The effect of accounting standards on Big Bath behavior

This paper investigates the influence of accounting standards on systematic earnings understatement. To isolate the effect of reporting regulations from those of other institutional drivers of earnings management, Holthausen (2003) proposes analyzing reporting practices in a country undergoing a transition in accounting standards. We respond to this call by analyzing earnings management practices of large German-listed companies before and after their transitions from German GAAP to IFRS. Specifically, we focus on Big Bath behavior following Chief Financial Officer turnovers between 1999 and 2006. Our findings provide evidence of the effect of accounting standards on the existence of this particular earnings understatement pattern. However, while we detect Big Bath behavior for our sample of German GAAP firms, we find no such indication for those firms reporting under IFRS. Controlling for alternative explanations such as self-selection bias does not change our findings. We conclude that accounting standards seem to have a considerable influence on earnings management behavior, independent of managers’ and auditors’ incentives.     

CDS and rating announcements: changing signaling during the crisis?

In parallel with the development of credit derivatives market, researchers have begun to explore the relationship between Credit Default Swap (CDS) market and rating events. Many papers, via classical event-study methodology, show that CDS market is able to signal future negative rating events announced by credit rating agencies. In this work, we incorporate into the event-study methodology the ability of Markov switching models in modeling state-dependent means and variances. This approach allows to get over the drawbacks of the classical methodology, which ignores the heteroscedasticity and volatility clustering often affecting financial time series. The proposed methodology is applied to study the reactions of CDS quotes to reviews for downgrading and effective downgradings announced by the three major credit rating agencies (Fitch Ratings, Moody’s, Standard and Poor’s), in order to examine if and to what extent CDS market anticipates announcements related with a company’s creditworthiness. The analysis, focusing mainly on volatility, is performed on two periods, 2004–2006 and 2007–2009, in order to verify whether a change in the signaling power of CDS quotes can be ascribed to recent financial turmoils.     

Innovation in family firms: an empirical analysis linking organizational and managerial innovation to corporate success

Family firms play a significant role in national economies worldwide, accounting e.g. for 85% of all enterprises in the OECD countries as well as for the majority of companies in Central Europe. Previous scholarly research on family firms has mostly focused on the question of how they differ from public corporations, describing family firms as being more conservative, less risk-raking, or reluctant to grow—in sum, as being less entrepreneurial than their non-family counterparts. Similarly, the existing literature often criticizes the lack of innovation in family firms. But since innovation has long been discovered as one of the key drivers to company success, it is surprising that its role in family firms has been mostly neglected in existing academic research so far. The aim of this article is therefore to study the role of (managerial and organizational) innovation in family firms compared to non-family firms on the basis of an empirical survey of 533 companies from Finland, using structural equation modelling (MPlus) for the statistical analyses.     

An Examination of Factors Affecting Perception of Workplace Discrimination

This study investigates perceptions of workplace discrimination among racial minorities in Canada. Specifically, the study examines how objective experiences of disadvantage and expectations for equity influence racial minorities’ perceptions of discrimination. The results indicate that while both of these factors affect perceptions of discrimination, expectations for equity may be especially important. Although new immigrants are among the most disadvantaged groups in the Canadian labor market, they are less likely to perceive discrimination than longer term immigrants, who may have higher expectations for equitable treatment. Education also increases the perception of discrimination among immigrants, perhaps due to the higher expectations of educated immigrants. Lastly, objective income inequity is not found to be related to perceived discrimination.

Registered domestic partnerships among gay men and lesbians: the role of economic factors

In this paper, we predict the demand for a marriage-like status—registered domestic partnership–among same-sex couples. Domestic partnership in the state of California now comes with almost all of the rights and responsibilities of marriage that a state can provide. We use the LGBT (Lesbian, Gay, Bisexual, and Transgender) Tobacco Use Survey conducted by the California Department of Health and the Field Research Corporation in 2003. From this telephone survey, we use a probability sample of 1,002 lesbian and gay individuals in California. Using multinomial probit models of partnership status (single, not cohabiting, cohabiting, or registered), we find limited evidence of economic motivations in the choice to register. Gay men’s likelihood of registration rises with income; lesbians’ probability of registration rises with age. Couples with longer duration are more likely to register, suggesting that registration and duration are complementary signals of commitment and possibly of the need for rights and benefits of registration.

Using the Internet for scientific publishing: <Emphasis Type="Italic">FQS</Emphasis> as an example

Since the “Public Library of Science” launched its first open-access journals and the “Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities” has been released in 2003 and found enormous attention, the claim for open access—to make publicly funded journal articles available for the public—started to reach German scientists too. But still no experience has been made with electronic publishing in general and more specifically with open-access publishing. One consequence is that the potential capacity of open access—the (inter) national and (trans) disciplinary visibility and accessibility of scientific output—is not sufficiently used by German researchers. Ways to successfully establish an open-access journal are presented in this article by referring to “Forum Qualitative Sozialforschung/Forum:Qualitative Social Research” (FQS) as an example: after introducing the current state of FQS traditional and innovative ways of publishing are being discussed which had been employed while developing FQS and which helped FQS to become the most important electronic journal in the field of qualitative research.     

Eskalierendes Commitment bei Gruppenentscheidungen: Begünstigende Faktoren und Maßnahmen zur Reduktion

Escalating commitment to a course of action that is failing or incurring great costs is at least as prevalent in group decision making as in individual decisions. The first experiment studies factors influencing escalating commitment in groups in the context of social identity and dissonance theory. 36 3-person-groups had to decide about further investigations into a risky urban development project. The amount of investigations as an indicator of escalating commitment depended as well on social identity (strong vs. weak) as on the responsibility for initiating the project (high vs. low). The second study investigated the effectiveness of two interventions aimed at reducing escalating commitment: introduction of an advocatus diaboli and pre-information about psychological insights into escalating commitment. Further, interaction processes correlating with escalation or reduction of commitment are studied.