Knowledge that Transforms

The increasing dominance of Asian manufacturing firms in the global economy has raised an important issue: whether these firms’ superior manufacturing performance is caused by their management control systems, the national culture of their employees, or the interaction of these two factors. This experimental study provides a direct test of the effects of national culture and management control system on manufacturing performance. The dimension of national culture studied was individualism ( vs collectivism ) because this work-related attribute has been noted as a major difference between Asian and Western cultures. In turn, the focus on cultural individualism motivated a study of two aspects of management controls: work flow interdependence and pay interdependence. The results are consistent with cultural individualism and management controls having independent, but not interactive, effects on manufacturing performance. The potential implications of these findings and suggestions for future research are discussed.

Through a detailed critique of Johnson & Kaplan's Relevance Lost, (Johnson, H.T. & Kaplan, R.S., Relevance Lost: The Rise and Fall of Management Accounting (Boston, MA: Harvard Business School Press, 1987)), based upon labour histories of control within North American firms, this article identifies major deficiencies in conventional historical studies of cost and management accounting and offers possibilities for their resolution. After noting the limitations of transaction cost theory for the theorisation of organisations and their history, the paper argues that accounting controls were not a consequence of economic or technological imperatives, but rather were rooted in struggles as firms attempted to control labour processes in various epochs of capitalistic development. Cost accounting developments are related to the destruction of internal subcontructing and craft control of production in early factories, the advent of “Scientific” Management and homogenised labour and, post-1930, with an accord between primary sectors of labour and corporations, which led to an increased emphasis on monopoly pricing, smoothing production and hence employment patterns, and a shift of economic pressures to secondary labour and producer markets. The paper concludes by arguing that, in the context of today's globalisation of capital, control associated with the labour and capital accord are being abandoned as corporations experiments with new methods and ideologies of control which are reflected in current fashions in accounting research.

In this article I develop a model that accounts for interdependence between trading costs in various asset markets arising from the optimizing behavior of liquidity traders. The model suggests that noise trading is an important determinant of the liquidity of asset markets and provides a positive theory for diversified asset holding by risk-neutral liquidity traders. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

An asymmetric information model of the bid–ask spread is developed for a foreign exchange market subject to occasional government interventions. Traditional tests of the unbiasedness of the forward rate as a predictor of the future spot rate are shown to be inconsistent when the rates are measured as the average of their respective bid and ask quotes. Larger bid–ask spreads on Fridays are documented. Reliable evidence of asymmetric bid–ask spreads for all days of the week, albeit more pronounced on Fridays, are presented. The null hypothesis that the forward rate is an unbiased predictor of the future spot rate continues to be rejected. The regression slope coefficients increase toward unity, however, indicating a less variable risk premium.

In this article, we consider the possibility that some liquidity traders preannounce the size of their orders, a practice that has come to be known as “sunshine trading”. Two possible effects preannouncement might have on the equilibrium are examined. First, since it identifies certain trades as informationless, preannouncement changes the nature of any informational asymmetries in the market. Second, preannouncement can coordinate the supply and demand of liquidity in the market. We show that preannouncement typically reduces the trading costs of those who preannounce, but its effects on the trading costs and welfare of other traders are ambiguous. We also examine the implications of preannouncement for the distribution of prices and the amount of information that prices reveal.

ABSTRACT This paper investigates the efficiency of the market for stock index futures and the profitability of index arbitrage for The Chicago Board of Trade's Major Market Index contracts. The spot value of the index is computed with transactions prices for the component shares of the index obtained from the Fitch database. The tests account for transaction costs, execution lags, and the uptick rule for short sales of stocks. Results indicate that the size and frequency of boundary violations are substantially smaller than those reported by earlier studies and have declined sharply with time.

ABSTRACT This paper examines the risks and returns of long‐term low‐grade bonds for the period 1977–1989. We find: (1) low‐grade bonds realized higher returns than higher‐grade bonds and lower returns than common stocks, and low‐grade bonds exhibited less volatility than higher‐grade bonds due to their call features and high coupons; (2) there is no relation between the age of low‐grade bonds and their realized returns; cyclical factors explain much of the observed relation between default rates and bond age; and (3) low‐grade bonds behave like both bonds and stocks. Despite this complexity there is no evidence that low‐grade bonds are systematically over‐ or under‐priced.

This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax-based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.

ABSTRACT After the stock market crash of October 19, 1987, interest in nonlinear dynamics, especially deterministic chaotic dynamics, has increased in both the financial press and the academic literature. This has come about because the frequency of large moves in stock markets is greater than would be expected under a normal distribution. There are a number of possible explanations. A popular one is that the stock market is governed by chaotic dynamics. What exactly is chaos and how is it related to nonlinear dynamics? How does one detect chaos? Is there chaos in financial markets? Are there other explanations of the movements of financial prices other than chaos? The purpose of this paper is to explore these issues.

ABSTRACT This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote-based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications.