Valuing mortgage-related securities is more complicated than valuing regular defaultable claims due to the borrower's prepayment behavior as well as the possibility of default. Some researchers use a structural-form model to obtain the closed-form formulas for the mortgage value. With this method, however, it is difficult to identify the critical region of early exercise. As an alternative, the reduced-form model developed in this article is able to value the mortgage without setting boundary conditions, and it can thereby accurately handle the multidimensional space of correlated state variables. The purpose of this article is to derive a closed-form solution of the mortgage valuation equation under a general reduced-form model that embeds relevant economic variables. This new approach enables portfolio managers to undertake sophisticated portfolio optimization and hedging analyses. An implementation procedure for the model is also provided to demonstrate how the valuation framework can be utilized in practical applications. Copyright 2008 American Real Estate and Urban Economics Association

Purpose The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance. Research limitations/implications The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well. Originality/value This study deepens the field’s understanding of the impact of corporate governance arrangements and schedules for electing board of directors’ members on issues of interest to stockholders.

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Purpose This study aims to explore the relationship between audit partner and firm industry specialization and board of director independence on the decision by Taiwanese firms to use International Financial Reporting Standards (IFRS) flexibility concerning reporting interest income and expense and dividends received in different sections of the statement of cash flows. This flexibility existed in Taiwan for the first time in 2013, the year that Taiwan switched from its own generally accepted accounting principle to IFRS. Design/methodology/approach Using 2013 data for a sample of 1,227 firms, 354 of whom changed their reporting classification, this study examined the interaction effect of board independence and partner-level and firm-level auditor industry specialization on the cash flow reporting decision using logistic regression. Findings The results show there is a substitute relationship between board independence and partner-level industry specialization on the change in cash flow reporting classification, but a complementary relationship between board independence and firm-level auditor specialization. Further, both partner-level and firm-level auditor industry specializations have a complementary (but negative) relationship with board independence as to whether the firm is likely to report interest expense paid in the operating or financing activities sections. Practical implications An important implication is that knowing the levels of audit firm and partner specialization and how independent the board is, is useful for researchers and regulators in investigating auditor-client relationships and understanding the influences of variables investigated here on the outcome(s) of accounting policy and regulatory changes. Originality/value This study improved the field’s understanding of the impacts of audit partner and firm specialization, board independence and relevant interactions on cash flow reporting choices.

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