We examine whether application of International Accounting Standards (IAS) is associated with higher accounting quality. The application of IAS reflects combined effects of features of the financial ...reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do matched sample firms applying non-U.S. domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the postadoption differences. Firms applying IAS generally evidence an improvement in accounting quality between the pre- and postadoption periods. Although we cannot be sure our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate effects of both.
Like governance structure and alliance scope, partner selection may serve to safeguard firms' intellectual assets in R&D alliances. We categorize potential alliance partners into friends, ...acquaintances, and strangers, depending on their previous alliance experience. Data on 1,159 R&D alliances indicate that the more radical an alliance's innovation goals, the more likely it is that partners are friends rather than strangers. However, strangers are preferred to acquaintances, suggesting partner selection preferences are not transitive. Moreover, results suggest that firms use partner selection, governance structure, and alliance scope as substitute mechanisms to protect valuable technological assets from appropriation in R&D alliances.
This paper describes the extent of product creation and destruction in a large sector of the US economy. We find four times more entry and exit in product markets than is found in labor markets ...because most product turnover happens within firms. Net product creation is strongly procyclical and primarily driven by creation rather than destruction. We find that a cost-of-living index that takes product turnover into account is 0.8 percentage points per year lower than a "fixed goods" price index like the CPI. The procyclicality of the bias implies that business cycles are more volatile than indicated by official statistics.
► We study the impact of venture capital investments on young high-tech firm growth. ► We disentangle the treatment and selection effect of venture capital (VC). ► A longitudinal dataset of 538 ...Italian young high-tech firms (NTBFs) is used. ► The treatment is of large magnitude while the selection effect appears to be negligible. ► Most of the impact is obtained immediately after the first round of VC finance.
The financial and innovation literature generally claims that venture capital (VC) investments spur the growth of new technology-based firms (NTBFs). However, it has proved difficult so far to separate the “treatment” effect of the VC investment from the “selection” effect attributable to the ability of the VC investor to screen high growth NTBFs. The aim of this work is to test whether VC investments have a positive treatment effect on the growth of employment and sales of NTBFs. For this purpose we consider a 10-year longitudinal data set for 538 Italian NTBFs, most of which are privately held. The sample includes both VC-backed and non-VC-backed firms. We estimate Gibrat-law-type dynamic panel-data models augmented with time-varying variables that capture the VC status of firms. To control for the endogeneity of VC investments we use several GMM estimators. The econometric results strongly support the view that VC investments positively influence firm growth. The treatment effect of VC investments is of large economic magnitude, especially on growth of employment. Most of it is obtained immediately after the first round of VC finance. Conversely, the selection effect of VC appears to be negligible in the Italian context.
We exploit the introduction of electronic toll collection, (E-ZPass), which greatly reduced both traffic congestion and vehicle emissions near highway toll plazas. We show that the introduction of ...E-ZPass reduced prematurity and low birth weight among mothers within 2 kilometers (km) of a toll plaza by 10.8 percent and 11.8 percent, respectively, relative to mothers 2–10 km from a toll plaza. There were no immediate changes in the characteristics of mothers or in housing prices near toll plazas that could explain these changes. The results are robust to many changes in specification and suggest that traffic congestion contributes significantly to poor health among infants.
We examine the roles of episodic and systemic forms of power in radical organizational change. Drawing on a study of three attempted transformations in professional service firms from traditional ...professional partnerships into managed professional businesses – one relatively complete and two incomplete – we identify two key mechanisms that link episodic and systemic forms of power and show how those mechanisms affect the likelihood that organizations will be able to successfully undergo radical change. We find that episodic power is able to initiate and energize radical change when it represents a significant break from traditional authority structures and is legitimated through appeals to traditional organizational values. We find that systemic power is able to institutionalize radical change when the systems associated with it are legitimated by the skilled use of language by key actors and then left to operate independently by those actors. By articulating the specific mechanisms that link episodic and systemic power, our study provides a more complete model of the role of power in radical change, enabling better prediction of the likelihood of successful transformation and a fuller theoretical explanation of change outcomes.
Universities play an important role in the development of a country in this age of the knowledge economy. As government subsidies to universities have been reducing in recent years, the more ...efficient use of resources becomes an important issue for university administrators. This paper applies data envelopment analysis (DEA) to assess the relative efficiency of the academic departments at National Cheng Kung University in Taiwan. The outputs considered are total credit-hours, publications, and external grants; and the inputs utilized by the departments are personnel, operating expenses, and floor space. An assurance region is constructed by the top administrators of the university to confine the flexibility in selecting the virtual multipliers in DEA. Four groups of departments of similar characteristics are categorized via an efficiency decomposition and cluster analysis. The aggregate efficiency indicates whether the resources have been utilized efficiently by a department and the efficiency decomposition helps identify the weak areas where more effort should be devoted so that the efficiency of the department can be improved.
We examine the selection and termination of investment management firms by 3,400 plan sponsors between 1994 and 2003. Plan sponsors hire investment managers after large positive excess returns but ...this return-chasing behavior does not deliver positive excess returns thereafter. Investment managers are terminated for a variety of reasons, including but not limited to underperformance. Excess returns after terminations are typically indistinguishable from zero but in some cases positive. In a sample of round-trip firing and hiring decisions, we find that if plan sponsors had stayed with fired investment managers, their excess returns would be no different from those delivered by newly hired managers. We uncover significant variation in pre- and post-hiring and firing returns that is related to plan sponsor characteristics.
Commercial real estate expected returns and expected rent growth rates are time-varying. Relying on transactions data from a cross-section of U.S. metropolitan areas, we find that up to 30% of the ...variability of realized returns to commercial real estate can be accounted for by expected return variability, while expected rent growth rate variability explains up to 45% of the variability of realized rent growth rates. The cap rate—that is, the rent-price ratio in commercial real estate—captures fluctuations in expected returns for apartments and retail properties, as well as industrial properties. For offices, by contrast, cap rates do not forecast (in-sample) returns even though expected returns on offices are also time-varying. As implied by the present value relation, cap rates marginally forecast office rent growth but not rent growth of apartments, retail properties, and industrial properties. We link these differences in in-sample predictability to differences in the stochastic properties of the underlying commercial real estate data-generating processes. Also, rent growth predictability is observed mostly in locations characterized by higher population density and stringent land-use restrictions. The opposite is true for return predictability. The dynamic portfolio implications of time-varying commercial real estate returns are also explored in the context of a portfolio manager investing in the aggregate stock market and Treasury bills, as well as commercial real estate.
We use NLSY97 data to examine how home price variation affects the quality of postsecondary schools students attend. We find a $10,000 increase in housing wealth increases the likelihood of public ...flagship university enrollment relative to nonflagship enrollment by 2.0 percent and decreases the relative probability of attending a community college by 1.6 percent. These effects are driven by lower-income families, predominantly by altering student application decisions. We also find home price changes affect direct quality measures of institutions students attend. Furthermore, for lower-income students, each $10,000 increase in home prices leads to a 1.8 percent increase in the likelihood of completing college.
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