Articles

Analyst coverage, earnings management and financial development: An international study

F. Degeorge, Y. Ding, T. Jeanjean, H. Stolowy

Journal of Accounting and Public Policy

January-February 2013, vol. 32, n°1, pp.1-25

Department: Accouting and Management Control

Using data from 21 countries, this paper analyzes the relation among analyst coverage, earnings management and financial development in an international context. We document that the effectiveness of financial analysts as monitors increases with a country’s financial development (FD). We find that in high-FD countries, increased within-firm analyst coverage results in less earnings management. Such is not the case in low-FD countries. Our results are economically significant and robust to reverse causality checks. Our findings illustrate one mechanism through which financial development mitigates the cost of monitoring firms and curbs earnings management

Boarding the Aircraft: Trust Development amongst Negotiators of a Complex Merger

M. Lander, L. Kooning

Journal of Management Studies

January 2013, vol. 50, n°1

Department: Management and Human Resources

We explore trust development in the context of an international merger negotiation. Based on in-depth interviews with chief negotiators of the Air France-KLM merger we contribute to existing theory by showing that trust develops in three interrelated domains: personal, process and outcome. Progressively, trust develops in all domains on the basis of antecedents that differ between phases and domains. Distinguishing between different domains facilitates analysis of trust asymmetry and the co-existence of trust and distrust, as well as the influence of trust in interorganizational relationships.

Keywords: M&A, Negotiations, Process Study, Trust

Bottom-Up Corporate Governance

A. Landier, J. Sauvagnat, D. Sraer, D. Thesmar

Review of Finance

January 2013, vol. 17, n°1, pp.161-201

Department: Finance

This article empirically relates the internal organization of a firm with decision making quality and corporate performance. We call “independent from the CEO” a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of independent executives exhibit (1) a lower level of profitability and (2) lower shareholder returns following large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder friendly provisions. One interpretation is that “independently minded” top ranking executives act as a counter-power imposing strong discipline on their CEO, even though they are formally under his authority.

Buying Beauty: On Prices and Returns in the Art Market

L. Renneboog, S. Spaenjers

Management Science

January 2013, vol. 59, n°1, pp.36-53

Department: Finance

This paper investigates the price determinants and investment performance of art. We apply a hedonic regression analysis to a new data set of more than one million auction transactions of paintings and works on paper. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 3.97% per year, in real U.S. dollar terms, between 1957 and 2007. This is a performance similar to that of corporate bonds—at much higher risk. A repeat-sales regression on a subset of the data demonstrates the robustness of our index. Next, quantile regressions document larger average price appreciations (and higher volatilities) in more expensive price brackets. We also find variation in historical returns across mediums and movements. Finally, we show that measures of high-income consumer confidence and art market sentiment predict art price trends.

art, auctions, hedonic regressions, investments, repeat-sales regressions, sentiment

Committed to Professionalism: Organizational responses of Mid-tier Accounting firms to conflicting institutional logics

M. Lander, B. A. S. Koene, S. N. Linssen

Accounting Organizations and Society

February 2013, vol. 38, n°2, pp.130-148

Department: Management and Human Resources

We study how mid-tier accounting firms deal with changes in their institutional environment that resulted in a shift in emphasis from the trustee logic to the commercial logic. We find that these mid-tier firms selectively adopt practices related to the commercial logic, while retaining a principal commitment to the trustee logic. Interviews with high level informants in these firms show how specific strategic choice opportunities serve as independent critical events framing practice-adoption decisions. Main strategic issues for the mid-tier firms relate to the changing role of the accountant and changes in organizational structure and practices. As these issues fundamentally challenge characteristics of their professional identity, there is internal resistance against this transformation. Non-partnered accountants mainly challenge new roles that upset their extant work routines, whereas partners resist changes affecting their autonomy. These types of resistance directly impact the strategic organizational responses of the accounting firms to institutional pressures.

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