Industry Membership Research Articles

The role of industry membership and monetary policy in generating the size effect

The role of industry membership and monetary policy in generating the size effect

The Impact of Firm Characteristics on Earnings Management: A Study of Firms Listed in India

This study examines the impact of firm characteristics on earnings management (EM) using a sample of listed non-financial firms in India. First, we take a comprehensive perspective to estimate EM focusing on total accruals, current accruals and specific accruals. Second, we examine firm characteristics such as size, leverage, performance, growth opportunities and industry membership that are potentially related to accruals EM. We find that: 1) Large firms and firms with high performance have higher accruals quality. 2) Firms with higher growth opportunities have lower accruals quality. 3) Firms with high leverage use accruals EM to avoid violation of debt covenants. These findings indicate that investors and regulators should take into account both: the abnormal accruals over a period of time and the variability of abnormal accruals to analyse the quality of financial reporting of large firms, firms with high performance and highly levered firms.

AN INVESTIGATION OF A MULTIVARIATE SIMILARITY APPROACH FOR PEER SELECTION IN RELATIVE VALUATION

This study presents a multivariate similarity-based peers approach (MSBP) for the selection of peer firms in relative valuation. We select peer firms based on the collective similarity of ten variables which reflect firms’ expected profitability, risk and growth. We test this approach by comparing its valuation accuracy relative to the industry membership selection method. We measure accuracy based on the absolute percentage pricing error and the squared percentage pricing error. We conclude that selecting comparable firms based on our approach offers very sharp improvements in the accuracy of relative valuation using the price-to-book, enterprise-value-to sales and price-to-earnings ratios in comparison to the industry membership selection method. Also, we introduce the use of a multivariate similarity visualization tool which we believe will be very useful in finance research, in general, and firm valuation research in particular.JEL Classification: G320.

A contrast of the popularity and the interpretation of non‐GAAP earning disclosures in different industries

AbstractThis study examines non‐GAAP disclosures in two selected industries, the consumer nondurable goods industry and the business services industry, to address the question of whether non‐GAAP measures are applied and interpreted uniformly across industries, and more importantly, if the market reacts to non‐GAAP disclosures similarly across different industries. Industry membership potentially has an impact on the usage and interpretation of non‐GAAP disclosures; some industries issue their own policy trying to standardize the use of non‐GAAP measures in their industry. However, industry effects on non‐GAAP disclosures have not been thoroughly studied. This study fills in the gap. Using hand‐collected non‐GAAP measures disclosed in the 8‐K reports from 308 firms in the selected two industries, this study finds that: (1) the use of non‐GAAP measures is more popular than reported in previous studies, and non‐GAAP measures are not limited to performance measures; (2) there is weak evidence of industry preference as to which non‐GAAP measures are more popular in that industry; and (3) the market reacts differently to non‐GAAP disclosures in different industries. Combining the empirical findings, this study documents industry effects and market reactions in the interpretation of non‐GAAP disclosures. Considering that these effects have not been formally academically documented in previous studies, this study carries practical implications for investors and financial analysts.

Financial statement comparability and the usefulness of earnings: Some Canadian evidence

In this study, we investigate whether financial statement comparability enhances the usefulness of earnings, specifically their relevance and faithful representation, as asserted in the International Accounting Standards Board (IASB)’s conceptual framework. Thus far, researchers have documented various capital market benefits of comparability. However, the role of comparability in improving the usefulness of earnings has not yet been directly examined. Our study is motivated to address this question using data from Canadian firms in the post-International Financial Reporting Standards (IFRS) adoption period. The findings are consistent with our prediction and support the IASB’s claim, indicating that comparability enhances the decision-usefulness of earnings. These results are robust to several control factors, including industry membership, firm profitability, firm size, and leverage.

MIT CAACB Risk Assessment Case Study: Assessing Virus Cross-Contamination Risk between Two Simultaneous Processes in an Open Biomanufacturing Facility.

Some members of MIT's Consortium on Adventitious Agent Contamination in Biomanufacturing (CAACB) previously published content on the "Quality Risk Management in the Context of Viral Contamination", which described tools, procedures, and methodologies for assessing and managing the risk of a potential virus contamination in cell culture processes. To address the growing industry interest in moving manufacturing toward open ballrooms with functionally closed systems and to demonstrate how the ideas of risk management can be leveraged to perform a risk assessment, CAACB conducted a case study exercise of these new manufacturing modalities. In the case study exercise, a cross-functional team composed of personnel from many of CAACB's industry membership collaboratively assessed the risks of viral cross-contamination between a human and non-human host cell system in an open manufacturing facility. This open manufacturing facility had no walls to provide architectural separation of two processes occurring simultaneously, specifically a recombinant protein perfusion cell culture process using the human cell line, HEK-293 (Process 1) and a downstream postviral filtration unit operation (Process 2) of a recombinant protein produced in CHO cells. This viral risk assessment focused on cross-contamination of the Process 2 filtration unit operation after the Process 1 perfusion bioreactor was contaminated with a virus that went undetected. The workflow for quality risk management that is recommended by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) was followed, which included identifying and mapping the manufacturing process, defining the risk question, risk evaluation, and risk control. The case study includes a completed Failure Mode and Effects Analysis (FMEA) to provide descriptions of the specific risks and corresponding recommended risk reduction actions.

Getting Involved With IEEE Power Electronics Society: Successful APEC Event for WIE, YP, and You!

<fig orientation="portrait" position="float" xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <graphic orientation="portrait" position="float" xlink:href="butle-3193860.tif"/> </fig> An insurmountable wall of acronyms glued together with complex organizational dynamics can present a complicated scenario for those wanting to become more involved with the IEEE Power Electronics Society (PELS). This wall can feel even more unsurmountable to those new to engaging with the IEEE, especially students, recent graduates, or diverse members. Industry members may struggle to find relevant opportunities, and non-native English speakers may find understanding the jargon too large of an obstacle. PELS’s five-year strategic plan lists and cites engagement of its membership several times, especially with respect to diversity and inclusion and industrial membership <xref ref-type="bibr" rid="ref1" xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">[1]</xref> . Therefore, the leadership of PELS, with the assistance of the PELS Women in Engineering (WIE) Committee, have been investigating best practices for increasing engagement levels and satisfaction.

Changes in industry and corporate effects in the United States, 1978–2019

AbstractResearch SummaryI present evidence of a shift in the relative contributions of industry and corporate effects to heterogeneity in business performance in the United States. In a systematic analysis of sequential timeframes between 1978 and 2019, I find a persistent rise in the explanatory power of corporate effects, which has grown to surpass that of industry effects. Consistent with these trends, I also find that an increasing share of multi‐business firms is operating only high‐performing or only low‐performing businesses, which coincides with refocusing efforts that began in the 1980s. This temporal perspective provides an explanation for why prior studies estimating industry and corporate effects have reached different conclusions.Managerial SummaryI present evidence that how much industry and corporate parentage each matter to business performance among diversified firms in the United States has changed over time in a systematic way. Specifically, my analyses show that while factors at the industry level may have mattered more than those at the corporate level from the late 1970s through most of the 1990s, this has since reversed and corporate parentage likely explained more of business profitability throughout the 2000s and 2010s than industry membership. These changes coincide with a trend that began in the 1980s toward greater focus and relatedness among the operations of diversified firms.

Positive Accounting Theory In Predicting Accounting Choice (An Overview Of Adopted IFRS In PSAK 16 Research On The Audited Financial Statements)

Background of this study is the implementation of IFRS di Indonesia which is implemented since 2008. One of PSAK that have been adopted was PSAK 16. This PSAK was permited entity to choose one of the method of fair value or historical cost to measure the property, plant and equipment. The purpose of this study is to test if The Positive Accounting Theory can predict choices of fair value method or historical cost method . This study observed 52 financial statement of company that listed on BEI at 2009. Dependent variable that used in this study was firm size, institutional stock ownership, leverage, and industrial membership. Result of the study shows that the fourth variable wasn’t have significant result in explaining The PAT predicting accounting choice of those methods of property, plant and equipment measurement

The spillover effects of financial misconduct on the value of cash of peer firms

PurposePrior research has documented a guilt by association phenomenon whereby instances of corporate misconduct generate a negative spillover to innocent firms due to their shared industry membership with the wrongdoing firm. However, research on competitive dynamics predicts a positive spillover whereby some firms benefit from the revelation of financial misconduct by an industry peer. This study lends support to both these effects by highlighting the role product similarity plays in the understanding of investors' perceptions surrounding corporate misconduct.Design/methodology/approachThe study assesses the investors' valuation of cash using Faulkender and Wang's (2006) methodology. The difference-in-differences approach is employed to compare the market valuation of cash held by non-accused firms with higher and lower litigation spillover risk operating in industries with higher vs lower product similarity.FindingsThe findings show that an increase in the volume and severity of misconduct by industry peers is associated with an undeserved loss in the value of cash held by non-accused firms operating in industries with high product similarity. In contrast, firms that sell differentiated products stand to gain from the troubles of the accused peer. Moreover, non-accused firms in industries with high product similarity reduce capital expenditures more following misconduct accusations against peers to preserve cash in anticipation of future lawsuits.Originality/valueThis study contributes to the growing spillover literature that investigates how a crisis caused by one firm affects the valuation of its peers.

The response of majority employee-owned firms during the pandemic compared to other firms

PurposeThe purpose of this study is to understand how majority employee-owned firms responded to the pandemic compared to firms that were not majority employee-owned. The Employee Ownership Foundation partnered with Rutgers University and the SSRS survey firm to survey ESOP and non-ESOP firms about their responses to the COVID-19 pandemic. A key purpose of the survey was to estimate firm-level changes in employment from mid-January to August (current employment figures were adjusted to August 5 using BLS industry employment trends). The survey also looked at other forms of adjustment and responses to the pandemic as reviewed below. The focus in this study is on the differences between firms that are majority owned by ESOPs and those that are not.Design/methodology/approachThe survey included 247 executives from ESOP Association member companies and 500 executives from an SSRS business panel constructed to be representative of US companies with 50 or more employees. The survey started on August 5 and ended on September 23, 2020.Findings(1) Majority ESOP firms had employment declines from January to August that were on average only one-fourth as large as for other firms. The difference is maintained when controlling for industry membership. (2) Majority ESOP firms were more likely to be declared “essential,” but the lower employment cutbacks among majority ESOP firms remain among essential and non-essential businesses. As essential businesses, majority ESOP firms were more likely receive Paycheck Protection Program or other government pandemic assistance, but both assistance recipients and non-recipients had lower employment cutbacks among majority ESOP firms. (3) The extent of employment cutbacks was higher for non-managers than for managers, but the manager/non-manager gap was higher among other firms than among majority ESOP firms.Research limitations/implicationsThis study supports empirical findings done previously.Practical implicationsThis study suggests to non-EO firms what they can do.Social implicationsThis study suggests strengths of EO firms.Originality/valueA very original and one-of-a-kind dataset.

Public versus Private: New Insights into the Private Company Discount

Abstract We examine whether private companies are valued with a discount compared to publicly traded companies. The analysis is based on a comparison of private company transactions with those of public companies. Whereas prior studies build pairs based on industry membership, we match private companies with public counterparts that are comparable in value relevant firm characteristics, i.e. profitability, risk, and growth, to calculate the percentage difference in valuation multiples. We find that private companies are valued on average with a discount on the EBITDA-multiple of 13% compared to their public counterparts. Private companies sell at lower discounts, if the acquirer firm is publicly listed. As size is associated with lower risk, we show that larger private companies sell at lower discounts.

Does the sector matter? An analysis of high-growth firms and industry growth rates

PurposeThis paper aims to analyze the effect of industry growth rates on the characteristics of high-growth firms (HGFs) that are active in a particular industry. By making a distinction between HGFs active in stable and declining industries and HGFs active in growing and high-growing industries, it is analyzed if the main dimensions of firm performance are significantly different for HGFs active in one of these different industry types. Gaining more insight into this industry aspect of high firm growth is important as governmental measures towards HGFs may be more effective if they have a specific sectoral focus.Design/methodology/approachA subset of 740 Belgian HGFs was analyzed. Data were gathered from the Belfirst database. HGFs were classified within their corresponding industry type: a declining industry (negative growth), a stable industry (0 −5% growth), a growing industry (5 −10% growth) and a high-growth industry (&gt;10% growth). Four dimensions of structural firm performance that are expected to correlate with high growth were taken into consideration: productivity (value added per FTE), profitability (ROA), innovativeness (intangible assets) and financial health (solvency and liquidity).Tukey's range tests in conjunction with post-hoc analysis of variance (ANOVA) tests were carried out to test for significant differences in all the mentioned variables for the HGFs in the four different industry types.FindingsResults show that HGFs active in a stable industry are not significantly more profitable or innovative than HGFs active in a growth industry. However, significant differences could be encountered when it comes to the other two dimensions of structural firm performance: productivity and financial health. It is shown that HGFs active in declining and stable industries are significantly more productive than HGFs active in growth industries and high-growth industries. Also, HGFs active in declining and stable industries have significantly higher liquidity ratios than firms active in growth industries, pointing towards a better financial health for HGFs in nongrowing industries.Research limitations/implicationsThe results confirm the conceptual logic that the differences between resource-based view (RBV) and industrial organization (IO) propositions will have an impact on the drivers of firm performance and high business growth. Every future study that focuses on the growth determinants of HGFs should be aware that considering the subset of HGFs as one homogenous group may be suboptimal. It is likely that the growth determinants of both HGF types will indeed be fundamentally different.Originality/valueUntil now, all studies on HGFs have considered the subset of HGFs as a whole. This paper tried to disentangle the subset based on the growth rate of the industry in which HGFs are mainly active. In this proposition, a reason for the lack of knowledge about characteristics of HGFs may – at least partially – be found in the fact that industry membership plays an important role in determining the characteristics of a high-growth firm. Future studies focusing on high-growth determinants may benefit from systematically taking the industry growth rates into account, with the knowledge that the propositions of two different theories – IO and RBV – may be the fundamental drivers of a firm's high-growth rates.

Identification and assessment of the unionization factors of the US electrical construction trade

PurposeConstruction trade unions have been a vital force in improving the job standards and wellbeing of trade workers. However, the union membership in the construction industry has dropped by half between 1983 and 2017. The objective of this study is to identify and assess the controlling factors of construction electrical trade unionization in the United States.Design/methodology/approachThe study involved four main steps. Literature review and industry townhall meetings were conducted to identify the electrical trade unionization factors. A new unionization trend metric was developed using available union market share data to quantify the growth and decline of local unions. Mixed-mode surveying was used to collect questionnaire and interview data on the unionization factors in different local units of the electrical trade union. Finally, the survey data from the questionnaire and interviews were merged and their correlation with the unionization trend data was assessed.FindingsThe study found that the unionization of this specialty trade is dependent on increasing the crew ratio, expanding the non-apprenticeship union membership program, organizing larger contractors, and continuing the union focus on public and heavy industrial projects.Originality/valueThe study contributes to the construction management body of knowledge by providing a data-driven industry-wide assessment of the factors that affect electrical construction unionization. The study advances the understanding of construction trade unions by narrowing the theory-practice knowledge gap, illustrating the use of macro quantitative empirical research methods, and developing a new unionization trend metric.

Challenging quota market efficiencies: A case-study of Scotland (United Kingdom)

Exploring fisheries access through the lens of market-based policies, this study investigates complexities surrounding the temporary accumulation or dispensation of quota units, which define rights to land catch in UK commercial sea-fishing. The study examines quota transaction behaviours from Scotland’s ten industry membership groups, known as Producer Organisations (POs), by analysing their annual ‘Production and Marketing Plans’. Integrating data from the government Fixed-Quota Allocation (FQA) database, and official ‘quota-use’ records, the analysis pieces together previously ‘unknown knowledge’ surrounding quota exchanges, in the UK offshore pelagic and whitefish sectors. Leasing and barter transactions are pervasive among those with access to quota, although a core-group of POs dominate pelagic opportunity. These dynamics suggest consolidation to a point of inefficiency, given the dependence of marginal POs in Scotland's rural areas upon marine fisheries capture and processing. Inclusive participatory scenario-modelling techniques may now offer equitable options, in a new era of fisheries management.

The Firm-Level Effects of Monetary Policy: Implications for Firm Performance

We study the dynamic transmission of monetary policy shocks into corporate profitability. We find an initial negative association between the shocks and corporate revenues and expenses. The revenue response is consistent with a consumer substitution effect, while the expense response is consistent with a firm cost of capital effect. The expense effect exceeds the revenue effect, yielding a positive relation between the shocks and profitability. Additional tests show that the effect concentrates in cash rather than accrual revenues and expenses and that it varies predictably with firms’ industry membership and the accounting treatment of firms’ investment outlays.

Materiality Thresholds: Empirical Evidence from Change in Accounting Estimate Disclosures

SYNOPSIS This paper provides empirical evidence on the materiality thresholds adopted in “change in accounting estimate” (CAE) disclosures. We also investigate the characteristics of the disclosing firms and their auditors, as well as the characteristics of the CAEs. We analyze 4,335 CAE disclosures from 2006 to 2016 and provide the first descriptive evidence of the actual materiality thresholds used for CAE disclosures in practice. Our main finding is that quantitative materiality thresholds for CAE disclosures are significantly lower than conventional materiality thresholds, such as 5 percent of pretax income, and that firms may not only apply quantitative materiality thresholds more conservatively, but that other qualitative considerations play an important role in determining CAE materiality. Our results also show that there exists considerable variation in CAE disclosure across firm size, industry membership, auditor, financial statement account effected, and the direction of the effect on income. Data Availability: The data used in this study are publicly available from the sources listed in the paper.

Closing the Gap in Human Factors Everybody Has a Role To Play

Human factors is a broad technical discipline focused on enhancing people’s performance in complex organizations where people interact with equipment and processes over time and across levels of hierarchy. Despite this relatively clear definition, human factors is still poorly understand and doesn’t yet yield the full potential that the practical insights and actions can produce. Despite a substantial effort on the part of many industry bodies, including the UK Energy Institute (EI) and the International Oil and Gas Producers Association (IOGP), to raise awareness of human-factors principles, with some exceptions in a few organizations, progress on implementation has been slow. Momentum is now finally building with the formation of the Human Performance Oil and Gas Group (HPOG), which is designed to be an industry membership organization modeled on the highly successful Dropped Objects Prevention Safety initiative, DROPS. Its purpose is to embed human factors concepts into practical organizational processes and operational procedures. There is a common misconception that human-factors skills are solely for frontline employees and once suitably trained, their behavior will change and performance will improve. This approach rests on the belief that the behavior of frontline operators is the source of all problems, which is wide of the mark. Human factors is a challenge for the organization as a whole and extends beyond simply understanding how the human brain works or silver-bullet solutions such as training crew resource-management skills.

GREEN-BASED GOVERNANCE AND EXTERNAL PRESSURE: DO THEY INFLUENCE ENVIRONMENTAL DISCLOSURE? EMPIRICAL EVIDENCE FROM ISO 14001 COMPANIES IN MALAYSIA

Purpose: The primary objective of this study is to investigate the synergistic influence of green-based governance and external pressure on the quality of environmental disclosure among ISO14001 certified companies that are publicly-listed in Malaysia.&#x0D; Methodology: Content analyses have been conducted on the 2014 annual and sustainability reports of ninety (90) ISO14001 certified companies.&#x0D; Results: The results of the multiple regression analyses reveal that green-based governance in the form of an effective environmental management system (EMS) and external pressure from industry membership influence the quality of environmental disclosure. The findings of the study signify that a proper EMS system needs to be implemented in order to reduce agency conflicts arising from information asymmetry.&#x0D; Implications: Companies need to have an effective environmental management system such as ISO14001 companies are motivated to provide quality environmental information to reduce information asymmetry and agency conflicts between managers and stakeholders.

Drivers of combined assurance in a sustainable development context: Evidence from integrated reports

AbstractExternal assurance engagements performed by auditors and consultants to test sections of organisations' sustainability and integrated reports have become commonplace and are examined in detail by the prior research. Less often considered is how different types of internal and external sources of assurance form part of a combined assurance model that organisations rely on to ensure the integrity of information used for internal decision making and reporting to stakeholders. As a result, this paper offers an important contribution to the academic literature by providing one of the first reviews to deal specifically with the operation of combined assurance. The research considers if firm size and profitability, industry membership and select governance features are associated with the use of more sophisticated combined assurance models for ensuring relevant and reliable integrated reporting. Multiple regression, complemented by supplementary analysis, reveals that larger firms that are more profitable and members of environmentally and socially sensitive industries are not necessarily using extensive combined assurance models. These organisations rely on robust assurance methodologies, but the coverage of their combined assurance models is restricted. Similarly, board experience is substituting for the use of complex assurance methodologies. Board size and independence are only associated with a stronger commitment to implementing codes of best practice dealing with combined assurance but not with the coverage of the assurance models or the assurance methodologies being applied. The results may be indicative of the fact that internal controls and systems required to support integrated thinking and reporting are still in a developmental stage, making it difficult for them to be the subject of any formal verification by internal or external assurance providers.