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Archive for August, 2013

28
Aug

Asia markets fall on Syria concerns

Asian stocks fall, extending a global market sell-off sparked by growing fears of a military strike against Syria.

28
Aug

Square Feet: Across China, Skyscrapers Brush the Heavens

China is home to 60 of the world’s 100 tallest buildings now under construction, but the scale and speed of the projects have caused concern.

    



28
Aug

Fate chooses your relations, you choose your friends. …

Fate chooses your relations, you choose your friends. Jacques Delille

28
Aug

Destroyers Syria: Latest Chemical Attack Responses

“The President continues to work with his national security team reviewing the options available,” White House Press Secretary Jay Carney stated at this afternoon’s press briefing in response to questions about the US reaction to the Syrian regime. Briefings from both the White House and the State Department today confirmed that US officials hold the Syrian regime responsible for the use of chemical weapons that killed more than 300 last week; the intelligence community assessment on the attacks will be released to the public later this week.

Meanwhile, Syrian President Bashar al-Asad is using a new Instagram presence, in addition to those on Facebook, Twitter and a YouTube channel to record his side of the story posting pictures such as his recent visit with the Syrian Scientific Olympiad team. The Team brought home three bronze medals and two certificates for distinguished performance. “The chemical weapons allegations are completely politicized and come on the back of the advances made by the Syrian Army against the terrorists,” pulled from Asad’s official Facebook page, this statement was made yesterday to a Russian newspaper. Asad has firmly denied his administration’s involvement in the attacks.

While no specific military strike has been dictated as of this posting, four US Sixth Fleet Navy destroyers, currently located in the Mediterranean, were deployed today to cover the situation in Syria. In a Pentagon statement, Secretary of Defense Chuck Hagel committed to continued cooperation with the international community to respond to Damascus, specifically referencing French and British defense forces, but Hagel also defended the US right to take military action without the permission of international organizations such as the United Nations. The UN faced its own struggles on the ground yesterday as inspectors were reportedly fired upon by snipers. The inspectors were en route to another chemical attack location close to Damascus.

The Arab League, a regional organization of 22 member states (though Syria’s participation has been suspended since 2011) issued a statement today blaming Asad for the attacks. If military action is enacted, support from the League will add a layer of legitimacy in the Arab world.

27
Aug

Accounting for everyone

Rodrigo Verdi is aware that accounting does not have the most — how to put it — alluring reputation. He senses, from the first time students walk into his accounting class, their anticipation that the subject will be dry and technical. So Verdi addresses this issue head-on.

“Accounting is the language of business,” Verdi, an associate professor at the MIT Sloan School of Management, tells his students. Moreover, he emphasizes, it is the basis of evaluating almost any aspect of a firm. “When I step in the classroom to teach the core accounting class to MBA students, I tell them, ‘I’m not training you to be an accountant. I’m training you because whatever you decide to do, accounting is going to be fundamental.’”

Consider MBA students who want to pursue marketing, finance or operations. “Accounting is not separated from these activities in a corporation,” Verdi says. “If you’re going to do marketing, you’ll need to understand the prices of goods, to see which you should market more or market less — you’re using accounting. When you’re in finance and you talk to investors about raising capital and investing strategies — you’re using accounting. In operations, you want to improve firm performance, minimize costs — you’re using accounting.”

Verdi’s own research probes the links between accounting practices and capital flows in global markets. He has published an extensive set of empirical papers along two lines of inquiry: The first studies how the accounting methods firms use correlate with the substantive strategies and risks they pursue. The second examines the effects of the International Financial Reporting Standards (IFRS), a uniform system of accounting methods, on patterns of global commerce.

“I don’t think accounting is a self-contained field,” Verdi says. “A lot of what I do is on the frontier between accounting and finance.”

From Porto Alegre to Cambridgeport

Verdi was born in Brasilia, the capital Brazil built from scratch around 1960 —  “I am from one of the first generations of people born in Brasilia,” he observes — but mostly grew up further south, in Porto Alegre, where his father was an economist. Verdi majored in civil engineering as an undergraduate at the Federal University of Rio Grande do Sul, in Porto Alegre, and says he retains an “engineering frame of mind” today.

Verdi also harbored an interest in finance, and — encouraged by his father — stayed at the university to pursue a master’s degree in finance and accounting while working in a bank. “I liked the switch to doing research, which I had not done,” he says.

Significantly, Verdi’s advisor also took a concerted interest in his work and suggested he apply to PhD programs in the United States. Verdi was admitted to the Wharton School, at the University of Pennsylvania, where he received his PhD in accounting in 2006. Emerging from Wharton, Verdi received a job offer from MIT, which he happily took; he received tenure from the Institute earlier this year.

Verdi has published a string of research papers during his time at MIT, such as one 2009 study, from the Journal of Accounting & Economics, that used 12 years of data and about 35,000 cases of annual corporate earnings to examine the relationship between high-quality accounting practices and investment efficiency. Verdi and two co-authors found that firms using higher-quality accounting methods make better decisions about how to invest their capital, in two ways: Those firms are both more likely to avoid bad investments and less likely to miss good investment opportunities.

Then there is the ongoing issue of whether all countries should adopt the IFRS system of uniform accounting methods. So far, more than 100 countries have done so — although some large ones, including the United States and Japan, have not. Here, much of Verdi’s research has explored the costs and benefits of IFRS.

“There is a lot of evidence it adds liquidity to markets — it attracts more foreign investors from countries that have also adopted,” Verdi says. The assurance provided by global standards, he explains, means “there is more flow of global capital. Firms with growth projects are able to tap into those [global] markets and increase the investments in themselves.”

Verdi notes that the overall impact of IFRS is still subject to more research and debate: “There seems to be a certain amount of benefit, but up to precisely what point? I don’t think we know that answer yet.”

Beneath the radar — sometimes

Large-scale accounting issues such as this typically go unrecognized by the general public and most of the media, Verdi notes — although members of the public who are active investors are much more likely to watch the field.

“It’s fair to say that accounting only gets into the larger public domain when things go badly, like the Enron type of case, when you have something more extreme,” Verdi says. “But on a day-to-day basis, the more nuanced changes are known by the investors following firms, and people in financial markets.”

And, perhaps, by many of the students who have passed through Verdi’s classes. In the classroom, Verdi employs a variety of devices to get students to see the value of accounting. Sometimes, he’ll have particular students pick out 10 newspaper articles on business at the beginning of the semester, and highlight the terms they do not know.

“At the end of the semester, you’re going to know 95 percent of those terms and read the articles much more confidently,” Verdi says.

Alternately, he’ll encourage students to read the financial statements of companies they like, at the beginning and then the end of a semester.

“At the start, you’re going to learn about the company, but by the end of the semester, you’re going to know 10 times more,” Verdi says. “You don’t have to do more with accounting down the road, but learn it now, and you’ll have an important tool.”

27
Aug

Ex-JP Morgan trader held in Spain

Ex-JPMorgan employee Javier Martin-Artajo is arrested by Spanish police in connection with the so-called London Whale trading scandal.

27
Aug

Across China, Skyscrapers Brush the Heavens

China is home to 60 of the world’s 100 tallest buildings now under construction, but the scale and speed of the projects have caused concern.

    



27
Aug

Three Ways to Increase Your Shelf Life as CMO

The average tenure of a CMO has lengthened slightly, but there are ways to ensure real longevity.