Marcela Porporato

Corporate bankruptcy prediction models applied to emerging economies

Purpose – The papers aim is to test the usefulness of ratio analysis to predict bankruptcy in a period of stability of an emerging economy, such as the case of Argentina in the 1990s.Design/methodology/approach – Financial profiles of 22 bankrupt and healthy companies are examined and a model is built using the multiple discriminant analysis technique, thus providing comparability with previous studies.Findings – The set of models tested in this paper show that the financial data of Argentine companies in the 1990s do have information content, but the model to use depends on the preferences of the decision maker. Comparing models it is observed a common use of solvency ratios in terms of total assets and profitability ratios in terms of sales.Research limitations/implications – Data availability constitutes the primary limitation of this and similar studies, here is reflected in the sample size: 11 healthy and 11 bankrupt.Practical implications – The model can be used to assist investors, creditors, and ...

Evidence of sticky costs in banks of Argentina, Brazil and Canada

An assumption made in traditional cost accounting books is that variable costs move proportionately with revenues. Recent studies on sticky costs challenged this assumption. This study shows that sticky costs were observed in banks of Argentina, Brazil and Canada in 2004-2009. Total costs are sticky because the magnitude of the increase associated with an increase in the volume of activity (Argentina 0.60%, Brazil 0.82% and Canada 0.94%) is larger than the magnitude of the fall associated with a decrease of the volume (Argentina 0.38%, Brazil 0.48% and Canada 0.55%, respectively). These results suggest that cost structure and macroeconomic climate might be valid explanations for cost behaviour. Banks with higher proportions of fixed costs show lower reductions of costs when demand declines. Banks that operate in an uncertain economic environment show the lowest change of costs levels when demand changes.

Active Cost Management in Banks: Evidence of Sticky Costs in Argentina, Brazil and Canada

An assumption made in traditional cost accounting books is that variable costs move proportionately with revenues. Recent studies in management accounting literature suggest that the magnitude of the change in the costs does not only depend on the magnitude of the change in the cost driver, but also of the direction of this change (ascending or descending). To define this situation, numerous authors refer to sticky costs.The motivation of this work is to test if the concept of sticky costs is observed in banks as a way to improve the generalization of Anderson, Banker and Janakiraman (2003) idea because cost structures and scale economies are likely to be similar across firms in the same industry (Balakrishnan and Gruca, 2008; Balakrishnan et al., 2004). The analysis confirms the validity of existing literature on sticky costs even when controlling for cost structure. The results show that sticky costs are observed also in banks of Argentina, Brazil and Canada for the years 2004-2009. If the activity of the sector expands, the costs grow but less than proportional; the relation between an increase of 1% total income and increase of costs is positive as the theory predicts (0.60% for Argentina, 0.82% for Brazil and 0.94% for Canada). It is argued that total costs in this industry follow a sticky behavior because the magnitude of the increase associated with an increase in the volume of activity or revenues (0.60%, 0.82% and 0.94%) is larger than the magnitude of the fall associated with a decrease of the volume (0.38%, 0.48% and 0.55%). A second set of results suggests that cost structure and economic climate are valid explanations for cost behavior. The cost structure of banks in each country affects the level of cost responses to increases and decreases in demand. Banks with higher proportions of fixed costs, such as Brazil, will show a lower reduction of costs when demand declines. Banks with higher levels of asset intensity, such as Canada, will show a higher reduction of costs when demand declines. Finally, banks that operate in an uncertain economic environment, such as Argentina, will show the lowest increase of costs when demand increases and consequently will also show the lowest reduction of costs when demand declines.

Timing and drivers of management control systems in joint ventures: The effect on JV survival

Purpose - The purpose of this paper is to describe the timing of management control systems (MCS) implementations, their drivers and effect on joint venture (JV) survival. Design/methodology/approach - This paper draws on case study data (archival data, interviews, and site visits) collected at three JVs in the automotive industry. Contingency theory is used to define Cartesian relationships. Findings - A description of the timing and reasons for MCS implementation in JVs is provided. Initially, environment, strategy, and partner culture are considered to implement governance mechanisms and transfer prices/cost allocations for long-term transfers of technology and corporate services. Later, structural and technological factors are considered to implement operative MCS such as budgeting, transfer prices/cost allocations of manufactured parts and performance measurement. Research limitations/implications - All three JVs studied: belong to the automotive industry (SIC 3174); have balanced ownership (50/50); and have one partner in common (a European family-owned business with professional management). Data are obtained mainly through site visits, five interviews, five mailed questionnaires, and public and private archival data. Originality/value - The paper is the first to offer a descriptive model of the timing of MCS implementation in 50/50 JVs explained by the effect of contingent factors in each stage of the JV life and in JV survival.

Determinants of the Use of Management Control Systems in Companies Operating Under Turbulent Conditions

This paper investigates the role that management control systems (MCS) play in the performance of the organizations operating under turbulent conditions. Two sets of companies are studied as turbulent conditions: international joint ventures (JVs) in the auto and motor industry and manufacturing companies located in a regional economy of a less developed country (LDC). Two surveys gathered data of 35 JVs and 45 industries in Cordoba (Argentina) that allowed testing a contingent framework. The results are concordant with the literature that holds that MCS helps to reduce uncertainty when the factors that generate it can be affected by the managerial decisions (Galbraith, 1973; Davila, 2000). Uncertainty is reduced by an appropriate use of MCS that implies a more intense use and a use orientated to coordinate rather than to control that in turn positively affects the organizational performance. Companies operating under turbulent conditions show that the use of MCS information improves their performance and is completely independent from factors not controllable by managers. The empirical study showed a clear association between previous exposure to a factor perceived as manageably and a high intensity of use of MCS with purposes of coordination to reduce the uncertainty understood as the difference between the information available and information needed to perform the task. The major limitations of this study are the lack of literature focused on the topic, testing of an ad-hoc contingent model, the small sample sizes and the measurement of latent variables through questionnaires based on perceptions.

Do hospital balanced scorecard measures reflect cause-effect relationships?

Purpose The purpose of this paper is to investigate whether first level measures in the Balanced Scorecard (BSC) declaring a cause-effect relationship by design are composite indices of lower measures, and if they converge into a single factor as is traditionally accepted in the BSC literature. Design/methodology/approach This study reports results of a quantitative case study that focusses on an Ontario (Canada) community hospital that has been using the BSC. Findings The results of this study challenge the cause-effect assumption of the BSC, particularly in a cascading context, and suggest that a lack of attention of how composite indices of lower measures converge into a single higher level measure may be the reason for ineffective use of the BSC. Research limitations/implications The BSC is a dynamic tool; as such there are several measures that have a very short history, thus limiting the observations available to be used in statistical models. Practical implications A key recommendation for practice that emerges from this study is the need to test if lower level metrics do merge naturally in the upper level measure of the BSC; if not, the upper level measure might not be linked to other measures rendering the BSC ineffective in the context of causality. Originality/value Although several studies have argued in favour of the cause-effect relationship of the BSC, none of those found in the literature have paid attention to the way in which first level measures are constructed. This may explain why certain measures are linked, while others are not, to those that are calculated as composite indices of several lower level indicators.

TRENDS IN ACCOUNTING DOCTORAL DISSERTATIONS: 1991–2000

Abstract Repeated calls for change in accounting programs and various pressures on the profession emphasize the importance of academic reflective adaptation. Yet, curricula remain largely unchanged. One possible explanation may lie in the training of accounting educators. Doctoral programs focus on research culminating in dissertations. Assuming academics will tend to align career teaching and research interests consistent with their doctoral training, we examine doctoral dissertations in accounting over the ten-year period of 1991 through 2000. Trends based on topic, research methodology, country of origin, and university are examined. The United States dominates and 14 major institutions continue to produce the preponderance of dissertations. Dissertation topics proportionally have not changed, nor has the predominant research methodology employed over the last decade. A strong emphasis on financial accounting topics utilizing publicly available databases persists. This is particularly so in the schools identified as the most prestigious. Implications for the crisis in accounting education are discussed.