General Economic Conditions Research Articles

‘Making text talk’: The minutes of the Central Bank of Brazil and the real economy

This paper investigates the relationship between the views expressed in the minutes of the meetings of the Central Bank of Brazil's Monetary Policy Committee (COPOM) and the real economy. It applies various linguistic machine learning algorithms to construct different measures of the uncertainty contained in the minutes of the COPOM. To achieve this, we first infer the content of the paragraphs of the minutes with Latent Dirichlet Allocation (LDA). Secondly, we build an uncertainty index for the minutes with Word Embedding and K-Means. Thirdly, we create two topic-uncertainty indices. The first topic-uncertainty index is constructed from paragraphs with a higher probability of topics related to general economic conditions. The second topic-uncertainty index is built from paragraphs with a higher probability of topics related to inflation and the monetary policy decision. Then, via a Structural VAR, we explore the lasting effects of these uncertainty indices on some Brazilian macroeconomic variables. Our results show that an unexpected increase in the minutes' uncertainty leads to a depreciation of the exchange rate and a decline in industrial production and retail trade. Moreover, we show that a positive shock to the general economic conditions topic-uncertainty index leads to higher inflation, whereas a positive shock to the inflation and monetary policy decision topic-uncertainty index leads to lower inflation.

Place branding in resource peripheries: attracting the knowledge elite to Antofagasta, Chile

ABSTRACT Cities in resource peripheries tend to be unattractive places. They lack the features that appeal to the knowledge elite – at least from the perspective of Richard Florida’s influential work – and, therefore, face challenges to diversify their economy. The article deals with Antofagasta, which is the capital of one of the world’s most important mining regions. In recent years, considerable efforts have been undertaken in terms of “place branding” and “place marketing” so as to make Antofagasta more livable. Against the backdrop of narrative interviews, the author analyzes whether these efforts help to attract highly skilled professionals. A qualitative comparative analysis reveals that career opportunities are the key factor – a necessary condition for the knowledge elite to move to Antofagasta, not amenities or a pleasant lifestyle. The region’s general economic conditions are relevant too. The built urban and natural environment is much less important, although it matters to some interviewees. Most highly skilled professionals find that Antofagasta is not an attractive city to live in. They do not project themselves being there for a long time.

Assessment and the Effective Teacher

The role of the teacher is of great importance and closely related to the general economic and socio-political conditions and changes of the modern era. It is therefore imperative to maximize the performance of the teachers' offer which will make them more effective, improve the infrastructure and the rest of the human staff. The basic purpose of the assessment is to ensure the quality of teaching and consequently of learning to the maximum extent possible, thus fulfilling the goals and vision of the educational policy, but also of each individual school unit. Educational evaluation is a more comprehensive concept, which does not aim exclusively at the evaluation and control of students' progress, but of the educational system as a whole (Mokou & Mokos, 2006). Teachers, as active members of society, must monitor its ever-changing trends and needs, as well as the needs of the modern family (students-parents). The exercise of leadership in the classroom by the teacher is of particular importance and teachers must act as role models for their students. They must not only assume and exercise leadership in the classroom, but also encourage students to exercise leadership. In this way, you reduce the teacher's workload, and give a sense of collegiality. It also plays a decisive role in the comprehensive education of students. The human staff of the school is the most creative connecting element of all actions that lead to the achievement of its goals. The teachers' effort to recognize their professional contribution is multi-year, persistent and met great resistance, ideological, financial, exercise of power and increase in workload.

Designing an Efficient Administrative System Model with a Jihadi Management and Organizational Justice Approach (Case Study: Social Security Organization)

The Social Security Organization, as one of the largest institutions providing social and insurance services in Iran, plays a significant role in ensuring the social and economic security of various segments of society. The objective of this research is to present a model of an efficient administrative system based on justice-oriented and jihadi management principles. This research follows an interpretive philosophy, an inductive approach, a qualitative method, and a grounded theory strategy with an emergent approach. The study population consists of the Social Security Organization, where the qualitative sample includes individuals with at least 10 years of work experience who possess theoretical and practical knowledge related to the research topic and understand the efficient processes of the administrative system within the Social Security Organization. Out of these individuals, 21 were selected as the sample through purposive sampling. To assess the validity of the research, the four criteria of Lincoln and Guba (1987) were used. The findings revealed that 548 initial codes were extracted, categorized into 104 categories and 31 components. For theoretical coding, Glaser's "6 Cs" family was utilized. In this context, the causal components include environmental and structural conditions, participatory management, interaction with insurance parties, jihadi management, training and empowerment, initiative, human resource management, process simplification, and behavioral factors. The correlational factors include supportive policies, organizational innovation, and service compensation. The contingencies involve Islamic and human values, jihadi culture, and time management. The mediating conditions consist of justice-oriented principles, utilization of modern technologies, a supportive political and economic environment, and social capital. The outcomes encompass improved productivity, enhanced justice, increased motivation and commitment, economic and social improvement, better performance, employee satisfaction and motivation, and increased customer and societal satisfaction. Finally, the environmental context includes government support for workers' rights, low government support for employers, public unawareness of laws, the existence of general laws, and unfavorable general-economic conditions.

Analysis of Net Asset Value-based Projected Performance of Sharia Mutual Funds Post Covid

As we know that the Covid-19 pandemic has affected the financial markets and banking sectors; however, it is different from the non-banking financial institutions having Sharia mutual funds. In 2019, the net asset value (NAV) of Sharia mutual funds were about 53,735.58, while in 2020 it increased to 74,367.44. Seeing the above phenomenon, mutual funds are one of the strategies that can be an investment opportunity and can be a safe investment alternative for capital owners, especially small capital owners and owners who do not have much time and expertise to calculate the return and risk on their investment. This study aims to examine the projections of the financial performance of Sharia mutual funds for the next 6 years. The method used is quantitative with a descriptive approach, data processing was done by projection analysis using Excel. The results of this study are the performance of Islamic mutual funds during the early post-Covid era, from May to the present, that has decreased to an asset value of 42,668.70 caused by withdrawal for Hajj funds, inflation, etc. The cause of the decline is in line with the theory above that Islamic mutual funds can be affected by unsystematic risk, which is impacted by the value of securities in the stock market that fluctuates according to general economic conditions. There is also a projected performance of Sharia mutual funds based on the NAV of the post-Covid era for the next 6 years that will continue to increase, reaching the highest point in 2027 of 102,054.28.
 Keywords: mutual fund, Sharia, net asset value

Forecasting of Taiwan's weighted stock Price index based on machine learning

AbstractThis study proposes a stack framework of light gradient boosting machine (LGBM) for Taiwan stock market index prediction. Stock market predictions have been regarded as a challenging task, as the market is affected by several factors such as political events, general economic conditions, institutional investors' choices, movement of the global market, psychology of investors. We construct a rich feature set to capture the impacts of global markets, institutional investors' choices, and the psychology of investors. A feature selection algorithm is proposed to choose important feature subset and enhance the training performance. To further improve the prediction accuracy, we employ stacking strategy to combine multiple classifiers together. A 10‐year period of the Taiwan stock exchange capitalization weighted stock index (TAIEX) is used to verify the performance of the proposed model. The experimental results suggest that our prediction model as well as the feature selection method can achieve good prediction performance.

Concession policy of the Soviet state: implementation mechanism

The article analyzes the experience of the concession policy implementation by the RSFSR and the USSR during the 20s of the twentieth century and the approaches used in its framework, which allowed solving simultaneously a wide range of tasks related to the rise of the domestic economy and overcoming foreign policy isolation. This experience of the Soviet state can be used to solve the challenges the Russian Federation is facing today. The authors substantiate that the concession policy of the Soviet state was a rationally constructed mechanism able to solve a number of tasks. 1) Creation of foreign concessions in the Soviet country contributed to withdrawal from the diplomatic blockade declared by Western countries. 2) Through the concession policy the obligations of the Russian Empire to foreign investors were renewed in the conditions of a socialist economy. 3) By creating concessions the Soviet government headed by V.I. Lenin attracted the material and technological resources of the European countries and the USA for the development of the economy of the Soviet country. 4) At concession enterprises models of industrial relations with a high level of labor organization and living conditions of workers were formed at the expense of foreign investors, which then had to be introduced everywhere. 5) The concession policy covered the national suburbs and contributed to unification of the economic potential of the republics as part of the USSR. The analysis of the legal regulation of concession relationships carried out in this article gives reason to suppose that the concession policy of the Soviet state should not be reduced to the NEP because its implementation started earlier. In fact, it was launched with the adoption of the Decree of the Council of People’s Commissars of November 23, 1920 On General Economic and Legal Conditions for Concessions and within its framework a range of tasks that went far beyond the economic recovery envisaged by the NEP through private law principles was solved. Attention should also be paid to the constitutional nature of the regulation of concession legal relations, which was determined by the “Treaty on the USSR Foundation of 1922” and the Constitution of 1924.

Investment process and the ways to reduce the duration of investment construction projects

The urgent task of the state is to intensify investment activities and significantly increase the volume of investments.
 The general legal, economic and social conditions of investment activity on the territory of Ukraine are defined by the Law of Ukraine "On Investment Activity", which is aimed at ensuring equal protection of the rights, interests and property of subjects of investment activity regardless of the forms of ownership, as well as at effective investment of the economy of Ukraine. development of international economic cooperation and integration.
 The investment process means constant and growing investment of capital in material production for the purpose of successful social and economic development of Ukraine. For construction, the investment process means the creation of specific objects (or their complexes) for production and non-production purposes in the interests of specific investors (investor). The investment process consists of the implementation of separate investment construction projects (ICP). Each ICP is characterized by the duration of the life (or investment) cycle, which is measured by the interval of calendar time from the date of making the investment decision to the moment when the project goal is achieved. There are three stages of this cycle: justification of the idea and planning of investment, development of funds, reimbursement of invested funds or achievement of the project goal.
 The article examines the main, key procedures of each stage, which emphasize the importance of solving the financing issue, since the full set of procedures depends on the scope of the project. Reducing the duration of the investment cycle of a construction project depends on the intensification of each of its stages. The main factors affecting the reduction of the duration of each stage of the investment cycle of the construction project are given.
 The results of the conducted research should be taken into account in the further improvement of the legislative acts of Ukraine in order to activate investment activities and significantly increase the volume of investments in Ukraine.

Analysis of the Quality of Scientific and Innovative Transformations in the Territories in the General Economic Conditions of the Crisis

Relevance. Recently, the Russian economy has been experiencing a number of serious problems due to the sanctioning influence of Western countries and the spread of the COVID-19 epidemic. Together, these factors complicate the dynamic development of the country's economic complex in almost all directions, hindering the creation and generation of knowledge-intensive solutions. In this regard, research that helps to identify the trends and nature of reproductive processes in the regions, as well as the regularities of formation of optimal growth parameters when passing through the post-crisis phase of the socio-economic system, is of particular relevance.The purpose is a quantitative analysis of the quality of scientific and innovative transformations in the territories of the Russian Federation in the pre- and post-crisis periods of functioning of the economy.Objectives: to identify trends in the development of innovation potential of the regions in the context of two time phases (before and after 2014) according to two indicators: the average per capita turnover of innovative products and specific costs of research work. At the same time, it is proposed to link the studied results to the euro exchange rate.Methodology. The article considers the theoretical framework that reveals the peculiarities of the emergence and passage of crises by territories. The work is based on quantitative research methods (econometric and correlation and regression analysis). The data are systematized and synthesized thanks to freely available official statistics of the Federal State Statistics Service. Results. The maximum value of dynamics on the average per capita turnover of innovation products in the pre-crisis period was achieved in Moscow. In the post-crisis phase, the harshest drop in this indicator was also recorded for the Moscow region. In terms of specific R&D expenditures, none of the territories under consideration is characterized by positive transformations in 2014-20120 in relation to 2000-2013.Conclusions. The calculations confirm the existence of a protracted crisis in the reproductive sphere of the analyzed territories. In addition, a strong correlation between the states of the research and innovation sectors is quantitatively substantiated. In this regard, in order to move the country to a fundamentally different level of technological development there is a need to strengthen the support of the scientific base, as well as continuous monitoring of the achieved results.

Subjective well-being, satisfaction with public services and election outcomes in Turkey

There is an emerging literature to explain the variation in voting behavior by subjective well-being (or ‘happiness’) measures beyond standard economic and financial variables that economic voting models assert. This paper contributes to this new line of research by testing whether subjective well-being indicators are significant predictors of the June 2015 elections in Turkey. Using the 2013 wave of Life Satisfaction Surveys that is representative at the provincial level, our findings indicate that low levels of subjective well-being (‘discontent’) have a strong predictive power on the outcome of elections at the local level, accounting for provincial demographic and socioeconomic covariates, and possible reverse causality. We also use additional questions on satisfaction with public services and find that the Turkish electorate is more responsive to particular policies of the incumbent party rather than general economic conditions, or their general well-being.

Dynamics of survey responses before and during the pandemic: entropy and dissimilarity measures app

This article is set within the framework of studies focusing on the impact of the SARS-CoV-2 virus on the dynamics of economic activity. For the purposes of the analysis of the expectations expressed in business tendency surveys, the paper aims to verify whether the pandemic of 2020-2022 can be seen as just another contraction phase. Entropy and dissimilarity measures are employed to study the characteristics of the expectations and assessments expressed in the business tendency survey of Polish manufacturing companies. The empirical results show that the dynamics of the manufacturing sector data, particularly as far as general economic conditions are concerned, set the pandemic period apart. The economic consequences of the COVID-19 pandemic expressed in business tendency surveys tend to be unfavourable, but the statistical properties or the degree of the concentration of respondents’ answers do not correspond closely either to the expansion or contraction phases of the business cycle.

The relationship between ecology and economy in German public opinion, 1984–2019

ABSTRACT Based on data from the German Socio-Economic Panel for 1984–2019, this article investigates how changes in environmental concern are associated with changes in general and personal economic conditions. It examines the hypothesis of a trade-off between ecology and economy, i.e., that public concern about the environment increases under favorable economic circumstances, but erodes during unfavorable ones. On the aggregate level, trend analyses with yearly cross-sections of the data mainly support this trade-off hypothesis. On the individual level, analyses of the data with fixed-effects panel regression models yield similar, but more complex results – including contradictory findings. In addition to the trade-off hypothesis, our analyses confirm the more special hypothesis that the link between ecology and economy in public opinion has become weaker over time. This weakened relationship tends to create new opportunities for environmental politics because many citizens no longer follow the argument that ‘it hurts the economy.’

Analisis Penentuan Harga Pokok Produksi Dengan Metode Full Costing, Variable Costing dan Activity Based Costing Pada Pabrik Air Minum Syifa’ P2S2 Sukorejo Situbondo

The selling price is a crucial aspect of a product. Considering the selling price is one of the factors that will influence consumer decisions in buying a product. So that the determination of the selling price of the product must be done carefully and with integrated considerations. Through production costs, operational costs, desired profit targets, people's purchasing power, competitors' selling prices, general economic conditions, product price elasticity, and so on. The selling price policy is influenced by the cost of production and affects the success or failure of the company in achieving its goals.
 Thus, the As-Syifa' Bottled Drinking Water Factory (AMDK), as one of the producers of drinking water circulating in the midst of the Sukorejo Islamic Boarding School environment, must carefully consider the method of determining the cost of production that is applied. Departing from this thought, the researcher intends to conduct research at As-Syifa's AMDK by applying the full costing method, variable costing, and activity based costing.
 This research was conducted at Jln. KHR. Syamsul Arifin, Sukorejo village, Banyuputih, Situbondo. Precisely in one of the Islamic boarding school business units that produces drinking water. Data sources consist of primary and secondary sources. Data obtained through observation, interviews with managers, and documentation.
 From the results of the discussion, the following conclusions are obtained: (1) the As-Syifa' AMDK factory has so far used the conventional method in determining its HPP and obtained a HPP of Rp. 9,612.- (2) from the results of applying the full costing method, variable costing, and activity based costing obtained by different HPP which can be taken into consideration by As-Syifa's AMDK manager.

Abstract 78: Neighborhood Socioeconomic Deprivation Is Associated With Increased 30-day Mortality After Stroke: Results From A Nationwide Study Of 755,899 Medicare Patients

Introduction: The relationship between neighborhood socioeconomic deprivation- a reflection of the general economic and environmental conditions of a neighborhood- and outcomes after stroke is not known. Methods: We performed a retrospective study of 100% nationwide Medicare inpatient claims from 2017-2019. We categorized admissions for cerebrovascular diseases using principal ICD-10-CM codes as follows: Ischemic Stroke (I63), Subarachnoid Hemorrhage (I60), Intracerebral Hemorrhage other than SAH (I61 and I62); Transient Ischemic Attack (G45); Precranial stenosis without ischemia (I65). The primary outcomes of interest were 30-day mortality and 30-day unplanned readmission (per CMS definition). The exposure of interest was the Area Deprivation Index (ADI), calculated at the census block group level. Adjustment covariates included beneficiary demographics (age, sex, and race), Medicaid-dual eligibility status (as a proxy for individual SES), end-stage renal disease status, discharge year, and the 29 Elixhauser index comorbid conditions. Generalized estimating equation methods were used to estimate logistic regression models. Results: A total of 755,899 patients were included (mean age 79.4 years (SD 8.3), 47.1% male, 18.9% dually eligible for both Medicare and Medicaid) and the median Elixhauser comorbidity index was 17.0 (SD 14.1). After multivariable adjustment, a strong, dose-dependent association was observed between neighborhood deprivation and 30-day mortality for all conditions studied (Figure). No adjusted association was observed between ADI and 30-day unplanned readmission. Conclusions: For the first time, we show that neighborhood socioeconomic deprivation is associated with increased 30-day mortality for patients admitted with common cerebrovascular disorders, potentially in a dose-dependent fashion, after adjusting for age, sex, race, comorbidity burden and individual socioeconomic status.

ПРЯМІ ІНОЗЕМНІ ІНВЕСТИЦІЇ: СТАН ТА ПЕРСПЕКТИВИ РОЗВИТКУ

The article is devoted to an analysis of the state and prospects for attracting foreign direct investment into the Ukrainian economy under martial law. The essence of the concept of “foreign direct investment” explored and its characteristic features are determined. It established that in the legislative acts of Ukraine only the concept of “foreign investments” presented for consideration and their content described. The role of transnational companies at the present stage of attracting foreign investment to Ukraine outlined. A list of transnational companies operating in the domestic investment market provided. An analysis of the dynamics of foreign direct investment in Ukraine carried out based on the principle of direction. The unstable nature of cash flows revealed. It established that a significant part of foreign direct investment in the overall structure made up of those directed to Ukraine. However with the advent of war in 2022, the already not very high investment attractiveness of the Ukrainian economy decreased. This significantly complicated the economic situation in the country and significantly decreased its investment activity. An assessment was made of the scale of capital reinvestment in Ukraine through “round tripping” operations. Their unstable dynamics established and it revealed that the most significant volumes of foreign direct investment were directed to industries and institutions engaged in wholesale and retail trade. The main investor countries for round tripping operations presented, of which a significant part belongs to Cyprus and the Netherlands. Because of the study, factors identified that negatively affected the processes of foreign investment in Ukraine and related to the war and business rules. Recommendations developed that take into account general economic and institutional conditions for activating the foreign investment market in Ukraine. Separate effective mechanisms for their implementation presented. The need to formulate a state investment policy to further attract foreign investment into the Ukrainian economy for recovery after the war noted. This is due to the priority of restoring the domestic industrial and agricultural complex, increasing the country’s export potential by implementing strategies to overcome the economy’s dependence on imported energy resources, etc.

Presentation of a Conceptual Model for Central Bank Supervision over Banks with a Grounded Theory Approach

Objective: The aim of this research was to present a conceptual model for Central Bank supervision over banks with a grounded theory approach. Method: In this study, the grounded theory research approach based on parametric methods is employed. The statistical population of this research comprises experts and professionals in the field of central banking, capable of providing valuable information to the researcher. Sampling in this research has been conducted purposively. For this purpose, the qualitative samples of this research consist of 15 experts and professionals knowledgeable in the field of central banking. Data analysis of this research has been performed following the procedures of Strauss and Corbin (2011) at the Central Bank. Findings: According to the findings of the current research, factors such as government ownership in banks and changes in bank ownership, the impact of general economic conditions, the role of governance and government in supervision, government intervention in decision-making and management of the banking system, and the necessity of consistency and unity of approach in supervision are influential as intervening conditions on the strategies of the supervisory model. Further, the readiness of managers and experts in the banking system to accept the model, creating economic and social conditions meaning stability in the economic situation based on macroeconomic variables, attention to the characteristics of the banking industry as intermediaries in allocating surplus resources of some economic sectors to others in need of financial resources, and defining a suitable position for the supervisory institution in terms of ensuring the independence of the supervisory body, and providing sufficient authority in supervision were contextual conditions. Then, strategies for the success of the supervisory model were presented, including the identification and assessment of major risks in the banking industry such as credit risk, liquidity risk, market risk, and operational risk, in terms of structure and risk management methods, related analyses, and their impact on the future outlook of each bank's activities. Conclusion: Strategic analyses regarding the distribution of granted loans, commitments, investments in affiliated companies, and the status of bank reserves, assets, and collaterals, and the presentation of precautionary plans during economic shocks or potential crises are among the strategies of each bank.

Study of CoVD19 Pandemic, Financial Ratios, and Macroeconomic Impact on Financial Distress in Indonesian Manufacturing Firms Traded on the Indonesian Stock Exchange

The study examined CoV19, financial distress, and other macroeconomic and financial ratios to draw their conclusions. Profitability, liquidity, and leverage were used for financial measures, while inflation and currency exchange rates stood in for macroeconomic indicators. Companies in a financial crisis have lost money for two years, have negative equity, or have a debt-to-asset ratio of more than one. Included in this sample are all 186 manufacturing firms trading on the Indonesia Stock Exchange between 2017 and 2020. From 2017 to 2020, 482 businesses were observed during course time, and the sample was chosen randomly. Logit regression was used to analyze the data. No correlation was found between financial distress and variables like the COVID-19 epidemic, inflation, or currency exchange rates. profitability has a detrimental impact on distress. However, both liquidity and leverage can alleviate distress. Findings are consistent across all segments of the industrial industry. This research shows that financial distress are caused less by general economic conditions and the covid 19 epidemics than by profitability, liquidity, and debt issues.

Model Penyelesaian Kredit Macet Kud Perintis Utama Oleh Pemerintahan Dusun Tuo Limbur

This study aims to analyze internal factors and external factors with the settlement model of bad loans in the cause of bad debts at KUD Perintis Utama, Limbur Lubuk Mengkuang District. The data of this research were obtained from interviews (Primary) directly from the Cooperative Unit of the Main Pioneer Village and several documents. Research findings show that the internal factors that cause bad debts at the Tuo Limbur Village Unit Perintis Utama Cooperative are negligence on the part of creditors in complying with the approval of the granting of credits that have been confirmed, it is too easy to give receivables due to the absence of clear benchmarks on wealth standards, cash flow developments. old debtor users. While the external factor is the decline in the company's economic condition caused by the decline in general economic conditions and the business fields in which they operate, the bad character of the debtor who originally planned to not pay off his receivables. The efforts of the Main Pioneer Village Unit Cooperative in dealing with bad loans include Age cannot be more than 60 years old, there is a recommendation from Rio (Village Head), adjusted to a minimum income of 2 hectares with a maximum income of 100 million and is not allowed to sell with palm oil tokens. condition of economy), payment is adjusted to the income result where 25% of farmers' income is for payment of bad credit, credit restructuring or improvement efforts carried out by KUD in credit activities for debtors who have difficulty fulfilling their obligations.

Model Penyelesaian Kredit Macet Kud Perintis Utama Oleh Pemerintahan Dusun Tuo Limbur

This study aims to analyze internal factors and external factors with the settlement model of bad loans in the cause of bad debts at KUD Perintis Utama, Limbur Lubuk Mengkuang District. The data of this research were obtained from interviews (Primary) directly from the Cooperative Unit of the Main Pioneer Village and several documents. Research findings show that the internal factors that cause bad debts at the Tuo Limbur Village Unit Perintis Utama Cooperative are negligence on the part of creditors in complying with the approval of the granting of credits that have been confirmed, it is too easy to give receivables due to the absence of clear benchmarks on wealth standards, cash flow developments. old debtor users. While the external factor is the decline in the company's economic condition caused by the decline in general economic conditions and the business fields in which they operate, the bad character of the debtor who originally planned to not pay off his receivables. The efforts of the Main Pioneer Village Unit Cooperative in dealing with bad loans include Age cannot be more than 60 years old, there is a recommendation from Rio (Village Head), adjusted to a minimum income of 2 hectares with a maximum income of 100 million and is not allowed to sell with palm oil tokens. condition of economy), payment is adjusted to the income result where 25% of farmers' income is for payment of bad credit, credit restructuring or improvement efforts carried out by KUD in credit activities for debtors who have difficulty fulfilling their obligations.

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Long‐Term Impact of Arthur Andersen's Demise on Partners' Audit Quality*

ABSTRACTAlthough recent evidence suggests that individual audit partners explain a substantial portion of the variation in audit quality proxies, much less is known about what determines an audit partner's quality. Psychology and behavioral economics theories hold that an individual's experiences can have enduring impacts on subsequent behavior. We examine whether auditors' direct exposure to Arthur Andersen's collapse has a long‐term impact on the quality of their audits. Our evidence implies that audit partners who directly experienced Andersen's demise impose stricter monitoring evident in their clients exhibiting a lower propensity for misstatements and small profits, and paying higher audit fees. Importantly, these findings reconcile with research in finance and economics implying that firsthand experiences matter more to subsequent behavior than general economic conditions or secondhand or thirdhand experiences. Collectively, the results shed light on one facet of how partners' audit quality evolves over time. Our findings suggest that major failures associated with the audit firm in which an auditor works can ultimately result in these affected individuals later delivering higher audit quality, which should benefit audit committees in partner selection decisions and audit firms in designing partner assignment policies.