Conflict of Interests and Analysts' Forecast (이해상충과 애널리스트 예측)
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- KDI Journal of Economic Policy
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- v.31 no.1
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- pp.239-276
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- 2009
The paper investigates the possible relationship between earnings prediction by security analysts and special ownership ties that link security companies those analysts belong to and firms under analysis. "Security analysts" are known best for their role as information producers in stock markets where imperfect information is prevalent and transaction costs are high. In such a market, changes in the fundamental value of a company are not spontaneously reflected in the stock price, and the security analysts actively produce and distribute the relevant information crucial for the price mechanism to operate efficiently. Therefore, securing the fairness and accuracy of information they provide is very important for efficiencyof resource allocation as well as protection of investors who are excluded from the special relationship. Evidence of systematic distortion of information by the special tie naturally calls for regulatory intervention, if found. However, one cannot presuppose the existence of distorted information based on the common ownership between the appraiser and the appraisee. Reputation effect is especially cherished by security firms and among analysts as indispensable intangible asset in the industry, and the incentive to maintain good reputation by providing accurate earnings prediction may overweigh the incentive to offer favorable rating or stock recommendation for the firms that are affiliated by common ownership. This study shares the theme of existing literature concerning the effect of conflict of interests on the accuracy of analyst's predictions. This study, however, focuses on the potential conflict of interest situation that may originate from the Korea-specific ownership structure of large conglomerates. Utilizing an extensive database of analysts' reports provided by WiseFn(R) in Korea, we perform empirical analysis of potential relationship between earnings prediction and common ownership. We first analyzed the prediction bias index which tells how optimistic or friendly the analyst's prediction is compared to the realized earnings. It is shown that there exists no statistically significant relationship between the prediction bias and common ownership. This is a rather surprising result since it is observed that the frequency of positive prediction bias is higher with such ownership tie. Next, we analyzed the prediction accuracy index which shows how accurate the analyst's prediction is compared to the realized earnings regardless of its sign. It is also concluded that there is no significant association between the accuracy ofearnings prediction and special relationship. We interpret the results implying that market discipline based on reputation effect is working in Korean stock market in the sense that security companies do not seem to be influenced by an incentive to offer distorted information on affiliated firms. While many of the existing studies confirm the relationship between the ability of the analystand the accuracy of the analyst's prediction, these factors cannot be controlled in the above analysis due to the lack of relevant data. As an indirect way to examine the possibility that such relationship might have distorted the result, we perform an additional but identical analysis based on a sub-sample consisting only of reports by best analysts. The result also confirms the earlier conclusion that the common ownership structure does not affect the accuracy and bias of earnings prediction by the analyst.
Impulse purchasing is defined as an immediate purchase with no pre-shopping intentions. Previous studies of impulse buying have focused primarily on factors linked to marketing mix variables, situational factors, and consumer demographics and traits. In previous studies, marketing mix variables such as product category, product type, and atmospheric factors including advertising, coupons, sales events, promotional stimuli at the point of sale, and media format have been used to evaluate product information. Some authors have also focused on situational factors surrounding the consumer. Factors such as the availability of credit card usage, time available, transportability of the products, and the presence and number of shopping companions were found to have a positive impact on impulse buying and/or impulse tendency. Research has also been conducted to evaluate the effects of individual characteristics such as the age, gender, and educational level of the consumer, as well as perceived crowding, stimulation, and the need for touch, on impulse purchasing. In summary, previous studies have found that all products can be purchased impulsively (Vohs and Faber, 2007), that situational factors affect and/or at least facilitate impulse purchasing behavior, and that various individual traits are closely linked to impulse buying. The recent introduction of new distribution channels such as home shopping channels, discount stores, and Internet stores that are open 24 hours a day increases the probability of impulse purchasing. However, previous literature has focused predominantly on situational and marketing variables and thus studies that consider critical consumer characteristics are still lacking. To fill this gap in the literature, the present study builds on this third tradition of research and focuses on individual trait variables, which have rarely been studied. More specifically, the current study investigates whether impulse buying tendency has a positive impact on impulse buying behavior, and evaluates how consumer characteristics such as the need for cognitive closure (NFCC), psychological wellbeing, and susceptibility to interpersonal influences affect the tendency of consumers towards impulse buying. The survey results reveal that while consumer affective impulsivity has a strong positive impact on impulse buying behavior, cognitive impulsivity has no impact on impulse buying behavior. Furthermore, affective impulse buying tendency is driven by sub-components of NFCC such as decisiveness and discomfort with ambiguity, psychological wellbeing constructs such as environmental control and purpose in life, and by normative and informational influences. In addition, cognitive impulse tendency is driven by sub-components of NFCC such as decisiveness, discomfort with ambiguity, and close-mindedness, and the psychological wellbeing constructs of environmental control, as well as normative and informational influences. The present study has significant theoretical implications. First, affective impulsivity has a strong impact on impulse purchase behavior. Previous studies based on affectivity and flow theories proposed that low to moderate levels of impulsivity are driven by reduced self-control or a failure of self-regulatory mechanisms. The present study confirms the above proposition. Second, the present study also contributes to the literature by confirming that impulse buying tendency can be viewed as a two-dimensional concept with both affective and cognitive dimensions, and illustrates that impulse purchase behavior is explained mainly by affective impulsivity, not by cognitive impulsivity. Third, the current study accommodates new constructs such as psychological wellbeing and NFCC as potential influencing factors in the research model, thereby contributing to the existing literature. Fourth, by incorporating multi-dimensional concepts such as psychological wellbeing and NFCC, more diverse aspects of consumer information processing can be evaluated. Fifth, the current study also extends the existing literature by confirming the two competing routes of normative and informational influences. Normative influence occurs when individuals conform to the expectations of others or to enhance his/her self-image. Whereas informational influence occurs when individuals search for information from knowledgeable others or making inferences based upon observations of the behavior of others. The present study shows that these two competing routes of social influence can be attributed to different sources of influence power. The current study also has many practical implications. First, it suggests that people with affective impulsivity may be primary targets to whom companies should pay closer attention. Cultivating a more amenable and mood-elevating shopping environment will appeal to this segment. Second, the present results demonstrate that NFCC is closely related to the cognitive dimension of impulsivity. These people are driven by careless thoughts, not by feelings or excitement. Rational advertising at the point of purchase will attract these customers. Third, people susceptible to normative influences are another potential target market. Retailers and manufacturers could appeal to this segment by advertising their products and/or services as products that can be used to identify with or conform to the expectations of others in the aspiration group. However, retailers should avoid targeting people susceptible to informational influences as a segment market. These people are engaged in an extensive information search relevant to their purchase, and therefore more elaborate, long-term rational advertising messages, which can be internalized into these consumers' thought processes, will appeal to this segment. The current findings should be interpreted with caution for several reasons. The study used a small convenience sample, and only investigated behavior in two dimensions. Accordingly, future studies should incorporate a sample with more diverse characteristics and measure different aspects of behavior. Future studies should also investigate personality traits closely related to affectivity theories. Trait variables such as sensory curiosity, interpersonal curiosity, and atmospheric responsiveness are interesting areas for future investigation.
While examining the religious ideas implied by Jeungsan's Great Works of the Reordering of Universe, we find special ideas which cannot be found in any other religions, and these ideas are presented in diverse ways. Most of all, the representative idea is that of human nobility; a distinctive idea which makes Daesoonjinrihoe different from other religions. Thus, this research focuses on the following questions: when was Human Nobility concretely realized? What kind of organic relationship does human nobility have between the divine world and the world of humanity? In light of the forthcoming Era of Human Nobility, what are some concrete images which can be drawn from the interaction between the realms of heaven and humanity wherein preordinations are plotted in heaven and then carried out by humankind? Prior to formulating my own sense of the subject matter, I consulted 43 previous discussions and dissertations and arranged them chronologically so as to examine their correlation. From these sources and my own insights, I was able to gain a sense of the starting point of the era of human nobility and its tenor. I have found the following problems in previous research on the uniqueness and distinctness of human nobility: ①The conceptual undertones of human nobility have not been adequately gleaned. ②There do not seem to be any dissertations which examine the way in which human nobility is connected with the doctrines of the creative conjunction between yin and yang, the harmonious union of divine beings and human beings, and the resolution of grievances for mutual beneficence. ③In most dissertations, not only is the starting point of the Era of Human Nobility regarded as concurrent with the start of the 50,000 years of earthly paradise in the Later World, but also the point of division between the former world and the later world is widely disputed. ④In-depth and fully realized studies dealing with the subject of human nobility are not easily found. ⑤There is little sense of progression in the research on human nobility because scholars are not sufficiently engage with one another to achieve common consensus. Therefore, in this dissertation, I have provided answers to the problems I discovered in previous research. I have developed my own tenor as follows: ①By giving priority to the Jeongyeong, I have closely investigated the period which divides the Former World and the Later World. Then, I produced a chronological timeline to demonstrate the progression: the Former World → the Era of the Resolution of Grievances → the Later World. This aids in the comprehension of human nobility. ②The Era of Human Nobility was preceeded by the opening of the Era of the Resolution of Grievances of human world which began in 1901. Human nobility is stipulated as a regulatory system for the universe set in motion by the opening the Era of Resolution of Grievances. ③While synthetically examining the aspects of transition which enable the Ear of Human Nobility to be realized, the period to be studied is stipulated as beginning from 1901 and ending at the start of the Later World. The subjects are defined as the flowing from Jeungsan, the first leader of human nobility, to the noble individuals empowered by Dao and the noble populace. In the Era of Human Nobility, studying the transition process by which human nobility is realized requires delving into the resolution of grievances. Although this method is essential to understanding Daesoon ideas, in actuality it does not hinge upon speculative exegetical theorizing but instead it was gained through eisegetical rigor.
The goal of this article is to examine the connection between creativity of unconscious and religion. Jung criticized how Freud's approach in studying the unconscious as a scientific inquiry focuses on the unconscious as reflecting only those which is repressed by the ego. Jung conceived of the unconscious as encompassing not only the repressed but also the variety of other psychic materials that have not reached the threshold of the consciousness in its range. Moreover, since human psyche is as individualistic as is a collective phenomenon, the collective psyche is thought to be pervasive at the bottom of the psychic functioning and the conscious and the personal unconscious comprising the upper level of the psychic functioning. Through clinical and personal experience, Jung had come to a realization that the unconscious has the self-regulatory function. The unconscious can make "demands" and also can retract its demands. Jung saw this as the autonomous function of the unconscious. And this autonomous unconscious creates, through dreams and fantasies, images that include an abundance of ideas and feelings. These creative images the unconscious produces assist and lead the "individuation process" which leads to the discovery of the Self. Because this unconscious process compensates the conscious ego, it has the necessary ingredients for self-regulation and can function in a creative and autonomous fashion. Jung saw religion as a special attitude of human psyche, which can be explained by careful and diligent observation about a dynamic being or action, which Rudolph Otto called the Numinosum. This kind of being or action does not get elicited by artificial or willful action. On the contrary, it takes a hold and dominates the human subject. Jung distinguished between religion and religious sector or denomination. He explained religious sector as reflecting the contents of sanctified and indoctrinated religious experiences. It is fixated in the complex organization of ritualized thoughts. And this ritualization gives rise to a system that is fixated. There is a clear goal in the religious sector to replace intellectual experiences with firmly established dogma and rituals. Religion as Jung experienced is the attitude of contemplation about Numinosum, which is formed by the images of the collective unconscious that is propelled by the creativity and autonomy of the unconscious. Religious sector is a religious community that is formed by these images that are ritualized. Jung saw religion as the relationship with the best or the uttermost value. And this relationship has a duality of being involuntary and reflecting free will. Therefore people can be influenced by one value, overcome with the unconscious being charged with psychic energy, or could accept it on a conscious level. Jung saw God as the dominating psychic element among humans or that psychic reality itself. Although Jung grew up in the atmosphere of the traditional Swiss reformed church, it does not seem that he considered himself to be a devoted Christian. To Jung, Christianity is a habitual, ritualized institution, which lacked vitality because it did not have the intellectual honesty or spiritual energy. However, Jung's encounter with the dramatic religious experience at age 12 through hallucination led him to perceive the existence of living god in his unconscious. This is why the theological questions and religious problems in everyday life became Jung's life-long interest. To this author, the reason why Jung delved into problems with religion has to do with his personal interest and love for the revival of the Christian church which had lost its spiritual vitality and depth and had become heavily ritualized.
With the continued globalization of world markets, transfer pricing has become one of the dominant sources of controversy in international taxation. Transfer pricing is the process by which a multinational corporation calculates a price for goods and services that are transferred to affiliated entities. Consider a Korean electronic enterprise that buys supplies from its own subsidiary located in China. How much the Korean parent company pays its subsidiary will determine how much profit the Chinese unit reports in local taxes. If the parent company pays above normal market prices, it may appear to have a poor profit, even if the group as a whole shows a respectable profit margin. In this way, transfer prices impact the taxable income reported in each country in which the multinational enterprise operates. It's importance lies in that around 60% of international trade involves transactions between two related parts of multinationals, according to the OECD. Multinational enterprises (hereafter MEs) exert much effort into utilizing organizational advantages to make global investments. MEs wish to minimize their tax burden. So MEs spend a fortune on economists and accountants to justify transfer prices that suit their tax needs. On the contrary, local governments are not prepared to cope with MEs' powerful financial instruments. Tax authorities in each country wish to ensure that the tax base of any ME is divided fairly. Thus, both tax authorities and MEs have a vested interest in the way in which a transfer price is determined, and this is why MEs' international transfer prices are at the center of disputes concerned with taxation. Transfer pricing issues and practices are sometimes difficult to control for regulators because the tax administration does not have enough staffs with the knowledge and resources necessary to understand them. The authors examine transfer pricing practices to provide relevant resources useful in designing tax incentives and regulation schemes for policy makers. This study focuses on identifying the relevant business and environmental factors that could influence the international transfer pricing of MEs. In this perspective, we empirically investigate how the management perception of related variables influences their choice of international transfer pricing methods. We believe that this research is particularly useful in the design of tax policy. Because it can concentrate on a few selected factors in consideration of the limited budget of the tax administration with assistance of this research. Data is composed of questionnaire responses from foreign firms in Korea with investment balances exceeding one million dollars in the end of 2004. We mailed questionnaires to 861 managers in charge of the accounting departments of each company, resulting in 121 valid responses. Seventy six percent of the sample firms are classified as small and medium sized enterprises with assets below 100 billion Korean won. Reviewing transfer pricing methods, cost-based transfer pricing is most popular showing that 60 firms have adopted it. The market-based method is used by 31 firms, and 13 firms have reported the resale-pricing method. Regarding the nationalities of foreign investors, the Japanese and the Americans constitute most of the sample. Logistic regressions have been performed for statistical analysis. The dependent variable is binary in that whether the method of international transfer pricing is a market-based method or a cost-based method. This type of binary classification is founded on the belief that the market-based method is evaluated as the relatively objective way of pricing compared with the cost-based methods. Cost-based pricing is assumed to give mangers flexibility in transfer pricing decisions. Therefore, local regulatory agencies are thought to prefer market-based pricing over cost-based pricing. Independent variables are composed of eight factors such as corporate tax rate, tariffs, relations with local tax authorities, tax audit, equity ratios of local investors, volume of internal trade, sales volume, and product life cycle. The first four variables are included in the model because taxation lies in the center of transfer pricing disputes. So identifying the impact of these variables in Korean business environments is much needed. Equity ratio is included to represent the interest of local partners. Volume of internal trade was sometimes employed in previous research to check the pricing behavior of managers, so we have followed these footsteps in this paper. Product life cycle is used as a surrogate of competition in local markets. Control variables are firm size and nationality of foreign investors. Firm size is controlled using dummy variables in that whether or not the specific firm is small and medium sized. This is because some researchers report that big firms show different behaviors compared with small and medium sized firms in transfer pricing. The other control variable is also expressed in dummy variable showing if the entrepreneur is the American or not. That's because some prior studies conclude that the American management style is different in that they limit branch manger's freedom of decision. Reviewing the statistical results, we have found that managers prefer the cost-based method over the market-based method as the importance of corporate taxes and tariffs increase. This result means that managers need flexibility to lessen the tax burden when they feel taxes are important. They also prefer the cost-based method as the product life cycle matures, which means that they support subsidiaries in local market competition using cost-based transfer pricing. On the contrary, as the relationship with local tax authorities becomes more important, managers prefer the market-based method. That is because market-based pricing is a better way to maintain good relations with the tax officials. Other variables like tax audit, volume of internal transactions, sales volume, and local equity ratio have shown only insignificant influence. Additionally, we have replaced two tax variables(corporate taxes and tariffs) with the data showing top marginal tax rate and mean tariff rates of each country, and have performed another regression to find if we could get different results compared with the former one. As a consequence, we have found something different on the part of mean tariffs, that shows only an insignificant influence on the dependent variable. We guess that each company in the sample pays tariffs with a specific rate applied only for one's own company, which could be located far from mean tariff rates. Therefore we have concluded we need a more detailed data that shows the tariffs of each company if we want to check the role of this variable. Considering that the present paper has heavily relied on questionnaires, an effort to build a reliable data base is needed for enhancing the research reliability.