an earnings prediction approach to examining intercompany information transfers abstract we assess potential information transfers by examining the association between the earnings announcements of early and late announcers in an industry our earnings prediction models are statistically significant much more frequently than would be expected by chance the models suggest potential positive information transfers on average but there is substantial cross industry variation in the strength of this relation we find that the greatest price reactions by nonannouncers to same industry earnings announcements occur in industries with the greatest earnings comovement

empirical evidence on dividends as a signal of firm value the role of dividends in firm valuation continues to be a theoretical puzzle as well as an empirical obsession with economists the pioneering work by modigliani and miller mm 32 29 is the archetype of the theoretical dilemma whereas the authors proved convincingly the irrelevance of dividend policy to firm value within a perfect capital market they tempered their irrelevance proposition with what is usually referred to as the information content of dividends icd hypothesis in a more scientific sense this hypothesis should be labeled as a conjecture since it is essentially an ad hoc observation that dividends may convey information to the capital market concerning a firm s future earnings potential even though the icd hypothesis was not derived from a well specified economic model it has nevertheless been subjected to a plethora of empirical studies in general these studies have focused upon the precise influence of dividend changes upon a firm s common stock price overall the results can be described as being supportive of the notion that stock price movements are positively correlated with cash dividend changes this correlation of course is consistent with the icd hypothesis

unexpected earnings and intraindustry information transfers further evidence this paper provides evidence on the association between unexpected quarterly earnings information and the contemporaneous stock price behavior of announcing and nonannouncing firms in the same industry prior research provides evidence consistent with a positive sign and magnitude relation between the unsystematic stock returns of announcing and nonannouncing firms at earnings release dates i e information transfers foster 1981 and clinch and sinclair 1987 as these studies emphasize however such an association may arise from misspecification of the stock return generating process to address this issue we use unexpected earnings not announcing firms unsystematic stock returns in tests of information transfers evidence consistent with information transfers when unexpected earnings are used as a proxy for the informativeness of earnings would reduce the likelihood of information transfers attributable to returns model misspecification and would support the hypothesis that unexpected earnings and not some unspecified information item drive information transfers at earnings release dates we find a positive sign and magnitude relation between the contemporaneous unsystematic stock returns of announcing and nonannouncing firms at earnings release dates and between unexpected earnings of announcing firms and unsystematic stock returns of nonannouncing

a theory of disclosure in speculative markets this paper presents a theory of disclosure in a market where investors have heterogeneous beliefs and face short sale constraints assets trade above fundamentals reflecting the value of the option to sell to more optimistic investors in the future the initial seller has an incentive to commit to an imprecise disclosure policy despite the negative effect this has on the fundamental value of the asset in order to increase the potential for disagreement and hence the magnitude of the speculative premium i show that there is a strategic complementarity between sellers in their disclosure decisions this explains why financial misreporting and episodes of speculation occur together in waves and demonstrates that the endogenous choice of imprecise disclosure amplifies the extent to which assets are overpriced this paper was accepted by amit seru finance

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

government policy for a partially deregulated industry deregulate it fully alfred kahn was a major force behind regulatory reform that initially benefited air travelers and subsequently consumers in other industries by placing greater reliance on markets than on regulators to allocate resources kahn also believed that effective governance was important for deregulation s success in this paper i argue that such governance has not occurred in practice and that problems that persist in partially deregulated industries are more likely to be solved by full deregulation and if necessary privatization than by government intervention

signalling by direct disclosure under asymmetric information abstract in this paper an informational asymmetry exists between investors and the issuer of an initial public offering about the value of the security to avoid market failure a solution is proposed in which the issuer makes a disclosure about firm value that is verified by an investment banker the investment banker enters into a contingent contract with investors which imposes a penalty if the ex post observable cash flow indicates fraudulent disclosure a bivariate signalling model is formulated and solved and testable implications are derived from comparative statics analysis

efficiency differentials favouring resource based industries abstract this note draws attention to some characteristics of resource based industries not mentioned in roemer s 1979 recent survey on resource based industrialization which suggest that efficiency in these industries may be higher than in other ldc industries some empirical support is also provided

market assessment of industry and firm earnings information abstract this study examines the timing of security returns associated with industry wide earnings and firm specific earnings we predict and find that returns associated with differences in performance across industries begin and end earlier than returns associated with differences in firm specific performance within industries to earn abnormal profits a trading strategy based on forecasts of future earnings would require earlier predictions of industry wide earnings than of firm specific earnings

after airline deregulation and alfred e kahn among alfred e fred kahn s many accomplishments none is better remembered than his pivotal role in deregulation of the us airline industry kahn s commitment to marry core microeconomic principles with institutional analysis willingness as chairman of the civil aeronautics board to step outside the regulation as usual box and appealing wit made him the face of the airline deregulation act of 1978 one of the great microeconomic policy triumphs lessons drawn from kahn s work and the airline deregulation experience remain instructive for current academic research and regulatory policy design across broad sectors of the economy

trade tropical deforestation and policy interventions trade interventions are increasingly advocated as a means for controlling timber related tropical deforestation this paper analyzes the impact on deforestation of such policy instruments in a dynamic framework the forest is modelled as a potentially renewable resource and timber is extracted for purposes of export and domestic consumption optimality conditions for a variety of model specifications are derived and the impacts of changes in the terms of trade and market structure on long run deforestation are analyzed the results of this analysis suggest that trade interventions that seek to affect the terms of trade against the export of tropical timber products are in the long run a second best policy option for influencing the deforestation process

distinguished lecture on economics in government the private uses of public interests incentives and institutions as a long time student of the public sector i welcomed the opportunity to come to washington as a member of the council of economic advisers and later to become the chairman of the council partly because it gave me an opportunity to study at first hand this immensely important part of our economy and society and to test my ideas against the reality of government in action to be sure i came also as an activist if not with a fully articulated agenda at least with a view about what it was that government should and should not be doing my reference point was the fundamental theorems of welfare economics which as some describe them proved that the market left to itself would produce efficient allocations many saw in these theorems the vindication of adam smith s faith in the invisible hand leading the self interested decisions of each person to maximize the well being of the nation as a whole today many of us look at the fundamental theorem not as a description of the world but as an explication of the conditions under which a market equilibrium will be pareto efficient these conditions are quite strong the importance of some of the more explicit assumptions like the lack of externalities and the completeness of markets has long been known in the last two decades we have explored much more seriously the consequences of the informational assumptions implicit in the belief that markets are efficient in particular it has been shown that in the presence of imperfect information or incomplete markets the economy will not be pareto efficient in other words there joseph stiglitz is senior vice president and chief economist world bank washington d c stiglitz was a member of the council of economic advisers from 1993 95 and chairman

positive and negative information transfers from management forecasts we examine positive and negative information transfers associated with management earnings and revenue forecasts positive information transfers are due to industry commonalities whereas negative information transfers are caused by competitive shifts we argue that positive and negative intra industry information transfers offset each other and lead to an overall finding of no information transfers even though they exist we also conjecture that the type of information transfers from the same management forecast can be positive or negative based on the characteristics of the information receiver we hypothesize positive information transfers to nonrival firms and negative information transfers to rivals consistent with our prediction we find negative positive information transfers between forecasting firms and nonforecasting rival nonrival firms in the same industry through analyses using competitors identified by hoover s and 10 k reports we show more general evidence of negative information transfers to rival firms

on the efficiency of intra industry information transfers the dilution of the overreaction anomaly abstract we revisit the stock market anomaly documented by thomas and zhang 2008 and show that the apparent mispricing of information transfers has decayed over time as the us markets experienced rapid improvements in the efficiency of the underlying price formation processes utilizing recent advancements in market microstructure research to estimate firm specific proxies for market efficiency we demonstrate that the existence of the overreaction anomaly where stock prices of late announcers in response to the earnings reported by early announcers in the same industry are negatively related to subsequent price responses of late announcers to their own earnings reports is specific to an earlier sample period and results from the inefficient incorporation of information into prices largely attributable to an environment with high barriers to arbitrage our results indicate that the pricing efficiency of intra industry information transfers has increased in the recent years of increased liquidity and markedly higher trading activity

can privatization of u s highways improve motorists welfare abstract we assess the welfare effects of highway privatization accounting for government s behavior in setting the sale price firms strategic behavior in setting tolls and motorists heterogeneous preferences for speedy and reliable travel we find motorists are able to benefit from privatization by negotiating tolls with private providers that increase their consumer surplus surprisingly we find that by obtaining tolls and service that align with their varying preferences motorists may be better off negotiating with a monopolist than with duopoly providers or under public private competition toll regulation may be counterproductive because it is likely to treat motorists as homogeneous

managers earnings forecasts and intra industry information transfers abstract the effect that voluntarily disclosed managers earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined the results are consistent with information content in managers forecasts and with information transfer between forecast firms and other firms in the industry these inferences are drawn from firms abnormal returns computed from single and two index pricing models where the latter includes market and industry indexes interestingly while a positive information transfer is evident with market model residuals once industry cross sectional covariation in firms returns is removed no directional relation is apparent

assessing the relationship between government policy and deforestation abstract the effects of public policies on deforestation are assessed in a general equilibrium framework a forest can be left in its natural state to provide a consumption benefit such as biodiversity or carbon absorption in its natural state it is subject to free access however alternatively it can be converted to a market input needed to produce a valuable final product the utility of consumers depends on the amount of the forest left standing on consumption of the forest using commodity and on consumption of a numeraire that is produced from non forest inputs only final commodities are traded with the outside world at constant prices the model is used to evaluate claims in the literature regarding the effects of government policies on deforestation in developing countries the polices examined include transportation improvements taxes and royalties on timber harvests controls on log exports a variety of agricultural policies tax incentives to promote domestic processing industries and employment opportunity enhancement

overreaction to intra industry information transfers prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry we document a stock market anomaly associated with this phenomenon of intra industry information transfers by showing that the stock price movements of late announcers in response to earnings reported by early announcers are negatively related to subsequent price responses of late announcers to their own earnings reports apparently the stock market overestimates the intra industry implications of early announcers earnings for late announcers earnings and that overestimation is corrected when late announcers disclose their earnings

economic and environmental benefits of eliminating log export bans the case of costa rica an increasing number of tropical timber producing nations have enacted bans on export of logs arguing that this will reduce deforestation expand downstream wood processing and improve the scale efficiency of domestic processing create jobs and retain more value added nationally the theoretical literature is clear that trade restrictions are generally welfare reducing except in special cases such as when there is a potential for an optimal export tax at best a log export ban is a second best policy tool for reducing deforestation and addressing the associated environmental externalities in overall terms the suggestion that log export bans can achieve the objectives expected of them is dubious however very little quantitative evidence exists to demonstrate this claim and the paper attempts to address this gap by looking at the economic and environmental impacts of eliminating a log export ban in costa rica the authors argue that eliminating the export ban is pareto improving and could generate economic gains as high as 14 million per annum with the possibility of relatively modest environmental benefits

cross firm real earnings management cross firm real earnings management our analysis is rooted in the notion that stockholders can learn about the fundamental value of any firm from observing the earnings reports of its rivals we argue that such intra industry information transfers which have been broadly documented in the empirical literature may motivate managers to alter stockholders beliefs about the value of their firm not only by manipulating their own earnings report but also by influencing the earnings reports of rival firms managers obviously do not have access to the accounting system of peer firms but they can nevertheless influence the earnings reports of rival firms by distorting real transactions that relate to the product market competition we demonstrate such managerial behavior which we refer to as cross firm real earnings management and explore its potential consequences and interrelation with the practice of accounting based earnings management within an industry setting with imperfect non proprietary accounting information this article is protected by copyright all rights reserved

intraindustry information transfers associated with management forecasts of earnings this study documents information transfers associated with the sign and magnitude of the changes in earnings expectations conveyed by management forecasts that is the management forecast of one firm discloser generates unexpected price reactions for firms nondisclosers similar to the forecaster the results are consistent with information transfers documented for releases of actual earnings foster 1981 and sales announcements olsen and dietrich 1985 1 these results build on prior management forecast research that has documented a link between the sign and magnitude of the changes in earnings expectations conveyed by management forecasts and the unexpected share returns price reactions of forecasting firms ajinkya and

a note on reit bankruptcy and intraindustry information transfers an empirical analysis abstract this paper examines the capital market response to the bankruptcy of residential resources res res a real estate investment trust reit we find a significant event day value decline for a broad portfolio of reits reits whose portfolios are most similar to res res experienced both a significant value decline and an increase in bankruptcy risk on the event day reits with dissimilar portfolios experienced neither of these effects among the reits with similar portfolios to res res leverage ratios explain 84 of the event day value declines our findings suggest that ignoring intraindustry firm differences can lead to spurious conclusions

effects of an export embargo on related goods logs and lumber this paper extends and applies the marshallian derived demand model in the context of international trade the model is utilized to derive estimates of the market equilibrium net welfare and welfare incidence effects of a hypothetical embargo of softwood log exports from the pacific coast region of the united states the approach is potentially applicable to the analysis of various restrictions on primary products exports which may be instituted to maintain the viability of domestic processing industries

u s industry adjustment to economic deregulation conomic deregulation does not happen overnight it takes time for lawmakers and regulators to dismantle regulatory regimes and then it takes more time for the deregulated industries to adjust to their new competitive environment federal regulatory agencies and the u s congress began liberalizing pricing entry and exit in the transportation financial energy and communications industries during the mid 1970s but while some smaller industries such as intercity bus transportation and air cargo have been fully deregulated during that time the only major american industries fully deregulated to date are airlines and motor carriers as to the pace of industry adjustment consider airlines economic deregulation of the airline industry began in 1974 when the civil aeronautics board first encouraged experiments with discount fares it was completed in 1983 when all regulations on fares entry and exit were eliminated yet more than 20 years after the deregulatory process began the airline industry continues to shed inefficiencies that accumulated over decades of regulation and to find new ways to market their service indeed the airlines latest marketing innovation selling discount fares on the internet would be illegal if fares were still regulated it is not surprising that deregulated or partially deregulated industries are slow to achieve maximum efficiency when regulatory restrictions on pricing operations and entry especially from new firms have been enforced for decades managers and employees of regulated firms settle into patterns of inefficient production and missed opportunities for technological advance and entry into new markets deregulation frees an industry from the state s control over prices entry and exit although of course firms are still subject to antitrust laws and safety regulations after deregulation some costs usually fall in short order but it takes

intra industry information releases a recursive systems approach abstract this paper investigates the extent of intra industry information transfers associated with the half yearly earnings announcements of a sample of australian firms the omitted factor interpretation of foster s 1981 results is examined using a recursive systems specification of the return generating process to model extra market return covariation in cross section although some aspects of the results do appear sensitive to the alternative methodologies the overall conclusion is consistent with foster 1981 and supports the existence of intra industry information transfers associated with firms earnings releases

are there efficiency gains from the removal of natural resource export restrictions evidence from british columbia log export bans lebs are a popular development tool utilised by developing nations with sizable endowments of timber however the actual impact of these policies is debatable british columbia has a developed forestry sector and still maintains a leb this trade restriction continually creates conflicts with canada s international trade partners including the united states this paper examines the efficiency implications of a hypothetical removal of roundwood export restrictions in british columbia using roundwood price and quantity data from 1995 to 2008 a time series econometric approach is utilised to determine supply and demand elasticities for british columbia s roundwood empirical results from a vector error correction model suggest that a removal of export restrictions will generate an overall increase of approximately 347 91 million us dollars per year to british columbia s forest economy

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

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

policies for industrial progress in developing countries this book is a collection of essays by a distinguished group of authors who have had practical experience with industrial policy in both developing and industrialized countries the essays analyze the principal policies that influence the course and pace of industrialization and identify the practical constraints on policy formulation the book is intended primarily for administrators and decisionmakers to assist them in choosing among policy alternatives it is accordingly organized along lines of govenmental administrative responsibility with chapters on trade finance labor and technology taxation licensing and other controls public enterprises infrastructure and the location of industry as well as industrial links with agriculture and the international environment the use of mathematics and sophisticated models has been avoided in this attempt to bridge the chasm between theoretical concepts and the practical formulation policy

additional evidence on the information content of management earnings forecasts prior studies have documented that management earnings forecasts which exceed expected earnings good news forecasts are associated with significant positive abnormal stock returns on average when publicly released however no significant negative abnormal returns are observed immediately surrounding the release of management forecasts which are defined as bad news these findings conflict with the results to date on price reactions associated with earnings announcements for example ball and brown 1968 found that good news bad news annual earnings announcements are associated with positive negative abnormal returns in the months preceding and including the annual earnings announcement foster 1977 reported similar findings for quarterly earnings announcements beaver clarke and wright 1979 found a positive ordinal association between the magnitude of unexpected earnings the difference between actual earnings and expected earnings

discussion of when does the peer information environment matter abstract shroff et al 2017 examine whether a richer peer information environment reduces the cost of capital for firms with limited firm specific information and whether this effect decreases as firm specific information becomes more prevalent although much of the evidence supporting their hypotheses is based on a small highly idiosyncratic sample of firms issuing initial public debt the authors provide corroborating evidence using samples of ipo and seo firms however two research design choices make it difficult to discern the nature of the peer information that substitutes for firm information hence the implications of the findings for disclosure regulation are limited

the economics of tropical deforestation this paper provides a survey of first wave economic studies of tropical deforestation and land use these studies of tropical forest land conversion are generally at the cross country level we also conduct a synthesis cross country analysis of tropical agricultural land expansion the results show that agricultural development is the main factor determining land expansion but institutional factors have an important influence income effects tend to vary from region to region and do not always display an environmental kuznets curve relationship copyright 2001 by blackwell publishers ltd

environmental tariffs on polluting imports this paper examines the implications for the use of trade measures as weapons to address global environmental concerns there are already proposals in the u s senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the u s the paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed u s tariff hence the proposed legislation has very uncertain environmental consequences even if the policy has been mainly designed to protect domestic industries it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs the analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution

differential intra industry information transfer associated with management earnings forecasts abstract this study proposes that the amount of information about one firm conveyed by management forecasts of another firm in the same industry depends on the earnings covariance between the two firms and the forecast firm s earnings variance the covariance reflects the competitive relation between the firms and the variance represents noise contained in forecasts when both variance and covariance are included in regressions nonforecast firms abnormal returns are associated with forecast firms abnormal returns when they are excluded no such association is observed the results are similar but much weaker when the independent variable is unexpected management forecasts

stock price response to accounting information in oligopoly in this article the authors explore the linkages between the ball brown effect and the information transfer effect in oligopoly using the data from the wall street journal s digest of earnings report column they analyze how the stock market reacts to the subearnings information the authors show that an unexpected increase in sales is good news to the disclosing firm as well as to its competitors however an unexpected increase in costs is bad news to the disclosing firm but good news to its competitors the ball brown effect can be viewed as a consequence of stock market reactions to subearnings disclosure copyright 1992 by university of chicago press