deciding between competition and collusion we develop an approach to identify and test for bid rigging in procurement auctions first we introduce a general auction model with asymmetric bidders second we study the problem of identie cation in our model we state a set of conditions that are both necessary and sufe cient for a distribution of bids to be generated by a model with competitive bidding third we discuss how to elicit a prior distribution over a e rm s structural cost parameters from industry experts given this prior distri bution we use bayes s theorem to compare competitive and collusive models of industry equilibrium finally we apply our methodology to a data set of bidding by construction e rms in the midwest the techniques we propose are not computationally demanding use e exible functional forms and can be programmed using most standard statistical packages

optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

multiple round timber auction design and simulation this paper presents a multiple round timber auction simulation developed in order to study various configurations of auction design in this study simultaneous sequential timber auctions are modelled and analysed using agent based simulation technology as there are many individual items in the auction to be sold the auction designer defines several rounds that are sequential at pre defined intervals at each round the auction designer announces several simultaneous auctions since bidders are offered different items at each round a mathematical linear programing model for selecting the best set of items to bid for is presented different bidding patterns are simulated and compared in various setup configurations the most advanced of these strategies are adaptive and use agent learning capability the comparisons include the success rate of winning the auction and the winning price per m3 this study suggests an efficient bidding pattern for bidders to bid in order to achieve to their goal and increase their profit similarly in order to increase profit the auctioneer i e the government needs to control several auction parameters including the number of auctions per year the lot size the auction periodicity and the number of bidders this study also suggests parameters configurations that to maximise revenue for the auctioneer

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

common values unobserved heterogeneity and endogenous entry in u s offshore oil lease auctions although an auction of drilling rights is often cited as an example of common values formal evidence has been limited by the problem of auction level unobserved heterogeneity we develop an empiri

a study of the internal organization of a bidding cartel this paper examines bidding in over 1 700 knockout auctions used by a bidding cartel or ring of stamp dealers in the 1990s the knockout was conducted using a variant of the model studied by daniel graham robert marshall and jean francois richard 1990 following a reduced form examination of these data damages induced inefficiency and the ring s benefit from colluding are estimated using a structural model in the spirit of emmanuel guerre isabelle perrigne and quang vuong 2000 a notable finding is that nonring bidders suffered damages that were of the same order of magnitude as those of the sellers

are disclosures about bank derivatives and employee stock options value relevant abstract the papers by venkatachalam 1996 and aboody 1996 provide some interesting evidence on issues that are important to accounting regulators as well as accounting academics however for econometric as well as economic reasons there are limits to what we can learn from this type of research cross sectional levels studies careful attention to methodological issues in this type of research design can reduce but likely will not eliminate these interpretational difficulties

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

comparing open and sealed bid auctions evidence from timber auctions we study entry and bidding patterns in sealed bid and open auctions using data from the u s forest service timber auctions we document a set of systematic effects sealed bid auctions attract more small bidders shift the allocation toward these bidders and can also generate higher revenue a private value auction model with endogenous participation can account for these qualitative effects of auction format we estimate the model s parameters and show that it can explain the quantitative effects as well we then use the model to assess bidder competitiveness which has important consequences for auction design

effect of derivative accounting rules on corporate risk management behavior abstract i examine the effect of the accounting standard for derivative instruments sfas no 133 on corporate risk management behavior i classify a derivative user as an effective hedger eh firm if its risk exposures decreased after the initiation of the derivatives program and as an ineffective hedger speculator is firm otherwise i find that volatility of cash flows and risk exposures related to interest rate foreign exchange rate and commodity price decrease significantly for is firms but not for eh firms suggesting that is firms engaged in more prudent risk management activities after the adoption of sfas no 133

entry and competition effects in first price auctions theory and evidence from procurement auctions motivated by several interesting features of the highway mowing auction data from the texas department of transportation tdot we study three competing procurement auction models with endogenous entry our entry and bidding models provide several interesting implications for the first time we show that even within an independent private value paradigm as the number of potential bidders increases bidders equilibrium bidding behaviour can become less aggressive and the expected procurement cost may rise because the entry effect is always positive and may dominate the negative competition effect we then develop structural models of entry and bidding corresponding to the three models under consideration controlling for unobserved auction heterogeneity and use the recently developed semi parametric bayesian estimation method to analyse the data we select the model that best fits the data and use the corresponding structural estimates to quantify the entry effect and the competition effect with regard to the individual bids and the procurement cost copyright 2009 wiley blackwell

financial analyst characteristics and herding behavior in forecasting this study classifies analysts earnings forecasts as herding or bold and finds that 1 boldness likelihood increases with the analyst s prior accuracy brokerage size and experience and declines with the number of industries the analyst follows consistent with theory linking boldness with career concerns and ability 2 bold forecasts are more accurate than herding forecasts and 3 herding forecast revisions are more strongly associated with analysts earnings forecast errors actual earnings forecast than are bold forecast revisions thus bold forecasts incorporate analysts private information more completely and provide more relevant information to investors than herding forecasts

china s land market auctions evidence of corruption this paper studies the urban land market in china in 2003 2007 in china all urban land is owned by the state leasehold use rights for land for re development are sold by city governments and are a key source of city revenue leasehold sales are viewed as a major venue for corruption prompting a number of reforms over the years reforms now require all leasehold rights be sold at public auction there are two main types of auction regular english auction and an unusual type which we call a two stage auction the latter type of auction seems more subject to corruption and to side deals between potential bidders and the auctioneer absent corruption theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders or are cold which would suggest negative selection on property unobservables into such auctions however if such auctions are more corruptible that could involve positive selection as city officials divert hotter properties to a more corruptible auction form the paper finds that overall sales prices are lower for two stage auctions and there is strong evidence of positive selection the price difference is explained primarily by the fact that two stage auctions typically have just one bidder or no competition despite the vibrant land market in chinese cities

gaap versus the street an empirical assessment of two alternative definitions of earnings managers security analysts investors and the press rely increasingly on modified definitions of gaap net income known by such names as operating and pro forma earnings we document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where gaap and street earnings differ further there is a very strong bias toward the reporting of a street earnings number that exceeds the gaap earnings number we also show that the market response to the street earnings number has displaced gaap earnings as a primary determinant of stock prices finally through an analysis of earnings releases we show that management has taken a proactive role in defining and emphasizing the street number when communicating to analysts and investors

do analysts understand the economic and reporting complexities of derivatives we investigate whether and how the complexity of derivatives influences analysts earnings forecast properties using a difference in differences design we find that relative to a matched control sample of non users analysts earnings forecasts for new derivatives users are less accurate and more dispersed after derivatives initiation these results do not appear to be driven by the economic complexity of derivatives but rather the financial reporting of such economic complexity overall despite their financial expertise analysts routinely misjudge the earnings implications of firms derivatives activity however we find evidence that a series of derivatives accounting standards has helped analysts improve their forecasts over time

dynamic forecasting behavior by analysts theory and evidence abstract we develop a multi period learning model to examine the relation between analysts forecasting behavior and their performance in a competitive market for banking services the surplus and the analyst s payoff which is determined through bargaining are convex in her reputation the convexity of her payoff structure and the presence of employment risk lead to a u shaped relation between the analyst s forecast boldness and prior performance and a positive relation between forecast boldness and experience we find support for these predictions in our empirical analysis significant underperformers outperformers face higher lower employment risk and are more likely to issue bolder forecasts

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

bid preference programs and participation in highway procurement auctions we use data from highway procurement auctions subject to california s small business preference program to study the effect of bid preferences on auction outcomes our analysis is based on an estimated model of firms bidding and participation decisions which allows us to evaluate the effects of current and alternative policy designs we show that incorporating participation responses significantly alters the assessment of preferential treatment policies

the effect of cash flow forecasts on accrual quality and benchmark beating when analysts provide forecasts of both earnings and operating cash flow they also implicitly provide a forecast of total operating accruals we posit that this increases the transparency and the expected costs of accrual manipulations used to manage earnings as a consequence we predict and find that accrual quality improves and firms propensity to meet or beat earnings benchmarks declines following the provision of cash flow forecasts we also predict and find that firms turn to other benchmark beating mechanisms such as real activities manipulation and earnings guidance in response to the provision of cash flow forecasts

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

forecasting bankruptcy more accurately a simple hazard model i argue that hazard models are more appropriate than single period models for forecasting bankruptcy single period models are inconsistent while hazard models produce consistent estimates i describe a simple technique for estimating a discrete time hazard model i find that about half of the accounting ratios that have been used in previous models are not statistically significant moreover market size past stock returns and idiosyncratic returns variability are all strongly related to bankruptcy i propose a model that uses both accounting ratios and market driven variables to produce out of sample forecasts that are more accurate than those of alternative models copyright 2001 by university of chicago press

estimating risk aversion from ascending and sealed bid auctions the case of timber auction data estimating bidders risk aversion in auctions is a challeging problem because of identification issues this paper takes advantage of bidding data from two auction designs to identify nonparametrically the bidders utility function within a private value framework in particular ascending auction data allow us to recover the latent distribution of private values while first price sealed bid auction data allow us to recover the bidders utility function this leads to a nonparametric estimator an application to the us forest service timber auctions is proposed estimated utility functions display concavity which can be partly captured by constant relative risk aversion

the impact of derivatives on firm risk an empirical examination of new derivative users abstract the appropriateness of financial reporting rules for derivative securities depends on corporations reasons for using the instruments empirically little is documented about how the instruments affect firms risk exposures this study examines derivatives roles in firms initiating derivatives use the results are consistent with firms using derivatives to hedge and not to increase entity risk firm risk measured several ways declines following derivatives use realized risk reductions and decisions to initiate derivatives programs vary across firms with the expected benefits from hedging the findings emphasize the importance of hedge accounting rules that incorporate the impact of derivatives and hedged items simultaneously

quality awards and the market value of the firm an empirical investigation this paper empirically investigates the impact of winning a quality award on the market value of firms by estimating the mean abnormal change in the stock prices of a sample of firms on the date when information about winning a quality award was publicly announced we note that the abnormal returns generated by the quality award winning announcements provide a lower bound for the impact of implementing an effective quality award improvement program our results show that the stock market reacts positively to quality award announcements statistically significant mean abnormal returns on the day of the announcements ranged from a low of 0 59 to a high of 0 67 depending on the model used to generate the abnormal returns the reaction was particularly strong for smaller firms mean abnormal returns ranged from low of 1 16 to a high of 1 26 and for firms that won awards from independent organizations such as malcolm baldrige philip crosby etc mean abnormal returns ranged from a low of 1 31 to a h

do security analysts improve their performance with experience we investigate if sell side security analysts generate more accurate quarterly earnings forecasts and more profitable stock recommendations as their experience following a specific firm increases we measure firmspecific experience as the number of prior quarters for which the analyst has issued an earnings forecast for the firm if analysts improve their forecasting performance with repetition as suggested by the learning by doing lbd model an analyst s earnings forecasts will become more accurate with experience prior empirical work provides mixed evidence on whether analysts exhibit individual forecasting performance differences e g butler and

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

identification and estimation of auction models with unobserved heterogeneity in many procurement auctions the bidders unobserved costs depend both on a common shock and on idiosyncratic private information assuming a multiplicative structure i derive sufficient conditions under which the model is identified and propose a non parametric estimation procedure that results in uniformly consistent estimators of the cost components distributions the estimation procedure is applied to data from michigan highway procurement auctions private information is estimated to account for 34 of the variation in bidders costs it is shown that accounting for unobserved auction heterogeneity has important implications for the evaluation of the distribution of rents efficiency and optimal auction design

using capital markets as market intelligence evidence from the pharmaceutical industry financial theory posits that capital markets convey through stock prices their expectation of the firm s future performance we use concepts from principal agent theory and prospect theory to provide a theoretical explanation for the role stock price variation plays in managerial decision making we then empirically investigate what specific decisions managers undertake in response to stock price variation we perform our empirical analyses in the context of the pharmaceutical industry we find that drug firms whose stock underperformed the industry react differently than drug firms with high performing stocks specifically laggards tend to implement more changes to their current product portfolio and distribution than high performing firms the more laggards underperform the more they implement acquisitions aimed to produce immediate improvement in the firm s product portfolio in contrast drug firms whose stocks outperform the industry tend to make fewer changes to their current portfolio and distribution instead they focus more on long term research and development and marketing of existing products we interpret these findings in light of industry key success factors

herding among security analysts the paper shows that the buy or sell recommendations of security analysts have a signi cant positive in uence on the recommendations of the next two analysts this in uence can be traced to short lived information in the most recent revisions in contrast the in uence of the prevailing consensus is not stronger if the consensus accurately forecasts subsequent stock price movements this indicates consensus herding consistent with models in which analysts herd based on little information the consensus also has a stronger in uence when market conditions are favorable the resulting poorer information aggregation could cause bull markets to be intrinsically more fragilea e g bikhchandani et al j political economy 100 5 1992 992 1026 2000 elsevier science s a all rights reserved jel classixcation g11 g14 g24

identification of standard auction models this paper presents new identification results for models of first price second price ascending english and descending dutch auctions we consider a general specification of the latent demand and information structure nesting both private values and common values models and allowing correlated types as well as ex ante asymmetry we address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data the simplest model symmetric independent private values is nonparametrically identified even if only the transaction price from each auction is observed for richer models identification and testable restrictions may be obtained when additional information of one or more of the following types is available i the identity of the winning bidder or other bidders ii one or more bids in addition to the transaction price iii exogenous variation in the number of bidders iv bidder specific covariates while many private values pv models are nonparametrically identified and testable with commonly available data identification of common values cv models requires stringent assumptions nonetheless the pv model can be tested against the cv alternative even when neither model is identified

does it pay to change your company s name a stock market perspective a company s name is commonly considered to be an integral part of its image just like the quality of its products or the quality of its technical services changing a company s name is a major policy decision contemplated by many firms and actually implemented by some each year this paper attempts to examine albeit indirectly whether a name change can improve the profit performance of a firm and what type of firm is more likely to succeed in doing so we use the event study methodology developed in finance to examine the above questions with respect to 58 corporations that changed their names in 1981 1985 our findings are that for most of the firms name changes are associated with improved performance and that the greatest improvement tends to occur in firms that produce industrial goods and whose performance prior to the change was relatively poor evidence that industrial good producers are also heavy users of corporate advertising lends further credence to this finding our findings do not support however the contention that the new name per se will enhance demand for the firm s products rather it seems that the act of a name change serves as a signal that other measures to improve performance such as changes in product offerings and organizational changes will be seriously and successfully undertaken the rationale behind why such a signal is sent and why it is believed is discussed

security analysts career concerns and herding of earnings forecasts several theories of reputation and herding see e g scharfstein and stein 1990 suggest that herding among agents should vary with career concerns our goal in this paper is to document whether such a link exists in the labor market for security analysts specifically we look at the relationship between an analyst s job tenure a proxy for career concerns and various measures of stock earnings forecast performance we establish the following key results 1 older analysts are more likely to produce earnings forecasts of firms before younger ones 2 their forecasts also deviate more from the consensus forecast than their younger counterparts we argue that these results are consistent with some reputational models of herding we also establish a number of auxiliary findings regarding the relationship between forecast accuracy and frequency of forecast revisions with job tenure

sealed bid versus open auctions the evidence data from u s forest service timber auctions are used to test vickrey s original proposition that sealed bid and open auctions yield equal revenue models for the high bid in an auction are specified and estimated using three different procedures ordinary least squares two stage least squares and maximum likelihood the second two procedures include a second equation which accounts for the forest service s auction choice and therefore control for selection bias these two procedures which unlike ordinary least squares yield consistent estimators imply a statistically and economically insignificant difference in high bids between sealed bid and open auctions

mergers cartels set asides and bidding preferences in asymmetric oral auctions from bidding data we estimate the underlying value distribution for forest service timber we find that bidder values decrease 2 mbf thousand board feet with each mile from the tract and that small firms fewer than 500 employees have values that are 72 mbf lower than large firms the empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy the most anticompetitive mergers raise price by less than 3 and a 4 decline in marginal costs through greater merger efficiencies is enough to offset a 1 anticompetitive price increase eliminating the sba set aside program would raise timber revenues by 15 a policy of granting bidding preferences to small and more distant bidders would raise revenue by approximately one tenth of one percent

on the determinants of corporate hedging finance theory indicates that hedging increases firm value by reducing expected taxes expected costs of financial distress or other agency costs this paper provides evidence on these hypotheses using survey data on firm s use of forwards futures swaps and options combined with computstat data on firm characteristics of 169 firms in the sample 104 firms use hedging instruments in 1986 the data suggest that firms which hedge face more convex tax functions have less coverage of fixed claims are larger have more growth options in their investment opportunity set and employ fewer hedging substitutes

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices