The effect of the private securities litigation reform act on analyst forecast properties: The impact of firm size and growth opportunities

We provide evidence that the effect of the Private Securities Litigation Reform Act (the Act) of 1995 on analyst forecast properties is conditional on firm size and growth opportunities. We show that analyst coverage, frequency of forecast revisions, forecast errors and dispersion after the Act decreased for large firms and for firms with low growth opportunities but increased for small firms and for firms with high growth opportunities. These results are consistent with the hypothesis that the Act results in additional high quality disclosures in large firms, which face higher litigation risk and tighter scrutiny from investors but not in smaller firms. Our findings of increases in analyst coverage and revision but deterioration in accuracy and precision of analyst forecasts for firms with high growth opportunities after the Act suggest that in spite of increased corporate disclosures, the information environment for analysts deteriorated in those firms. Journal compilation © 2006 Blackwell Publishing Ltd

Just in time or just in case? An explanatory model with informational and incentive effects

There is extensive literature on the benefits of manufacturing control arising from minimal inventory policies of just in time (JIT). Operations management literature has focused on controlling set-up, lead and changeover times to streamline the operations and achieve low optimal inventory levels. Our paper first expands these models to include information and incentive effects. We then develop a model in which JIT focuses attention on process imbalances and derive the compensation contract that induces managers to be more creative in managing the process. We show that the loss of controllability decreases the benefits of JIT and increase the benefits of traditional buffer inventory. If, as on 11 September 2001, the loss or gain of controllability occurs quickly and unexpectedly, organizations need to develop the agility to switch between minimal inventory and buffer inventory systems

A Stable Cost Application Scheme For Service Center Usage

A Stable Cost Application Scheme For Service Center Usag

A stochastic planning model for manufacturing environments

A stochastic planning model for manufacturing environment

A NOTE ON COST ALLOCATION, OPPORTUNITY COSTS AND OPTIMAL UTILIZATION

A NOTE ON COST ALLOCATION, OPPORTUNITY COSTS AND OPTIMAL UTILIZATIO

A synthesizing framework for technology and content choices for information exchange

In this paper, we develop a synthesizing framework for information exchange. In particular, we identify the drivers of both the content of information exchange as well as the choice of the technology used to facilitate information exchange across multiple organizations. Our first driver is the inter-organizational architecture. Unlike the general architectures developed by Williamson [11] and Adler [1], we focus specifically on the effect of architectures on information exchange. We classify the existing architectures in three dimensions, namely, customization, information sharing or trading and closed or open networks. Such a classification enables us to identify particular architectural characteristics that affect content and technology choices. Our second driver refers to the characteristics of the information, the system, the network and the regulatory environment that affect the credibility and usefulness of information exchange for the participants. Our third driver is the incentive structure in the architecture. Only the information that is deemed to be mutually beneficial by all participants will get exchanged. The incentive structure highlights the cost-benefit trade-offs of individual participants. We also place all the five papers accepted for this special issue within this synthesizing framework. Such positioning allows us to identify potential areas for future research and exploration. © Springer Science + Business Media, LLC 2006

Market imperfections as the cause of accountingincome smoothing - The case of differential capital access

We show income smoothing results as a rational equilibrium behavior in a setting where the manager has superior foresight about the firm's prospects but faces inferior capital access relative to the owner. Under a legal structure that makes forecast-based compensation impractical and an accounting framework that requires reported income to be consistent, unbiased and cash-flow convergent, we show that the manager reports a composite of the underlying income and his foresight information. Moreover, the reported income will exhibit a lower intertemporal variance than the underlying income. The extent of smoothing is shown to increase with the accuracy of foresight information. We argue that other market imperfections could also cause income smoothing if the manager is privately better informed about future prospects. As such, this paper supports the view that income smoothing is not always opportunistic but can be induced by the owner to satisfy his need to be informed about the future performance of the firm. © 2001 Kluwer Academic Publishers

Leases with purchase options and double moral hazard

The purpose of this paper is to explain why leases have a purchase option and how the exercise price of this option is determined. We follow Demski and Sappington's (1991) approach by using a double moral hazard setting. One limitation of their model is that the agent has unlimited liability. The agent has to have enough wealth and the obligation to buy the firm when the principal decides to exercise the put option. In our paper, this problem is resolved by using a call option, which is a feature of many lease contracts. We show that leases with a purchase option can completely resolve the double moral hazard problem even if all the variables in the model are unverifiable. It is the threat of being the residual claimant that induces the lessor to provide an efficient level of effort. On the other hand, it is the opportunity of being the residual claimant that induces the lessee to maintain the asset efficiently. Finally, the model predicts that certain leased assets are not properly accounted for under the current accounting standards for leasing. © 2006 Blackwell Publishing Ltd