Mark Myring

The Integrated Business Curriculum: An Examination of Perceptions and Practices

Constituents often criticize business schools for failing to provide students with a comprehensive understanding of how business organizations function. Business schools have responded to the mandate with attempts to integrate discipline-specific functional knowledge into a coherent understanding of the evolving business organization. Successful integration of the undergraduate business curriculum will result in students who are more directly involved in the learning process and will increase curricular relevance by translating functional knowledge into business skills. However, curriculum integration is an extensive and potentially disruptive curricular change that may involve cost and is fraught with pitfalls. The authors surveyed deans at member schools of the Association to Advance Collegiate Schools of Business International to assess the extent to which and the manner in which integration has taken place within the business curriculum.

International Evidence on Analyst Stock Recommendations, Valuations, and Returns

This is the first large study to examine the relation between analysts’ stock recommendations, earnings forecasts, and future excess stock returns in an international context. We first document that some of the peculiar findings established in the U.S. extend to other countries where individual investor participation in the stock market is high (especially when Japan is excluded from the sample). Specifically, we find that analysts’ recommendations relate positively to simple heuristics but negatively to more rigorous residual income valuation estimates (scaled by price). Furthermore, residual income valuation estimates relate positively to future returns, indicating their usefulness to investors, while analysts’ recommendations and heuristics relate negatively to future stock returns. In contrast, in countries with low investor participation rates, these peculiar findings are less observable. In these countries, analysts appear to rely relatively more on residual income valuation estimates in setting their recommendations, and these recommendations relate positively to future returns. The overall results are consistent with analysts’ recommendations being influenced by economic incentives other than identifying mispriced stocks in countries with high investor participation rates, substantiating puzzling results in the U.S.

THE IMPACT OF STATEMENT OF FINANCIAL ACCOUNTING STANDARD NUMBER 123 ON EQUITY PRICES OF COMPUTER SOFTWARE COMPANIES

Abstract Stock options have become a significant component of compensation for top executives. However, the appropriate method of accounting for stock options has been the subject of much debate. We document the history and current status of accounting for stock options including the issuance of Statement of Financial Accounting Standard No. 123, Accounting for Stock Based Compensation (SFAS 123). We then examine the stock market reaction to six events leading to the adoption of SFAS 123. The results from this test show that the market reacted negatively to the possibility that a standard would be adopted requiring stock options to be expensed. We also document that the magnitude of the market reaction is affected by debt contracting costs and political costs. These results suggest that the market reduces the value of firms who might violate their debt covenants and that firms with higher income are more subject to regulation by political entities. These results can add to the debate about accounting for stock options that has been revived in light of the Enron, WorldCom, and Tyco accounting scandals.

Has Sarbanes-Oxley standardized audit quality?

Purpose - The purpose of this paper is to examine whether the institutional changes accompanying the passage of the Sarbanes-Oxley Act of 2002 (SOX) have standardized the audit’s role in the overall financial reporting process, thereby reducing the impact of auditor characteristics on financial reporting quality. Design/methodology/approach - To test this hypothesis, the association between audit quality characteristics (auditor size and industry expertise) and measures of financial reporting quality (analyst earning forecast dispersion and accuracy) are estimated using regression analysis. Results of this analysis are compared across the pre- and post-SOX periods. Findings - The results of the study document a significant relationship between auditor size (Big N vs non-Big N) and financial reporting quality (as proxied by analyst earnings forecast properties) during the pre-SOX period but not in the post-SOX period. Auditor industry expertise is significantly associated with financial reporting quality throughout the entire sample period. Thus, financial reporting quality continues to be dependent on the degree of specialization of an audit firm in both the pre- and post-SOX periods; however, the impact of auditor size as a surrogate for quality has diminished. Originality/value - The SOX Act of 2002 represented one of the most significant changes in the regulation of audits. This paper adds to the literature by examining the Act’s effects on financial professionals’ perception of the impact of audit firm characteristics on their client’s financial reporting quality.