When the word ‘integrated’ is associated to a business practice, an organisational environment, or a workplace, it is often good news. The term has a positive connotation in common language, expressing something that is ‘systematic’, ‘comprehensive’, ‘coherent’, ‘cohesive’ etc. Indeed, dictionary definitions leave no doubt. Something is integrated if ‘two or more things [are] combined in order to become […]
Evidence exists that investors are subject to attentional constraints when making economic decisions and as a result focus on subsets of publicly available information that are more salient, i.e. that tend to stand out and are easier to process. Selective attention to salient stimuli can be economically justified if time and attention are costly.
A large literature to date examines […]
The sensitivity of corporate bond returns to changes in the value of equity is a fundamental input for portfolio asset allocation. Since imperfect correlation of asset returns is a key assumption in portfolio theory, stock-bond return co-movement is important to determine the diversification benefits of bonds, and to hedge common exposures across the two asset markets. Because bonds exhibit […]
The regulation of and by algorithms has become of growing relevance to the delivery of public services, coinciding with the related interest in open and big data. Debates about the consequences of the rise of algorithms have been however limited. Early contributions considered whether the rise of algorithmic regulation and new information technologies represented a fundamental (mostly benevolent) change […]
Since the pioneer writings of Weber and Sombart, the debate on the nexus between accounting and the rise of capitalism has caused a lot of ink to flow. Literature on the subject has focused on assessing the capacity of the double-entry form to promote “rational” decision-making based on profit calculation. While the classical approach, drawing on Weber and Sombart’s […]
We find ourselves today at the start of an industrial revolution. There have been others of course. The first revolution happened 250 years ago. Its engine was mechanisation. Another, about a hundred years ago, was all about electrification and mass production. Then 50 years ago, electronics and automation started a third revolution.
Right now, our physical and virtual worlds are […]
In managing risk, organizational actors are constantly engaged in the work of representing it. From a philosophical point of view, this co-mingling of risk and representation is unsurprising. Risks are contingencies or future possibilities which have not yet crystallized into events. As non-real possibilities, they literally do not exist and cannot be seen until they are represented and processed […]
Over a decade has passed since the European Union (EU) mandated a uniform set of accounting standards, i.e. International Financial Reporting Standards (IFRS), for all companies listed on the major European stock exchanges in 2005. Since then, over 100 countries are currently requiring their listed firms to prepare financial reports either under IFRS or under a closely linked accounting […]
Canary Wharf Skyline, by David Iliff, under a CC-BY-SA-3.0 licence
In the aftermath of the financial crisis and other large scale corporate scandals, a large number of public inquires and documents written by regulators, consulting firms and professional associations drew attention to something that needs fixing: the risk culture of financial sector organisations (see, for example, publications by the International institute of Finance, the Financial […]
Home, by George Hodan, Public Domain
Increasingly, people who work for the good of humanity speak the language of business (G8, 2014). Social impact reporting has become best practice for many social enterprises, which use metrics such as ‘social return on investment’ as a means of quantifying their success. ‘Social impact’ can be seen as the social sector analogue of ‘profit’ in […]
… it may please your worships to understand, that the chiefest living and maintenance that we have is upon the commissions that are sent unto us of our friends from beyond the seas…
— Italian merchants explaining their foreign exchanges to Sir Thomas Gresham and other royal commissioners [Ms. of Lord Calthorpe, Vol XX, f. 28].
Most of today’s banks […]
The traditional perspective for engaging in corporate social responsibility (CSR) assumes that early adopters are more authentic than late adopters. Why? Those that fear their operations aren’t CSR friendly take longer to bend to the will of external stakeholders, and report later. On the other hand, “best practice” organisations release CSR reports in advance of stakeholder expectations, taking advantage […]
Financial reporting and auditing are vital elements for global capital markets. The confidence in the financial market’s efficiency is bolstered by the trust placed in auditing being able to operate as an external controlling function, something that has led to the audit profession being perceived as the “guardians of truth in markets”. However, concerns over the guardians’ trustworthiness are […]
You are sitting on an airplane, enjoying the end of a flight back home. The flight lands ok, the pilot and crew thank you for choosing airline X – persuasively saying that they look forward to seeing you again on board – the doors open ok and you can happily disembark the aircraft. It happens for thousands of flights […]
Every time I see corporate accounting irregularities in the news I recall how a key finding in my doctoral research some time ago has remained relevant. The research showed support for a spillover effect between slack resources and managerial time horizon. Kind of like a ‘whack-a-mole’ effect. Slack refers to securing more resources (such as during an organization’s annual […]
The mandatory adoption of International Financial Reporting Standards (IFRS) by European listed firms in 2005, accompanied by similar regulatory action worldwide, represents one of the most influential accounting rule changes in history. The switch from a diverse set of domestic financial reporting regulations to a common set of accounting standards has affected thousands of companies that differ in terms […]
The first picture shows the distribution of actual earnings in our study on target setting (see the study in brief box below) and replicates a well-established finding that reported earnings exhibit a ‘discontinuity at zero’ (meaning that there are disproportionally fewer firms with small losses compared to small profits), which one might surmise perhaps suggests that firms ‘manage’ earnings […]
Some time ago I was asked to comment on a study that found that the use of accounting return measures and non-financial measures in bonus plans was associated with managers’ long-term focus. This suggests that proper performance measurement systems can affect managers’ horizon and alleviate myopia.
Myopia is indeed a pervasive issue in business, as the Kay Review suggests (amongst countless others). The blame is often squarely […]
Business groups constitute a common way for ultimate owners to exercise control over a large number of companies while containing their risk exposure to different parts of the business through limited liability. In countries with underdeveloped financial infrastructures, these groups overcome difficulties in accessing external finance by reshuffling funds within the corporate structure.
Group bankruptcies tend to be large (e.g., Global […]
Here is one diehard maxim of business: don’t overshoot your performance target this year, because before you know it the one for next year will be tougher yet. This is target ratcheting at work: when you do better than the established goal, your next objective will be even higher; but the converse is not true. If you do worse, the company will […]