Over-Investment And The Cost Of Debt

In this paper, we examine the association between over-investment and the cost of debt. Using bond yield spreads as a proxy for the cost of debt, we find that over-investment is positively associated with bond yield spreads. This suggests that when firms engage in over-investment, the quality of their financial reporting is lower and business risk is higher. Therefore, investors demand higher risk premiums because of their inability to evaluate firms’ financial position and future operating performance efficiently. We also find that the positive association between over-investment and bond yield spreads is weaker for firms in which managers and foreign shareholders own a high percentage of shares. This same association is stronger for firms in which the largest shareholders own a large proportion of the company. These results imply variation in the effect of over-investment on bond yield spreads according to the ownership structure. Our findings provide empirical evidence that over-investment brings about negative consequences for firms by increasing their external financing costs. This paper contributes to extant literature by using bond yield spreads as a proxy for the cost of debt rather than using credit ratings and interest expenses. Bond yield spreads can be regarded as a more effective measure for the cost of debt because this measure reflects more timely and direct information about decision-making processes of financial market participants when corporate bonds are issued

The Role of Argumentation in Hypothetico-Deductive Reasoning During Problem-Based Learning in Medical Education: A Conceptual Framework

One of the important goals of problem-based learning (PBL) in medical education is to enhance medical students’ clinical reasoning—hypothetico-deductive reasoning (HDR) in particular—through small group discussions. However, few studies have focused on explicit strategies for promoting students’ HDR during group discussions in PBL. This paper proposes a novel conceptual framework that integrates Toulmin’s argumentation model (1958) into Barrows’s HDR process (1994). This framework explains the structure of argumentation (a claim, data, and a warrant) contextualized in each phase of HDR during PBL. This paper suggests four instructional strategies—understanding argument structures, questioning, elaborating on structural knowledge, and assessing argumentation—for promoting medical students’ argumentation in relation to HDR processes. Further implications of the proposed framework for other disciplines, such as science, legal, and engineering education, are also discussed

Perceptions Of Corporate Social Responsibility In The Capital Market

This study investigates how capital market participants such as investors and financial analysts perceive corporate social responsibility (CSR) as improving earnings quality. Managers use CSR as a signal of future financial improvement, which causes companies to invest in CSR in the current period. An expectation of future financial improvement leads to increase in the quality of earnings because it curtails the incentive to engage in earnings management. In addition, CSR is a signal to increase the reputation of the firm. If a firm values its reputation, managers of a CSR firm would refrain from earnings management to avoid damage to its reputation. We use a sample of Korean listed companies for the period 2002–2011 and a proxy for CSR involvement based on the Korea Economic Justice Institute index. When we use earnings response coefficients (ERCs) to measure investors’ perceptions of earnings quality, we find that ERCs are higher for firms with engagement in CSR activity. Further, when we use the predictive ability of past earnings in forecasting future earnings to measure analysts’ perceptions of earnings quality, we find that the predictive ability of past earnings is higher when firms engage in CSR. Our results provide evidence that capital market participants perceive CSR as a signal of improved earnings quality

The Effect Of Internal Control Weakness On Investment Efficiency

This paper examines whether material weakness in internal accounting control is negatively associated with investment efficiency in Korea. Since internal accounting control weakness drives poor accounting quality and poor accounting quality exacerbates information asymmetry between firms and outside capital suppliers, managerial investment cannot be monitored effectively which result in over- and/or under- investment. Since internal accounting system is closely related to corporate governance, weak internal accounting control is often associated with poor corporate governance, and this control environment makes it hard to monitor managerial opportunistic behavior, causing abnormal investment such as over- and/or under- investment.  We find that firms with internal accounting control weakness tend to make over- and under- investment. We also find the number of weakness in internal accounting control is negatively related to investment efficiency. In addition, three types of qualified review opinion - overall company level weakness, account-specific weakness and disclaimer review opinion due to scope limitation - are differentially affected to investment efficiency; disclaimer review opinion is present the most severe problem in internal accounting control that drives over- and under- investment. Our findings suggest weak internal accounting control provides poor monitoring to manager and cannot restrain managerial inefficient investment decision.

The Relationship Between An Auditing Firm's Characteristics And The Incidence Rate Of Its Clients Subject To AAERs

This paper examines the relationship between an auditors characteristics and the incidence rate of its client subject to the Accounting and Auditing Enforcement Release. Using the sample of AAERs from 2002 to 2006, we find that when a firm is audited from a large accounting firm, there is a significantly less incidence rate subject to AAERs. Also, we find that the audit time of AAERs firms is significantly less than that of non-AAERs firms. Because AAER is related with audit quality, it implies that AAER depends on audit time and audit firm size, and that a firm is affected by the incidence rate of subjects toward AAERs. However, there is no difference between the audit fee of AAERs firms audit fee and that of non-AAERs firms. Although audit time leads to a high audit fee, audit firms are very competitive and therefore, there are some limitations with receiving a high audit fee according to audit time. Therefore, the audit fee is significantly affected by the incidence rate of subjects toward AAERs. Additionally, we also examine the effectiveness of AAERs and the difference of audit efforts depending on the cause of AAERs and the degree of penalties imposed by FSS. Overall, the results suggest that depending on the auditors characteristics, such as the size of accounting firm, audit time, and audit fee, a company is affected by the incidence rate subject to AAERs

The relationship between corporate social responsibility and earnings management: accounting for endogeneity

This study examines the relationship between corporate social responsibility (CSR) and earnings management after controlling for endogeneity of CSR. Using a sample of non-financial firms listed on Korean Securities Market between 2002 and 2010, this study finds that ignoring endogeneity biases the estimated relation between CSR and earnings management. Specifically, the results show that the negative and significant relation between CSR commitment and discretionary accruals reported in the previous studies becomes insignificant. However, the negative and significant relation between CSR commitment and real activities manipulation remains significant even when the endogeneity of CSR commitment is taken into account. Therefore, this study provides evidence that proactive CSR engagement significantly affects firm’s practice of real activities manipulation, while it does not affect its practice of discretionary accruals. These results indicate that CSR commitment leads managers to be more responsible in management of operational activities than in accruals management

Challenges Experienced by Korean Medical Students and Tutors During Problem-Based Learning: A Cultural Perspective

How people learn is influenced by the cultural contexts in which their learning occurs. This qualitative case study explored challenges Korean medical students and tutors experienced during their PBL sessions from a cultural perspective using Hofstede’s cultural dimensions. Twelve preclinical medical students and nine tutors from a large Korean medical school participated in interviews. The interview data were analyzed using the constant comparative method and classified according to Hofstede’s cultural dimensions. Twenty-two themes emerged within the following overarching categories: large power distance (6 themes), high uncertainty avoidance (6), individualism (3), collectivism (4), and masculinity/short-term orientation (3). This article discusses culturally responsive solutions with regard to each cultural dimension, which would help overcome these challenges and enhance the experiences of students and tutors with PBL

Effect of Rare Earth Elements (Er, Ho) on Semi-Metallic Materials (ScN) in an Applied Electric Field

The development of materials and fabrication technology for field-controlled spectrally active optics is essential for applications such as membrane optics, filters for LIDARs, windows for sensors, telescopes, spectroscopes, cameras and flat-panel displays. The dopants of rare earth elements, in a host of optical systems, create a number of absorption and emission band structures and can easily be incorporated into many high quality crystalline and amorphous hosts. In wide band-gap semiconductors like ScN, the existing deep levels can capture or emit the mobile charges, and can be ionized with the loss or capture of the carriers which are the fundamental basis of concept for smart optic materials. The band gap shrinkage or splitting with dopants supports the possibility of this concept. In the present work, a semi-metallic material (ScN) was doped with rare earth elements (Er, Ho) and tested under an applied electric field to characterize spectral and refractive index shifts by either Stark or Zeeman Effect. These effects can be verified using the UV-Vis spectroscopy, the Hall Effect measurement and the ellipsometric spectroscopy. The optical band gaps of ScN doped with Er and doped with Ho were experimentally estimated as 2.33eV and 2.24eV ( 0.2eV) respectively. This is less than that of undoped ScN (2.5 0.2eV). The red-shifted absorption onset is a direct evidence for the decrease of band gap energy (Eg), and the broadening of valence band states is attributable to the doping cases. A decrease in refractive index with an applied field was observed as a small shift in absorption coefficient using a variable angle spectroscopic ellipsometer. In the presence of an electric field, mobile carriers are redistributed within the space charge region (SCR) to produce this electro-refractive effect. The shift in refractive index is also affected by the density and location of deep potential wells within the SCR. In addition, the microstructure change was observed by a TEM analysis. These results give an insight for future applications for the field-controlled spectrally active material systems