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Launched in Summer 2012, the European Central Bank's (ECB) Outright Monetary Transactions (OMT) program indirectly recapitalized European banks through its positive impact on periphery sovereign bonds. However, the stability reestablished in the banking sector did not fully translate into economic growth. We document zombie lending by banks that remained weakly capitalized even post-OMT. In turn, firms receiving loans used these funds not to undertake real economic activity, such as employment and investment, but to build cash reserves. Creditworthy firms in industries with a high zombie firm prevalence significantly suffered from this credit misallocation, which further slowed the economic recovery. Received March 21, 2018; editorial decision November 13, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This study aims to comprehensively analyze how to develop human resource management (HRM) practices that create organizational resilience and investigate factors influencing it. This study was done in a qualitativedescriptive manner. Key informants participated in this study – selected based on positions at work and their length of work relevant to the research problems – included HR Manager, HR Coordinator, and Training Manager Assistant of Hotel Ciputra Semarang. The data was collected through in-depth interviews. To examine the data credibility, a triangulation process to the key informants was done. The data was analyzed using a technique proposed by Miles and Hubberman consisting of data reduction, data presentation and conclusion drawing. This study finds that there are 4 HRM practices that can support the organizational resilience, including selective and measurable recruitment, employee compensation, employee training and development, and employee engagement. Further, there are also 4 factors influencing the organizational resilience, namely healthy finance (reserve fund), good employee performance, leadership, and organizational experience. [ABSTRACT FROM AUTHOR]

Although a large body of accounting research has investigated the value relevance of operating cash flow, there has been scant research investigating whether a buildup of cash flow, or lack thereof, affects firm value. This is despite that fact that financial statement analysis requires a determination of the cash holdings necessary for liquidity purposes and then decision making on how a firm will allocate the remaining cash between investment opportunities, dividend distribution, or the repurchase of shares. This paper investigates whether future performance suffers when a firm deviates from an estimated “target” cash level. If a firm’s estimated target cash level provides a reasonable proxy for a firm’s optimal cash level, then future performance should be decreasing in both positive and negative deviations. We begin by modifying prior cash models to produce an improved estimate of target cash. We then show that one-year-ahead return on net operating assets and one-year-ahead abnormal stock returns are decreasing in the level of deviation from the estimated target, with returns results being most pronounced for firms with insufficient cash. Finally, we show that the anomalous results of Penman, Richardson, and Tuna 2007, which suggest that investors misprice firm leverage, pertain only to firms with insufficient cash, where interest payments may be most constraining. Our findings demonstrate the importance of cash level for a firm’s future performance, aid in the understanding of the relationship between cash levels and leverage, and provide support for the static trade-off model of corporate financing. [ABSTRACT FROM AUTHOR]

The article presents abstracts of articles in the issue including "Implications of Insufficient and Excess Cash for Future Performance" by Derek K. Oler and Marc P. Picconi, "Board Monitoring and Endogenous Information Asymmetry" by Jie Joyce Tian, and "Equity Incentives and Internal Control Weaknesses" by Steven Balsam, Wei Jiang, and Bo Lu.

This paper explores the role of replication and adaptation in knowledge transfer relationships. I develop a model of knowledge transfer in which firms replicate because knowledge is ambiguous and adapt because knowledge depends on context. In the model, firms replicate more when knowledge is discrete and adapt more when they understand the interactions between different areas of knowledge. Replication and adaptation lead to successful knowledge transfer, which leads to improved performance of the receiving unit. The predictions are tested using a survey of cross-border knowledge transfer relationships among firms in the telecommunications industry. The results are largely consistent with the model and point to potential areas for future research, such as the drivers of replication, the depreciation rate of knowledge, and the role of understanding in organizational knowledge. Copyright © 2007 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Conservative financial policies are often criticized as serving the interests of managers rather than the interests of stockholders. We test this argument by examining the operating performance and other characteristics of firms that for a five-year period held more than one-fourth of their assets in cash and cash equivalents. Following the five-year period, operating performance of high cash firms is comparable to or greater than the performance of firms matched by size and industry or by a measure of proclivity to hold substantial cash. In addition, proxies for managerial incentive problems, such as ownership and board characteristics, are not unusual and do not explain differences in operating performance among high cash firms. We find that high cash holdings are accompanied by greater investment, particularly R&D expenditures, and by greater growth in assets. For firms that persistently hold large cash reserves, we conclude that such policies support investment without hindering corporate performance. [ABSTRACT FROM AUTHOR]

We analyze the ability of earnings and non-earnings performance metrics to explain the variability in annual stock returns for industries where we identify, ex ante, an allegedly preferred (for valuation purposes) summary performance metric. We identify three industries where earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash from operations (CFO) are preferred, and three industries where specific non-GAAP performance metrics are preferred. As a benchmark, we also examine the ability of EBITDA and CFO to explain returns for seven industries for which earnings is the preferred metric. Results for the benchmark earnings industries show that earnings dominates EBITDA and CFO in explaining returns. All other results are inconsistent with the view that perceptions of preferred metrics are reflected in actual aggregate investment behaviors. [ABSTRACT FROM AUTHOR]

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We estimate the internal rates of return earned by nonfinancial firms on (i) the initial market values of their securities and (ii) the cost of their investments. The return on value is an estimate of the overall corporate cost of capital. The estimate of the real cost of capital for 1950-96 is 5.95 percent. The real return on cost is larger, 7.38 percent, so on average corporate investment seems to be profitable. A by-product of calculating these returns is information about the history of corporate earnings, investment, and financing decisions that is perhaps more interesting than the returns. [ABSTRACT FROM AUTHOR]

This article explores the relationship between new housing and the existing housing stock in terms of an urban market value hierarchy, considering the importance of the concept of depreciation, as influenced by three factors: the age, location and quality of the building. Based on a sample from the Almond area of Madrid City Centre, the research considers many variables and applies an adapted appraisal approach termed differential depreciation to analyse the evidence of real estate values and the influence of spatial and temporal location factors. The study of the role of depreciation in the value of housing used in this research provides researchers with objective criteria on the functioning of the urban land market. This shows that the relationship between depreciation and the need for renovation is not linear, but instead follows identifiable patterns linked to the era of construction rather than solely the age of the building. [ABSTRACT FROM AUTHOR]

Abstract This paper investigates whether determinants and effects of sovereign wealth funds (SWFs) investment vary across types of funds. To address this issue, we classify SWFs based on their scope and the origin of wealth. We find that saving and reserve funds and non-commodity funds pick better-performing firms. Furthermore, effects vary among SWF categories. In fact, saving and reserve funds assume a passive role in managing investments, unlike multi-objective and development funds which have detrimental effects on the target companies. As a whole, these findings confirm that heterogeneity of SWFs in terms of how they target firms and activism matters. Highlights • Findings reveal that heterogeneity of SWFs in terms of how they target firms and their level of activism matters. • SWFs tends to invest in risky firms, only saving and reserve funds and non-commodity funds select better-performing firms. • The origin of wealth does not highlight marked differences on the manner in which SWFs manage investee firms. • Multi-objective and development funds take an active role but with detrimental effects for the target companies. • Shareholder activism is not common among saving and reserve SWFs. [ABSTRACT FROM AUTHOR]

This article examines the impact of regional financial arrangements (RFAs) on the global liquidity regime. It argues that the design of RFAs could potentially alter the global regime, whether by strengthening it and making it more coherent or by decentring the International Monetary Fund (IMF) and destabilizing it. To determine possible outcomes, this analysis deploys a 'middle‐up' approach that focuses on the institutional design of these RFAs. It first draws on the rational design of institutions framework to identify the internal characteristics of RFAs that are most relevant to their capabilities and capacities. It then applies these insights to the interactions of RFAs with the IMF, building on Aggarwal's (1998) concept of 'nested' versus 'parallel' institutions, to create an analytical lens through which to assess the nature and sustainability of nested linkages. Through an analysis of the Chiang Mai Initiative Multilateralization (CMIM) and the Latin American Reserve Fund (FLAR), the article demonstrates the usefulness of this lens. It concludes by considering three circumstances in which fault lines created by these RFAs' institutional design could be activated, permitting an institution to 'leave the nest', including changing intentions of principals, creation of parallel capabilities and facilities, and failure of the global regime to address regional needs in a crisis. [ABSTRACT FROM AUTHOR]

In this paper, the author has attempted to explain the slowdown of the growth rate of U.S. wages in different sectors. Some economists have suggested international competition or the exchange rate is responsible. However, evidence is inconclusive and the authors investigate other empirical issues. They emphasize the difference between wage stagnation caused by a shift in the wage norm and that caused by foreign competition. They also build upon previous work by Rudiger Dornbusch and Stanley Fisher by excluding the fixed exchange rate.

The article presents comments from John Makin's article about the general stabilization of assets such as gold, dollars, and special drawing rights. The author comments on the Walras Law of the markets, the dynamic analysis, and the power of the analytical framework advanced by Makin. The author explains Makin's research methodology pertaining to problems with dynamic stability. Also discussed is how Makin's dynamic analysis is restrictive because the gold market is stuck in equilibrium and the money market in the U.S. is not a component of this model.

This paper argues that current discount window policy, coupled with non-borrowed reserve targeting of the Federal Reserve, makes the quantity of high-powered money endogenous. Examination of the advisability of this procedure in a stochastic environment is conducted using a general equilibrium financial model. It is concluded that the current policy reduces the destabilizing effects of shifts between various depository financial assets, but increases the effect of other asset portfolio shifts and aggregate supply disturbances. These results are consistent with the work of Poole inasmuch as the current debate over discount policy is a repackaging of the debate over interest rate or aggregates control for monetary policy. [ABSTRACT FROM AUTHOR]

This article examines equipment replacement under the asset depreciation range system and under the accelerated cost recovery system. The main features of both are reviewed and a small and large business replacement scenario is simulated under each. Results indicate that the new approach does not yield faster replacement in all cases. [ABSTRACT FROM AUTHOR]

This study examines the effect of the particular set of accounting methods used by a firm (its information system) on the ex ante information content of its earnings announcements. The results suggest that reported income figures produced from a system consisting of inventory, depreciation, and tax credit accounting methods which are consistent in their effects on net income are more informative than when those effects are inconsistent. Informativeness of an earnings announcement is estimated by the expected increased variability in share prices at the earnings announcement date, using the option-pricing methodology introduced by Patell and Wolfson [1979; 1981]. [ABSTRACT FROM AUTHOR]

The article derives certain analytical relationships for a class of depreciation methods where the solutions are obtained using linear difference equations. The author considers conventional depreciation methods and proposes a new class of depreciation methods that are consistent with a broader group of implied cash flows. Utilizing Thomas R. Dyckman's gross cash flow analysis, the author presents three alternative methods for reporting depreciation, the accelerated, straight-line with tax deferral, and straight-line with no tax deferral methods.

In the world of practical finance, the management of working capital— cash, marketable securities, receivables, and inventories is, perhaps, the most pressing and most frequently encountered problem for financial managers. Yet, in the realm of theoretical finance, and even at the level of "textbook" finance, working capital is given minimal attention. The reason this important field is treated as an unwanted stepchild is that, with the exception of a few papers such as Copeland and Khoury's [8], it has never been incorporated into the mainstream of the theory of finance that emphasizes the maximization of the value of the firm. For example, the existing cash balance models (cf. [2], [6], [11], [12], [13], [9], and [18]) are derived with the objective of minimizing the expected cost of managing the cash account. Miller and Orr [18] are, perhaps, the best known, with the stated objective to determine the upper limit (h) and restoration point (z) for the cash balance so as "to minimize the long run average cost of managing the cash balance." However, this objective has not been shown to be consistent with value maximization. In spite of the elegant mathematical structure of inventory theory on which these cash balance models are based, such models are ad hoc from the viewpoint of the financial theory of valuation that weighs the trade-off between risk and return. The inventory theoretic models do not consider such trade-offs and focus only on the return aspect—that is, expected cost—taking no account of the effect of the risk on the value of the firm. Consequently, the cash management policies derived with the inventory framework may be suboptimal with respect to value maximization. [ABSTRACT FROM AUTHOR]

In this article the author reviews the research paper of William L. Beedles entitled "Evaluating Negative Benefits," in the March 1978 issue. Beedles discusses the valuation process for cash outflows and the valuation process for cash inflows. The author states that Beedles' results are not consistent with the assumption of perfect capital markets. The author goes on to discuss cash in and outflows representation between different firms. The article also discusses topics such as benefits, risk with cashflow streams, and why Beedles' argument is not consistent with the Value Additivity Principle.

The article addresses the use of sinking fund provisions in preferred stock issues in the U.S. The article explains the growing use of these provisions, which usually take the form of a contract between the company and stockholders, where the company allocates earnings towards the purchase of outstanding preferred stock, removing it from the capital structure. The article discusses the frequency of sinking fund use, the nature of sinking fund provisions, and the sinking fund in practice. The author considers the use if sinking funds from the perspective of the investor and the corporation.

The article discusses a model that could predict purchase-pooling choice and presents empirical research showing that the model is valid. The model works by considering the preferences of business professionals for one financial reporting method over others during a corporate merger. When stocks are used for the merger as payment, there is a choice of purchasing or pooling the stock. The article concludes that income smoothing can likely not be used to explain what impact accounting choices are likely to have in the long-term.

This article focuses on the uses of sequential models in probabilistic depreciation for the treatment of service life of an asset. The authors explain how depreciation rates for various types of assets are calculated. The study found that for single asset depreciation, when conventional calculation methods are used, the asset is underdepreciated. In cases of group asset depreciation, undepreciation also occurs. The authors find that when estimating the value of an asset over its lifetime, changes that may occur over time must be accounted for.

The article presents comments of the author on the paper "The Return to Straight-Line Depreciation: An Analysis of a Change in Accounting Method," by T. Ross Archibald that was published in a 1967 issue of the periodical "Journal of Accounting Research." In his paper Archibald discusses the decisions of some firms to switch back from accelerated to straight-line depreciation. The author states that Archibald's research divides neatly into three parts timing of the switch-backs, relationships of the switch-back decisions and the decisions about accounting for the investment credit, and the relationships of the switchback decision and disclosure.

The article presents comments of the author on the paper "A New Dimension to Breakeven Analysis," by Rene P. Manes that was published in Spring 1966 issue of the periodical "Journal of Accounting Research." The author states that Manes attempted to integrate breakeven analysis with the techniques used in capital budgeting. He explains that Manes' example shows how to calculate the total net present value and the equivalent annual profit of a machine at various levels of output. He also states that Manes' example illustrates how each of the following may be incorporated into the analysis changes in the discount factor, changes in the method used to calculate depreciation for tax purposes, a steady rate of change in sales volume, and a steady rate of change in prices.

The article investigates the effects of cyclical asset expenditures on deferral of income taxes associated with the use of accelerated depreciation in the United States. The article reports an extension of previous research into the effects of cyclical asset expenditures on deferral of income taxes associated with the use of accelerated depreciation. The author explains that the extension consists of consideration of nonlinear, as well as linear trends in asset expenditures over time, development of an improved simulation model, and use of data from Price Waterhouse and Co. clients consisting of major manufacturing companies, all members of the Fortune 500 list.

The article focuses on the financial reporting of depreciation and income taxes. The author states that the financial reporting of income taxes becomes more complicated whenever depreciation is recognized faster or slower for tax purposes than for financial reporting purposes. He explains that with the flow-through method of tax accounting the financial reporting of income taxes is not adjusted for the tax effects of depreciation timing differences. The article reports that the tax expense in the income statement equals the tax assessable for the year.

The article examines the relationship between double-declining-balance depreciation and sum-of-the-years-digits depreciation. The author discusses the determination of infinity values and the inclusion of the taxable payer. The author states that the depreciation methods can be classified as either biased or neutral with respect to asset lives. The article states that a method is biased if it permits more rapid depreciation for assets with some useful lives than for others, and neutral if it does not. The article also discusses the consideration of the accumulated depreciation. [ABSTRACT FROM AUTHOR]

This article discusses the correlation between accelerated depreciation and deferred tax allocation. The author states that firms which elect to use accelerated depreciation for tax purposes while using straight-line for reporting purposes have only one approved method for recording the difference between book tax expense and the tax liability. He explains that this method relies on a deferred credit account in which the difference between the tax expense and the actual tax paid is recorded. The article says that the reported net income resulting from this procedure is the same as it would have been if straight-line depreciation were taken for tax purposes.

This article presents information on depreciation models. Objective values of assets based upon external transactions are only available at the moment of acquisition and at the moment of disposal. When these two events occur a great deal of time apart, a value for the asset at the end of each intervening period must be established in order to determine periodic income. Two approaches to the solution of this depreciation problem, the accounting approach and the economic approach, are discussed. The three main problems encountered in the valuation of assets are the forecasting of the asset's future services, the valuation of these services, and the determination of an appropriate rate of discount.

This article presents information on the cash-flow approach to valuation and depreciation of productive assets. The author discusses various methods that are used to value firms and measure cash flows. The author presents a method of valuation and depreciation that proves the independence of the value of a firm's physical assets and the firm's cash flow. The model shows the depreciation is a function of the asset's age, expected economic life, replacement costs and the firm's cost of capital. The model also shows that depreciation is not related to the overall cash flow the firm will earn.

The article offers information on the Ecological Society of America (ESA) Council meeting that was held on August 6, 2017 in Portland, Oregon. It states that president David Lodge, introduced the historical goals of ESA and welcomed the members of the Council. It mentions that vice-president for Finance, presented the financial health, endowment and reserve funds for ESA.

In this paper, we first review some important aspects of asset allocation for some typical large Social Security Reserve Funds (SSRFs) in the world. Then we present the mean-variance model with CVaR constraints as asset allocation methodology. Concerning the real circumstance in China, we apply the model to pension fund asset allocation. The empirical results show that to maintain purchase power of pension fund, certain proportion should be invested in stocks as well as direct equity investments. We also find that time horizon significantly influence asset allocation of pension fund. If time horizon is longer, more allocations to stocks and equity investments help the pension fund to achieve better performance. [ABSTRACT FROM AUTHOR]

Using a novel dataset, which merges good-level prices underlying the PPI with the respondents' balance sheets, we show that liquidity constrained firms increased prices in 2008, while their unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms' decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output. (JEL E31, E32, E44, G01, G32, L11) [ABSTRACT FROM AUTHOR]