsibility alone. Additionally, unlike previous studies, we consider both stakeholder and agency explanations. We investigate the relationships between environmental, social, and corporate governance (ESG) ratings and stock price crash risk, finding a statistically and economically significant negative relationship for Chinese firms. Results are consistent with agency-theory based explanations. Results will be of interest to scholars interested in the general impact of promotion of public goods on firm performance, as well as to researchers and investors interested in the Chinese institutional environment.
Writing is a skill that is considered difficult because many aspects must be considered. The aim of this research is to investigate and analyze the use of capitalization, punctuation, and spelling in ...the abstracts of theses. Understand the impact of these errors on written communication and provide concrete recommendations to enhance the quality of academic writing. This research was qualitative approach with text analysis, the population involves undergraduate students from English Department of IAIN KERINCI, and the sample was taken from the theses of the last 5 years, number of tenth theses on abstracts. Data was collected through manual analysis of thesis texts, focusing on capitalization, punctuation, and spelling. Based on the results of the researcher finding capitalization errors are the most prevalent, totaling 60 instances. On the other hand, punctuation errors, specifically in the abstract section of the theses, are comparatively lower, with only 25 occurrences. Meanwhile, spelling errors identified in the abstracts of the theses amount to 30 mistakes.
'FinTech' is the digital sector of retail money and finance widely proclaimed to be transforming banking in the global North and 'banking the unbanked' in the global South. This paper develops a ...perspective for critically understanding FinTech as a platform political economy that is marked by three distinctive and related processes: reintermediation, consolidation, and capitalisation. Through experimentation with the platform business model and building on the digital infrastructures and data flows of the broader platform ecosystem, a constellation of organisations - including start-ups, early-career firms, BigTech companies and incumbent banks - are engaged in processes of platform reintermediation. Changing the bases of competition in retail money and financial markets and encouraging oligopoly and even monopoly, the reintermediation processes of FinTech are presently manifest in strong tendencies towards platform consolidation. The imagined potential of FinTech has also triggered intensive processes of capitalisation, with platforms receiving significant prospective investment by venture capital, private equity funds, banks and BigTech firms.
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