Accounting and Finance

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    Conflicting expectations in transforming government service processes: the story of e-payment for social welfare in Ireland
    (Brunel University, London, 2011-03) O'Brien, Leona; Giller, Kieran; Tan, Kay-Ti; McCarthy, James B.; Csáki, Csaba; Adam, Frédéric; Ghoneim, Ahmad; Weerakkody, Vishanth; Kamal, Muhammad; Enterprise Ireland; Briconi Holdings Ltd
    Despite its clear potential and attractiveness as a solution to a broad range of societal problems, E-Government has not been adopted to levels predicted in early 2000 literature. Whilst case studies of punctual development of E-Government initiatives abound, few countries have progressed to high levels of maturity in the systematic use of ICT in the relationship between government and citizens. At the same time, the current period brings challenges in terms of access to public services and costs of delivering these services which make the large scale use of ICT by governments more attractive than ever, if not even a necessity. This paper presents a detailed case study of a specific E-Government initiative in Ireland in the area of E-payments for G2C, in the social welfare area. Locating the current initiative in its historical context, it analyses the varied motivations and conflicting requirements of the numerous stakeholders and discusses the constraints that bear on the potential scenarios that could be followed at this point in time.
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    Developing a framework for mobile payments integration
    (Academic Publishing International Ltd., 2012) Carton, Fergal; Hedman, Jonas; Dennehy, Denis J.; Damsgaard, Jan; Tan, Kay-Ti; McCarthy, James B.; Copenhagen Fintech Innovation and Research, Denmark; Danish Enterprise and Construction Authority, Denmark
    This paper derives a theoretical framework for consideration of both the technologically driven dimensions of mobile payment solutions, and the associated value proposition for customers. Banks promote traditional payment instruments whose value proposition is the management of risk for both consumers and merchants. These instruments are centralised, costly and lack decision support functionality. The ubiquity of the mobile phone has provided a decentralised platform for managing payment processes in a new way, but the value proposition for customers has yet to be elaborated clearly. This inertia has stalled the design of sustainable revenue models for a mobile payments ecosystem. Merchants and consumers in the meantime are being seduced by the convenience of on-line and mobile payment solutions. Adopting the purchase and payment process as the unit of analysis, the current mobile payment landscape is reviewed with respect to the creation and consumption of customer value. From this analysis, a framework is derived juxtaposing customer value, related to what is being paid for, with payment integration, related to how payments are being made. The framework provides a theoretical and practical basis for considering the contribution of mobile technologies to the payment industry. The framework is then used to describe the components of a mobile payments pilot project being run on a trial population of 250 students on a campus in Ireland. In this manner, weaknesses in the value proposition for consumers and merchants were highlighted. Limitations of the framework as a research tool are also discussed.
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    Cash or non-cash: that is the question - the story of e-payment for social welfare in Ireland part 2
    (2012-05) Csáki, Csaba; O'Brien, Leona; Giller, Kieran; Tan, Kay-Ti; McCarthy, James B.; Adam, Frédéric; Weerakkody, Vishanth; Ghoneim, Ahmad; Kamal, Muhammad
    E-Government in its various forms and extensions, notably T-Government, is often presented as the panacea for resolving such complex social problems as social exclusion, lack of governance transparency, poor value for money and other ailments of modern societies. Yet, E-Government has not been adopted up to predicted levels. Many case studies investigating success factors, maturity models, and the application of acceptance models have been presented over the last 15 years, but a deep understanding of the potential impact and consequences of E-Government is still lacking. This is especially true for those initiatives that involve socio-economic and cultural contexts, which makes their evaluation and the prediction of their impact difficult. This paper reports on an on-going E-Government initiative in Ireland aimed at implementing E-payments for G2C, notably in the social welfare area. Three sets of personal surveys have been carried out to understand the perceived impact of governmental plans of moving from an almost fully cash-based payment system to a fully electronic based solution. Early results indicate that perceived pre-requisites for the planned change may be misleading. The impact on recipients’ lives cannot solely be measured in terms of economic gains: the consequences of such implementation may well reach further than expected.
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    FuturICT: Participatory computing to understand and manage our complex world in a more sustainable and resilient way
    (EDP Sciences, Società Italiana di Fisica and Springer, 2012-11) Helbing, Dirk; Bishop, Steven; Conte, Rosaria; Lukowicz, Paul; McCarthy, James B.
    We have built particle accelerators to understand the forces that make up our physical world. Yet, we do not understand the principles underlying our strongly connected, techno-socio-economic systems. We have enabled ubiquitous Internet connectivity and instant, global information access. Yet we do not understand how it impacts our behavior and the evolution of society. To fill the knowledge gaps and keep up with the fast pace at which our world is changing, a Knowledge Accelerator must urgently be created. The financial crisis, international wars, global terror, the spreading of diseases and cyber-crime as well as demographic, technological and environmental change demonstrate that humanity is facing serious challenges. These problems cannot be solved within the traditional paradigms.Moving our attention from a component-oriented view of the world to an interaction-oriented view will allow us to understand the complex systems we have created and the emergent collective phenomena characterising them. This paradigm shift will enable new solutions to long-standing problems, very much as the shift from a geocentric to a heliocentric worldview has facilitated modern physics and the ability to launch satellites.The FuturICT flagship project will develop new science and technology to manage our future in a complex, strongly connected world. For this, it will combine the power of information and communication technology (ICT) with knowledge from the social and complexity sciences.ICT will provide the data to boost the social sciences into a new era. Complexity science will shed new light on the emergent phenomena in socially interactive systems, and the social sciences will provide a better understanding of the opportunities and risks of strongly networked systems, in particular future ICT systems. Hence, the envisaged FuturICT flagship will create new methods and instruments to tackle the challenges of the 21st century.FuturICT could indeed become one of the most important scientific endeavours ever, by revealing the principles that make socially interactive systems work well, by inspiring the creation of new platforms to explore our possible futures, and by initiating an era of social and socio-inspired innovations.
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    Leveraging lessons learned in organizations through implementing practice-based organizational learning and performance improvement - An opportunity for context-based intelligent assistant support (CIAS)
    (University College Cork, 2013) Hegarty, Garrett John; Adam, Frédéric; Brézillon, Patrick
    Organizations that leverage lessons learned from their experience in the practice of complex real-world activities are faced with five difficult problems. First, how to represent the learning situation in a recognizable way. Second, how to represent what was actually done in terms of repeatable actions. Third, how to assess performance taking account of the particular circumstances. Fourth, how to abstract lessons learned that are re-usable on future occasions. Fifth, how to determine whether to pursue practice maturity or strategic relevance of activities. Here, organizational learning and performance improvement are investigated in a field study using the Context-based Intelligent Assistant Support (CIAS) approach. A new conceptual framework for practice-based organizational learning and performance improvement is presented that supports researchers and practitioners address the problems evoked and contributes to a practice-based approach to activity management. The novelty of the research lies in the simultaneous study of the different levels involved in the activity. Route selection in light rail infrastructure projects involves practices at both the strategic and operational levels; it is part managerial/political and part engineering. Aspectual comparison of practices represented in Contextual Graphs constitutes a new approach to the selection of Key Performance Indicators (KPIs). This approach is free from causality assumptions and forms the basis of a new approach to practice-based organizational learning and performance improvement. The evolution of practices in contextual graphs is shown to be an objective and measurable expression of organizational learning. This diachronic representation is interpreted using a practice-based organizational learning novelty typology. This dissertation shows how lessons learned when effectively leveraged by an organization lead to practice maturity. The practice maturity level of an activity in combination with an assessment of an activity’s strategic relevance can be used by management to prioritize improvement effort.
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    Initial losses, corporate governance and earnings management
    (University College Cork, 2013) Mulcahy, Mark Brendan; Donnelly, Raymond
    This thesis examines the relationship between initial loss events and the corporate governance and earnings management behaviour of these firms. This is done using four years of corporate governance information spanning the report of an initial loss for companies listed on the UK Stock Exchange. An industry- and sizematched control sample is used in a difference-in-difference analysis to isolate the impact of the initial loss event during the period. It is reported that, in general, an initial loss motivates an improvement in corporate governance in those loss firms where a relative weakness existed prior to the loss and that these changes mainly occur before the initial loss is announced. Firms with stronger (i.e. better quality) corporate governance have less need to alter it in response to the loss. It is also reported that initial loss firms use positive abnormal accruals in the year before the loss in an attempt to defer/avoid the loss — the weaker corporate governance the more likely is it that loss firms manage earnings in this manner. Abnormal accruals are also found to be predictive of an initial loss and when used as a conditioning variable, the quality of corporate governance is an important mitigating factor in this regard. Once the loss is reported, loss firms unwind these abnormal accruals although no evidence of big-bath behaviour is found. The extent to which these abnormal accruals are subsequently unwound are also found to be a function of both the quality of corporate governance as well as the severity of the initial loss.
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    Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia
    (University College Cork, 2013) Shaari, Hasnah; Donnelly, Raymond; Cao, Tong Yu; Ministry of Education, Malaysia; Universiti Utara Malaysia
    Malaysian Financial Reporting Standard (FRS) No. 136, Impairment of Assets, was issued in 2005. The standard requires public listed companies to report their non-current assets at no more than their recoverable amount. When the value of impaired assets is recovered, or partly recovered, FRS 136 requires the impairment charges to be reversed to its new recoverable amount. This study tests whether the reversal of impairment losses by Malaysian firms is more closely associated with economic reasons or reporting incentives. The sample of this study consists of 182 public companies listed on Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange) that reported reversals of their impairment charges during the period 2006-2009. These firms are matched with firms which do not reverse impairment on the basis of industrial classification and size. In the year of reversal, this study finds that the reversal firms are more profitable (before reversals) than their matched firms. On average, the Malaysian stock market values the reversals of impairment losses positively. These results suggest that the reversals generally reflect increases in the value of the previously impaired assets. After partitioning firms that are likely to manage earnings and those that are not, this study finds that there are some Malaysian firms which reverse the impairment charges to manage earnings. Their reversals are not value-relevant, and are negatively associated with future firm performance. On the other hand, the reversals of firms which are deemed not to be earnings managers are positively associated with both future firm performance and current stock price performance, and this is the dominant motivation for the reversal of impairment charges in Malaysia. In further analysis, this study provides evidence that the opportunistic reversals are also associated with other earnings management manifestations, namely abnormal working capital accruals and the motivation to avoid earnings declines. In general, the findings suggest that the fair value measurement in impairment standard provides useful information to the users of financial statements.
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    Cash dividends and investor protection in Asia
    (Elsevier, 2013-03-26) Goyal, Abhinav; Muckley, Cal B.
    We study the importance of investor rights in payout policy determination in Asia, using a sample of up to 52,778 firm years. The listed Asian firms located in relatively high investor protection, common law countries, have a greater tendency to payout and, if they do so, they tend to pay out more. We also examine the importance of distinctive creditor and minority shareholder rights in respect to payout policy determination. In our study of a variety of payout events (decisions to pay out, to initiate or omit payout and to markedly increase or decrease payout), we show that this set of payout events is principally determined by competing creditor and minority shareholder rights, rather than managerial sought reputation related effects, to diminish the cost of capital. Our findings indicate that creditors exert significant and far reaching influence over corporate payout policy decision-making, however, the importance of the agency costs of equity predominates.
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    Investment incentives and valuation of power sector infrastructure assets with increasing interconnection, intermittency and decarbonisation
    (University College Cork, 2014) McInerney, Celine; Murphy, Ciaran; Bunn, Derek
    This dissertation applies a variety of quantitative methods to electricity and carbon market data, utility company accounts data, capital and operating costs to analyse some of the challenges associated with investment in energy assets. In particular, three distinct research topics are analysed within this general theme: the efficiency of interconnector trading, the optimal sizing of intermittent wind facilities and the impact of carbon pricing on the cost of capital for investors are researched in successive sections.
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    The asset pricing effects of UK market liquidity shocks: evidence from tick data
    (Elsevier, 2014-03) Foran, Jason; Hutchinson, Mark C.; O'Sullivan, Niall; Irish Research Council for Humanities and Social Sciences; University College Cork
    Using tick data covering a 12 year period including much of the recent financial crisis we provide an unprecedented examination of the relationship between liquidity and stock returns in the UK market. Previous research on liquidity using high frequency data omits the recent financial crisis and is focused on the US, which has a different market structure to the UK. We first construct several microstructure liquidity measures for FTSE All Share stocks, demonstrating that tick data reveal patterns in intra-day liquidity not observable with lower frequency daily data. Our asymptotic principal component analysis captures commonality in liquidity across stocks to construct systematic market liquidity factors. We find that cross-sectional differences in returns exist across portfolios sorted by liquidity risk. These are strongly robust to market, size and value risk. The inclusion of a momentum factor partially explains some of the liquidity premia but they remain statistically significant. However, during the crisis period a long liquidity risk strategy experiences significantly negative alphas.
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    Does the information content of payout initiations and omissions influence firm risks?
    (Elsevier, 2014-05-20) Von Eije, Henk; Goyal, Abhinav; Muckley, Cal B.
    We study the influence on firm risks of NASDAQ and NYSE firm payout initiations and omissions. These payout events can be interpreted as managerial signals of firm financial life-cycle maturation resulting in concomitant changes in firm risks. We remove confounding payout types and we match on the propensity to initiate or omit informed by determinants of payout known to investors in advance. For payout event and matched firms, we apply the difference-in-differences method to estimate the effect of the information content of actual initiations and omissions on firm risks. We find consistent significant declines in total, aggregate systematic, and idiosyncratic firm risks after cash dividend initiations and increases after dividend omissions, but only incidentally after share repurchase initiations and omissions.
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    Pairs trading in the UK equity market: risk and return
    (2014-09-11) Bowen, David A.; Hutchinson, Mark C.; Irish Research Council for the Humanities and Social Sciences
    In this paper, we provide the first comprehensive UK evidence on the profitability of the pairs trading strategy. Evidence suggests that the strategy performs well in crisis periods, so we control for both risk and liquidity to assess performance. To evaluate the effect of market frictions on the strategy, we use several estimates of transaction costs. We also present evidence on the performance of the strategy in different economic and market states. Our results show that pairs trading portfolios typically have little exposure to known equity risk factors such as market, size, value, momentum and reversal. However, a model controlling for risk and liquidity explains a far larger proportion of returns. Incorporating different assumptions about bid-ask spreads leads to reductions in performance estimates. When we allow for time-varying risk exposures, conditioned on the contemporaneous equity market return, risk-adjusted returns are generally not significantly different from zero.
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    Commonality in liquidity: An empirical examination of emerging order-driven equity and derivatives market
    (Elsevier, 2014-09-16) Syamala, Sudhakar Reddy; Reddy, V. Nagi; Goyal, Abhinav
    Using a sample of actively traded stocks and options from emerging order-driven market, this study examines and provides satisfactory evidence for the existence of commonality in liquidity for both spot and derivatives market. For equities, the market- and industry-wide commonality remain strong even after controlling for market returns and individual firm volatility and for options after accounting for the underlying stock market liquidity and implied volatility. Compared to the stock market, options market exhibit an increased commonality in liquidity with market capitalization. Here, information asymmetry acts as an important microstructure related source of commonality in liquidity across markets. The findings are robust across call and put options with negligible evidence of cross-sectional error correlation for all the liquidity measures.
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    Herding dynamics in exchange groups: Evidence from Euronext
    (Elsevier, 2014-12-04) Economou, Fotini; Gavriilidis, Konstantinos; Goyal, Abhinav; Kallinterakis, Vasileios
    This study investigates in the context of the Euronext, whether joining an exchange group affects herding in the group's member-markets and if this effect persists when accounting for various domestic and international market states, the dynamics of the group's member-markets and the outbreak of financial crises. We find that herding is significant post-merger in all four constituent equity markets (Belgium, France, the Netherlands and Portugal) of the Euronext, with herding in Portugal being significant (yet less strong) pre-merger as well. These results are robust when controlling for various domestic and international market states, as well as the dynamics of the group's markets. The period following the outbreak of the euro-zone sovereign debt crisis produces significant herding in Belgium, the Netherlands and Portugal, with this herding being motivated by the dynamics of the group's two largest markets (France and the Netherlands).
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    Liquidity commonality and pricing in UK equities
    (Elsevier B.V., 2015-01) Foran, Jason; Hutchinson, Mark C.; O'Sullivan, Niall
    We investigate the pricing of systematic liquidity risk in UK equities using a large sample of daily data. Employing four alternative measures of liquidity we first find strong evidence of commonality in liquidity across stocks. We apply asymptotic principal component analysis (PCA) on the sample of stocks to extract market or systematic liquidity factors. Previous research on systematic liquidity risk, estimated using PCA, is focused on the US, which has very different market structures to the UK. Our pricing results indicate that systematic liquidity risk is positively priced in the cross-section of stocks, specifically for the quoted spread liquidity measure. These findings around the pricing of systematic liquidity risk are not affected by the level of individual stock liquidity as a risk characteristic. However, counter-intuitively, we find that the latter is negatively priced in the cross-section of stocks, confirming earlier research.
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    Block-ownership structure, bank nominee director and crash-risk
    (Elsevier, 2015-07-13) Chauhan, Yogesh; Wadhwa, Kavita; Syamala, Sudhakar Reddy; Goyal, Abhinav
    We study the effect of outside block-ownership on the future firm-specific crash-risk of Indian firms. Major and dedicated block-owners play a significant role in aggravating the firm’s susceptibility towards crash-risk. Within a novel regulatory setup in India, where borrowing firms are entitled to a bank nominated board-member, we find an ancillary influence of bank nominee’s presence in dissipating block-owners influence on firm-level crash-risk. These results support the monitoring hypothesis in alleviating future firm-level crash-risk. Our results are robust to alternate model specifications, different crash-risk and block-ownership measures, clustering, and an array of control variables.
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    The global preference for dividends in declining markets
    (Wiley, 2015-10-23) Goldstein, Michael A.; Goyal, Abhinav; Lucey, Brian M.; Muckley, Cal B.
    Investors globally prefer dividend‐paying stocks over nondividend‐paying stocks more in declining than in advancing markets, even accounting for firm‐level growth opportunities, size and risk effects. Dividend‐paying stocks outperform nondividend‐paying stocks, from 0.63% (China) to 3.79% (Canada) more per month in declining than in advancing markets. In declining markets, dividend‐paying firms outperform by more than any underperformance in advancing markets. The results are robust across dividend taxation regimes, legal environments, emerging and developed markets, periods prior to and after the 2008 global financial crisis, the exclusion of the dividend declaration month and in respect to segmented or integrated international capital markets.
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    The quality of financial information in the extractive industries: a value relevance analysis
    (University College Cork, 2016) Power, Sean; Cleary, Peter; Donnelly, Raymond
    The extractive industry is characterized by high levels of risk and uncertainty. These attributes create challenges when applying traditional accounting concepts (such as the revenue recognition and matching concepts) to the preparation of financial statements in the industry. The International Accounting Standards Board (2010) states that the objective of general purpose financial statements is to provide useful financial information to assist the capital allocation decisions of existing and potential providers of capital. The usefulness of information is defined as being relevant and faithfully represented so as to best aid in the investment decisions of capital providers. Value relevance research utilizes adaptations of the Ohlson (1995) to assess the attribute of value relevance which is one part of the attributes resulting in useful information. This study firstly examines the value relevance of the financial information disclosed in the financial reports of extractive firms. The findings reveal that the value relevance of information disclosed in the financial reports depends on the circumstances of the firm including sector, size and profitability. Traditional accounting concepts such as the matching concept can be ineffective when applied to small firms who are primarily engaged in nonproduction activities that involve significant levels of uncertainty such as exploration activities or the development of sites. Standard setting bodies such as the International Accounting Standards Board and the Financial Accounting Standards Board have addressed the financial reporting challenges in the extractive industry by allowing a significant amount of accounting flexibility in industryspecific accounting standards, particularly in relation to the accounting treatment of exploration and evaluation expenditure. Therefore, secondly this study examines whether the choice of exploration accounting policy has an effect on the value relevance of information disclosed in the financial reports. The findings show that, in general, the Successful Efforts method produces value relevant information in the financial reports of profitable extractive firms. However, specifically in the oil & gas sector, the Full Cost method produces value relevant asset disclosures if the firm is lossmaking. This indicates that investors in production and non-production orientated firms have different information needs and these needs cannot be simultaneously fulfilled by a single accounting policy. In the mining sector, a preference by large profitable mining companies towards a more conservative policy than either the Full Cost or Successful Efforts methods does not result in more value relevant information being disclosed in the financial reports. This finding supports the fact that the qualitative characteristic of prudence is a form of bias which has a downward effect on asset values. The third aspect of this study is an examination of the effect of corporate governance on the value relevance of disclosures made in the financial reports of extractive firms. The findings show that the key factor influencing the value relevance of financial information is the ability of the directors to select accounting policies which reflect the economic substance of the particular circumstances facing the firms in an effective way. Corporate governance is found to have an effect on value relevance, particularly in the oil & gas sector. However, there is no significant difference between the exploration accounting policy choices made by directors of firms with good systems of corporate governance and those with weak systems of corporate governance.
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    An evaluation of the implications of the best interests of the child principle in the context of same-sex parenting in Ireland
    (University College Cork, 2016) Bracken, Lydia L.; O'Mahony, Conor; Department of Children and Youth Affairs, Ireland; Law, College of Business and Law, University College Cork
    Same-sex parenting is by no means a new phenomenon but the legal recognition and acceptance of gay and lesbian couples as parents is a relatively recent development in most countries. Traditionally, such recognition has been opposed on the basis of the claim that the best interests of children could not be met by gay and lesbian parents. This thesis examines the validity of this argument and it explores the true implications of the best interests principle in this context. The objective is to move away from subjective or moral conceptions of the best interests principle to an understanding which is informed by relevant sociological and psychological data and which is guided by reference to the rights contained in the UN Convention on the Rights of the Child. Using this perspective, the thesis addresses the overarching issue of whether the law should offer legal recognition and protection to gay and lesbian families and the more discrete matter of how legal protection should be provided. It is argued that the best interests principle can be used to demand that same-sex parenting arrangements should be afforded legal recognition and protection. Suggestions are also presented as to the most appropriate manner of providing for this recognition. In this regard, guidance is drawn from the English and South African experience in this area. Overall, the objective is to assess the current laws from the perspective of the best interests principle so as to ensure that the law operates in a manner which adheres to the rights and interests of children.
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    An examination of the mutual relationship between information & communications technology and democracy
    (University College Cork, 2016) Hayes, Martin; Murphy, Ciaran; Dockstader, Jason
    There is a widely held view that information and communications technology (ICT) has the potential to enhance democracy by enabling all citizens to participate actively in public affairs. Many theorists suggest that the drive to maximise participation in politics could lead to totalitarianism, while a certain level of apathy can provide political stability. Democracy is a middle way between totalitarianism and anarchy and pushing it too far in any of its attributes is likely to lead to its collapse. There is a complex web of relationships between bureaucracy, government and citizens with democracy and ICT weaving through them as they each take on different roles in society. The overreach of bureaucracy is becoming a major threat to the future of democracy today. Politics is about compromise and transforming conflict into cooperation. This is best achieved through face-to-face embodied interaction rather than through virtual channels although the latter can be valuable when used to support face-to-face meetings rather than as a substitute for them. With the possible exception of electricity, no other technology has transformed our society to the extent that ICT has done. Since the technology has such a strong impact on our lives and on society generally, we should have a say in its design and distribution. Even if we refuse to actively use the technology, it nevertheless affects our social environment and it is impossible to avoid becoming passive users. The question then arises as to whether ICT is a neutral, deterministic or an autonomous technology. Some theorists have proposed ways in which people could have a democratic input to the development of technology but it is difficult to find any who have focused on the disingenuous business model which ICT industry has adopted and which leaves no room for democratic input from users.