Search results

The purpose of this paper is to examine the operating characteristics as well as risk and performance measures of all available self-proclaimed socially responsible funds (hereafter SRFs) in the USA over the ten-year (2007–2016) period. The first research question addressed is: Do SRFs perform as well as the average of all mutual funds in their respective categories? The second research question addressed is: Are SRF expense ratios correlated with fund performance?

This study analyzes all socially responsible equity mutual funds, as self-reported to Morningstar. This paper empirically compares operating characteristics and performance measures of SRFs relative to category averages in the US mutual fund industry. Operating characteristics include expense ratios and annual turnover rates. Performance measures include conventional return, risk and risk-adjusted return measures.

Although prior research suggests that socially responsible investing (SRI) indexes and SRI-friendly stocks have favorable returns, this study finds that these self-proclaimed SRFs underperform the average of all mutual funds in matched equity categories. However, this study demonstrates that a simple filter based on expense ratios can identify those SRFs that will enable investors to do quite well while doing good.

The contribution of this paper is twofold. First, the authors report that self-proclaimed SRFs, as a whole, have not generated competitive returns relative to other mutual funds in the same categories over the past ten years. This result contradicts the notion that socially responsible investors do not give up return performance when investing with their conscience. Second, the authors find that those SRFs with expense ratios in the lowest quartile of their respective category have significantly higher risk-adjusted returns and significantly lower turnover than category averages. Thus, by focusing on SRFs with low-expense ratios, socially responsible investors can do quite well while doing good.

Prior research has used computer-generated data to illustrate the benefits of the recently developed duration-based costing (DBC) and its affiliate modified duration-based costing (MDBC). The purpose of this paper is to use data from a Fortune 500 corporation to compare its traditional, or functional-based, cost allocation method with that of the recently developed DBC and MDBC models.

A Fortune 500 company provided one month of production data for a particular, key machine within its manufacturing process. The data were used to apply DBC and MDBC.

Variations arising from differences in the models’ cost allocation reveal the advantages of using time-based cost allocation over the traditional, mostly non-time-based allocation to estimate profit.

By using actual data, this case study enhances prior theoretical research concerning the benefits of utilizing DBC and MDBC over the traditional costing method.

This case study is of benefit to practitioners who use traditional costing since it will encourage them to explore DBC and/or MDBC that tend to be more accurate in situations where the old adage of “time is money” applies. Implementing DBC and MDBC was not difficult to do for the Fortune 500 company as all of the components to run the models were readily available.

This is the first study to utilize actual company data to illustrate DBC and MDBC, and thus, adding to the literature concerning DBC and MDBC.

This article aims to examine the influence of chief executive officer (CEO) internal political beliefs on labor relations. Prior research has paid little attention to channels through which the internal personal value system of managers enhances or deteriorates firm value. The authors provide evidence consistent with CEOs adopting labor policies impacting incumbent management–labor relationships based upon their political ideologies.

The research design tests the impact of CEO political ideology on labor relation using an individual CEO’s personal information and firm affiliation, employee lawsuit information, financial contributions to candidates and committees, and firm financial information. The authors compiled a sample of 4,354 unique CEOs from 2,558 US firms that are covered by ExecuComp and used 18,404 firm-year observations for the study’s analysis. A Heckman two-stage estimation process is used to address a potential sample selection bias and match the requirements of exclusion and relevance criteria.

Findings indicate that firms led by Republican-leaning CEOs are more likely to be sued by their employees, especially for violating union rights. Moreover, the findings of the study uncovered that Republican-leaning CEOs have fewer cases dismissed or withdrawn compared to Democrat-leaning CEOs and are also less likely to settle court cases prior to trial. Results indicate that Republican-leaning CEOs are associated with more substantial decreases in firm value compared to Democrat-leaning CEOs when facing labor allegations. The authors further show that firm value is lower for all firms facing litigation, with the magnitude of the decrease being more pronounced for firms with Republican CEOs.

Firm affiliations are identified using ExecuComp, employee lawsuit information from the National Labor Relations Board (NLRB), financial contributions to candidates and committees from the Federal Election Committee (FEC) website, and financial information from Compustat. To the extent that these websites are inaccurate, such as financial contributions being underreported, the findings reported here may understate the relationships reported in this article.

The authors capture CEO political ideology using political contributions. There may be other means, such as physical space and personal effort, by which one could also estimate the party and intensity of CEO political ideology. This information is unavailable.

While presidential politics has four-year cycles, managerial finance is a daily activity. While political affiliation is most clearly measurable through monetary contributions, one can see implications of manager political leaning through their relationship with labor throughout the election cycle.

The analyses of this study indicate that labor unions are more likely to sponsor lawsuits and stronger allegations in firms with Republican CEOs and show that withdrawal, settlement or dismissal rates are lower when firms are managed by Republican managers, resulting in higher subsequent legal costs and potentially damaged employee morale. Also, this paper investigates whether lawsuits have a greater negative consequence on firm value when the firm is run by a Republican CEO. The authors find that lawsuits significantly lower Tobin's Q for Republican-led firms compared to companies with Democratic and apolitical CEOs. The authors further show that firm value is lower for all firms facing litigation, with the magnitude of the decrease being more pronounced for firms with Republican CEOs.

Firms are able to reduce financing costs and/or increase the funds available for expansion by minimizing the amount of funds tied up in current assets. We provide insights into the performance of surveyed firms across key components of working capital management by using the CFO magazine’s annual Working Capital Management Survey. We discover that significant differences exist between industries in working capital measures across time. In addition, we discover that these measures for working capital change significantly within industries across time.

The purpose of this paper is to examine the contemporaneous relationship between changes in corporate reputations and stock prices.

The Harris Interactive Reputation Quotient^TM is used as a measure of corporate reputation. Stock return and risk measures are evaluated for each Reputation Quotient^TM survey period for the years 1999‐2007.

The results provide evidence that, in the aggregate, firm reputations are procyclical. Additionally, firms with improved reputations enjoy lower volatility in their stock prices than firms with diminished reputations.

Due to the Harris Poll Online methodology, it is not clear that the price changes occur concurrently with the change in reputation.

This paper contributes to the finance literature by examining the effect of a change in corporate reputation on stock price.

For a number of reasons ranging from their more recent introduction to their perceived lesser excitement relative to stock-based peers, there have been few studies of fixed income (mainly bond) exchange-traded funds (ETFs). The purpose of this paper is to fill the void by comparing performance measures of fixed income ETFs to fixed income closed-end funds (CEFs).

This paper examines operating characteristics as well as risk and performance measures of all available fixed income ETFs and CEFs in the USA over the last five and ten years ending on December 31, 2014. Operating characteristics include expense ratios, annual turnover rates, tax cost ratios, and tracking error ratios. Performance measures include average annual returns, risks (measured by standard deviations), and risk-adjusted returns (measured by Sharpe ratios and Sortino ratios).

This study finds material and significant difference in a variety of expenses, return measures, and risk measures. Sharpe and Sortino ratio significance is highly dependent on whether net asset values or market values serve as the dependent variable. ETFs would be the preferred choice of fixed income investors who are presumed to be focussing on market-based return measures.

This paper empirically compares operating characteristics as well as risk and performance measures of US fixed income ETFs and fixed income CEFs in the same Morningstar categories over the last five and ten years.

The purpose of this paper is to examine operating characteristics, risk and performance measures of all available vehicles for index investing in US bond funds during the 15‐year period from April, 1994 to March, 2009. The results shed light on the important issue of bond index mutual funds (BIMFs) and bond exchange‐traded funds (BETFs) performance compared with average of all bond mutual funds.

Data were obtained from Morningstar Principia. Operating characteristics include expense ratios, annual turnover rates, and tax cost ratios. Performance measures include average annual returns and return percentile rank in category, risks (measured by standard deviation) and risk‐adjusted returns (measured by the Sharpe ratio).

BIMFs and BETFs have significantly lower expense ratios and annual turnover rates than category averages. Their returns and risk‐adjusted returns are significantly higher than bond category averages.

Future studies will be able to benefit from a larger sample size, longer performance records, and the strength of bond index funds in foreign markets.

Both BIMFs and bond exchange‐traded mutual funds have significantly lower expense and annual turnover rates, making them preferred investment choices.

Efforts by active bond mutual fund managers to beat index benchmarks have largely failed. Investors should be wary of bond mutual fund managers touting their ability to beat the average or a bond index.

The advantage of investment in BIMFs and BETFs is clear.

Despite the extensive research on the determinants and consequences of firm growth, research focusing on how the actual process unfolds is still evolving. An important part of firm growth process research is entrepreneurial cognition. The purpose of this chapter is to explore the relationship between entrepreneurial cognition and firm growth intentions. Specifically, we propose a theoretical model of entrepreneurial cognitive interpretation and categorization of market information as it relates to firm growth intentions. Drawing from the strategic cognition literature in general and strategic issue interpretation literature in particular, we propose that entrepreneurs’ interpretation of market information as opportunity or threat, gain or loss, and controllable or uncontrollable influences their firm growth intentions. Furthermore, our theoretical model discusses the condition under which favorable interpretation of market information leads to higher growth intentions by incorporating insights from the Entrepreneurial Orientation (EO) construct. This chapter extends our understanding of firm growth processes by highlighting the important role cognitive interpretation and categorization play in facilitating or hindering entrepreneurial firm growth.