Traditional planning for working capital needs is typically conducted with a relatively short time horizon. In this process, management attempts to optimize the return on existing fixed assets. The period for capital investment planning is much longer, reflecting the irreversibility of these decisions. Current research in the two areas tends to dichotomize these decision processes. The implications seem to be that working capital policies only have impact in the short run. However, it is clear that cash flows for potential capital expenditures are based on assumptions relative to expected future demand and production to meet this demand—assumptions that are necessarily tied to working capital commitments in the long run. The overall planning for credit, inventory, and liquidity should, therefore, be carried out before, or simultaneously with, the capital investment decision. It is a planning requirement that becomes an integral part of the total asset planning system. The vast majority of existing working capital models or long-term capital planning models do not allow for the explicit existence of and the simultaneous interrelationships between these two important subsystems.

The current assets and current liabilities of a firm are the stock reflections of closely interrelated operational and financial cash flows. The net effect of these combined flows must be recognized in searching for the optimal credit, inventory, or short-term borrowing policies. Yet, the vast majority of models for short-term investment and borrowing decisions do not allow for the interrelationships of this system.

Donald L. Tuttle, William L. Wilbur, A Multivariate Time-Series Investigation of Annual Returns on Highest Grade Corporate Bonds, The Journal of Financial and Quantitative Analysis, Vol. 6, No. 2 (Mar., 1971), pp. 707-721

I test whether retirement plan providers extend preferential corporate loan terms to firms that have an overlapping retirement plan relationship. I find that loans from affiliated retirement plan providers (i.e., relationship loans) have lower spreads than non-relationship loans. Relationship loans are also larger and exhibit longer maturities. These terms benefit shareholders without sacrificing the quality of retirement plans available to employees. The favorable terms within this banking relationship are most likely explained by the ability of retirement plan relationships to alleviate information asymmetries in the corporate loan market rather than a quid pro quo arrangement.

This paper tests two theories of corporate investment myopia which predict a distortion in investment policy with respect to the standard net present value rule. The theories are confronted with the empirical evidence, allowing the theories to compete to explain investment behavior. Research and development expense is used to proxy for long-term investment in a pooled, cross-sectional time-series regression. I find that research and development expense is decreasing in the age of the Chief Executive Officer. Results are consistent with the hypothesis that agency costs are lower when the firm invests myopically, rather than follow a standard net present value rule.

Auditing, Decision making, Frequency judgements, Internal control evaluations

Inventory accounting method, LIFO, Event dates, Announcement returns

This paper provides a framework and some empirical evidence to evaluate the seriousness of problems in inference that arise in stockreturn-based studies when the data are cross-sectionally dependent. The study is motivated on the grounds that statistical procedures designed to address such problems are often infeasible, and even when they can be implemented they sometimes introduce other more serious difficulties. Thus, researchers have frequently adopted an approach that ignores the cross-sectional dependence (e.g., ordinary least squares [OLS]). The objective of this paper is to help identify the contexts in which ignoring the dependence would lead to serious misstatement of significance levels. Cross-sectional dependence in stock returns data is likely to exist when at least some of the returns are sampled from common time periods. This would be the case in all studies of the reaction of stock prices to a

Auditing, Internal auditing, Internal auditor competence, Internal auditor work performance