Optimal monitoring in family-owned companies? Evidence from Asia

Manuscript Type: Empirical Research Issue: We propose that high levels of monitoring are not always in the best interests of minority shareholders. In family-owned companies the optimal level of board monitoring required by minority shareholders is expected to be lower than that of other companies. This is because the relative benefits and costs of monitoring are different in family-owned companies. Research Findings: At moderate levels of board monitoring, we find concave relationships between board monitoring variables and firm performance for family-owned companies but not for other companies. The optimal level of board monitoring for our sample of Asian family-owned companies equates to board independence of 38%, separation of the Chairman and CEO positions and establishment of audit and remuneration committees. Additional testing shows that the optimal level of board monitoring is sensitive to the magnitude of the agency conflict between the family group and minority shareholders and the presence of substitute monitoring. Practitioner/Policy Implications: For policymakers, the results show that more monitoring is not always in the best interests of minority shareholders. Therefore, it may be inappropriate for regulators to advise all companies to follow the same set of corporate governance guidelines. However, our results also indicate that the board governance practices of family-owned companies are still well below the identified optimal levels. Keywords: Corporate Governance, Board Independence, Board of Directors, Family Firms, Monitoring.

The effect of national governance codes on firm disclosure practices : evidence from analyst earnings forecasts

This study examines whether voluntary national governance codes have a significant effect on company disclosure practices. Two direct effects of the codes are expected: 1) an overall improvement in company disclosure practices, which is greater when the codes have a greater emphasis on disclosure; and 2) a leveling out of disclosure practices across companies (i.e., larger improvements in companies that were previously poorer disclosers) due to the codes new comply-or-explain requirements. The codes are also expected to have an indirect effect on disclosure practices through their effect on company governance practices. The results show that the introduction of the codes in eight East Asian countries has been associated with lower analyst forecast error and a leveling out of disclosure practices across companies. The codes are also found to have an indirect effect on company disclosure practices through their effect on board independence. This study shows that a regulatory approach to improving disclosure practices is not always necessary. Voluntary national governance codes are found to have both a significant direct effect and a significant indirect effect on company disclosure practices. In addition, the results indicate that analysts in Asia do react to changes in disclosure practices, so there is an incentive for small companies and family-owned companies to further improve their disclosure practices.

The influence of travel time and size of shopping center towards the frequencies of visiting customers in shopping centers in surabaya

Visiting a modern shopping center is becoming vital in our society nowadays. The fast growth of shopping center, transportation system, and modern vehicles has given more choices for consumers in shopping. Although there are many reasons for the consumers in visiting the shopping center, the influence of travel time and size of shopping center are important things to be considered towards the frequencies of visiting customers in shopping centers. A survey to the customers of three major shopping centers in Surabaya has been conducted to evaluate the Ellwood’s model and Huff’s model. A new exponent value N of 0.48 and n of 0.50 has been found from the Ellwood’s model, while a coefficient of 0.267 and an add value of 0.245 have been found from the Huff’s model.

The creative sector in New Zealand : mapping and economic role : report to New Zealand Trade and Enterprise

The New Zealand creative sector was responsible for almost 121,000 jobs at the time of the 2006 Census (6.3% of total employment). These are divided between • 35,751 creative specialists – persons employed doing creative work in creative industries • 42,300 support workers - persons providing management and support services in creative industries • 42,792 embedded creative workers – persons engaged in creative work in other types of enterprise The most striking feature of this breakdown is the fact that the largest group of creative workers are employed outside the creative industries, i.e. in other types of businesses. Even within the creative industries, there are fewer people directly engaged in creative work than in providing management and support. Creative sector employees earned incomes of approximately $52,000 per annum at the time of the 2006 Census. This is relatively uniform across all three types of creative worker, and is significantly above the average for all employed persons (of approximately $40,700). Creative employment and incomes were growing strongly over both five year periods between the 1996, 2001 and 2006 Censuses. However, when we compare creative and general trends, we see two distinct phases in the development of the creative sector: • rapid structural growth over the five years to 2001 (especially led by developments in ICT), with creative employment and incomes increasing rapidly at a time when they were growing modestly across the whole economy; • subsequent consolidation, with growth driven by more by national economic expansion than structural change, and creative employment and incomes moving in parallel with strong economy-wide growth. Other important trends revealed by the data are that • the strongest growth during the decade was in embedded creative workers, especially over the first five years. The weakest growth was in creative specialists, with support workers in creative industries in the middle rank, • by far the strongest growth in creative industries’ employment was in Software & digital content, which trebled in size over the decade Comparing New Zealand with the United Kingdom and Australia, the two southern hemisphere nations have significantly lower proportions of total employment in the creative sector (both in creative industries and embedded employment). New Zealand’s and Australia’s creative shares in 2001 were similar (5.4% each), but in the following five years, our share has expanded (to 5.7%) whereas Australia’s fell slightly (to 5.2%) – in both cases, through changes in creative industries’ employment. The creative industries generated $10.5 billion in total gross output in the March 2006 year. Resulting from this was value added totalling $5.1b, representing 3.3% of New Zealand’s total GDP. Overall, value added in the creative industries represents 49% of industry gross output, which is higher than the average across the whole economy, 45%. This is a reflection of the relatively high labour intensity and high earnings of the creative industries. Industries which have an above-average ratio of value added to gross output are usually labour-intensive, especially when wages and salaries are above average. This is true for Software & Digital Content and Architecture, Design & Visual Arts, with ratios of 60.4% and 55.2% respectively. However there is significant variation in this ratio between different parts of the creative industries, with some parts (e.g. Software & Digital Content and Architecture, Design & Visual Arts) generating even higher value added relative to output, and others (e.g. TV & Radio, Publishing and Music & Performing Arts) less, because of high capital intensity and import content. When we take into account the impact of the creative industries’ demand for goods and services from its suppliers and consumption spending from incomes earned, we estimate that there is an addition to economic activity of: • $30.9 billion in gross output, $41.4b in total • $15.1b in value added, $20.3b in total • 158,100 people employed, 234,600 in total The total economic impact of the creative industries is approximately four times their direct output and value added, and three times their direct employment. Their effect on output and value added is roughly in line with the average over all industries, although the effect on employment is significantly lower. This is because of the relatively high labour intensity (and high earnings) of the creative industries, which generate below-average demand from suppliers, but normal levels of demand though expenditure from incomes. Drawing on these numbers and conclusions, we suggest some (slightly speculative) directions for future research. The goal is to better understand the contribution the creative sector makes to productivity growth; in particular, the distinctive contributions from creative firms and embedded creative workers. The ideas for future research can be organised into the several categories: • Understanding the categories of the creative sector– who is doing the business? In other words, examine via more fine grained research (at a firm level perhaps) just what is the creative contribution from the different aspects of the creative sector industries. It may be possible to categorise these in terms of more or less striking innovations. • Investigate the relationship between the characteristics and the performance of the various creative industries/ sectors; • Look more closely at innovation at an industry level e.g. using an index of relative growth of exports, and see if this can be related to intensity of use of creative inputs; • Undertake case studies of the creative sector; • Undertake case studies of the embedded contribution to growth in the firms and industries that employ them, by examining taking several high performing noncreative industries (in the same way as proposed for the creative sector). • Look at the aggregates – drawing on the broad picture of the extent of the numbers of creative workers embedded within the different industries, consider the extent to which these might explain aspects of the industries’ varied performance in terms of exports, growth and so on. • This might be able to extended to examine issues like the type of creative workers that are most effective when embedded, or test the hypothesis that each industry has its own particular requirements for embedded creative workers that overwhelms any generic contributions from say design, or IT.

External auditors' reliance on internal audit : the impact of sourcing arrangements and consulting activities

This study examines the impact of internal audit outsourcing and internal audit’s involvement in consulting on external auditors’ reliance on the work of internal audit. We test whether these factors influence (i) reliance on internal audit work already undertaken and (ii) the use of internal auditors as assistants. In each case, we distinguish between control evaluation and substantive testing. We find that involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks than for substantive testing.

The impact of corporate venturing on a firm's competence modes

In this conceptual paper we investigate how corporate venturing influences an organization's competences. The impact of various types of corporate ventures on the portfolio of strategic options of a firm's competence modes (Sanchez, 2004a; Sanchez & Heene, 2002) will be assessed by distinguishing two fundamentally different dimensions of corporate venturing: technology and product (Block & MacMillan, 1993). We argue that the level of product and factor market dynamism mediates the effect of corporate venturing on a firm's competence modes. Corporate ventures that significantly increase the level of product or factor market dynamics will increase the flexibility in all five competence modes. These ventures have a direct effect on the lower-order competence modes and an indirect, lagged effect on higher-order competence modes through feedback loops. The developed framework and the propositions contribute to managing the ability of a firm to change its coordination, resource, and operating flexibility in order to sustain value creation.

Associations among body size dissatisfaction, perceived dietary control, and diet history in African American and European American women

European American (EA) women report greater body dissatisfaction and less dietary control than do African American (AA) women. This study investigated whether ethnic differences in dieting history contributed to differences in body dissatisfaction and dietary control, or to differential changes that may occur during weight loss and regain. Eighty-nine EA and AA women underwent dual-energy X-ray absorptiometry to measure body composition and completed questionnaires to assess body dissatisfaction and dietary control before, after, and one year following, a controlled weight-loss intervention. While EA women reported a more extensive dieting history than AA women, this difference did not contribute to ethnic differences in body dissatisfaction and perceived dietary control. During weight loss, body satisfaction improved more for AA women, and during weight regain, dietary self-efficacy worsened to a greater degree for EA women. Ethnic differences in dieting history did not contribute significantly to these differential changes. Although ethnic differences in body image and dietary control are evident prior to weight loss, and some change differentially by ethnic group during weight loss and regain, differences in dieting history do not contribute significantly to ethnic differences in body image and dietary control.

Micro-family-owned business : transitory survival mechanism or long term wealth creator?

Principal Topic: Entrepreneurship is key to employment, innovation and growth (Acs & Mueller, 2008), and as such, has been the subject of tremendous research in both the economic and management literatures since Solow (1957), Schumpeter (1934, 1943), and Penrose (1959). The presence of entrepreneurs in the economy is a key factor in the success or failure of countries to grow (Audretsch and Thurik, 2001; Dejardin, 2001). Further studies focus on the conditions of existence of entrepreneurship, influential factors invoked are historical, cultural, social, institutional, or purely economic (North, 1997; Thurik 1996 & 1999). Of particular interest, beyond the reasons behind the existence of entrepreneurship, are entrepreneurial survival and good ''performance'' factors. Using cross-country firm data analysis, La Porta & Schleifer (2008) confirm that informal micro-businesses provide on average half of all economic activity in developing countries. They find that these are utterly unproductive compared to formal firms, and conclude that the informal sector serves as a social security net ''keep[ing] millions of people alive, but disappearing over time'' (abstract). Robison (1986), Hill (1996, 1997) posit that the Indonesian government under Suharto always pointed to the lack of indigenous entrepreneurship , thereby motivating the nationalisation of all industries. Furthermore, the same literature also points to the fact that small businesses were mostly left out of development programmes because they were supposed less productive and having less productivity potential than larger ones. Vial (2008) challenges this view and shows that small firms represent about 70% of firms, 12% of total output, but contribute to 25% of total factor productivity growth on average over the period 1975-94 in the industrial sector (Table 10, p.316). ---------- Methodology/Key Propositions: A review of the empirical literature points at several under-researched questions. Firstly, we assess whether there is, evidence of small family-business entrepreneurship in Indonesia. Secondly, we examine and present the characteristics of these enterprises, along with the size of the sector, and its dynamics. Thirdly, we study whether these enterprises underperform compared to the larger scale industrial sector, as it is suggested in the literature. We reconsider performance measurements for micro-family owned businesses. We suggest that, beside productivity measures, performance could be appraised by both the survival probability of the firm, and by the amount of household assets formation. We compare micro-family-owned and larger industrial firms' survival probabilities after the 1997 crisis, their capital productivity, then compare household assets of families involved in business with those who do not. Finally, we examine human and social capital as moderators of enterprises' performance. In particular, we assess whether a higher level of education and community participation have an effect on the likelihood of running a family business, and whether it has an impact on households' assets level. We use the IFLS database compiled and published by RAND Corporation. The data is a rich community, households, and individuals panel dataset in four waves: 1993, 1997, 2000, 2007. We now focus on the waves 1997 and 2000 in order to investigate entrepreneurship behaviours in turbulent times, i.e. the 1997 Asian crisis. We use aggregate individual data, and focus on households data in order to study micro-family-owned businesses. IFLS data covers roughly 7,600 households in 1997 and over 10,000 households in 2000, with about 95% of 1997 households re-interviewed in 2000. Households were interviewed in 13 of the 27 provinces as defined before 2001. Those 13 provinces were targeted because accounting for 83% of the population. A full description of the data is provided in Frankenberg and Thomas (2000), and Strauss et alii (2004). We deflate all monetary values in Rupiah with the World Development Indicators Consumer Price Index base 100 in 2000. ---------- Results and Implications: We find that in Indonesia, entrepreneurship is widespread and two thirds of households hold one or several family businesses. In rural areas, in 2000, 75% of households run one or several businesses. The proportion of households holding both a farm and a non farm business is higher in rural areas, underlining the reliance of rural households on self-employment, especially after the crisis. Those businesses come in various sizes from very small to larger ones. The median business production value represents less than the annual national minimum wage. Figures show that at least 75% of farm businesses produce less than the annual minimum wage, with non farm businesses being more numerous to produce the minimum wage. However, this is only one part of the story, as production is not the only ''output'' or effect of the business. We show that the survival rate of those businesses ranks between 70 and 82% after the 1997 crisis, which contrasts with the 67% survival rate for the formal industrial sector (Ter Wengel & Rodriguez, 2006). Micro Family Owned Businesses might be relatively small in terms of production, they also provide stability in times of crisis. For those businesses that provide business assets figures, we show that capital productivity is fairly high, with rates that are ten times higher for non farm businesses. Results show that households running a business have larger family assets, and households are better off in urban areas. We run a panel logit model in order to test the effect of human and social capital on the existence of businesses among households. We find that non farm businesses are more likely to appear in households with higher human and social capital situated in urban areas. Farm businesses are more likely to appear in lower human capital and rural contexts, while still being supported by community participation. The estimation of our panel data model confirm that households are more likely to have higher family assets if situated in urban area, the higher the education level, the larger the assets, and running a business increase the likelihood of having larger assets. This is especially true for non farm businesses that have a clearly larger and more significant effect on assets than farm businesses. Finally, social capital in the form of community participation also has a positive effect on assets. Those results confirm the existence of a strong entrepreneurship culture among Indonesian households. Investigating survival rates also shows that those businesses are quite stable, even in the face of a violent crisis such as the 1997 one, and as a result, can provide a safety net. Finally, considering household assets - the returns of business to the household, rather than profit or productivity - the returns of business to itself, shows that households running a business are better off. While we demonstrate that uman and social capital are key to business existence, survival and performance, those results open avenues for further research regarding the factors that could hamper growth of those businesses in terms of output and employment.

Portfolio size effect in retirement accounts : what does it imply for lifecycle asset allocation funds?

Lifecycle funds offered by retirement plan providers allocate aggressively to risky asset classes when the employee participants are young, gradually switching to more conservative asset classes as they grow older and approach retirement. This approach focuses on maximizing growth of the accumulation fund in the initial years and preserving its value in the later years. The authors simulate terminal wealth outcomes based on conventional lifecycle asset allocation rules as well as on contrarian strategies that reverse the direction of asset switching. The evidence suggests that the growth in portfolio size over time significantly impacts the asset allocation decision. Due to the portfolio size effect that is observed by the authors, the terminal value of accumulation in retirement accounts is influenced more by the asset allocation strategy adopted in later years relative to that adopted in early years. By mechanistically switching to conservative assets in the later years of a plan, lifecycle strategies sacrifice significant growth opportunity and prove counterproductive to the participant's wealth accumulation objective. The authors' conclude that this sacrifice does not seem to be compensated adequately in terms of reducing the risk of potentially adverse outcomes.

Effect of representation size and visual ambiguity on RatSLAM system performance

RatSLAM is a vision-based SLAM system based on extended models of the rodent hippocampus. RatSLAM creates environment representations that can be processed by the experience mapping algorithm to produce maps suitable for goal recall. The experience mapping algorithm also allows RatSLAM to map environments many times larger than could be achieved with a one to one correspondence between the map and environment, by reusing the RatSLAM maps to represent multiple sections of the environment. This paper describes experiments investigating the effects of the environment-representation size ratio and visual ambiguity on mapping and goal navigation performance. The experiments demonstrate that system performance is weakly dependent on either parameter in isolation, but strongly dependent on their joint values.

A Knight without a Sword? The Effects of Audit Courts on Tax Morale

The intention of this paper is to analyse how audit courts affect tax morale, controlling in a multivariate analysis for a broad variety of potential factors. Switzerland, with its variety of audit-court competence among the cantons, has been analysed. With data from the ISSP [1998] (Swiss data 1999), evidence has been found that higher audit-court competence has a significantly positive effect on tax morale. Thus, the results in Switzerland suggest that in the cantons where audit courts are not just knights without swords; they help improve taxpayers' tax morale and thus citizens' intrinsic motivation to pay taxes.

Small firm growth

We review and discuss the literature on small firm growth with an intention to provide a useful vantage point for new research studies regarding this important phenomenon. We first discuss conceptual and methodological issues that represent critical choices for those who research growth and which make it challenging to compare results from previous studies. The substantial review of past research is organized into four sections representing two smaller and two larger literatures. The first of the latter focuses on internal and external drivers of small firm growth. Here we find that much has been learnt and that many valuable generalizations can be made. However, we also conclude that more research of the same kind is unlikely to yield much. While interactive and non-linear effects may be worth pursuing it is unlikely that any new and important growth drivers or strong, linear main effects would be found. The second large literature deals with organizational life-cycles or stages of development. While deservedly criticized for unwarranted determinism and weak empirics this type of approach addresses problems of high practical and also theoretical relevance, and should not be shunned by researchers. We argue that with a change in the fundamental assumptions and improved empirical design, research on the organizational and managerial consequences of growth is an important line of inquiry. With this, we overlap with one of the smaller literatures, namely studies focusing on the effects of growth. We argue that studies too often assume that growth equals success. We advocate instead the use of growth as an intermediary variable that influences more fundamental goals in ways that should be carefully examined rather than assumed. The second small literature distinguishes between different modes or forms of growth, including, e.g., organic vs. acquisition-based growth, and international expansion. We note that modes of growth is an important topic that has been under studied in the growth literature, whereas in other branches of research aspects of it may have been studied intensely, but not primarily from a growth perspective. In the final section we elaborate on ways forward for research on small firm growth. We point at rich opportunities for researchers who look beyond drivers of growth, where growth is viewed as a homogenous phenomenon assumed to unambiguously reflect success, and instead focus on growth as a process and a multi-dimensional phenomenon, as well as on how growth relates to more fundamental outcomes.