The purpose of this paper is to verify whether the benefits gained by granting extended payment terms can lead to higher profitability for Italian companies. Moreover, the…
The purpose of this paper is to verify whether the benefits gained by granting extended payment terms can lead to higher profitability for Italian companies. Moreover, the analysis aims to investigate whether trade credit offered at a higher level than the sector average can contribute to the profitability of companies. Finally, it aims to test whether the profitability connected to granting trade credit is higher for the unconstrained and financially sound companies.
The empirical analyses are conducted on a sample of Italian firms, over the period 2008–2016. The methodologies used to test research hypotheses are panel analysis with fixed effects and random effects models, as well as the generalized method of moment (GMM).
The results show the contribution of trade credit to the profitability of Italian companies. The empirical analysis also suggests that companies might improve their profitability by increasing investments in trade receivables to a greater extent than companies in their business sector. Finally, the greater use of payables to suppliers and the higher incidence of bank debt reduce the contribution of accounts receivable to the profitability of companies.
This study contributes to the existing literature as very few studies have analyzed whether trade credit offered at a higher level than the sector average may contribute to the profitability of companies. Moreover, the study provides new evidence on the moderation effect of payables to banks and suppliers on the contribution of granting trade credit to company performance.
The purpose of this paper is to identify factors associated with the presence and use of internal audit functions (IAFs) at US colleges and universities, as well as their…
The purpose of this paper is to identify factors associated with the presence and use of internal audit functions (IAFs) at US colleges and universities, as well as their relationship with financial reporting quality and federal grant outcomes.
Using a combination of publicly available and manually collected data, this paper uses a two-stage model to examine both the factors associated with the use of IAFs within US institutions of higher education and the consequences therein.
Results indicate that institutions with larger enrollments and endowments, those that receive public funding and those that have an audit committee are more likely to maintain an IAF. Findings also suggest that the presence of an IAF is negatively associated with reported material weaknesses for major programs at significant levels. Finally, the presence of an IAF is found to have a positive and significant association with federal grants received by the institution, with an even stronger association for IAFs that perform grant-specific procedures.
The study’s findings provide the first large-sample quantitative insights on IAF work within US colleges and universities. Results should be of interest to college/university leadership as they attempt to improve financial reporting quality and grant outcomes, as well as external stakeholders looking to evaluate whether institutions are acting as good stewards over resources. Additionally, the Institute of Internal Auditors may find the results helpful when promoting the profession.
The 2008-2009 subprime mortgage crisis in the USA caused bankruptcies and closures of many financial institutions. Yet many CEOs of US financial institutions were awarded…
The 2008-2009 subprime mortgage crisis in the USA caused bankruptcies and closures of many financial institutions. Yet many CEOs of US financial institutions were awarded huge bonuses and pay packages despite the economic collapse, suggesting that their incomes were not in conjunction with those of the shareholders, indicating a serious agency problem. This issue raises the question as to whether stock option backdating, another example of an agency problem, was as prevalent as slack lending policies among these financial institutions. This paper aims to compare the relative magnitude of executive option backdating in financial and nonfinancial firms.
Using a sample of CEO stock option grants from 1995 to 2006, obtained from ExecuComp, the authors employ an event study around the grant dates of executive options. The authors compare the abnormal price movements between financial and nonfinancial firms.
The abnormal negative stock returns were found before the award dates for both groups of firms. The after-event abnormal returns of both groups of firms, however, show different trends. For nonfinancial firms, there is an immediate turnaround of the abnormal return movement right after the grants; that is, the price increases, indicating the occurrence of significant backdating events. For financial firms, however, there is no significant price rebound after the grant date. In fact, the price continued to decline throughout the after-event period.
The result shows that nonfinancial firms demonstrate significantly more option backdating behavior than financial firms.
The findings suggest that previous findings on prevalent backdating among all public listed firms are only partially correct. This paper shows that backdating behavior found in previous studies is indeed driven by nonfinancial firms. This unexpected finding contradicts the initial prediction of authors that option backdating may be more likely among financial firms.
Based on previous research, the authors recognize that generally the official grant dates of firms must have been set retroactively, as shown by Lie (2005). The findings, however, show that financial firms demonstrate only partial backdating behavior. This study opens a path for future research to further discover why financial firms exhibit less backdating behavior compared with nonfinancial firms, and if option backdating is not an issue for financial firms, why the share prices of these firms decline significantly prior to the grant date.
University governance is constantly challenged by changing expectations and contexts. New, prestigious and well-endowed funding schemes are one possible source of pressure…
University governance is constantly challenged by changing expectations and contexts. New, prestigious and well-endowed funding schemes are one possible source of pressure for change of university governance. This article analyses the impact of one such scheme, the grants of the European Research Council (ERC), on the governance of European universities. After outlining a model of how this impact on universities can be expected to occur, we present the results of an exploratory study at a very early stage of the ERC’s existence (2010–2011). The empirical analysis is based on an investigation of 11 universities in eight countries, which shows that different kinds of universities are affected in varied and often unexpected ways, with particular differences arising at different levels within the universities.
This paper looks at the research to date on the future of broadly granted stock options (options granted to at least half the full-time employees of a company). In the…
This paper looks at the research to date on the future of broadly granted stock options (options granted to at least half the full-time employees of a company). In the U.S., granting options broadly became popular in the late 1990s, but has lost some of its appeal in the wake of stock market declines, accounting changes, and increased shareholder concerns about dilution. The data indicate a significant minority of companies will change their plans, but a substantial majority will keep them. The data also indicate changes in accounting rules will not affect stock prices and that broadly granted options are better for corporate performance than narrowly granted options.
During the 1930s Franklin Roosevelt’s New Deal created a wide range of spending and loan programs. Brief descriptions are provided for the programs created by the New Deal…
During the 1930s Franklin Roosevelt’s New Deal created a wide range of spending and loan programs. Brief descriptions are provided for the programs created by the New Deal and loan and spending programs that were in place before the New Deal. I worked with others to create a panel data set with estimates of the spending and lending by the programs each year from 1930 through 1940. The data aggregated to broad categories are reported here and the methods and sources used to construct the estimates of the spending and lending for the categories are discussed.
A study of the price discounts granted by Morton Salt Company and other producers of table salt in the U.S. on their sales of table salt to grocery wholesalers and…
A study of the price discounts granted by Morton Salt Company and other producers of table salt in the U.S. on their sales of table salt to grocery wholesalers and retailers. The discounts were found to be illegal under the Robinson-Patman Act by the Federal Trade Commission and the Supreme Court. The Commission and the Court believed that the discounts were unjustified price concessions granted to “large” buyers, consistent with the concerns of the Robinson-Patman Act. However, the evidence indicates that the most common discount – the “carload discount” – was received by virtually all buyers, regardless of the buyer’s size; the other discounts – “annual volume” discounts – though received primarily by “large” buyers, were likely cost based. The history of the discounts and likely reasons why they were granted are explored in detail.
The change in CEO pay after their firms make large corporate investments is examined. Whether the change in CEO pay is a beneficial practice or harmful practice to firms…
The change in CEO pay after their firms make large corporate investments is examined. Whether the change in CEO pay is a beneficial practice or harmful practice to firms is investigated.
A sample of firms that make large corporate investments is identified. For this sample, we identify the change in CEO pay before and after the investment, and we also measure the pay-for-size sensitivity of these investing firms.
For firms that make large corporate investments, CEOs get significantly more option grants when their firms’ stock returns are negative after the investments and these investing CEOs get more option grants than noninvesting CEOs.
The present study suggests that firms may have to increase CEO pay after large corporate investments to encourage investment. However, the results may also be consistent with an agency cost explanation. Future research should try to distinguish between the two explanations.
The study reveals a potential way to prevent CEOs from underinvesting.
The study provides important insights to shareholders on how to encourage CEOs to get their firms to invest, and on how to view CEO pay increases after their firms invest.