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2757 items in total found

Working Papers | 2016

Auditors' Consideration of Material Income-increasing versus Material Income-decreasing Items: Are Conservatism and Risk affected by Company Level Information?

Naman Desai

Auditors tend to focus more on income-increasing items compared to income-decreasing items because they are trained to be more conservative and also because the risk of litigation is significantly higher for failing to detect material income-increasing items compared to material income-decreasing items. Auditors' consideration of transaction level items is also affected by their evaluation of company level information. In this study we examine how the interaction between company level information and sign of the material items affect auditors' evaluation of income-increasing and income-decreasing items. The results indicate that in the absence of company level information, auditors intuitively associate a higher risk and audit effort to income-increasing items. When the company level information indicates that management is under pressure to inflate earnings, auditor conservatism and risk associated with income-increasing items gets amplified leading to an increase in the difference in assessed risk and audit effort between income-increasing and decreasing items. However, when the company level information indicates that management is not under pressure to inflate earnings, there are no significant differences in assessed risk and audit effort between income-increasing and income-decreasing items. These results indicate that auditor conservatism is affected by company level information

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Working Papers | 2016

An Introduction to the Aluminum Industry and Survey of OR Applications in an Integrated Aluminum Plant

Payal Apujani, Goutam Dutta, and Narain Gupta

Worldwide, the manufacturing industry is now aiming for competitive advantage and increased profits. To remain competitive, a manufacturing company needs to use tools that provide it with a distinctive competitive edge. This research first discusses the manufacturing process of aluminum, the world and the Indian aluminum industry, technological changes in the aluminum industry. In the second part we discuss a literature survey of various operation research models in the aluminum industry. The survey has been done through the published research works from 1967 till the present year. The purpose of this study is to survey models which are related to the aluminum industry either in methodology or in practice. The study lists the opportunities for OR/MS in the aluminum industry and the major challenging areas for research. It also motivates researchers to explore more such problems in operations research and management science related to aluminum manufacturing.

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Working Papers | 2016

Examination of Affordable Housing Policies in India

Anindo Sarkar, Udayan Dhavalikar, Vikram Agrawal, and Sebastian Morris

In this paper we critique the Government of Indias programmes for affordable housing in India, namely the Rajiv Awas Yojana and Housing for All 2022. We analyse the efficacy of these policies in being able to provide thee sections of the population who are unable to avail housing from the formal market, both through direct support and most importantly in addressing the many distortions that have made the housing unnecessarily expensive, while taking away much of the value to consumers. We argue that while these programmes and policies are a major advancement over the previous approaches, they do not fully exploit the potential that is there in increased FSI, sensitivity of low cost housing development to exploiting locational value appropriately, to use of government land judiciously, to the reform of titles and squatter rights, and to more efficient land use changes. They are also constrained by an inability to distinguish between what the markets can be coaxed to deliver and where state intervention becomes necessary.

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Working Papers | 2016

Is "Make in India" constrained by Indian Labour Market Regulations?

Ajeet N. Mathur

This paper examines whether "Make in India" policies are constrained by over-regulation or under-regulation in the Indian labour market. Specific labour law provisions and the scope of circumventing them as evidenced from strategy-as-practised are analysed. The paper concludes that the Indian Labour Market is undergoverned and over-controlled because: (1) the nature of implicit "quid pro quo" grant of oligopolistic protection in the product market in the license raj period against reciprocal guarantees of lifelong employment protection has been nullified without being jettisoned from the tripartite frame; (2) the weakened countervailing power of trade unions has affected social dialogue required to balance the interests of organized and unorganized workers, and (3) the failure of successive governments to put employment in mission mode has shrunk the real price of skilled labour to unprecedented lows and in some cases even below statutory minimum wages. Skill premia in wages required for quality cannot be sustained in conditions akin to chattel slavery due to underregulation and the pace of change required cannot be attained in scale economies due to overregulation.

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Working Papers | 2016

Comparing Genetic Algorithm Crossover and Mutation Operators for the Indexing Problem

Diptesh Ghosh

The tool indexing problem is one of allocating tools to slots in a tool magazine so as to
minimize the tool change time in automated machining. Genetic algorithms have been suggested
in the literature to solve this problem, but the reasons behind the choice of operators for those
algorithms are unclear. In this paper we compare the performances of four common crossover
operators and four common mutation operators to find the one most suited for the problem.
Our experiments show that the choice of operators for the genetic algorithms presented in the
literature is suboptimal.

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Working Papers | 2016

Do managers manipulate gross profits? Role of product market competition

Neerav Nagar

Gross profits being a part of the sustainable profits of the firm are monitored by investors and analysts. This study examines whether managers manipulate gross profits by misclassifying costs of goods sold as other operating expenses. The paper also tests whether the level of competition in the product market intensifies such misclassification, as managers in more competitive industries face declining margins, more capital market pressures, and are more concerned about their careers. Using data from the United States, the paper presents evidence that managers do engage in such misclassification and the firms in more competitive industries are more likely to do so. The study thus sheds light on an earnings management tool that is used to manipulate an important performance indicator, and also shows the adverse effects of product market competition.

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Working Papers | 2016

Stewardship Value of Income Statement Classifications: An Empirical Examination

Neerav Nagar and Avinash Arya

A classified income statement has up to four distinct components of earnings - income from continuing operations, special items, discontinued operations, and extraordinary items. This study investigates how persistence and controllability affect the stewardship role of earnings components. The results correspond to our intuition regarding persistence and controllability of earnings components. Among above the line items, income from continuing items, the most persistent item, also receives the most weight, followed by special items which have smaller persistence. Among below the line items, discontinued items, which are at least under partial control of the CEO receive a positive weight while extraordinary items, which are largely beyond the control of the CEO, are filtered in compensation. Since special items make up the vast majority of nonrecurring items, we select them for further analysis. It appears that compensation committees modify the weight on special items based on their frequency and historical pattern. When we disaggregate special items by type we find that some items flow through to compensation while others are filtered. Combining disparate item into one, as has been done in prior literature may mask their true economic significance.

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Working Papers | 2016

Classification Shifting: Do Managers' Real Actions Matter?

Neerav Nagar and Kaustav Sen

McVay (2006) presents evidence that managers inflate core earnings by shifting operating expenses to special items. In this paper, we improve her model to estimate core earnings by controlling for a firm's fundamental operating performance effectively. McVay (2006) suggests that poorly performing firms, which are more likely to report income-decreasing special items, may elect to temporarily reduce discretionary spending leading to a positive association between income-decreasing special items and unexpected core earnings. This positive association may then be incorrectly inferred as evidence of classification shifting. Hence, we control for those managerial actions which can impact the level of discretionary expenses and inventory, in order to estimate unexpected core earnings. Using the modified model, which exhibits better explanatory and forecasting power, we continue to find evidence of classification shifting for our full sample (1990-2010). Focusing on financial distress, we also show that McVay's (2006) model seems to overstate magnitude of shifting due to insufficient control for performance, and likelihood of presence of poorly performing firms in the sample. Further, her model doesn't capture classification shifting using shiftable income-decreasing special items, while the model proposed is able to do so. When we use special item subtypes reported by Compustat from 2001 onwards, we find that classification shifting continues to exist in the recent period (2001-2010) and in fact, its magnitude has increased. Overall, the proposed model improves identification and understanding of classification shifting.

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Working Papers | 2016

Cash Flow Manipulation in State-owned Enterprises

Neerav Nagar and Jaskiran Arora

Manuscript Type: Empirical
Research Question/Issue: We examine whether the state-owned enterprises (SOEs) are more likely to manipulate operating cash flows than private-owned enterprises (POEs). We also test whether the financially distressed SOEs are more likely to exhibit such manipulation.
Research Findings/Insights: Consistent with the arguments about SOEs being inefficient, we find that these are more likely to manipulate operating cash flows than POEs. Our results suggest that SOEs are likely to upward manage reported cash flows by about 6-8% more as compared to POEs. This manipulation in SOEs increases with profitability on one hand and with financial distress on the other i.e. SOEs with higher profitability and higher financial distress demonstrate higher cash manipulations.
Theoretical/Academic Implications: There is dearth of literature on cash flow manipulation and none that presents the evidence on such manipulation by SOEs. The literature shows that firms manipulate cash flows from operations (Lee, 2012; Hollie et al., 2011), and SOEs are more likely to manage earnings (Ding et al. 2007; Wang & Yung, 2011; Liu et al., 2014). We link both sets of literature and present first evidence that SOEs are more likely to upward manage cash flows from operations as compared to POEs.
Practitioner/Policy Implications: Our findings should be of interest to policy makers and accounting standards-setting bodies in emerging markets, suggesting that there is a need to pay closer attention to cash flow reporting practices of SOEs. This might also help the State
to develop a redressal mechanism by bringing about changes in the practices and policies governing SOEs.

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Working Papers | 2016

Sensemaking and Institutionalization in Armed Conflict: Applying Concepts to Practice

Kirti Sharda

The aim of this paper was to capture the sensemaking process employed by soldiers to cope with the challenges presented to them by the environment in which they are operating. The research identified the various individual and situational variables that impacted the sensemaking process and how they moderated the intensity of work and non-work pressures experienced by soldiers. A combination of exploratory and descriptive research design was used to investigate the research objectives.The researcher used a grounded theory approach to capture and analyse the narratives of security forces. This study revealed that soldiers' sensemaking processes were organized around the following themes: identity, work, significance, feelings, dealing with stress, and dealing with excesses and aberrations. Further, the role of institutional practices in sensemaking processes remains underexamined, and most of the available research uses anecdotal or atheoretical approach, the current study addresses both a theoretical and an important empirical gap. It demonstrates that institutions provide building blocks and actively direct action formation, as well as moderate the sensemaking process to help employees cope with attendant pressures in a better manner and guide their behaviour in exceptional situations.

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