Future Performance (future + performance)

Distribution by Scientific Domains
Distribution within Business, Economics, Finance and Accounting

Selected Abstracts

Audit Qualifications of Income-Decreasing Accounting Choices,

Frank D. Hodge
Abstract In this study we conduct an experiment to examine how qualifying an income-decreasing accounting change in years of strong financial performance affects financial report users' assessments of strategic reporting, current financial performance, and future financial performance (performance over the next three years). We find that without the qualification, users viewed the income-decreasing accounting change as relatively nonstrategic and that user assessments of current and future performance were not different. In the presence of the qualification, users believed that the accounting change was relatively strategic, and they discounted the income effect of the accounting change. We find further that their assessments of future performance were below their assessments of current performance but no different from the assessments of future performance in the absence of the qualification. Although our findings suggest that audit qualifications encourage users to be skeptical of income-decreasing accounting changes, we find no evidence that they impose negative consequences on management in terms of lower assessments of financial performance. [source]

Strategic Decisions of New Technology Adoption under Asymmetric Information: A Game-Theoretic Model*

Kevin Zhu
ABSTRACT In this paper we explore strategic decision making in new technology adoption by using economic analysis. We show how asymmetric information affects firms' decisions to adopt the technology. We do so in a two-stage game-theoretic model where the first-stage investment results in the acquisition of a new technology that, in the second stage, may give the firm a competitive advantage in the product market. We compare two information structures under which two competing firms have asymmetric information about the future performance (i.e., postadoption costs) of the new technology. We find that equilibrium strategies under asymmetric information are quite different from those under symmetric information. Information asymmetry leads to different incentives and strategic behaviors in the technology adoption game. In contrast to conventional wisdom, our model shows that market uncertainty may actually induce firms to act more aggressively under certain conditions. We also show that having better information is not always a good thing. These results illustrate a key departure from established decision theory. [source]

A Method for Evaluating Horizontal Well Pumping Tests

GROUND WATER, Issue 5 2004
David E. Langseth
Predicting the future performance of horizontal wells under varying pumping conditions requires estimates of basic aquifer parameters, notably transmissivity and storativity. For vertical wells, there are well-established methods for estimating these parameters, typically based on either the recovery from induced head changes in a well or from the head response in observation wells to pumping in a test well. Comparable aquifer parameter estimation methods for horizontal wells have not been presented in the ground water literature. Formation parameter estimation methods based on measurements of pressure in horizontal wells have been presented in the petroleum industry literature, but these methods have limited applicability for ground water evaluation and are based on pressure measurements in only the horizontal well borehole, rather than in observation wells. This paper presents a simple and versatile method by which pumping test procedures developed for vertical wells can be applied to horizontal well pumping tests. The method presented here uses the principle of superposition to represent the horizontal well as a series of partially penetrating vertical wells. This concept is used to estimate a distance from an observation well at which a vertical well that has the same total pumping rate as the horizontal well will produce the same drawdown as the horizontal well. This equivalent distance may then be associated with an observation well for use in pumping test algorithms and type curves developed for vertical wells. The method is shown to produce good results for confined aquifers and unconfined aquifers in the absence of delayed yield response. For unconfined aquifers, the presence of delayed yield response increases the method error. [source]

Is prior performance priced through closed-end fund discounts?

Michael Bleaney
Abstract In open-end mutual funds (unit trusts), there is a strong positive cross-sectional relationship between net inflows to individual funds and past performance, as if investors attributed performance to managerial skill. Performance shows only very weak persistence, however, so at first sight investors do not appear to gain anything by responding to past performance information. This behaviour can be explained by the fact that past performance is effectively unpriced in the unit trust market, since management fees are unresponsive to demand. If investors believe that there is a non-zero probability that future performance will turn out to be positively correlated with past performance (i.e. that there is an element of managerial skill in performance), but a zero probability that this correlation will be negative, it is rational to prefer funds with better past performance when performance is not priced. In other words, it costs nothing to insure against the possibility of some managerial skill effect. If this explanation of the flow,performance relationship in unit trusts is correct, one would expect the relationship between investor demand and past fund performance to be much weaker if past performance were to be priced. We test this hypothesis in the market for closed-end funds (investment trusts). Because closed-end funds do not trade at net asset value, but at a price determined in the market, strong demand will raise the ratio of price to net asset value (known as the premium). Since it is well established that premiums are mean-reverting, future shareholder returns on funds currently on high premiums tend to be depressed by the reversion of the premium to the mean. In the closed-end fund market, as for open-end funds, there is little evidence of performance persistence, and therefore, to the extent that funds with good past performance are pushed to higher premiums, the expected return on them is less than on the average fund. This implicit pricing mechanism should mean that demand is a declining function of the premium, so that, even if demand is an increasing function of past performance for a given premium, any effect on the premium itself will be muted. We test this hypothesis for closed-end funds traded in the US and the UK. We find that there is a statistically significant effect of past performance on the premium in both countries. However, consistent with the hypothesis, it has limited economic significance, since it represents only a small component of premium variability. Copyright 2008 John Wiley & Sons, Ltd. [source]

Narcissism, confidence, and risk attitude

W. Keith Campbell
Abstract The present research addresses whether narcissists are more overconfident than others and whether this overconfidence leads to deficits in decision making. In Study 1, narcissism predicted overconfidence. This was attributable to narcissists' greater confidence despite no greater accuracy. In Study 2, participants were offered fair bets on their answers. Narcissists lost significantly more points in this betting task than non-narcissists, due both to their greater overconfidence and greater willingness to bet. Finally, in Study 3, narcissists' predictions of future performance were based on performance expectations rather than actual performance. This research extends the literature on betting on knowledge to the important personality dimension of narcissism. Copyright 2004 John Wiley & Sons, Ltd. [source]

Investment Opportunities and the Relation Between Equity Value and Employees' Bonus

Article first published online: 22 AUG 200, Chih-Ying Chen
A sample of firms where employee stock options and other long-term incentives are absent but an annual bonus is required is examined. A positive relation is found between firm equity value and stock bonus but not cash bonus. The positive relation is stronger when the firm has greater investment opportunities. Additionally, the relation is shown to be nonlinear in the sense that the marginal effect of stock bonus on equity value is positive but decreasing (negative) when the stock bonus is below (above) the breakpoint. Overall, the annual stock bonus is valued positively by investors even though it is linked to the firm's contemporaneous but not future performance. [source]

R&D and Firm Performance in a Transition Economy

Dirk Czarnitzki
SUMMARY We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk. This stands in contrast to Western Germany where R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation. [source]

Assessing the performance of doctors in teams and systems

Elizabeth A Farmer
Introduction, Increasing attention is being directed towards finding ways of assessing how well doctors perform in clinical practice. Current approaches rely on strategies directed at individuals only, but, in real life, doctors' work is characterised by multiple complex professional interactions. These interactions involve different kinds of teams and are embedded within the overall context and systems of care. In addition to individual factors, therefore, we propose that the performance of doctors in health care teams and systems will also impact on the overall quality of patient care. Assessing these dimensions, however, poses a number of challenges. Strategies, Taking a profile of a National Health Service, UK surgeon as an example, the team structures to which he or she may relate are illustrated. These include formal teams such as those found in the operating theatre, and those formed through various professional and collegial partnerships. The authors then propose a model for assessing doctors' performances in teams and systems, which incorporates the educational principles of continuous feedback to enhance future performance. Discussion, To implement the proposed model, a wide range of professional, educational and regulatory bodies must collaborate. This raises a number of important implications for the future roles and relationships of these bodies, which are discussed. A strong and constructive partnership will be essential if the full potential of a more inclusive and representative assessment approach is to be realised. [source]

Stock Returns and Operating Performance of Securities Issuers

Gil S. Bae
Abstract We examine long-run stock returns and operating performance around firms' offerings of common stock, convertible debt, and straight debt from 1985 to 1990. We find that pre-issue abnormal returns are positive and significant for stock issuers, but not for convertible and straight debt issuers. The post-issue mean returns show that common stock and convertible debt issuers experience underperformance during the post-issue periods, but straight debt issuers do not. Consistent with these results, common stock issuers experience the best pre-issue operating performance among all three types of issuers, and operating performance declines during the post-issue periods for common stock and convertible debt issuers. Using a new approach in linear model estimations to correct heteroskedasticity and to adjust for finite sample, we find a positive relation between post-issue operating performance and issue-period stock price reactions. The results suggest that future operating performance is anticipated at the issue and that securities issues provide information on issuers' future performance. [source]

Corporate environmental reporting: what's in a metric?

R. Scott Marshall Assistant Professor of Management
Although there has been increased attention to corporate environmental reports (CERs), there has yet to be a close examination of the metrics used in these reports. Metrics do not address the content of CERs, but, perhaps more importantly, metrics provide the means for conveying the content. In this paper, we analyze metrics used in 79 corporations' recent CER reports. We define and use an 'environmental sustainability' lens, and apply two environmental metrics taxonomies to CER metrics. We also consider the implications of key internal and external firm factors on CER metrics. Our findings suggest that (i) firms' compliance with ISO 14001 increases the presence of future oriented metrics, (ii) a majority of CER content uses lagging metrics with descriptive and operational performance information, (iii) larger firms are more likely than smaller firms to use future oriented metrics and (iv) there are noticeable differences across countries/regions in terms of CER metrics. Several important issues seem evident from the study. First, the metrics most commonly used in CERs provide little information about future performance. Second, the majority of metrics describe operations performance rather than environmental impact. Third, even though the sample was chosen based on a priori indicators of corporate environmental awareness, only about half of the companies sampled had a CER available. Copyright 2003 John Wiley & Sons, Ltd. and ERP Environment [source]

Regression to the mean and football wagers

Marcus Lee
Abstract Football performances are an imperfect measure of abilities, and consequently exaggerate differences in abilities. The skills of those football teams that perform the best and the worst are not really that far from average; thus their future performances regress to the mean. Betting data indicate that gamblers do not fully account for this regression. Copyright 2002 John Wiley & Sons, Ltd. [source]

Origins, uses of, and relations between goal programming and data envelopment analysis

W.W. Cooper
Abstract Origins and uses of ,goal programming' and ,data envelopment analysis' (DEA) are identified and discussed. The purpose of this paper is not only to review some of the history of these developments, but also to show some of their uses (e.g. in statistical regression formulations) in order to suggest paths for possible further developments. Turning to how the two types of models relate to each other, the ,additive model' of DEA is shown to have the same structure as a goal programming model in which only ,one-sided deviations' are permitted. A way for formally relating the two to each other is then provided. However, the objectives are differently oriented because goal programming is directed to future performances as part of the planning function whereas DEA is directed to evaluating past performances as part of the control function of management. Other possible ways of comparing and combining the two approaches are also noted including statistical regressions that utilize goal programming to ensure that the resulting estimates satisfy the multi-criteria conditions that are often encountered in managerial applications. Both goal programming and DEA originated in actual applications that were successfully addressed. The research was then generalized and published. This leads to what is referred to as an ,applications-driven theory' strategy for research that is also described in this paper. Copyright 2006 John Wiley & Sons, Ltd. [source]