Asset revaluations and earnings management: Evidence from Australian companies

This paper examines the association between asset revaluations and discretionary accruals (a proxy for earnings management) using a sample of the largest 300 Australian companies. The results from this study indicate that the revaluation of non-current assets is positively associated with discretionary accruals. This finding is consistent with the argument that revaluation of assets reflects higher agency problems in the form of increased earnings management. Additional findings are that discretionary accruals are higher for firms reporting their non-current assets at fair values appraised by directors, than those of firms that use external appraisers. As well, the choice of auditors and the strength of corporate governance can constrain the opportunistic behaviour of managers in the accounting choice to revalue non-current assets.

Fair values and audit fees: Evidence from asset revaluations in Australia

This paper examines the association between the level of audit fees paid and asset revaluations, one use of fair value accounting. This Australian study also investigates attributes of asset revaluations and the association with the level of audit fees paid. We find that firms choosing the revaluation model incur higher audit fees than those that chose the cost model; asset revaluations made by directors lead to the firm incurring higher audit fees than for those made by external independent appraisers; and revaluation of investment properties leads to lower audit fees. The findings suggest that asset revaluations can result in higher agency costs and audit fees vary with the reliability of the revaluations and the class of assets being revalued.

Conditional Moments in Asset Pricing

A better understanding of stock price changes is important in guiding many economic activities. Since prices often do not change without good reasons, searching for related explanatory variables has involved many enthusiasts. This book seeks answers from prices per se by relating price changes to their conditional moments. This is based on the belief that prices are the products of a complex psychological and economic process and their conditional moments derive ultimately from these psychological and economic shocks. Utilizing information about conditional moments hence makes it an attractive alternative to using other selective financial variables in explaining price changes. The first paper examines the relation between the conditional mean and the conditional variance using information about moments in three types of conditional distributions; it finds that the significance of the estimated mean and variance ratio can be affected by the assumed distributions and the time variations in skewness. The second paper decomposes the conditional industry volatility into a concurrent market component and an industry specific component; it finds that market volatility is on average responsible for a rather small share of total industry volatility — 6 to 9 percent in UK and 2 to 3 percent in Germany. The third paper looks at the heteroskedasticity in stock returns through an ARCH process supplemented with a set of conditioning information variables; it finds that the heteroskedasticity in stock returns allows for several forms of heteroskedasticity that include deterministic changes in variances due to seasonal factors, random adjustments in variances due to market and macro factors, and ARCH processes with past information. The fourth paper examines the role of higher moments — especially skewness and kurtosis — in determining the expected returns; it finds that total skewness and total kurtosis are more relevant non-beta risk measures and that they are costly to be diversified due either to the possible eliminations of their desirable parts or to the unsustainability of diversification strategies based on them.

Modeling Nonlinearities and Asymmetries in Asset Pricing

Financial time series tend to behave in a manner that is not directly drawn from a normal distribution. Asymmetries and nonlinearities are usually seen and these characteristics need to be taken into account. To make forecasts and predictions of future return and risk is rather complicated. The existing models for predicting risk are of help to a certain degree, but the complexity in financial time series data makes it difficult. The introduction of nonlinearities and asymmetries for the purpose of better models and forecasts regarding both mean and variance is supported by the essays in this dissertation. Linear and nonlinear models are consequently introduced in this dissertation. The advantages of nonlinear models are that they can take into account asymmetries. Asymmetric patterns usually mean that large negative returns appear more often than positive returns of the same magnitude. This goes hand in hand with the fact that negative returns are associated with higher risk than in the case where positive returns of the same magnitude are observed. The reason why these models are of high importance lies in the ability to make the best possible estimations and predictions of future returns and for predicting risk.

Customer asset management in action: using customers portfolio for allocating resources across business-to-business relationships for improved shareholder value

Suvi Nenonen Customer asset management in action: using customer portfolios for allocating resources across business-to-business relationships for improved shareholder value Customers are crucial assets to all firms as customers are the ultimate source of all cash flows. Regardless this financial importance of customer relationships, for decades there has been a lack of suitable frameworks explaining how customer relationships contribute to the firm financial performance and how this contribution can be actively managed. In order to facilitate a better understanding of the customer asset, contemporary marketing has investigated the use of financial theories and asset management practices in the customer relationship context. Building on this, marketing academics have promoted the customer lifetime value concept as a solution for valuating and managing customer relationships for optimal financial outcomes. However, the empirical investigation of customer asset management lags behind the conceptual development steps taken. Additionally, the practitioners have not embraced the use of customer lifetime value in guiding managerial decisions - especially in the business-to-business context. The thesis points out that there are fundamental differences between customer relationships and investment instruments as investment targets, effectively eliminating the possibility to use financial theories in a customer relationships context or to optimize the customer base as a single investment portfolio. As an alternative, the thesis proposes the use of customer portfolio approach for allocating resources across the customer base for improved shareholder value. In the customer portfolio approach, the customer base of a firm is divided into multiple portfolios based on customer relationships’ potential to contribute to the shareholder value creation. After this, customer management concepts are tailored to each customer portfolio, designed to improve the shareholder value in their own respect. Therefore, effective customer asset management with the customer portfolio approach necessitates that firms are able to manage multiple parallel customer management concepts, or business models, simultaneously. The thesis is one of the first empirical studies on customer asset management, bringing empirical evidence from multiple business-to-business case studies on how customer portfolio models can be formed, how customer portfolios can be managed, and how customer asset management has contributed to the firm financial performance.

Customer asset management in action: using customers portfolio for allocating resources across business-to-business relationships for improved shareholder value

Suvi Nenonen Customer asset management in action: using customer portfolios for allocating resources across business-to-business relationships for improved shareholder value Customers are crucial assets to all firms as customers are the ultimate source of all cash flows. Regardless this financial importance of customer relationships, for decades there has been a lack of suitable frameworks explaining how customer relationships contribute to the firm financial performance and how this contribution can be actively managed. In order to facilitate a better understanding of the customer asset, contemporary marketing has investigated the use of financial theories and asset management practices in the customer relationship context. Building on this, marketing academics have promoted the customer lifetime value concept as a solution for valuating and managing customer relationships for optimal financial outcomes. However, the empirical investigation of customer asset management lags behind the conceptual development steps taken. Additionally, the practitioners have not embraced the use of customer lifetime value in guiding managerial decisions - especially in the business-to-business context. The thesis points out that there are fundamental differences between customer relationships and investment instruments as investment targets, effectively eliminating the possibility to use financial theories in a customer relationships context or to optimize the customer base as a single investment portfolio. As an alternative, the thesis proposes the use of customer portfolio approach for allocating resources across the customer base for improved shareholder value. In the customer portfolio approach, the customer base of a firm is divided into multiple portfolios based on customer relationships’ potential to contribute to the shareholder value creation. After this, customer management concepts are tailored to each customer portfolio, designed to improve the shareholder value in their own respect. Therefore, effective customer asset management with the customer portfolio approach necessitates that firms are able to manage multiple parallel customer management concepts, or business models, simultaneously. The thesis is one of the first empirical studies on customer asset management, bringing empirical evidence from multiple business-to-business case studies on how customer portfolio models can be formed, how customer portfolios can be managed, and how customer asset management has contributed to the firm financial performance.

The principle of microscopic reversibility in organic chemistry - a critique

The principle of microscopic reversibility is one of the few generalising principles used in organic chemistry which have their roots in the fundamental laws of thermodynamics. It has, therefore, been highly popular. However, although the principle has some important uses, its general application is not without pitfalls. The principle is easy to misunderstand and to misapply: indeed, some of its formulations are semantically dubious. The principle is most dangerous when used as a charm, for it is more subtle than some of its formulations suggest. But above all, the principle may not be used for deducing or disproving the mechanism of a reaction, except when the mechanism in the reverse direction is known independently. For, such use is, perhaps, the deadliest misapplication.

Irreversibility-to-reversibility crossover in transient response of an optically trapped particle

We study the transient response of a colloidal bead which is released from different heights and allowed to relax in the potential well of an optical trap. Depending on the initial potential energy, the system's time evolution shows dramatically different behaviors. Starting from the short-time reversible to long-time irreversible transition, a stationary reversible state with zero net dissipation can be achieved as the release point energy is decreased. If the system starts with even lower energy, it progressively extracts useful work from thermal noise and exhibits an anomalous irreversibility. In addition, we have verified the Transient Fluctuation Theorem and the Integrated Transient Fluctuation Theorem even for the non-ergodic descriptions of our system. Copyright (C) EPLA, 2011

Reversibility of Mg/Mg2+ couple in a gel polymer electrolyte

Investigations on solid state rechargeable magnesium batteries are considered important similar to lithium batteries. In view of negligible hazards and less reactivity of the magnesium, in comparison with lithium, studies on rechargeable magnesium batteries are expected to have a wide scope in future. Solid polymer electrolytes, which conduct Mg2+ ions and reversibility of a Mg/Mg2+ couple are essential components of the studies. In the present investigations, the existence of reversibility of a Mg/Mg2+ couple in a gel polymer electrolyte (GPE) medium is established for the first time in literature. Results obtained by electrochemical impedance spectroscopy and cyclic voltammetry on Mg/GPE/Mg, SS/GPE/SS symmetrical cells show evidence for the reversibility. (C) 1999 Elsevier Science Ltd. All rights reserved.