Allied Academies International Conference. Academy of Accounting and Financial Studies. Proceedings

News

Earnings Management and the Banking Crisis of the 1990s: Evidence From Nigeria

The objective of this study is to investigate whether there is evidence of earnings management during the Nigeria banking crisis of the 1990s. I hypothesize and find that Nigeria banks generally show a positive association between earnings before taxes and provisions for loan loss and loan loss provisions; indicating earnings smoothing. Also that healthy banks have smoother earnings than distressed ones, even as the latter continue to deliberately under-provide/understate loan loss provisions...

Customized Assessment Group: A Different Approach to Students Learning

The purpose of this study is to inculcate into my students the importance of group dynamics that emphasize cooperative team building through Customized Assessment Group (CAG). Using a sample of sophomore students in the Principles of Accounting II, an introduction to management accounting course, I administer CAG in a five-stage process. The findings indicate CAG substantially improves students' performances. The process also produces three unintended positive effects. I strongly believe that...

Using Earnings Versus Cash Flows to Measure Abnormal Accruals: Problems

In attempting to identify instances of earnings management through accruals manipulation, two separate issues need to be addressed: how are accruals to be measured, and how can normal accruals be differentiated from abnormal accruals. Several different models have been developed over the years which attempt to capture evidence of earnings management. One of the more widely used measures of accruals has been the difference between operating income and operating cash flows. One of the more endu...

Evaluating a Trend Analysis of Fraud Factors

The Sarbanes-Oxley Act of 2002 was established primarily as an attempt to combat an increasing level of corporate fraud and to hold executives accountable. However, the level of fraud and the cost of fraud continues to increase. This paper provides a trend analysis of fraud factors in an attempt to evaluate the factors that are most prevalent so as to assist in the identification of fraudsters and the reduction of fraud occurrences. According to the biannual Report to the Nation on Occupation...

Customer Service Management Among Entrepreneurial Accountants in Oklahoma

A model of how to study customers is developed and the importance of better equipping private accountants to collect and handle customer service oriented information is developed. It is found that personality is important with the personality variables being important for accountants differs from that of other jobs. Typically Agreeableness, Extroversion, and Conscientiousness have been found to be important for predicting customer levels.

The Impact of Multiple Work Arrangements On Labor Productivity

This paper examines the economic impact of multiple work arrangements (MWA) in long haul trucking companies. Specifically, we investigated the use of independent contractors (owner-operator drivers) versus full-time company drivers and their impact on labor productivity. In a managerial context, owner-operators represent soft capacity and company drivers represent hard capacity. Our results indicate that owner-operators will improve the productivity of the company. There is a significant and ...

Do Mutual Fund Managers Take More Risk Toward Yearend?

This study finds evidence for both the tournament hypothesis, mutual fund managers who are possible "losers" in the final tournament tend to take greater risk than possible "winners" in the latter part of a year, and the alternative hypothesis, mutual fund managers with higher interim returns are more likely to take greater risk toward the end of the year than those with low interim returns. This behavior aggravates agency problem between mutual fund companies and investors. Results vary with...

Margin Debt Balance V.S. Stock Market Movements and Expected Gdp Growth

Both regression and Granger causality tests are used to examine whether stock market movements lead margin debt changes, or vice versa. The study also examines whether the level of interest rate on margin debt affects margin loan borrowing. The study tries to find whether margin loan borrowers' behavior is affected by expected macro economic growth. Margin debt balances at both the New York Stock Exchange and the NASDAQ stock market increase as major stock indexes rise and decrease as the ind...

New Standards Available for Private Companies: At Last a Little Gaap?

In July 2009 the IASB published a single comprehensive standard for non-public companies. The Small and Medium-sized Entity Standard (SME) provides a simplified set of rules for companies with no public reporting responsibilities. This is the first official 'Little GAAP' ever created that could be used by U.S. entities. In the US the need for a little GAAP has been debated for decades with small firms wanting relief from onerous reporting requirements that large public firms face and regulato...

An Examination of Anticipatory Socialization and Professional Commitment: An Analysis of Diversity Among Accounting Students

This study examines the attitudes of accounting students before they enter the accounting profession (anticipatory socialization) and investigates whether measured differences can enlighten us to why minorities leave the profession. We measured auditing students' anticipatory socialization and professional commitment; however, the results did not show significant differences in the relationship between anticipatory socialization and professional commitment when taking ethnicity into considera...

Spreadsheet Simulation in Accounting Without Add-Ins

Simulation is widely used in accounting practice to analyze risk for a variety of types of problems. Developing and experimenting a simulation model on an electronic spreadsheet not only eliminates the need for learning a programming language and simplifies the model building process but also eases the experiments for different values of the parameters. This paper discusses the procedures for generating random numbers in the electronic spreadsheet environment and demonstrates the use of Micro...

Do Ceos and Principal Financial Officers Take a 'Bath' Separately or Together? An Investigation of Discretionary Accruals Surrounding Appointments of New Ceos and Pfos

This study presents the first targeted examination of changes in financial reporting surrounding the appointment of both new CEOs and Principal Financial Officers (PFOs). We identify companies that appoint new CEOs and PFOs in the period 1995 to 2002 and find that the change in discretionary accruals is negative and significant in the year of hire (from t-1 to t) for firms appointing a new CEO or both a new CEO and PFO (i.e., the "big bath"), but not for firms appointing only a new PFO. We al...

Accounting for Unprofitable Long-Term Contracts: A Teaching Note

The fact that a long-term contract results in an overall loss should not result in a change in the framework that we use to calculate the gross profit under the percentage completion method. The proposed method captures the economic consequences of the contract using the same framework developed for profitable contracts. This is achieved by disclosing the actual costs incurred as the costs of construction and then recognizing a provision for future losses. It is argued that the any provision ...

Earnings Management and Long-Run Stock Underperformance of Private Placements

The study investigates whether private placement issuers manipulate their earnings around the time of issuance and the effect of earnings management on the long-run stock performance. We find that managers of U.S. private placement issuers tend to engage in income-increasing earnings management in the year prior to the issuance of private placements. We further speculate that earnings management serves as a likely source of investor over-optimism at the time of private placements. To support ...

Sustainability Reporting

The purpose of the paper is to explore the importance of sustainability reporting and identify its impacts on the firm, shareholders, customers, the public, and the environment. The effect on sustainability reporting in the U.S. of the shift from GAAP to IFRS is also discussed. Research findings indicate that sustainability reporting is necessary, but differing methodologies present dilemmas. Further, implementation faces many obstacles.

Testing the Trade-Off Theory of Capital Structure

We test the trade-off theory of capital structure in a setting in which a crisis suddenly changes the probability of bankruptcy. In this setting, the trade-off theory of capital structure predicts that the optimum level of capital structure would shift to a lower level of debt, and thus would lead to a negative market reaction for a firm at its optimum level of debt. Because the optimum level of debt is unobservable, we predict that the level of debt affects the market reaction. We use stock ...

Stock Splits and When-Issued Trading: A Test of the Signaling Theory

This study investigates empirically the presence/absence of when-issued trading in a sample of firms announcing stock splits in 2005 and 2006. The findings indicate that the operational performance of when-issued traded and non-when-issued traded firms differs prior to and after the stock split announcement. When-issued traded firms outperform when-issued traded firms with respect to EPS and ROTC after the stock split announcement suggesting that the existence of when-issued trading might be ...

Mutual Fund Performance and Board Characteristics Relating to Manager Terminations

This study examines mutual fund performance around fund manager replacement and the timing of the decision to replace mutual fund managers. The study includes data from 507 instances of replacement of an individual fund manager or the entire management team. While results match previous findings that returns improve and standard deviation falls following a manager change, several important new findings are also presented. In using a unique control sample of funds matched on prior period perfo...

How Does Prior Information Affect Analyst Forecast Herding?

We test the empirical implications of a few theoretical models with a sample of individual analysts' annual earnings forecasts. A better understanding of the relation between prior information and analyst herding will allow investors to better interpret analyst forecasts. Results indicate the probability of herding among analysts is greater with large information shocks. Evidence also shows that analysts are more likely to herd in their earnings forecast revisions when their current outstandi...

Do Firms Manipulate Earnings When Entering the Bond Market?

This paper examines whether firms issuing bonds engage in earnings management via either accrual-based or real activities. Based on a sample of bond issuers from 1992 through 2002, we document that bond issuers increase their accruals prior to the issuance then decrease their accruals subsequent to the issuance year. In addition, we also find some evidence that bond issuers engage in real earnings management. Overall, the findings in this study suggest that firms issuing bonds not only manipu...

A Study of the Financial Characteristics of European and Us Companies Leading Up to the Recession of 2008/2009

This study will examine the similarities and differences in the financial characteristics of large corporations operating in Europe and the US. Financial data is used from year end 2005 and 2008 for large corporations to examine if there are major differences in how businesses operate, the profitability of their operations, how they are set up and how they raise capital. It will also be instructive to examine what if any steps the corporations might have taken in the midst of the global reces...

Education Expenses: How Several Tax Policies Can Ease the Strain

College costs have been on the rise. But because education is favored as a social goal, Congress has responded by enacting various tax policies to ease the strain of paying for high education expenses. The special tax provisions include exclusions from gross income, tax deductions, and tax credits. A taxpayer can analyze the various tax opportunities to determine a best strategy. The choice is subject to a clientele effect because the optimal choice depends on various factors such as the inco...

Why Still Defined Benefit Plans?

Employers are at risk with defined benefit plans because they must contribute enough to meet the cost of benefits that the plan defines. According to a recent survey conducted by the U.S. Government Accounting Office, the number of private DB pension plans has declined substantially over the past two decades. At the same time, the number of DC pension plans, such as 401(k)-type plans, has grown dramatically and resulted in a shift from DB plans to DC plans. The primary reason for the shift is...

Is There Lifo After Ifrs?

Given the rapid move toward globalization in the business world, the accounting profession has also recently seen many changes including adoption of international financial reporting standards (IFRS) by the EU and other countries, the move toward international convergence by US GAAP, and most recently the expectation that US firms will adopt international standards soon. Some of those standards differ significantly from current US standards. This paper addresses IAS 2, the standard for invent...

Variable Prepaid Forward Contracts and Constructive Sales Legislation

Debate among tax professionals hinges on what circumstances make Variable Prepaid Forward Contract (VPFC) taxable at execution under Section 1259 (constructive sales legislation). A brief review of events that prompted this legislation and the tax treatment of VPFCs will be covered in this paper, followed by a discussion of subsequent IRS positions found in Revenue Ruling 2003-7 and TAM 200604033. The tax positions will then be compared to the U.S. GAAP treatment, as explained by the new FASB...

Tax Issues with a Family Limited Partnership

The IRS allows individuals to create a Family Limited Partnership (FLP) to eliminate or decrease the estate and gift taxes while allowing the individual to control the assets. However, there are challenges to an FLP if the rules are not followed. Disadvantages of an FLP are failure to fund the FLP, failure to involve "business" assets only, liability of a parent as the general partner, limit creditor's access to the FLP's assets, and limit the percentage of the assets placed in the FLP.

The Short-Term Effect of Pre Ipo Earnings Management On Post Ipo Ownership Structure

The purpose of this study is to investigate whether IPO firms engage in earnings management before IPO to increase institutional ownerships after IPO. Using a sample of 302 IPO's over six-year period (1997-2002), we find that IPO firms with high discretionary accruals, a measure of aggressive earnings managements, have greater institutional ownerships one quarter after IPO than IPO firms with low discretionary accruals. This result holds after controlling for other influencing factors such as...

Corporate Finance Assessment Results: Student Performance Across Multiple Learning Objectives

This paper examines assessment results for principles of corporate finance at a regional institution. Results are derived from 91 students taking a comprehensive final exam in corporate finance in the spring of 2009. The learning objectives state students will develop and demonstrate knowledge of the following areas: (1) Financial markets and efficiency; (2) Financial statement analysis; (3) Time value of money; (4) Stocks and bonds; (5) Risk, return and diversification; (6) Capital budgeting...

Robustness of the Black-Scholes Model in Pricing Indian Stock Options

The robustness of the Black-Scholes model as it applies to pricing options in the Indian options market was evaluated by (a) assessing the validity of its assumptions as it applies to the Indian options market, (b) assessing its predictive ability, and (c) assessing the distributive characteristics of the residuals. The results of the study on a sample of options prices for the period 2008 indicate that for the most part the assumptions of the Black-Scholes model are applicable in the Indian ...

Small and Medium-Scale Enterprices and Institute and Foundation Supporting Smes Financially: Turkish Case

In Turkey, SMEs are referred as the economical units which employ less than 250 workers, are classified as micro company, small and medium sized enterprise in bylaws, the annual net selling output and financial balance sheet of which does not exceed 25 million Turkish Liras. The following criteria are used in defining SMEs: labor, number of machines, production capacity, value of fixed assets, sales revenue, and added-value. The employment SMEs provide, added value, the investments they made,...