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    Accounting

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    The Effect on Stockholder’s Wealth on Critical Systems Failure and Remedy: The Boeing 787 Case

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    In this paper we analyze the effect of Boeing Dreamliner 787’s battery problems on stockholder wealth. Using the event study methodology, we show that the recall in January of 2013 initially caused the company’s cumulative abnormal returns to fall by almost 4% in four trading days after the recall. This was followed by an announcement by two major airlines to ground all of the 787 Dreamliner jets. The FAA also ordered all US airlines to ground their 787s and announced an investigation to review all critical systems of 787s. However within four months of the investigation, FAA approved Boeing’s revisions to its 787 design. This caused Boeing’s abnormal returns to rise by almost 2%. On April 24th Boeing reported it’s greater than expected quarterly results which caused its abnormal returns to rise by an additional 3%. The Boeing case provides us an opportunity to study how critical mistakes can change the value of a manufacturer. It also shows how critical it is for the company to redeem itself by quickly addressing a crisis situation

    Competition and Price Wars in the U.S. Brewing Industry

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    The behavior of the macro or mass-production segment of the U.S. brewing industry appears to be paradoxical. Since the end of Prohibition in 1934, the number of independent brewer has continuously declined while the major national brewers, such as Anheuser-Busch, Miller, and Coors, have gained market share. In spite of this decline in the number of competitors, profits and market power have remained low in brewing. Iwasaki et al. (2008) explain this result by providing evidence that changes in marketing and production technologies favored larger brewers and forced the industry into a war of attrition, in which only a handful of firms could survive. This led to fierce competition, especially from the 1960s through the mid 1980s. Since the late 1990s, the war appears to have subsided. Thus, the purpose of this study is to determine whether price competition diminished after the mid-1990s. We find evidence that competition has diminished but not enough to substantially increase market power

    Inward FDI in the United States and its Policy Context

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    Inward foreign direct investment (IFDI) represents an integral part of the United States (U.S.)economy, with its stock growing from US83billionin1980toUS 83 billion in 1980 to US 3.5 trillion in 2011. The United States, which had earlier been primarily a home for multinational enterprises (MNEs) rather than a host for affiliates of foreign MNEs, has become a preferred host country for FDI since the 1980s. Foreign MNEs have contributed robust flows of FDI into diverse industries of the U.S. economy, and total FDI inflows reached US227billionin2011,equivalentto15 227 billion in 2011, equivalent to 15% of global inflows, the single largest share of any economy. Inflows of FDI, with a peak of US 314 billion in 2000 and another of US$ 306 billion in 2008, have been an important factor contributing to sustained economic growth in the United States. The recent financial and economic crises negatively impacted FDI flows to the United States and opened a period of major uncertainty. The effectiveness of government policy responses at both the national and international levels in addressing the financial crisis and its economic consequences will play a crucial role for creating favorable conditions for a rebound in FDI inflows

    Valuation Bias and Profit Opportunities in Financial Markets

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    Recent work by Gokhale et al. (2013) proposes a method for detecting misvalued stocks. This paper applies the method to look for profitable investment opportunities by identifying undervalued stocks. Using data on companies in the S&P 100 over a period of 22 years, we test several specifications of our investment strategy for robustness. We find that investing in undervalued stocks significantly outperforms benchmark indices over time, and that this strategy can lead to risk-adjusted excess returns that are positive and statistically significant

    The Effect on Stockholder Wealth of Product Recalls and Government Action: The Case of Toyota\u27s Accelerator Pedal Recall

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    We analyze the effect of Toyota’s faulty accelerator pedal on stockholder wealth. Using the event study methodology, we show that a major recall in January of 2010 caused the company’s cumulative abnormal returns to fall by 19%. Continued concerns that Toyota was unable to identify and adequately fix the problem induced the National Highway Traffic Safety Administration to conduct its own investigation in March, 2010. The results of this government investigation exonerated the company and caused Toyota’s cumulative abnormal returns to rise by almost 9%. The Toyota case provides an opportunity to study a product recall with both company error and a government action that addressed concerns about the safety of the product

    Foreign Direct Investment and Macroeconomic Changes in CEE Integrating in to the Global Market

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    This study relates to the post communist era in the Central and Eastern Europe (CEE) and focuses on foreign direct investment (FDI) as a factor facilitating the globalization process while stimulating economic growth in the host countries. The first part of this study describes the globalization process and inward FDI performance index (CEE vs. World). The second part reflects macroeconomic changes in the post communist CEE and examines macroeconomic indicators, including GDP per capita, economic growth rate, unemployment and inflation. The third section focuses on the association between inward FDI stock and economic growth in the CEE

    Corporate social responsibility and stock price crash risk

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    This study investigates whether corporate social responsibility (CSR) mitigates or contributes to stock price crash risk. Crash risk, defined as the conditional skewness of return distribution, captures asymmetry in risk and is important for investment decisions and risk management. If socially responsible firms commit to a high standard of transparency and engage in less bad news hoarding, they would have lower crash risk. However, if managers engage in CSR to cover up bad news and divert shareholder scrutiny, CSR would be associated with higher crash risk. Our findings support the mitigating effect of CSR on crash risk. We find that firms\u27 CSR performance is negatively associated with future crash risk after controlling for other predictors of crash risk. The result holds after we account for potential endogeneity. Moreover, the mitigating effect of CSR on crash risk is more pronounced when firms have less effective corporate governance or a lower level of institutional ownership. The results are consistent with the notion that firms that actively engage in CSR also refrain from bad news hoarding behavior and thus reducing crash risk. This role of CSR is particularly important when governance mechanisms, such as monitoring by boards or institutional investors, are weak. JEL classification: G14; G30; M14; M4

    FDI in Central and Eastern Europe: Business Environment and Current FDI Trends in Poland

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    The Central and Eastern European Countries (CEEC) acknowledge foreign direct investment (FDI) as an essential tool in the development and modernization of their economies. The first part of this paper centers on economic stability and FDI inflows in the CEE indicating the Polish leadership in inward FDI inflow. The section of this study focuses on Poland and provides a description of business environment and current FDI trends in Poland. It analyzes the factors influencing the inward FDI in Poland, such as: economic stability, cost of labor, EU membership, regulatory framework. It presents the current FDI trends in Poland, such as: number of foreign firms, geographic origin of inward FDI, inward vs. outward FDI. The future research will focus on the impact of inward FDI stock on economic growth in Poland. To analyze the impact of the FDI stock on output growth in the Polish economy, a model of the economic growth based on the production function will be used

    State Based Determinants of Inward FDI Flow in the US Economy

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    Inward foreign direct investment (FDI) represents an integral part of the US economy. The flow of international capital has been a key factor expanding economy. The inward US FDI constitutes important factor contributing to output growth in the US economy. This paper investigates factors affecting the inward FDI flow among fifty states of the United States. The analysis uses annual data for the period from 1997 to 2007. The study identifies several state-specific determinants of FDI and investigates the changes in their importance during the study period. Our results show that among the major determinants, the real per capita income, real per capita expenditure on education, FDI related employment, research and development expenditure, and capital expenditure are found to have a significant positive impact on FDI inflows. There is also evidence that the share of scientists and engineers in the workforce exerts a small positive impact on inward FDI flow. In addition, per capita state taxes, unit labor cost, manufacturing density, unionization, and unemployment rate exert a negative impact on FDI inflows
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