Working Papers
Accounting Information as Political Currency
| Authors: | Karthik Ramanna and Sugata Roychowdhury |
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Abstract
We test whether accounting can be used as political currency. Our setting is the US congressional election of 2004, where outsourcing of US jobs was a campaign issue. We find that the largest corporate donors to principal candidates in closely watched congressional races manage earnings downwards in the two quarters immediately preceding the 2004 election. We find no evidence of such downwards earnings management among corporate donors to candidates in all other congressional races. Election outcomes for candidates are also systematically associated with the extent of donors' downwards earnings management in closely watched races, but not all other races. The findings are consistent with firms managing accounting information in circumstances where this is likely to benefit allied politicians.
Download the paper: http://www.hbs.edu/research/pdf/08-100.pdf
Coming Clean and Cleaning Up: Is Voluntary Disclosure a Signal of Effective Self-Policing?
| Authors: | Michael W. Toffel and Jodi L. Short |
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Abstract
As regulators increasingly embrace cooperative approaches to governance, voluntary public-private partnerships and self-regulation programs have proliferated. However, because few have been subjected to robust evaluation, little is known about whether these innovative approaches are achieving their objectives and enhancing regulatory effectiveness. In the context of a federal government program that encourages companies to voluntarily self-police and self-disclose regulatory violations, we examine how participation affects the behaviors of regulators and regulated facilities. We find that on average, facilities that committed to self-police experienced a decline in abnormal events resulting in toxic pollution, and that regulators reduced their scrutiny over self-policing facilities. Upon closer examination, we find strong evidence of these effects among facilities with clean past compliance records, but find no such evidence among facilities with more problematic compliance histories. These findings support the theoretical promise of meaningful self-policing practices and suggest that voluntary disclosure can serve as a reliable signal of future compliance—but only among a subset of facilities.
Download the paper: http://www.hbs.edu/research/pdf/08-098.pdf
Evidence from Goodwill Non-impairments on the Effects of Unverifiable Fair-Value Accounting (revised May 2008)
| Authors: | Karthik Ramanna and Ross L. Watt |
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Abstract
SFAS 142 requires firms to use unverifiable fair-value estimates to determine goodwill impairments. Standard setters suggest managers will use the discretion given by such estimates to convey private information on future cash flows, while agency theory predicts managers will use the discretion opportunistically. We test these alternative hypotheses using a sample of firms with market indications of goodwill impairment (firms with book goodwill and two successive years of book-to-market ratios above one). We find non-impairment of goodwill is increasing in firm characteristics predicted to be associated with greater managerial discretion. We also find evidence that the discretion is being used in a manner consistent with agency-based predictions. The evidence does not confirm managerial discretion is being used to convey private information.
Download the paper: http://www.hbs.edu/research/pdf/08-014.pdf
Cases & Course Materials
The Blackstone Group's IPO
Harvard Business School Case 808-100
Steven Schwarzman, Chairman of the Blackstone Group, has just learned that an investment group associated with the government of China wants to buy the majority of Blackstone's leveraged IPO. As he considers how to respond to this offer, Schwarzman reviews the firm's proposed structure as a public entity and assesses how he might retain the delicate balance among stakeholders while still maintaining liquidity in the market.
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The Boeing Company: Moonshine Shop
Harvard Business School Case 607-130
This case describes how the "Moonshine Shop," a group of plant-savvy creative generalists, is helping a great industrial company become more innovative. Chronicles the history of the Moonshine Shop, its successes and failures, and describes innovations they've helped put in place. The group routinely creates savings equal to multiples of their own budget through front-lines process innovation and support of staff on-the-floor.
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Broadband and Video Games: Playing and Winning Together
Harvard Business School Note 708-440
This note examines the relationship between video gaming devices (console, handhelds, mobile and PC) and gaming software development. The impact of broadband, wireless technologies and other innovations are also presented.
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Heidrick & Struggles International, Inc.
Harvard Business School Case 408-066
As CEO of leading executive search firm Heidrick & Struggles for the past 18 months, Kevin Kelly was pleased with his accomplishments so far but concerned about threats he perceived to Heidrick's position at the highest levels of the executive search business. In response, Kelly had begun making strategic investments in firms offering technology-based solutions, but had not yet made significant progress convincing Heidrick's search consultants about the significance of the threats, or the risks and opportunities being created by information technology and the Internet. The increased emphasis Kelly placed on building leadership consulting services was itself a big change. The case asks what levers Kelly can use, from culture to compensation, to make the challenges to Heidrick's traditional business model understood and how to implement the strategic initiatives he has launched.
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Note on the Bus Industry
Harvard Business School Case 708-435
Supplements the "Irizar in 2005" case. Briefly documents key points in the motor coach industry such as market size, categories of buses, reasons for purchasing, and the basis for competition amongst motor coach manufacturers.
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Robert Wessman and Actavis' ‘Winning Formula’
Harvard Business School Case 808-127
Robert Wessman took over Actavis in 1999 when it was a failing 90-person domestic generic pharmaceutical maker in Iceland. Within 7 years he had brought Actavis to number 5 worldwide, with 11,000 people, active in 40 countries, global manufacturing, and $1.6 billion. The case explores the reasons for the success of this global venture.
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The University of Texas MD Anderson Cancer Center: Interdisciplinary Cancer Care
Harvard Business School Case 708-487
In 2006, University of Texas MD Anderson Cancer Center was an internationally leading institution for cancer care, education, and research. Since 1996, it had successfully reorganized itself from a cancer hospital that was physically organized around clinical specialties into one that was organized into disease-based integrated practice units called multidisciplinary care centers. These units were supported by a new construction project that had created new disease-specific facilities and a widely supported administrative plan in which physicians reported both to leadership of specialty-based academic departments and disease-based clinical centers.
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Wanxiang Group: A Chinese Company's Global Strategy
Harvard Business School Case 308-058
With an almost forty-year history as a business in China, the Wanxiang Group has navigated through the significantly different political and economic changes in China to succeed as a global leader in the auto parts industry and to develop into a broad business conglomerate. Beginning in 1994, when it first began its operations in the United States, Wanxiang started to expand its role as a parts supplier into a discerning acquirer of distressed companies in the U.S. While it saw acquisition as an exciting means for growth, company strategy at its Hangzhou, China headquarters also included vertical integration with a goal of developing a full-on electric car. Were these two goals divergent or complementary: mutually supportive or exclusive?
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