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Volume 17, Issue No. 2, August 2010
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Editorial Note, iii
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Liming Guan and Hamid Pourjalali, Effect of Cultural Environmental and Accounting Regulation on Earnings Management: A Multiple Year-Country Analysis, 99-127
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Seung-Weon Yoo and Sung-Soo Yoon, Optimal Information System for Teams, 129-149
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Dan S. Dhaliwal, Oliver Zhen Li, and Hong Xie,Institutional Investors, Financial Health, and Equity Valuation, 151-173
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Kenji Fujiwara and Norimichi Matsueda, Effects of Transboundary Stock Pollution on the Mode of International Competition, 175-191
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Munirul H. Nabin and Pasquale M. Sgro,Clean Technology, Willingness to Pay and Market Size, 193-210
Effect of Cultural Environmental and Accounting Regulation on Earnings Management:
A Multiple Year-Country Analysis
Liming Guana and Hamid Pourjalalia*
aUniversity of Hawaii at Manoa
Abstract
We analyze the effect of cultural values and disclosure and earnings management scores on earnings management in 27 countries. The results indicate that debt-to-equity ratio (total assets) affects the earnings management upwards (downwards). These results are consistent with prior studies. Uncertainty Avoidance also affects the direction of earnings management downwards. Other cultural values, such as Individualism, Power Distance, and Masculinity, have a significant effect on the magnitude of earnings management. The results indicate that the higher the values of these variables, the higher the magnitude of earnings management. Furthermore, Disclosure Index has a significant effect on the magnitude of earnings management.
JEL Classifications: M41
Keywords: earnings management, cultural values, accounting values, multi-country comparison |
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Optimal Information System for Teams
Seung-Weon Yooa* and Sung-Soo Yoona
aKorea University
Abstract
This paper investigates an optimal information system for teams when externalities exist between team members' performance. Using a discrete model reflecting a sequential manufacturing process, we show that a team information system is better than an individual information system when the second agent utilizes information about the first agent's performance to decide her or his effort level. This decision-facilitating effect of the individual performance information increases the principal's expected costs of inducing the agent's desirable effort. In order to avoid this negative effect of the individual performance information, the principal may delay the inspection until all production processes are finished.
JEL Classifications: J33, J41, L23
Keywords: information system, team, externalities |
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Institutional Investors, Financial Health, and Equity Valuation
Dan S. Dhaliwala, Oliver Zhen Lia*, and Hong Xieb
aUniversity of Arizona
bUniversity of Kentucky
Abstract
We investigate the relation between institutional ownership, financial health, and the market valuation weights on earnings and the book value of equity. We find that the valuation weight on earnings (book value) increases (decreases) with the level of institutional ownership for profit firms, while that on book value increases with the level of institutional ownership for loss firms. This valuation effect is not subsumed by incorporating current measures of financial health and is mainly driven by institutions with long investment horizons and monitoring incentives. We conclude that the institutional valuation effect is consistent with institutions playing a positive governance role.
JEL Classifications: M41, G12
Keywords: institutional ownership, equity valuation, financial health |
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Effects of Transboundary Stock Pollution on the Mode of International Competition
Kenji Fujiwaraa and Norimichi Matsuedaa*
aKwansei Gakuin University, Japan
Abstract
This paper looks into potential determinants of the mode of international competition in a polluting good market by focusing on a strategic interaction between two environmentally concerned governments. From the analysis of our model based on a simple international duopoly model with transboundary stock pollution, we show how the resulting form of international competition depends on the magnitudes of the transboundary impacts of pollutant emissions and the decay rates of pollutant stocks in respective countries.
JEL Classifications: F10, F12, Q20
Keywords: transboundary pollution, stock pollution, international duopoly, endogenous timing |
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Clean Technology, Willingness to Pay and Market Size
Munirul H. Nabina and Pasquale M. Sgroa*
aDeakin University, Australia
Abstract
This paper extends Salop's model of localized competition by introducing the consumers' willingness to pay (WTP) for clean products and allows an individual firm to choose between a clean or a dirty technology. We assume that a clean technology is relatively costly to adopt. The consumer is willing to pay more for a product produced with clean technology and the model can also be interpreted as a world economy model where each firm represents a country. There exists a critical value of m (proportion of firms adopting the clean technology), m*, such that if m < m* then no country adopts the clean technology, all countries adopt the clean technology only if m > m* while some countries will adopt the clean technology and some will not adopt the clean technology if m = m*. Our results also identify an example of coordination failure. Since symmetric technology adoption delivers the same level of profits as non-adoption, global coordination will be necessary to achieve the clean technology adoption outcome. Finally, we demonstrate that the private and public (social planner) incentives to adopt clean technology differ.
JEL Classifications: C72, D43, D60, F12
Keywords: clean technology, willingness to pay, coordination failure |
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