IJAISL - International Journal of Accounting Information Science and Leadership

Volume: 5, Issue: 13

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• WHAT DRIVES THE UNDERPRICING OF VENTURE CAPITAL BACKED IPOS?
  Author(s): Donald Flagg, Jianping Qi and Hong Wan
  

WHAT DRIVES THE UNDERPRICING OF VENTURE CAPITAL BACKED IPOS?

Author(s): Donald Flagg, Jianping Qi and Hong Wan

This paper investigates the differential underpricing of IPOs with and without venture capital backing. The previous literature in the area has found mixed results when measuring the difference in underpricing between venture capital backed and non-venture capital backed IPOs. To reconcile these differences we focus on two potential incentive conflicts of venture capitalists during the IPO process. One is related to the grandstanding theory proposed by Gompers (1996). Gompers suggests that less well-established VCs may rapidly bring private firms public, so as to prove their capability to prospective clients and to secure future funding. The other is related to the spinning hypothesis suggested by Loughran and Ritter (2004). In the spinning theory, VCs may agree to underwriters' preference for a higher underpricing of the offering in exchange for promised allocations of future "hot" IPO shares from the same underwriters. Our evidence is consistent with such incentive conflicts leading to the greater underpricing of venture backed IPOs. After controlling for both grandstanding and spinning, we find underpricing to be lower for venture backed IPOs. This supports previous research on the certification effect of venture capital funding and connects the separation in the literature. Our results are robust to the endogenous choice of venture funding. We also show the apparent effectiveness of the spinning regulation in 2003.

Keywords: IPO Underpricing, Venture Capital, Grandstanding, Spinning, Incentive Conflicts.

JEL Classification Code: G24.



• MERGER & ACQUISITION BLINDNESS TO INTEGRATION: PRE- AND POST- ASSESSMENT
  Author(s): J.D. Williams
  

MERGER & ACQUISITION BLINDNESS TO INTEGRATION: PRE- AND POST- ASSESSMENT

Author(s): J.D. Williams

It would seem that the prime directive for corporate growth has been through merger and acquisition as evidenced by the thousands of mergers that have taken place over this past decade. This research will not challenge the rationale of M&A mania, although some manuscripts should. This paper has uncovered a set of blemish in the M&A process that may have "blinded" corporations in focusing upon the financial and managerial sectors as the merger and acquisition central mechanism. While this central mechanism has deliberated on determining the M&A cost-benefits of the joint relationship, the role of marketing integration was, for the most part, left out.

Keywords: Marketing Management, Finance, Merger & Acquisitions.



• HOW ECONOMIC AND PERSONAL FREEDOM AFFECT THE FISCAL CONDITION OF THE 50 STATES
  Author(s): Bradley D Childs, Howard H. Cochran Jr. and Marieta V. Velikova
  

HOW ECONOMIC AND PERSONAL FREEDOM AFFECT THE FISCAL CONDITION OF THE 50 STATES

Author(s): Bradley D Childs, Howard H. Cochran Jr. and Marieta V. Velikova

Emerging research is showing how freedom is linked to economic conditions of nations. Currently, freedom indices are being compiled for the fifty states. This study examines how measures of economic freedom and personal freedom are related to the surpluses and deficits for the fifty states from 2003 through 2010. While controlling for unemployment rates, this study demonstrates a positive relation between measures of freedom and the fiscal condition of the states. In other words, the regression results are significant for the idea that greater economic freedom for a state is associated with a greater surplus or lesser deficit for that state. Also, greater personal freedom is associated with a greater surplus or lesser deficit.

Keywords: Public Economics, State Government, Taxation, Revenue, Budget, Economic Freedom, Personal Freedom.



• QUESTIONS ABOUT THE CHANGING RELATIONSHIP BETWEEN TOTAL RESERVES (OR THE MONETARY BASE), M1, AND REAL GDP IN THE U.S.
  Author(s): Harrison C. Hartman
  

QUESTIONS ABOUT THE CHANGING RELATIONSHIP BETWEEN TOTAL RESERVES (OR THE MONETARY BASE), M1, AND REAL GDP IN THE U.S.

Author(s): Harrison C. Hartman

This study investigates whether a change in the relationship between total reserves held by banks, the M1 money supply, and real GDP (all in natural log form) has occurred. To address this issue, the study uses the Johansen (1991 and 1995) method of cointegration testing. Cointegration test results indicate that (of the cases considered) with a sample period beginning in 1959 but ending no later than the first quarter of 1995, the variables are cointegrated at the five per cent level. However, if the sample period begins in 1959 but ends later than the third quarter of 1995, cointegration is no longer found at either the five per cent or ten per cent levels, at least for the cases considered. The end of the cointegration between the natural logs of total reserves, M1, and real GDP occurred more than a decade before the recent financial crisis in the United States. Thus, what are some of the possible causes for the cointegrating relationship to cease? Could it be that as technology has improved and as some of those improvements have impacted the financial system, it became possible to finance a greater level of real GDP with a smaller number of dollars (and a smaller quantity of total reserves)? Did an increase in leveraging and off-balance-sheet transactions contribute to a change in the relationship between the variables? These possible explanations and other potential explanations could have caused a change in the ratios of currency to checkable deposits held by the public, excess reserves to deposits chosen by banks, and required reserves to deposits. A breakdown in the stability of any one of these ratios could end cointegration between total reserves, M1, and real GDP. Additionally, the study finds cointegration between the natural logs of the monetary base, M1, and real GDP in the United States for a sub-sample period ending with the second quarter of 2008. However, the study fails to find cointegration between the natural logs of the monetary base, M1, and real GDP in the U.S. if the sample period ends with the fourth quarter of 2011. Events related to the recent financial crisis could have caused a breakdown in the cointegration between the natural logs of total reserves, M1, and real GDP in the U.S.

Keywords: Total Reserves, Monetary Base, Financial Crisis, Macroeconomics, Real GDP, M1, Cointegration, Money Multiplier.



• KEY PERFORMANCE MEASUREMENT AND LEAN ENTERPRISE INITIATIVES IMPACT ON DEFENSE CONTRACTORS
  Author(s): Elmer R. Humbert, Ron Mesia, Thomas Griffin and H. Nathan Charles
  

KEY PERFORMANCE MEASUREMENT AND LEAN ENTERPRISE INITIATIVES IMPACT ON DEFENSE CONTRACTORS

Author(s): Elmer R. Humbert, Ron Mesia, Thomas Griffin and H. Nathan Charles

Lean Enterprise Initiatives (LEIs) have been applied to commercial large volume manufacturing processes with minimal variation, such as those found in the automobile and aerospace industries, with continued success, Murman, et al., (2002) The study showed that there was some correlation achieved by applying LEIs such as: value stream analysis, supply chain management, total quality management, six sigma, ISO certifications, continuous improvements, and process reduction initiatives to low volume manufacturing processes with multiple variations typically found in the defense industry. This research showed the impact of applying these LEIs by defense contractors and investigating the changes they have on Key Performance Measures (KPMs) such as: financial, manufacturing methods, quality management, and environmental management. The research found useful information to the senior leadership of defense contractors, the Department of Defense (DoD), and other organizations by discovering that a correlation exists when defense contractors implement these LEIs and impacts to KPMs.

Keywords: Lean, KPM, Department of Defense, Supply Chain, Defense Contractors.