monitoring changes in economy wide energy efficiency from energy gdp ratio to composite efficiency index since the 1973 world oil crisis monitoring trends in energy efficiency at the economy wide level has been an important component of energy strategy in many countries to support this effort various energy efficiency related indicators have been developed we examine some classical indicators which are often found in national and international energy studies in the 1970s and 1980s we then describe the recent developments in using the index decomposition analysis to give an economy wide composite energy efficiency index based on a bottom up approach this composite index is superior to the classical indicators as an economy wide energy efficiency measure and has lately been adopted by a growing number of countries for national energy efficiency trend monitoring

associations between alternative accounting profitability measures and security returns the importance of accounting information on security price determination is of interest to both security analysts and accountants beaver 3 downes and dyckman 6 gonedes 12 beaver and manegold 4 and others have investigated the possible relationships between accounting information and market information rosenberg 26 has shown the existence of extra market components of covariance in security returns while simkowitz and logue s l 28 have derived the interdependent structure of security returns however none of this research has explicitly investigated how the empirical results can be affected by alternative accounting profitability measures within an industry simultaneously

is firm specific innovation associated with greater value appropriation the roles of environmental dynamism and technological diversity abstract this paper extends the resource based theory of the firm to examine the contingencies that either intensify or reduce the relationship between firm specific innovation and value appropriation based on a large scale analysis of a sample of us manufacturing firms we found that greater innovation rents appropriation is associated with an increase in firm specificity of its innovative knowledge but the positive relationship between firm specific innovations and firm value appropriation tends to decrease when the product or technology market is highly dynamic further under high environmental dynamism firms should increase the diversity in their knowledge composition in order to mitigate the risk of value erosion associated with firm specific innovations

an empirical assessment of the residual income valuation model abstract this paper provides an empirical assessment of the residual income valuation model proposed in ohlson ohlson j a 1995 earnings book values and dividends in security valuation contemporary accounting research 11 661 687 we point out that existing empirical research relying on ohlson s model is similar to past research relying explicitly on the dividend discounting model we establish that the key original empirical implications of ohlson s model stem from the information dynamics that link current information to future residual income our empirical results generally support ohlson s information dynamics however we find that our empirical implementation of ohlson s model provides only minor improvements over existing attempts to implement the dividend discounting model by capitalizing short term earnings forecasts in perpetuity

changes in the probability of bankruptcy and equity value abstract work in finance suggests that changes in the probability of bankruptcy likely affect firm value by affecting perceptions of the cost of transacting with the firm in this paper accounting information from the balance sheet as well as the income statement is used in conjunction with ohlson s 1980 bankruptcy prediction model to calculate unexpected changes in the probability of bankruptcy for a sample of firms with a large estimated probability of bankruptcy sometime during the ten year study period unexpected changes in the probability of bankruptcy are useful in explaining security returns even after controlling for unexpected earnings

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

leveraged investments and agency conflicts when cash flows are mean reverting we analyse the effect of mean reverting cash flows on the costs of shareholder bondholder conflicts arising from partially debt financed investments in a partial equilibrium setting we find that such agency costs are significantly lower under mean reverting mr dynamics when compared to the ubiquitous geometric brownian motion gbm the difference is attributed to the stationarity of the mr process in addition through the application of a novel agency cost decomposition we show that for a larger speed of mean reversion agency costs are driven mainly by suboptimal timing decisions as opposed to suboptimal financing decisions in contrast under the standard gbm assumption the agency costs are driven mainly by suboptimal financing decisions for large growth rates and by suboptimal timing decisions for smaller or negative growth rates

does market based electricity price affect china s energy efficiency abstract china is in a critical period of market oriented reform and energy transition as a crucial means to regulate supply and demand under the market oriented mechanism the electricity price can promote the development of energy efficiency by optimizing resource allocation with the gradual increase in electricity consumption the influence of its price on energy consumption is also gradually enhanced therefore this paper evaluated the process of electricity price marketization and conducted a spatial temporal comparative analysis of the effect of electricity price on energy efficiency by controlling economic policy and other price factors the results show that 1 the marketization degree of china s electricity price has improved with steady steps 2 market oriented electricity price has a stable positive correlation with energy efficiency in both the short and long term 3 marketization improves the promotion effect of electricity price on energy efficiency and the influence of electricity price is more significant in the eastern region with a high degree of marketization and the subsequent stage 4 the impact of market oriented electricity price on energy efficiency is asymmetric the impulse response under positive and negative shock is opposite and under the positive shock the response time is longer and the degree is greater

exploiting ergodicity in forecasts of corporate profitability abstract theory suggests that competition tends to equalize profit rates through the process of capital reallocation and numerous studies have confirmed that profit rates are indeed persistent and mean reverting recent empirical evidence further shows that fluctuations in the profitability of surviving corporations are well approximated by a stationary laplace distribution here we show that a parsimonious diffusion process of corporate profitability that accounts for all three features of the data achieves better out of sample forecasting performance across different time horizons than previously suggested time series and cross sectional models as a consequence of replicating the empirical distribution of profit rates the model prescribes a particular strength or speed for the mean reversion of all returns which leads to superior forecasts of individual time series when we exploit information from the cross sectional collection of firms the new model should appeal to managers analysts investors and other groups of corporate stakeholders who are interested in accurate forecasts of profitability to the extent that mean reversion in profitability is the source of predictable variation in earnings our approach can also be used in forecasts of earnings and is thus useful for firm valuation

market based empirical research in accounting a review interpretation and extension a decade and a half of the most concerted and ambitious research effort in accounting history is evaluated here it is the search into the relationship between publicly disclosed accounting information and the consequences of the use of this information by the major group of usersequity investors as such consequences are reflected in characteristics of common stocks traded in major exchanges this research effort known as market based accounting research mbar obtained its impetus from major developments in finance theory during the late 1950s and early 1960s these were the portfolio selection theory and its offspring the capital asset pricing model capm and the concept of informationally efficient capital markets ecm subsequent developments in information economics agency theory and optimal incentive signaling models were quickly incorporated into mbar while the impetus to this line of research came from other disciplines accounting was not only a beneficiary but also to a modest extent a benefactor mbar is relevant to the study of capital market efficiency the capm information economics and regulation this contribution distinguishes mbar from most accounting areas whose contributions to other disciplines are negligible in

the performance of us corporations 1981 1994 this study decomposes the performance of us public firms between 1981 and 1994 into year industry corporate focus and firm effects performance is measured by tobin s q accounting profitability and a hybrid measure the results show that firm effects were more important to performance than industry effects although industry effects had a large permanent component corporate focus was not important the stylized facts suggest that competitive advantages that is differences between direct competitors in the same industry were at least as important as industry influences on performance industry influences were more predictable and sustainable than competitive advantages however

driven to be good a stakeholder theory perspective on the drivers of corporate social performance despite growing evidence of the benefits to a firm of improving corporate social performance csp many firms vary significantly in terms of their csp activities this research investigates how the characteristics of the stakeholder landscape influence a firm s csp breadth using stakeholder theory we specifically propose that several factors increase the salience and impact of stakeholders demands on the firm and that in response to these factors a firm s csp will have greater breadth a firm s csp breadth is operationalized as the number of different sub domains of csr for which a firm has taken positive actions and is captured using a unique dataset from kinder lydenburg and domini kld this data set includes positive and negative firm actions across more than 35 different dimensions of socially responsible behavior findings based on a longitudinal multi industry sample of 447 us firms during the period from 2000 to 2007 demonstrate that firms which 1 have greater sensitivity to stakeholder needs as a result of the firm s strategic emphasis on marketing and or value creation 2 face greater diversity of stakeholder demands and 3 encounter a greater degree of scrutiny or risk from stakeholder action have a greater breadth of csp in response to the stakeholder landscape that they face

security analyst superiority relative to univariate time series models in forecasting quarterly earnings abstract this paper provides evidence of security analyst sa superiority relative to univariate time series ts models in predicting firms quarterly earnings numbers and shows that sa forecast superiority in our sample is attributable to 1 better utilization of information existing on the date that ts model forecasts can be initiated a contemporaneous advantage and 2 use of information acquired between the date of initiation of ts model forecasts and the date when sa forecasts are published a timing advantage

growth and value hybrid valuation model based on mean reversion abstractthis article proposes a novel valuation model growth and value hybrid model to estimate the stock price this proposed model combines the essence of the asset based approach the income based approach and the principle of mean reversion to develop the theoretical closed form formula consisting of three coefficients value coefficient value support coefficient and growth coefficient regression analysis is employed to fit market data to determine these coefficients moreover this study proposes the double sorting method to build the quantile regression models of the formula to estimate the stock price at a specific quantile the results show that the predictive capability of the hybrid valuation model is superior to the model without using value support coefficient which supports the assumption that the pbr is not associated with the roe when the roe is less than a threshold in different time periods of the stock market no significant difference exists on the value support coefficient howe

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

does energy price affect energy efficiency cross country panel evidence abstract in this paper we analyze the relationship between energy intensity and energy price in a panel of 120 countries over 34 years from 1980 to 2013 we use information on energy intensity and real oil price and merge it with macroeconomic data on the countries structural characteristics we assess their long run relationship and direction of causality using panel cointegration tests and dynamic panel data models we identify a statistically significant but weak negative effect of real oil price on energy intensity which corresponds to a positive effect of energy price on energy efficiency we also show significant large regional differences in this relationship we thus posit that a global policy aimed at increasing the price of oil would induce a limited increase in average energy efficiency through a more efficient use of energy but this increase would differ considerably across regions around the world

assimilating earnings and split information abstract recent studies have implied that the capital market has become more efficient with respect to the announcements of stock splits and corporate earnings this study calculated residual returns associated with these announcements and then tested by time period early and late years for a between period difference the results suggest that for certain earnings and split announcements the market is no more efficient than it has been in the past

accounting measurement price earnings ratio and the information content of security prices a number of papers for example beaver lambert and morse 1980 beaver lambert and ryan 1987 collins kothari and rayburn 1987 and freeman 1987 have documented that stock prices lead accounting earnings these investigations have led to the conclusions that prices provide information about earnings ahead of time and that earnings capture events that affect security prices with a lag the study of p e ratios has supported those conclusions and also produced additional insights beaver and morse 1978 have shown that pie ratios not only predict future earnings changes but they also identify transitory aspects of current earnings investors utilize other information in setting prices which provides both a prediction of future earnings and an indication of whether current earnings are representative of future earnings thus a comparison of price to earnings in a p e calculation can indicate the extent to which current earnings are transitory 1 in this paper we show that information in prices that leads future earnings is contained in financial statements while accrual accounting

an analysis of the use of accounting and market measures of performance in executive compensation contracts prior research has provided useful insights into the structure of compensation plans and their incentive effects however one important limitation of these studies is the virtual absence of any cross sectional analyses of the attributes of compensation contracts 2 this absence is related in part to the problems associated with controlling for other factors that affect compensation that is compensation contracts are

a model of capital structure when earnings are mean reverting a multiperiod model of optimal capital structure is developed under the assumption that earnings follow an autoregressive process firm value and leverage vary through time and at each date the firm achieves an optimal debt level that is a function of the full state contingent debt policy the reversion parameter of the earnings series is shown to be positively related to various measures of variability and negatively related to leverage if earnings processes are not homogeneous across firms then standard earnings risk measures in capital structure studies do not adequately represent crosssectional differences in variability in firm value

complementarities momentum and the evolution of modern manufacturing in the nineteenth century the railroad and telegraph were at the center of a set of technological advances physical investments and managerial innovations that transformed american industry alfred chandler 1977 later the automobile and telephone played a similar role in another transformation today the high tech industries include computers telecommunications and electronics working on our remarkably powerful computers even as they rapidly become obsolete co authoring papers by electronic mail and fax and conversing on our portable cellular telephones we are struck by what appears to be a self supporting and reinforcing dynamic to the technological improvements across the electronics industries an advance almost anywhere in the sector seems to call forth more advances across the sector these advances are occurring contemporaneously with a broad pattern of other changes not only in the electronics industries but in manufacturing more generally and not just in hardware but in methods and organization as well a new paradigm has begun to emerge in contrast to traditional manufacturing firms modern firms frequently 1 make greater use of flexible programmable equipment and of computeraided design and manufacturing technologies 2 have fewer job classifications 3 offer more varieties of their major products and or update their product lines more frequently 4 put more emphasis on speed in order processing production and delivery 5 hold much lower inventories of intermediate and finished goods 6 rely on subcontractors to supply a greater proportion of the total value added and 7 overlap design product and process engineering to speed the introduction of new products these features of modern manufacturing firms encompass technology choices marketing strategies personnel policies supplier relations lines of internal communications and other operational policies in a far reaching and coherent pattern whose existence in the words of michael piore 1986 poses a challenge to economic theory in a recent paper milgrom and roberts 1990 proposed a theory to explain the emergence of this new paradigm arguing that the various characteristics and activities described are mutually complementary and so tend to be adopted together with each making the others more attractive in that theory the falling costs of high speed data communication data processing and flexible multitask equipment lead to increases in the directly affected activities which through a web of complementarities then lead to increases in a set of related activities as well although the costs of flexible machinery and data communication and processing surely have fallen substantially in recent decades an analysis that takes these changes as exogenous does not constitute a full explanation of the pattern of change that we observe one must ask why are these particular costs falling relative to others here we enrich the milgrom roberts analysis by adding a dynamic to it innovations in the manufacture of basic inputs both arise in response to a growing market for those inputs and simultaneously encourage that growth this reflects a fundamental complementarity between the level of any activity and investments that reduce its marginal department of economics milgrom and qian and graduate school of business roberts stanford university stanford ca 94305 we thank avner greif for his helpful comments on an earlier draft financial support from the national science foundation milgrom and roberts and the robert and anne bass faculty fellowship roberts is gratefully acknowledged

evidence on the effect of bond covenants and management compensation contracts on the choice of accounting techniques the case of the depreciation switch back abstract provisions of bond indenture agreements and management compensation contracts are examined to derive testable implications concerning management s incentives to choose among alternative accounting techniques the hypotheses are subjected to empirical examination by investigating the voluntary change from accelerated to straight line depreciation for financial reporting purposes only the methodology utilized incorporates an expectations model of accounting earnings in an attempt to separate out of the effects of earnings announcements from accounting change announcements which are often concurrent the evidence from both price and non price data is not consistent with the general hypothesis that bond covenants and management compensation contracts are important determinants of the decision to change depreciation techniques five potential explanations for the results are offered

energy intensity and its determinants in china s regional economies abstract this paper contributes to the existing literature as well as policy debates by examining energy intensity and its determinants in china s regional economies the analysis is based on a comprehensive database of china s regional energy balance constructed for this project through its focus on regional china this study extends the existing literature which mainly covers nationwide studies it is found in this paper that energy intensity declined substantially in china the main contributing factor is the improvement in energy efficiency changes in the economic structure have so far affected energy intensity modestly thus there is considerable scope to reduce energy intensity through the structural transformation of the chinese economy in the future

aspiration level effects an empirical investigation abstract theories of aspiration level effects predict that decisions under uncertainty will depend on whether performance is above or below some target level of performance a sample of 5000 quarterly earnings announcements by publicity held companies listed on the compustat and crsp data bases is examined to test this hypothesis four models from the current accounting literature are used as alternative estimates of the target level of earnings for these firms when earnings are announced the difference between actual and forecast earnings here called a forecast error can be computed the data indicate that the relationship between valuation and forecast error differs conditional on the sign of the forecast error

earnings volatility and earnings predictability abstract survey evidence indicates widely held managerial beliefs that earnings volatility is negatively related to earnings predictability in addition existing research suggests that earnings volatility is determined by economic and accounting factors and both of these factors reduce earnings predictability we find that the consideration of earnings volatility brings substantial improvements in the prediction of both short and long term earnings conditioning on volatility information also allows one to identify systematic errors in analyst forecasts which implies that analysts do not fully understand the implications of earnings volatility for earnings predictability

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

autoregressive modeling of earnings investment causality the purpose of this paper is to empirically test the relationships between corporate earnings and investment in particular the study investigates whether knowledge of past investments improves the prediction of future earnings beyond predictions that are based on past earnings alone similarly it investigates whether knowledge of past earnings improves the prediction of future investments beyond knowledge of past investments alone this is the empirical definition of granger causality the empirical results show that the bivariate past series of earnings and investments is superior to the univariate series in predicting future investments but not in predicting future earnings

successful in the long run a meta regression analysis of persistent firm profits we study the profit persistence literature by applying meta regression analysis mra to a set of 36 empirical papers which analyze the persistence of abnormal firm profits over time the analyzed literature provides evidence for a mediocre degree of persistence in abnormal profits an initial analysis of the distribution of reported profit persistence estimates reveals some degree of excess variation this points toward publication bias that favors significant results independent of their algebraic sign the mra however reveals that publication bias is particularly favoring results that indicate profit persistence and thus contradict the neoclassical model of perfect competition moreover the mra enables to control for heterogeneity driven by the study design we find that the analyzed country developing vs developed the applied econometric approach as well as the analyzed period of time are significant drivers of heterogeneity in reported persistence estimates

the convergence of profits in the long run inter firm and inter industry comparisons this paper considers the extent to which the short run dynamic behavior and long run equilibrium levels of profitability differ among firms within the same industry movements in profits are modeled in terms of firm specific deviations from average industry profits and industry specific deviations from economy wide average returns applied to a sample of 217 large u k firms 1951 77 the results suggest that considerable heterogeneities exist within most industries that is most firms profitability experience differs considerably from those of their closest rivals copyright 1987 by blackwell publishing ltd

exploring the curvature of the relationship between hrm csr and corporate financial performance this article contributes to the general literature on the relationship between corporate social performance and corporate financial performance as well as to the emerging hrm csr literature by exploring the curvature of the relationship between hrm csp and cfp we advance conceptual arguments in favor of an inverted u shaped relationship our results demonstrate a significant quadratic relationship between hrm csp and cfp we provide evidence that this relationship is not linear or s shaped but rather inverted u shaped

tobin s q and the structure performance relationship comment the exchange of comments between william shepherd and michael smirlock thomas gilligan and william marshall this review december 1986 raised two key points that remain unresolved the first point is whether tobin s q ratio a firm s financial market value divided by replacement cost of its assets is a better measure of firm performance than accounting rates of return the second point of contention is whether superior performance however measured can be attributed to efficiency rather than market power this paper offers further clarification on both of these points in section i the performance measure choice is shown to be influenced by fundamental differences between finance and economics in section ii the structure performance model employed by smirlock gilligan and marshall hereafter sgm and shepherd is shown to be a special case of a more general model allowing for a dependence of the market share performance relationship on the concentration ratio the same data from the original study by sgm 1984 are used in section iii to provide a comparison of sgm s findings with empirical results from an alternative specification of the structure performance model this comparison suggests that attributing superior firm performance exclusively to efficiency is not well founded concluding remarks are found in section iv

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

the costs of related diversification the impact of the core business on the productivity of related segments i develop the thesis that in related diversified firms the core business in my analysis the largest business may provide benefits such as scope economies to a related segment but it may also exert power and constrain the segment to act in its interests in various internal and external transactions this enables the core business to shift productivity gains toward itself from the segment which could lead to various inefficiencies within the related diversified firm using input output flow data and a multilevel model with the segment as the unit of analysis i first show that a segment s productivity is lower compared with a single business firm when it shares backward and forward complementarity i e when it shares transactions with common suppliers and customers with the core business correspondingly i show that as a mirror image the core business s productivity is enhanced when the business shares backward and forward complementarity with segments and when segments are backward integrated with it i e when the core business provides outputs to segments these shifts in productivity and the attendant inefficiencies do not seem to be destroying the entire value from related diversification overall the findings support the argument that the power and influence exerted by the core business and concomitantly the subsidization of the core business by related segments is an important source of costs borne by segments in a related diversified firm

the ex ante and ex post price effects of quarterly earnings announcements reflected in option and stock prices the subject of this study is the effect of investors anticipations of impending informative disclosures on the behavior of option and stock prices our approach introduced in a previous paper patell and wolfson 1979 and substantially extended here represents the following significant departure from traditional information content studies instead of analyzing security price reactions to announcements we analyze preannouncement option prices in order to discern investors beliefs about the range of possible stock price reactions expected to accompany a forthcoming disclosure whose actual content is not yet known in the tests reported here we focus on quarterly earnings announcements as disclosure events whose timing is predictable and we attempt to detect their systematic influence on the relationship between stock and option prices our operational definition of information content emphasizes changes in the variability of common stock returns in response to earnings disclosures while market efficiency precludes investors from predicting the direction of the stock price change which will accompany a future earnings announcement it is likely that investors will anticipate increased price variability at the time of disclosure and indeed several studies have documented announcement date increases in stock price volatility

the association between accounting earnings and security returns for large and small firms abstract the differential information hypothesis advanced by atiase 1980 states that information production and dissemination by private parties for the purpose of identifying mispriced securities is an increasing function of firm size this study examines two corollaries of that hypothesis first security prices of large firms anticipate accounting earnings earlier than security prices of small firms second for a given level of unexpected earnings the cumulative abnormal returns of small firms exceed those of large firms the results are generally consistent with atiase s hypothesis

energy price energy efficiency and capital productivity empirical investigations and policy implications abstract the immediate effect of carbon pricing policy is to raise energy costs which in turn reduces energy consumption either through induced capital under utilization or investments in new energy efficient capital the latter mechanism which implies improvements in energy efficiency is realized in the long run while the former which has implications for capital productivity tends to occur in the short run we employ panel vector autoregressions as well as co integration and error correction techniques to identify these short and long run relationships including their differences across canadian industries

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

the systematic risk of corporate bonds this statement presents the usual perception of bond risk it is striking in that it does not discuss what is from a portfolio theoretic view the risk of a bond the covariance of its return with the returns of other assets this is in contrast to the typical discussion of the riskiness of common stocks where we find some discussion of systematic risk and the role it plays in determining equilibrium expected security returns

bringing institutions into performance persistence research exploring the impact of product financial and labor market institutions this study challenges the implicit assumption of homogeneity in national institutional environments made in past studies of firm performance persistence we propose that home country institutions matter we focus on the impact of formal institutions in the product financial and labor markets arguing that they affect the size of pools of exchange partners and the types of exchanges allowed and condoned ultimately these restrictions affect competitive intensity among firms and firm performance persistence using data for over 10 000 firms from 33 countries over a 10 year time frame we show that antitrust law strength a product market institution designed to prevent collusion among firms is associated with decreases in performance persistence unskilled labor market flexibility a labor market institution that reduces legal constraints imposed on residual claimants managers and owners to take necessary actions to maintain or enhance profitability is associated with increases in performance persistence product liability law effectiveness another product market institution and corporate control market development a financial market institution are positively associated with performance persistence only in the case of mnes the two remaining financial and labor market institutions public equity market development respectively skilled labor market availability have a positive respectively negative impact for domestic firms only

the effects of double counting and expensing on the measured returns to r d this article focuses on the effects of double counting and expensing on the measured returns to r d the contribution of research and development r d to economic growth has been measured in two general ways the first is to compute total factor productivity in a growth accounting framework and to attribute this residual growth to r d the prevailing view is that in the presence of double counting the measured contribution of r d represents the return above and beyond the normal remuneration to traditional capital author demonstrate that this excess returns interpretation eri is essentially correct in the growth accounting framework and that the resulting bias in the measured contribution of r d to growth is large in postwar u s manufacturing the measured residual is biased downward by as much as 30 the expensing bias is downward and reinforces the excess returns bias in this case and the total bias is large in both the growth accounting and econometric contexts the magnitude of the biases may vary across samples and over time there is simply no substitute for properly measured variables

do firm sizes and profit rates converge evidence on gibrat s law and the persistence of profits in the long run three panel unit root tests are applied to a 31 year firm size growth and profit rate data set for 96 large quoted uk firms all tests reject the unit root null for log size if the augmented dickey fuller autoregressions exclude a linear time trend if a linear trend is included the results are more ambiguous and appear to differ systematically between tests the view that firm growth is either random or near random does not receive unequivocal support in all tests there is however strong and consistent evidence of mean reversion in profit rates

the persistence of shocks to profitability in this study we use data for 1981 through 1994 on a large sample of u s companies to examine the persistence of incremental industry corporate parent and business specific effects on profitability our results indicate that the incremental effects of industry on profitability persist longer than the incremental effects of the corporate parent and of the specific business changes in industry structure have a more persistent impact on profitability than do changes in firm structure

price and trading volume reaction surrounding earnings announcements a closer examination the process of information dissemination and interpretation in securities markets is very complex and mostly unobservable while changes in prices and the amount of trading that takes place at the market level provide evidence of information processing verrecchia 1981 demonstrated that these are not sufficient to describe completely the dissemination of information and its interpretation by investors a descriptive study of price changes and trading volume however may still provide some insights into how investors react to information this paper is an empirical investigation of price changes and trading volume during the days surrounding the announcement of quarterly and annual earnings in the wall street journal wsj in the original paper investigating trading volume and price changes surrounding earnings announcements beaver 1968 was primarily concerned with whether the annual earnings announcement had information content i e led to changes in investors assessments of the probability distribution of future returns if there were any significant price changes and or trading volume during the week of the announcement then the annual earnings announcement was assumed to have had

disentangling the multiple effects of affiliate reputation on resource attraction in new firms past research has established that new firms can enhance their attractiveness to prospective resource providers by affiliating with more reputable firms but research on this process has yet to fully account for two critical realities underscored by recent research 1 firms need to acquire resources from different groups of resource providers and 2 reputation is multidimensional drawing on the organizational reputation literature and on information processing theory we propose that two groups of resource providers will respond differently to new firms affiliations in accordance with differences in the groups abilities to recognize and interpret reputation related signals we also propose that within a single group of resource providers distinct characteristics of the affiliate will exert different influences we test these propositions using longitudinal data from belgian firms that affiliated with venture capital vc investors consistent with our predictions we find that characteristics of a

differential gains between partners in joint ventures role of resource appropriation and private benefits i examine why there are differences in wealth gains between firms when they announce a joint venture jv building on transaction cost economics and the resource based view i argue that because jvs often involve incomplete contracts differences in wealth gains arise due to resource appropriation and private benefits as a result two factors become important in understanding whether a firm earns higher lower wealth gains than its partner 1 its potential for earning private benefits and 2 its ability to extract private benefits as a test of the impact of the first factor i propose that when a jv is formed the partner that possesses more valuable resources is likely to earn lower wealth gains whereas the partner that possesses less valuable resources is likely to earn higher wealth gains because its potential for earning private benefits over the course of the venture is also higher i then argue that the partner with less valuable resources is likely to extract higher private benefits and gain more when it has greater bargaining power and absorptive capacity conversely the partner with more valuable resources is likely to protect itself better from appropriation when it has jv capabilities i find support for these arguments in a sample of 344 ventures the implications are that private benefits significantly influence value creation in jvs and that a broad array of contingencies and factors affect these benefits which need to be considered when entering into a cooperation

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

evidence of the impact of mandatory changes in accounting principles on corporate loan agreements abstract the theory in this paper predicts that mandatory changes in accounting princples can affect the measurement rules defined in restrictive covenants in firms lending agreements consequently those mandatory changes can have an impact on the value of a firm s equity even if the changes appear to be merely cosmetic this contracting cost theory is tested by examining of both event related and cross sectional abnormal performance of the equity of a sample of firms when the accounting princples board changes accounting princples for business combinations the theory provides at best in incomplete explanation of the observed abnormal performance

the trade off model with mean reverting earnings theory and empirical tests the trade off theory of capital structure predicts a positive relationship between earnings and leverage contradictory to well established empirical evidence since corporate earnings are known to be mean reverting we reformulate the trade off model with mean reverting earnings we show that with mean reverting earnings there should be a negative relationship between optimal leverage and the current earnings level the model also illustrates the importance of the earnings reversion parameter in the determination of capital structure the major implications of the model are supported by empirical tests carried out with a sample of firms in the s p 500 index

the information content of non earnings accounting numbers as earnings predictors this paper provides empirical evidence on the predictive ability and information content of nonearnings annual report numbers beyond that contained in earnings i take an earnings prediction approach to address the incremental information content issue 2 under this approach nonearnings accounting numbers jointly play the role of predictors of future earnings changes specifically i investigate whether nonearnings accounting numbers convey information about future earnings that is not reflected in current earnings and if they do whether this incremental predictive content is reflected in stock prices

prices technology development and the rebound effect abstract energy efficiency is the critical parameter for policies that aim at reducing energy consumption while maintaining or even boosting economic growth the two main options to influence energy efficiency are changes in relative prices i e raising the price of energy through economic instruments or to introduce new technologies which increase the productivity of each unit of energy this paper is based on the notion that in an equilibrium economy the marginal economic productivity is identical for all factors i e energy labour knowledge and capital from this premise two main conclusions can be drawn first any change in price or technology will have an impact on the whole economy by creating feedbacks through the substitution of factors of production and goods as well as increased wealth second the two policy approaches changing relative prices and technology development are not opposite to each other they are the two faces of the same reality and should be developed and promoted simultaneously and consistently

bank lending technologies and credit availability in europe what can we learn from the crisis abstract using a unique sample of european manufacturing firms we empirically investigate how bank lending technologies nd soft information adoption affected firms credit availability during the 2007 2009 financial crisis estimation results indicate that transactional lending technologies increased firms credit rationing whereas soft information mitigated asymmetric information problems and improved firms access to credit by looking at the combined effect of bank lending technologies and soft information we also provide evidence about the complementarity between transactional lending techniques and soft information adoption when soft information was incorporated in transactional lending technologies firms credit rationing significantly reduced this result is especially strong for small borrowing firms and for companies matching with large financial institutions

do industry level analyses improve forecasts of financial performance prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate however a large body of academic research suggests that there are systematic interindustry differences e g industry barriers to entry that differentially affect firm performance based on industry membership we evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry specific models are generally more accurate in predicting firm growth but not profitability

resolving the commitment versus flexibility trade off the role of resource accumulation lags we examine how time consuming resource accumulation influences the classic strategy trade off between commitment and flexibility in particular using 1975 95 data from the worldwide petrochemical

market value r d and patents abstract a significant relationship is found between the market value of the firm and its intangible capital proxied by past r d expenditures and the number of patents based on a time series cross section analysis of data for large u s firms

proxies for the corporate marginal tax rate abstract this paper focuses on how best to measure the corporate marginal tax rate which is an important input into financial analysis of the cost of capital financing policy corporate hedging and corporate reorganizations the results indicate that the simulated tax rate used by shevlin 1990 and graham 1996 although difficult to calculate is the best available proxy for the true marginal tax rate if the simulated rate is unavailable an easy to calculate trichotomous variable or the statutory marginal tax rate which captures the progressivity in the tax schedule are reasonable alternatives better than most commonly used tax variables

intangible resources tobin s q and sustainability of performance differences this paper tests empirically the hypothesis that the greater the intangibility of a firm s resources the greater the sustainability of its competitive advantage resource intangibility is measured by 1 tobin s q and 2 the predicted value from a hedonic regression of q on several accounting measures of intangibles sustainability is measured by the persistence of firm specific profits using a dynamic panel data regression model i find that intangibles play an effective role in sustaining a firm s competitive advantage as predicted by the resource based view of the firm however the results suggest that intangibles can also lock firms into persistent disadvantages

a framework linking intangible resources and capabilities to sustainable competitive advantage this article is concerned with the role of intangible resources in business strategy in particular it is concerned with identifying the intangible sources of sustainable competitive advantage sustainable competitive advantage results from the possession of relevant capability differentials regulatory and positional capabilities are concerned with intangible assets functional and cultural capabilities are concerned with competencies a framework linking intangible resources to capabilities has been devised and is used as the basis of a new technique for identifying the relative contribution which the different intangible resources make to competitive advantage the results of the use of this technique in six case studies are reported

structural change and convergence of energy intensity across oecd countries 1970 2005 abstract this paper uses new and unique data derived from a consistent framework of national accounts to compute and evaluate energy intensity developments across 18 oecd countries and 50 sectors over the period 1970 2005 we find that across countries energy intensity levels tend to decrease in most manufacturing sectors in the service sector energy intensity decreases at a relatively slow rate with diverse trends across sub sectors a decomposition analysis reveals that changes in the sectoral composition of the economy explain a considerable and increasing part of aggregate energy intensity dynamics a convergence analysis reveals that only after 1995 cross country variation in aggregate energy intensity levels clearly tends to decrease driven by a strong and robust trend break in manufacturing and enhanced convergence in services moreover we find evidence for the hypothesis that across sectors lagging countries are catching up with leading countries with rates of convergence that are on average higher in services than in manufacturing aggregate convergence patterns are almost exclusively caused by convergence of within sector energy intensity levels and not by convergence of the sectoral composition of economies

a capability based view of competitive heterogeneity the question of how firms differ is paramount to strategy scholars this question has motivated empirical research on the factors influencing performance differences among close competitors it also has motivated work on factors that increase or decrease the mean performance of firms in an industry theories about resources and capabilities tend to dominate discussions of heterogeneity in performance and superior performance yet the strategy field lacks a cumulative body of empirical work showing how firms differ this article derives conclusions and questions from empirical work on capabilities we then discuss work that complements but lies beyond the boundaries of traditional capabilities research we conclude by suggesting approaches to and areas of future work

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

the multiperiod information content of accounting earnings confirmations and contradictions of previous earnings reports in this study we propose and test the hypothesis that investors reevaluate earnings announcements in the light of postannouncement information 1 our argument for multiperiod price reactions to earnings news is motivated by the literature linking price responses to earnings persistence 2 when earnings are announced we assume that investors are unable to determine with certainty the persistence of an earnings

industry differences in the persistence of firm specific returns some firms such as kellogg nestle hewlett packard and boeing have consistently earned significantly higher returns than their immediate competitors why do intraindustry rents persist for these firms competition typically erodes these rents as evidenced by the strong convergence of firm profitability to the industry mean illustrated in figure 1 i claim that the persistence of these firmspecific rents depends at least partly on industry economic structure similar to richard e caves and michael e porter s 1977 mobility barriers so the rents are more persistent in some industries than others in this paper i test which of the theoretical industry factors are significant to support my claim i also show that the persistence of abnormal returns differs widely and systematically across industries for example an industry with highly persistent profitability differences is the american automobile industry in the 1970 s as illustrated by figure 2 which graphs differences in returns on assets roa s over time throughout the 1970 s general motors maintained a persistent significant profitability advantage over ford while ford held a persistent advantage over chrysler this situation did change later but it is still true that during the 1970 s there was no apparent convergence of profitability differences among the big three auto makers a comparison of figures 1 and 2 suggests that the economy wide result of figure 1 is merely an average over very different industries with convergence rates ranging from almost zero as in automobiles in the 1970 s to very rapid my methods for estimating persistence of above average returns improve on previous studies in several ways first i only consider the persistence of returns around the industry mean the persistence of this intra industry or firm specific rent rather than total rent has not been previously investigated yet the factors affecting firm specific rents need not be the same as those affecting industry rents second i estimate persistence in several ways finally i use a wider range of explanatory variables than earlier studies this study is structured as follows section i explains the concept of persistent firmspecific rents later sections specify the empirical model and estimate persistence by industry section ii theoretically relate industry factors to these varying persistence estimates section iii discuss cross sectional regression estimates section iv and provide conclusions section v

the market s response to recurring events the case of stock splits abstract a substantial body of literature suggests that stock splits convey information in this paper we extend this literature by examining firms that split their stock at least twice during 1970 1988 we focus on firms with multiple splits to provide evidence on the market s use of previous split experience in interpreting a recurring event our major findings are that stock price responses to both stock splits and post split earnings changes depend on earnings realizations observed after previous splits these findings support the conclusion that the market uses previous split experience to interpret a recurring event

the effect of technological knowledge assets on performance the innovative choice in spanish firms abstract the aim of this article is to examine the relationship between technological knowledge assets tkas and performance in the light of making the innovative choice that involves short term costs of acquiring or generating the assets but aims at longer term benefits through innovation to that end a study of 1267 industrial firms in spain was carried out over a period of 5 years 1998 2002 the results show that tkas have a positive indirect effect on financial performance mediated through innovation they also reveal that tkas have a negative direct effect on performance except licences thus the combined effect of tkas on performance urges the need for innovation to obtain a positive payoff

lmdi decomposition approach a guide for implementation since it was first used by researchers to analyze industrial electricity consumption in the early 1980s index decomposition analysis ida has been widely adopted in energy and emission studies lately its use as the analytical component of accounting frameworks for tracking economy wide energy efficiency trends has attracted considerable attention and interest among policy makers the last comprehensive literature review of ida was reported in 2000 which is some years back after giving an update and presenting the key trends in the last 15 years this study focuses on the implementation issues of the logarithmic mean divisia index lmdi decomposition methods in view of their dominance in ida in recent years eight lmdi models are presented and their origin decomposition formulae and strengths and weaknesses are summarized guidelines on the choice among these models are provided to assist users in implementation

persistence of profits in the long run a critical extension of some recent findings abstract recent discussions of the persistence of profits question have focussed on two econometric firm models which have been validated for several countries the paper gives a brief summary of the model concepts and of the most important findings for the countries in question both models are then applied to a data bank of german enterprises providing new results for one of them which has not been realized in germany yet finally the estimation results of the two models are examined by variance analysis this reveals that the convergence process is stronger than it has ever been perceived

industrial districts district effect and firm size the italian evidence the paper analyses the transformations that occurred in the italian industrial districts ids by empirically estimating the role of the district effect on firm performance over recent decades given their ability to manage upper level and size related business practices medium sized firms emerge as local players best able to exploit their embeddedness in the districtual system and leverage districtual assets however these effects are only present in firms belonging to the industrial specialization of the district an additional result of the empirical analysis shows that the leading role of medium sized firms is critical in younger districts where medium sized firms lead the renewal of the id and its adaptation to the changes of the competitive environment as most italian ids are specialized in traditional sectors this evidence contributes to understanding the mechanisms connecting the competitiveness of the traditional industry and its localised organizational structure the paper also provides a discussion of the future of ids including the relevance of the evolutionary stage of the district on the performance of affiliated firms and their reproducibility over time

intra industry information transfers associated with earnings releases abstract the impact that a firm s earnings releases have on the stock prices of other firms in its industry is examined for an identifiable sub set of firms the results are consistent with a significant information transfer occurring between the earnings release firm and the other firms in its industry this subset is identified by examining the impact of the release on the stock price of the announcing firm the magnitude of this impact is more significant for a sample of firms which have a larger percentage of their revenues in the same line of business as the earnings release firm vis a vis a sample with a lower percentage of their revenues from the same line of business alternative interpretations of the empirical results are also discussed the research findings have implications for information content and market efficiency research and for research on policy issues associated with disclosure regulation

further evidence on the debate of oil gas price decoupling a long memory approach abstract the long run oil gas price relationship has been challenged more often in recent years as these two prices have shown evidence of decoupling from each other this paper proposes the use of a long memory approach and a rolling windows method to model the time varying oil gas price relationship in three markets namely the united states europe and japan the results extend existing research conclusions on the oil gas price relationship and answer the question of whether it is a temporary phenomenon or a permanent market change our findings indicate that the us oil gas relationship remains nonstationary at almost all windows and illustrate strong evidence of decoupling conversely the european and asian oil gas prices exhibit temporary decoupling over time although the overall relationship still favours the oil indexation hypothesis the us experience suggests that oil and gas do not share the same fundamentals and a pricing hub can better reflect the true value of natural gas policy makers in europe and asia should reinforce their efforts towards a market based pricing mechanism for gas

book rate of return and prediction of earnings changes an empirical investigation over the years there has developed a fairly substantial body of research on the time series of earnings as a whole this literature concludes that changes in annual accounting earnings are unpredictable that is earnings follow a random walk 1 based on this result some inferences of economic substance policy have been claimed 2 in this paper we reconsider empirical issues which at least to some extent have been obscured by this conclusion we argue that the above result is only true in a limited sense since a modest enlargement of the predictive information set should allow for a rejection of the hypothesis that earnings changes are

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

forecasting profitability and earnings a study of the uk market 1982 2000 an approach recently developed by fama and french 2000 is applied to the study of whether uk company profitability is mean reverting a sample of roughly 987 firms per year for a period from 1982 2000 is used drawn from datastream in a simple partial adjustment model convergence towards the mean at a rate of about 25 per year is found the results are very similar in direction to those of fama and french 2000 but the results do not display significant non linearities the change in profitability appears to be more strongly influenced by dividends in the uk

estimating energy augmenting technological change in developing country industries assumptions regarding the magnitude and direction of energy related technological change have long been recognized as critical determinants of the outputs and policy conclusions derived from integrated assessment models particularly in the case of developing countries however empirical analysis of technological change has lagged behind simulation modeling this paper presents estimates of sectoral productivity trends and energy augmenting technological change for several energy intensive industries in india and south korea and for comparison the united states the key findings are substantial heterogeneity among both industries and countries and a number of cases of declining energy efficiency the results are subject to certain technical qualifications both in regards to the methodology and to the direct comparison to integrated assessment parameterizations nevertheless they highlight the importance of closer attention to the empirical basis for common modeling assumptions

the unexpected challenges of using energy intensity as a policy objective examining the debate over the apec energy intensity goal aims energy intensity energy demand per unit of economic output is one of the most widely used indicators of energy efficiency in energy policy discussions yet its application in real world policymaking can be surprisingly problematical this paper aims to provide guidance to governments and organizations considering using energy intensity as a policy objective scope in 2007 the apec community adopted then in 2011 revised an apec region wide energy intensity improvement goal this paper presents a case study of that experience focusing on three key lessons learned these lessons are not original findings however none of them have received the recognition they deserve and consequently they came as a surprise to many of those involved in apec s policy discussions conclusions the three lessons are as follows 1 energy intensity improvement is happening surprisingly quickly but not quickly enough to meet the world s energy challenges 2 it is difficult to find a definition of energy intensity that can make it suitable for use as an indicator of regional energy efficiency 3 whether the gdp s of individual economies are converted to common currency using market exchange rates or purchasing power parity ppp can dramatically change regional energy intensity improvement calculations

the impacts of energy prices on energy intensity evidence from china in this paper we present a review of the deregulation of energy prices in china between 1985 and 2004 and assess the impacts of changes in energy prices on aggregate energy intensity and coal oil electricity intensity we used time series data to provide estimates of energy price elasticities empirical results showed that 1 the own price elasticities of coal oil and aggregate energy were negative in periods both before and after 1995 implying that higher relative prices of different energy types lead to the decrease in coal oil and aggregate energy intensities however the positive own price elasticity of electricity after 1995 probably indicates that the price effect was weaker than other factors such as income effect and population effect 2 the impacts of energy prices were asymmetric over time 3 sectoral adjustment also drove the decrease in aggregate energy intensity although raising energy prices to boost efficiency of energy use seems to be an effective policy tool other policy implications concerned with energy prices such as energy supply security and fuel poverty must also be considered