|Working Papers 2013
13/7 Cross-Country Differences in Disclosure Quality: a Study of Fair Value Disclosures by European Real Estate Companies.
Stefan Sundgren, Juha Mäki i Antonio Somoza-Lopez
Companies are under IAS 40 required to report fair values of investment properties on the balance sheet or to disclose them in the notes. The standard requires also that companies have to disclose the methods and significant assumptions applied in determining fair values of investment properties. However, IAS 40 does not include any illustrative examples or other guidance on how to apply the disclosure requirements. We use a sample with publicly traded companies from the real estate sector in the EU. We find that a majority of the companies use income based methods for the measurement of fair values but there are considerable cross-country variations in the level of disclosures about the assumptions used in determining fair values. More specifically, we find that Scandinavian and German origin companies disclose more than French and English origin companies. We also test whether disclosure quality is associated with enforcement quality measured with the “Rule of Law” index according to Kaufmann et al. (2010), and associated with a secrecyversus transparency-measure based on Gray (1988). We find a positive association between disclosure and earnings quality and a negative association with secrecy.
13/6 Superstars Need Social Benefits: An Experiment on Network Formation.
Arthur Schram, Boris van Leeuwen i Theo Offerman
Abstract: We investigate contributions to the provision of public goods on a
network when efficient provision requires the formation of a star network. We
provide a theoretical analysis and study behavior is a controlled laboratory
experiment. In a 2x2 design, we examine the effects of group size and the
presence of (social) benefits for incoming links. We find that social benefits are
highly important. They facilitate convergence to equilibrium networks and
enhance the stability and efficiency of the outcome. Moreover, in large groups
social benefits encourage the formation of superstars: star networks in which the
core contributes more than expected in the stage-game equilibrium. We show that
this result is predicted by a repeated game equilibrium.
13/5 Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough.
Joaquín Gómez-Miñambres, Brice Corgnet i Roberto Hernán González
Abstract The aim of this paper is to test the effectiveness of wage-irrelevant goal setting policies in a laboratory environment. In our design, managers can assign a goal to their workers by setting a certain level of performance on the work task. We establish our theoretical conjectures by developing a model where assigned goals act as reference points to workers’ intrinsic motivation. Consistent with our model, we find that managers set goals which are challenging but attainable for an average-ability worker. Workers respond to these goals by increasing effort, performance and by decreasing on-the-job leisure activities with respect to the no-goal setting baseline. Finally, we study the interaction between goal setting and monetary rewards and find that goal setting is most effective when monetary incentives are strong. These results suggest that goal setting may produce intrinsic motivation and increase workers’ performance beyond what is achieved using solely monetary incentives.
13/4 The Price of Luck
Sílvia Bou, Magda Cayón
Abstract: We find that the vast majority of students taking an advanced undergraduate finance course show a preference for luck in a classroom experiment. In Phase I of the experiment part of the students, group A, were asked to guess a coin toss five times in a row. In Phase II the rest of the students, group B, were given 10 EUR to bet on some of the Group A students taking a second go at guessing a sequence of five coin tosses (Phase III). Group B students’ bets were by default allocated to the worse performing student in Phase I. Switching to better performing Group A students was costly. A total of 23 out of 28 students were willing to pay for switching and thus showed a preference for luck.
13/3 Market Rewards to Patterns on Increasing Earnings: Do Cash Flow Patterns, Accruals Manipulation and Real Activities Manipulation Matter?
Su-Ping Liu, Juan Manuel García Lara
Abstract: This study explores whether firms have differential price-earnings multiples associated with their means of achieving a sequential pattern of increasing positive earnings. Our main findings show that market participants assign higher price-earnings multiples to firms when their pattern of increasing earnings is supported by the same pattern of increasing cash flows. Market participants assign lower price-earnings multiples to firms suspect of having engaged in accrual-based earnings management, sales manipulation, and overproduction to achieve the earnings pattern. We find, however, that market participants do not penalize firms suspect of having achieved the earnings pattern through the opportunistic reduction of discretionary expenses.
13/2 Multimarket Contact Externalities: The Effect of Rivals' Multimarket Contacts on Focal Firm Performance.
Jaime Gómez, Raquel Orcos, Sergio Palomas
Abstract:Given that firms develop their activities in a network of multiple players, interfirm rivalry is not only a matter of direct competitors, but also of indirect competition. In spite of this, the literature on competitive dynamics tends to focus on analyzing rivalry as an exclusive function of the competitive relationship between a focal firm and its direct rivals. In this article, we extend competitive dynamics literature by considering how focal firms are affected by the relationships of their rivals with third-party firms. Specifically, we study the effect that the multimarket contacts of rivals produces on the performance of the focal firm. Additionally, we incorporate the idea that there are different strategic options for operating in an industry that affect the intensity of multimarket contact externalities. Our results show that multimarket contact among firms causes externalities that indirectly affect firms that are not directly involved in this competitive relationship. We find that multimarket contact externalities differ between and within strategic groups.
13/1 Studying the Micro-Angels approach to Micro-Investment Decisions.
Glòria Estapé Dubreuil, Arvind Ashta, Jean-Pierre Hédou
Purpose: The paper analyzes the micro-angels investment behaviour, looking both to the criteria used in the selection of their investment projects and to the characteristics of their guidance role during the investment period.
Design/Methodology/Approach: The paper focuses on a double bottom line movement of French micro-angels clubs that has been operating since 1983. Our primary source of data is an online survey carried out during March 2012, asking members of clubs all over France for different aspects of their procedures.
Findings: Our findings suggest that micro-angels are interested in small, socially or environmentally friendly projects having the potential to contribute to the development of their neighbourhood. We find that women are even more interested than men in such projects. Educated micro-angels value entrepreneurial motivation and understanding of the project more than less-educated micro-angels. We also point out the factors that micro-angels consider important in accompanying enterprises. Here we find that gender makes little difference. However, retired micro-angels value financial diagnosis made conjointly with entrepreneurs, while both active micro-angels and educated micro-angels value more the use of their network to help micro-entrepreneurs.
Practical/Social Implications: Given the potential benefits of micro-angels investing and guiding the development of micro-enterprises, a social micro-angel investment on a major scale in developing countries could help in tackling some of the problems faced by the development of microfinance, such as the over-indebtedness of micro-entrepreneurs. Practitioners and new initiatives would gain from understanding what adaptations need to be made.
Originality/value: We expect to add to the venture capital theory to take into account non-economic motives.