Earnings and book value are commonly used as the basis for firm valuation. However, the reliability of earnings, as indicated by earnings management, may affect its relevance in determining firm value. This thesis investigates the link between earnings management and firm valuation by assessing the impact of earnings management on the value-relevance of earnings and book value.Three different sources of earnings management are investigated: total discretionary accruals, short-term discretionary accruals, and long-term discretionary accruals. Total discretionary accruals are estimated using the Jones model (Jones 1991). New models are developed to estimate short-term and long-term discretionary accruals. These models enable investigation of the differential impact of earnings management via short-term versus earnings management via long-term discretionary accruals. The primary proposition is that earnings management via long-term discretionary accruals has a greater impact on the value-relevance of earnings and book value than earnings management via short-term discretionary accruals.For firm’s whose discretionary accruals indicate earnings management, the value relevance of earnings is expected to be lower than for firms without earnings management. Moreover, in the presence of earnings management, it is expected that there will be a shift from a reliance on earnings to a reliance on book value in the valuation process. This would be reflected in a decrease in the value-relevance of earnings and an increase in the value-relevance of book value.This thesis provides evidence that earnings management plays a role in the valuation process. A major contribution of this study is the development of models to enable the estimation of short-term and long-term discretionary accruals, thereby extending the earnings management literature by addressing the differential effect of short-term versus long-term discretionary accruals. The results clearly demonstrate that low reliability of information reduces its value-relevance. This link between the integrity of accounting information and its usefulness to market participants supports the need for ongoing regulatory activity to improve the integrity of the financial reporting process.

This thesis examines the relationship between corporate governance, risk assessment and debt contracting within the Australian context where companies are heavily reliant on intermediated debt financing.

Earnings and book value are commonly used as the basis for firm valuation. However, the reliability of earnings, as indicated by earnings management, may affect its relevance in determining firm value. This thesis investigates the link between earnings management and firm valuation by assessing the impact of earnings management on the value-relevance of earnings and book value.Three different sources of earnings management are investigated: total discretionary accruals, short-term discretionary accruals, and long-term discretionary accruals. Total discretionary accruals are estimated using the Jones model (Jones 1991). New models are developed to estimate short-term and long-term discretionary accruals. These models enable investigation of the differential impact of earnings management via short-term versus earnings management via long-term discretionary accruals. The primary proposition is that earnings management via long-term discretionary accruals has a greater impact on the value-relevance of earnings and book value than earnings management via short-term discretionary accruals.For firm’s whose discretionary accruals indicate earnings management, the value relevance of earnings is expected to be lower than for firms without earnings management. Moreover, in the presence of earnings management, it is expected that there will be a shift from a reliance on earnings to a reliance on book value in the valuation process. This would be reflected in a decrease in the value-relevance of earnings and an increase in the value-relevance of book value.This thesis provides evidence that earnings management plays a role in the valuation process. A major contribution of this study is the development of models to enable the estimation of short-term and long-term discretionary accruals, thereby extending the earnings management literature by addressing the differential effect of short-term versus long-term discretionary accruals. The results clearly demonstrate that low reliability of information reduces its value-relevance. This link between the integrity of accounting information and its usefulness to market participants supports the need for ongoing regulatory activity to improve the integrity of the financial reporting process.

Doctor of Philosophy / Department of Hotel, Restaurant, Institution Management and Dietetics / SooCheong Jang / Deborah D. Canter / In the last few decades, franchising has become a part of everyday life in the United States. Many firms in a variety of industries have adopted franchising as a method of doing business. Despite the importance of franchising, the literature on why firms initially choose to franchise and how franchising affects financial performance has been scant (Combs et al., 2004; Watson et al., 2005). The purposes of this study were 1) to examine how well agency theory, resource scarcity theory, risk-sharing theory, and specific knowledge theory justify the franchising decision, 2) to investigate whether franchising affects restaurant firms' market value and profitability, and 3) to investigate the relationship between the ownership mix, combination of franchised and company-owned outlets, and financial performance. For the statistical analysis, the data were collected from the Standard and Poor's COMPUSTAT database, Bond's Franchise Guide and 10 K reports. A logistic regression model was developed to identify a set of variables that best differentiated firms engaged in franchise contracts from those that were not. The statistical results indicated that: 1) Young and growing firms used franchise more to increase the flow of resources. This result supported resource scarcity theory. 2) The degree of geographic dispersion and involvement in foreign countries increased the probability of a firm's decision to franchise. These results supported agency theory. 3) The decrease of specific knowledge requirements increased the franchising probability. This result supported specific knowledge theory. T-tests and multivariate regression models were used to test how franchising affects firms' financial performance. The findings indicated that 1) franchised firms had better financial performance than non-franchised firms, 2) the relationship between ownership mix and financial performance was curvilinear and the inverted U-shaped relationship suggested the existence of optimal ownership mix that can maximize a firm's financial performance, and 3) ownership mix not only directly affected a firm's intangible assets, but also indirectly affected a firm's intangible assets through advertising. This study found that a purely company owned or a purely franchised chain did not produce the best financial performance. Restaurant companies could use both company-owned and franchised units to leverage the strengths of one another, which will yield a better overall financial performance than if either structure was to operate alone.

Master of Agribusiness / Department of Agricultural Economics / David G. Barton / The goal of this thesis was to help Farmers Cooperative Equity Company (FCE) remain a firm, stable cooperative while increasing wealth of their patron owners. This thesis evaluated alternative equity redemption strategies to help FCE decide what decisions need to be made for proper use of equity for financing assets and increasing patronage returns. To develop an understanding of FCE and their current financial structures, we looked at the history of FCE and cooperatives in general. Then we gave a brief background of financial performance measures that were used to evaluate the profitability, solvency, liquidity, and efficiency of FCE. A cooperative performance profile was then run on FCE, by using a financial analysis program called PERFORM, to compare it to other agriculture cooperatives. The results for FCE were very strong in that they were performing at or above the 50th percentile range for many of the measures examined. FCE appears to be a very profitable, liquid, solvent, and efficient cooperative. We then used the results provided by the financial analysis program called PERFORM to make financial projections for the future to evaluate alternative equity redemption strategies for FCE. A computer program called FINPLAN was used to make the financial projections and evaluate the alternative equity redemption strategies. Five different strategies were evaluated and compared to the status quo, “strategy S0,” business as usual. The results showed that if the projections made for the future are correct, FCE would be able to return larger redemptions to patron owners by implementing an alternative equity redemption strategy that adheres to strict balance sheet management. Balance sheet management requires a cooperative to meet predetermined solvency and liquidity goals and then distributes the residual equity over and above that needed to finance assets, in combination with debt, as the equity redemption budget for that year. FCE could return larger redemptions while financing their operations through the use of patron equity and then return excess equity to patrons based upon cooperative usage. FCE’s general manager and board of directors have been provided with this thesis and the full project report. This thesis and project provide FCE with valuable information for them to make critical decisions on cooperative finance, including income distribution and equity management decisions.

Master of Agribusiness / Department of Agricultural Economics / Bob Burton / The purpose of this thesis is to compare the net income and risk associated with custom farming, cash rent, and crop-share. This analysis will help provide insight on the best option for my 40 acres of farm land, which I recently was given from my mother. The 40 acres is located in Codington County, SD and has been previously in a corn, soybean, and wheat rotation. Another goal of the thesis is to create a business plan for Hauger Farm, which will lay out the activities involved for custom farming. The 40 acres will continue to be in a corn, soybean, and wheat rotation. A 12-year analysis was developed to determine the net income and risk associated with custom farming, cash rent, and crop-share. The analysis consisted of historical data from the past nine years while predicting the next three years. After creating the net income statement, the option providing the most income over the long-run was to have the land custom farmed. Custom farming also brought the most income variability or risk; while cash rent showed to have the lowest risk with the least variable income.

According to the U.S. Small Business Association, the failure rates for small businesses in 2014 were as high as 50% to 80% within the first 5 years of establishment. The purpose for this multiple case study was to explore the strategies that small business owners have used to sustain their businesses beyond 5 years. Guided by entrepreneurship theory as the conceptual framework, and a purposive sampling method, this qualitative case study used semistructured interviews with 3 successful, small, ethnic grocery business owners in Anchorage, AK to better understand small business strategies for survival. Member checking and triangulation with field notes, interview data, business websites, customer comments, and government documents helped ensure theoretical saturation and trustworthiness of interpretations. Using pre-coded themes for the data analysis, the 8 themes from this study were entrepreneur characteristics, education and management skills, financial planning, marketing strategies and competitive advantages, social networks and human relationships, technology and innovation, government supports and social responsibility, and motivational influence. Two key results indicated the strategies needed for small business owners were entrepreneur management skills and government support for small businesses. These findings may influence positive social change by improving small business owner competence and sustainability, rising higher business incomes, providing a better quality of life to employees and their communities welfare benefiting the entire U.S. economy.

Whole document restricted, see Access Instructions file below for details of how to access the print copy. Subscription resource available via Digital Dissertations / My research question is: Why do countries with similar rates of saving differ in economic growth? My thesis addresses this question by formulating an endogenous growth model using the Cobb-Douglas production function. My model disaggregates the rate of saving into the retention ratio and the household saving ratio and connects these ratios with three new parameters representing respectively the efficiency of financial institutions, the decision-making of managers, and barriers to technology diffusion. These three financial parameters make it possible to distinguish between quantitative and qualitative investments and to measure the growth rates of output, capital, and technological progress. Endogenous growth in technology neutralizes diminishing returns to capital. The Cobb-Douglas production function assumes diminishing marginal productivity under constant returns to scale. My model, however, measures the growth rate of per capita output under the balanced growth state/constant returns to capital situation. This situation is guaranteed when the relative share of profit is within the critical relative share of profit. A set of combination of the three financial parameters holds under diminishing returns to capital, yet the diminishing returns to capital situation turns to the balanced growth state situation by using delta defined as the elasticity of quality improvement with respect to effective labour units attached to a machine. An extreme case corresponds with the Solow and O'Connell (including Harrod-Domar) models, where the three financial parameters are all 1.0, with no technological progress. Simulation results demonstrate several new fact-findings. These fact-findings come from the characteristics of my model or the relationships between the growth rate of “per capita” output in the long-run (hereunder the growth rate) and the three financial parameters and delta, where the growth rate converges by setting delta = the relative share of profit. First, if the rate of saving increases, the growth rate also increases linearly. This is more definitely evident than the result of Mankiw, Romer, and Weil [1992]. Second, under a fixed rate of saving, the growth rate changes significantly differently if each of three parameters changes: the relative share of profit, the growth rate of population, and the retention ratio. In particular, the change in the retention ratio influences the growth rate positively or negatively depending on the relationship between the three financial parameters that reflect corporate behaviour and the nature of financial institutions. In this respect, I cannot find literature that relates the retention ratio or dividend policy to the growth rate in the Cobb-Douglas production function. Also the change in the growth rate of population does not influence per capita growth at all. This finding is also more definite than that found in the literature. In short, the three financial parameters play an important role in economic growth. When we divide saving into corporate saving and household saving, the rate of saving as a whole is not independent of the growth rate. A proportion of corporate saving and a proportion of household saving are used for investment in quality, which accelerates productivity enhancement. Consequently, the characteristics of the corporate sectors and financial institutions of a country play a significant role in determining its long run growth rate of per capita income (even under a fixed rate of saving).

Whole document restricted, see Access Instructions file below for details of how to access the print copy. Subscription resource available via Digital Dissertations / My research question is: Why do countries with similar rates of saving differ in economic growth? My thesis addresses this question by formulating an endogenous growth model using the Cobb-Douglas production function. My model disaggregates the rate of saving into the retention ratio and the household saving ratio and connects these ratios with three new parameters representing respectively the efficiency of financial institutions, the decision-making of managers, and barriers to technology diffusion. These three financial parameters make it possible to distinguish between quantitative and qualitative investments and to measure the growth rates of output, capital, and technological progress. Endogenous growth in technology neutralizes diminishing returns to capital. The Cobb-Douglas production function assumes diminishing marginal productivity under constant returns to scale. My model, however, measures the growth rate of per capita output under the balanced growth state/constant returns to capital situation. This situation is guaranteed when the relative share of profit is within the critical relative share of profit. A set of combination of the three financial parameters holds under diminishing returns to capital, yet the diminishing returns to capital situation turns to the balanced growth state situation by using delta defined as the elasticity of quality improvement with respect to effective labour units attached to a machine. An extreme case corresponds with the Solow and O'Connell (including Harrod-Domar) models, where the three financial parameters are all 1.0, with no technological progress. Simulation results demonstrate several new fact-findings. These fact-findings come from the characteristics of my model or the relationships between the growth rate of “per capita” output in the long-run (hereunder the growth rate) and the three financial parameters and delta, where the growth rate converges by setting delta = the relative share of profit. First, if the rate of saving increases, the growth rate also increases linearly. This is more definitely evident than the result of Mankiw, Romer, and Weil [1992]. Second, under a fixed rate of saving, the growth rate changes significantly differently if each of three parameters changes: the relative share of profit, the growth rate of population, and the retention ratio. In particular, the change in the retention ratio influences the growth rate positively or negatively depending on the relationship between the three financial parameters that reflect corporate behaviour and the nature of financial institutions. In this respect, I cannot find literature that relates the retention ratio or dividend policy to the growth rate in the Cobb-Douglas production function. Also the change in the growth rate of population does not influence per capita growth at all. This finding is also more definite than that found in the literature. In short, the three financial parameters play an important role in economic growth. When we divide saving into corporate saving and household saving, the rate of saving as a whole is not independent of the growth rate. A proportion of corporate saving and a proportion of household saving are used for investment in quality, which accelerates productivity enhancement. Consequently, the characteristics of the corporate sectors and financial institutions of a country play a significant role in determining its long run growth rate of per capita income (even under a fixed rate of saving).

Whole document restricted, see Access Instructions file below for details of how to access the print copy. Subscription resource available via Digital Dissertations / My research question is: Why do countries with similar rates of saving differ in economic growth? My thesis addresses this question by formulating an endogenous growth model using the Cobb-Douglas production function. My model disaggregates the rate of saving into the retention ratio and the household saving ratio and connects these ratios with three new parameters representing respectively the efficiency of financial institutions, the decision-making of managers, and barriers to technology diffusion. These three financial parameters make it possible to distinguish between quantitative and qualitative investments and to measure the growth rates of output, capital, and technological progress. Endogenous growth in technology neutralizes diminishing returns to capital. The Cobb-Douglas production function assumes diminishing marginal productivity under constant returns to scale. My model, however, measures the growth rate of per capita output under the balanced growth state/constant returns to capital situation. This situation is guaranteed when the relative share of profit is within the critical relative share of profit. A set of combination of the three financial parameters holds under diminishing returns to capital, yet the diminishing returns to capital situation turns to the balanced growth state situation by using delta defined as the elasticity of quality improvement with respect to effective labour units attached to a machine. An extreme case corresponds with the Solow and O'Connell (including Harrod-Domar) models, where the three financial parameters are all 1.0, with no technological progress. Simulation results demonstrate several new fact-findings. These fact-findings come from the characteristics of my model or the relationships between the growth rate of “per capita” output in the long-run (hereunder the growth rate) and the three financial parameters and delta, where the growth rate converges by setting delta = the relative share of profit. First, if the rate of saving increases, the growth rate also increases linearly. This is more definitely evident than the result of Mankiw, Romer, and Weil [1992]. Second, under a fixed rate of saving, the growth rate changes significantly differently if each of three parameters changes: the relative share of profit, the growth rate of population, and the retention ratio. In particular, the change in the retention ratio influences the growth rate positively or negatively depending on the relationship between the three financial parameters that reflect corporate behaviour and the nature of financial institutions. In this respect, I cannot find literature that relates the retention ratio or dividend policy to the growth rate in the Cobb-Douglas production function. Also the change in the growth rate of population does not influence per capita growth at all. This finding is also more definite than that found in the literature. In short, the three financial parameters play an important role in economic growth. When we divide saving into corporate saving and household saving, the rate of saving as a whole is not independent of the growth rate. A proportion of corporate saving and a proportion of household saving are used for investment in quality, which accelerates productivity enhancement. Consequently, the characteristics of the corporate sectors and financial institutions of a country play a significant role in determining its long run growth rate of per capita income (even under a fixed rate of saving).