accounting method choice opportunistic behavior efficient contracting and information perspectives abstract three alternative but not mutually exclusive perspectives on accounting method choice are contrasted the opportunistic behavior efficient contracting and information perspectives much of the empirical work on accounting method choice is based on the opportunistic behavior perspective the malmquist and main and smith papers are attempts to view accounting method choice as a means of improving the monitoring capabilities of contracts which rely on accounting numbers the papers serve as useful vehicles for illustrating the difficulties of delineating a set of maintained assumptions that result in hypotheses about how accounting method choice affects the monitoring characteristics of contracts and distinguishing between hypotheses based on the three perspectives on accounting method choice

urban bias revisited in his book why poor people stay poor the author has argued that urban bias is the moving force behind needlessly slow and inequitable growth in contemporary developing countries this claim is defended against three main criticisms that the methods chosen to test it are not appropriate that the evidence tendered is not relevant or sufficient and that the rural urban polarity is not clear cut or does not represent the prime conflict within contemporary developing countries

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

executive incentives and the horizon problem an empirical investigation abstract this paper investigates the hypothesis that ceos in their final years of office manage discretionary investment expenditures to improve short term earnings performance we examine the behavior of r d expenditures for a sample of firms in industries that have significant ongoing r d activities the results suggest that ceos spend less on r d during their final years in office however we find the reductions in r d expenditures are mitigated through ceo stock ownership there is no evidence that the reduced r d expenditures are associated with either poor firm performance or reductions in investment expenditures that are capitalized for accounting purposes

models of currency crises with self fulfilling features the discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency market equilibria after describing an illustrative model in which high unemployment may cause an exchange rate crisis with self fulfilling features the paper reviews some other self reinforcing mechanisms recent econometric evidence seems consistent with the practical importance of these mechanisms

the role of real income level and income distribution in fulfillment of basic needs abstract using internationally comparable estimates of real gdp per capita along with world bank data on seven basic needs indicators and one income equality measure relative importance of real income level and income equality for improvement in the provision of basic needs is assessed on the basis of a multiple regression model income level seems important in almost all cases but the importance of income equality is observed only on a limited scale although income is probably more important in low income ldcs the relationships studied appear broadly similar in the low income and the middle income ldc contexts

depreciation policy changes tax earnings management and investment opportunity incentives abstract contrary to previous studies we find managers change depreciation policies in predictable ways we identify three dimensions of depreciation policy changes whether it is a method change or an estimate revision whether it is income increasing or decreasing and whether it applies to new assets only or both new and existing assets this disaggregation leads to three findings first a 1981 tax law altered the frequency of estimate revisions and method changes second firms adopting income increasing method changes for all assets experience worse performance than those adopting such changes only for new assets finally non income increasing policy changes are associated with changes in investment opportunities

research in accounting for income taxes abstract this paper comprehensively reviews the accounting for income taxes afit literature we begin by identifying four distinctive aspects of afit and briefly covering the rules surrounding afit we then review the existing studies in detail and offer suggestions for future research we emphasize the research questions that have been addressed most of which relate to whether the tax accounts are used to manage earnings and whether the tax accounts are priced by equity market participants we also highlight areas that have not received much research attention and that warrant future analysis

testing the food first hypothesis a cross national study of dependency sectoral growth and food intake in less developed countries abstract previous cross national studies on dependency and economic growth in less developed countries ldcs seldom compare the impacts of different kinds of dependency their focus on economic growth also overlooks the fact that growth per se does not necessarily benefit the masses an alternative measure of the absolute living standard of the masses i e food intake is examined in this paper this study analyzes data from 73 ldcs after comparing the effects of manufacturing growth and cereal production growth on food intake this study supports the food first hypothesis derived from lappe and collins 1977 work since it demonstrates that in most ldcs even in middle income ldcs cereal production has a much stronger effect on food intake than does manufacturing growth

whatever it takes to resolve the european sovereign debt crisis bond pricing regime switches and monetary policy effects this paper investigates the role of unconventional monetary policy as a source of time variation in the relationship between sovereign bond yield spreads and their fundamental determinants we use a two step empirical approach first we apply a time varying parameter panel modelling framework to determine shifts in the pricing regime characterising sovereign bond markets in the euro area over the period january 1999 to july 2016 second we estimate the impact of ecb policy interventions on the time varying risk factor sensitivities of spreads our results provide evidence of a new bond pricing regime following the announcement of the outright monetary transactions omt programme in august 2012 this regime is characterised by a weakened link between spreads and fundamentals but with higher spreads relative to the pre crisis period and residual redenomination risk we also find that unconventional monetary policy measures affect the pricing of sovereign risk not only directly but also indirectly through changes in banking risk overall the actions of the ecb have operated as catalysts for reversing the dynamics of the european sovereign debt crisis

analysts use of managerial bonus incentives in forecasting earnings abstract this study presents evidence on whether analysts earnings forecasts anticipate management s discretionary accruals choices if analysts anticipate discretionary accruals earnings forecast errors are composed of at least two parts cash flow and discretionary accruals forecast errors management s bonus maximizing incentives allow for identification of circumstances in which discretionary accruals forecast errors are expected to offset cash flow forecast errors and circumstances in which they are expected to exacerbate cash flow errors controlling for the unexpected cash flow variability the empirical results are consistent with these predictions

euro area government bonds fragmentation and contagion during the sovereign debt crisis abstract the paper analyzes the integration of euro area sovereign bond markets during the european sovereign debt crisis it tests for contagion i e an intensification in the transmission of shocks across countries fragmentation a reduction in spillovers and flight to quality patterns exploiting the heteroskedasticity of intraday changes in bond yields for identification the paper finds that euro area government bond markets were well integrated prior to the crisis but saw a substantial fragmentation from 2010 onward flight to quality was present at the height of the crisis but has largely dissipated after the european central bank s ecb s announcement of its outright monetary transactions omt program in 2012 at the same time italy and spain became more interdependent after the omt announcement providing our only evidence of contagion this suggests that countries have been effectively ring fenced and italy and spain benefited from the joint reduction in yields following the omt announcement

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

ecb policy and eurozone fragility was de grauwe right paul de grauwe s eurozone fragility hypothesis states that sovereign debt markets in a monetary union without a lender of last resort are vulnerable to self fulfilling dynamics fuelled by pessimistic investor sentiment that can trigger default we test this contention by applying an eclectic methodology to a two year window around mario draghi s whatever it takes pledge that can be understood as the implicit announcement of the outright monetary transactions omt program a principal components analysis reveals that the perceived commonality in default risk among peripheral and core eurozone sovereigns increased after the announcement an event study reveals significant pre announcement news transmission from spain to italy france belgium and austria that clearly dissipates post announcement country specific regressions of cds spreads on systematic risk factors reveal frequent days of large adverse shocks affecting simultaneously those five eurozone countries but only during the pre announcement period altogether these findings support the fragility hypothesis and endorse the omt program

what drives spreads in the euro area government bond market spreads between euro area government bond yields are related to short term interest rates which are in turn related to market liquidity to cyclical conditions and to investors incentives to take risk in theory lower interest rates are associated with lower degrees of risk aversion and smaller government bond spreads empirically the eurosystem s short term interest rates are positively related to those spreads which our econometric model finds to include significant and policy relevant default risk and liquidity risk components simone manganelli and guido wolswijk

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

the investment opportunity set and accounting procedure choice abstract this paper provides evidence on the cross sectional relation between firms investment opportunities their debt and compensation contracts their size and financial leverage and their accounting procedure choices this evidence is important because previous studies hypothesize that the link between firms investment opportunities and their accounting choices helps explain extant results on the size debt equity and bonus plan hypotheses however while i find that firms investment opportunities do affect the nature of their contracts i also find that the traditional explanations for accounting choice are important after controlling for the effects of the investment opportunity set

a behavioral understanding of investment horizon and firm performance observers have argued that firms overly emphasize short term results at the expense of long run value using a behavioral perspective we analyze three hypotheses related to this general argument first we examine the association of investment time horizons with firm performance contributing new theory that argues for a quadratic rather than linear association second because the tendency toward immediate results could reflect stock market pressures we consider how the interaction of investor patience and firm horizon relates to firm performance third we examine the argument s implication that most firms have investment horizons at a level where marginal increases in horizon associate positively with firm performance measuring horizon as the expected useful lives of capital expenditures we find empirical support for the hypothesized quadratic relation in a large scale multiyear sample of u s publicly held manufacturing firms and confirm that a majority of firms have horizons in the region where our models predict increases in horizon positively influence performance we also find that the most positive returns occur when long horizon investments are aligned with investor patience

debt covenant violations and managers accounting responses abstract this paper examines accounting changes costs of default and accounting based covenants violated by 130 firms reporting violations in annual reports i find that managers of firms approaching default respond with income increasing accounting changes and that the default costs imposed by lenders and the accounting flexibility available to managers are important determinants of managers accounting responses i also document that private lending agreements are the first violated that net worth and working capital restrictions are the most frequently violated restrictions and that in 52 percent of the cases lenders require concessions from borrowers to resolve default

mining agriculture and manufacturing the impact of foreign investment on social distribution in third world countries in recent years a great deal of attention has been directed to the application of multivariate statistical methods to the assessment of dependency approaches to north south relations this article

structural determinants of peripheral urbanization the effects of international dependence this paper examines the extent and mechanisms by which international economic dependence affects urbanization in peripheral countries between 1950 and 1970 using panel regression analyses qnd structural equation models on a sample of37 countries investment dependence is found to have a lagged positive effect on urbanization in 1970 the data suggest that investment dependence stimulates growth in the tertiary and informal sectors while inhibiting growth in the industrial labor sector this restructuring of the urban labor force generates increased levels of overurbanization in peripheral countries finally it is argued that dependency theory provides a more adequate framework for understanding urbanization in peripheral countries than modernization theory

stock market liquidity and macro liquidity shocks evidence from the 2007 2009 financial crisis we develop an empirical framework that links micro liquidity macro liquidity and stock prices we provide evidence of a strong link between macro liquidity shocks and the returns of uk stock portfolios constructed on the basis of micro liquidity measures between 1999 and 2012 specifically macro liquidity shocks which are extracted on the meeting days of the bank of england monetary policy committee mpc relative to market expectations embedded in 3 month libor futures prices are transmitted in a differential manner to the cross section of liquidity sorted portfolios with liquid stocks playing the most active role we also find that there is a significant increase in shares trading activity and a rather small increase in their trading cost on mpc meeting days finally our results emphatically document that during the recent financial crisis the shocks returns relationship has reversed its sign interest rate cuts during the crisis were perceived by market participants as a signal of deteriorating economic prospects and reinforced flight to safety trading

risk financial stability and fdi all foreign direct investment fdi involves risk augmenting the international finance literature we assess the effects of financial system risk on fdi trends through considering both origin and host country effects motivated by the sovereign debt crisis and based on a dataset including bilateral fdi holdings this paper investigates the implications of sovereign and bank related risk on fdi in the eurozone strikingly we find that in terms of banking risk it is only that encountered in the country of origin that has an impact on fdi choices however we find that sovereign risk in both origin and host countries have effects as a corollary we suggest that although poor financial discipline by host governments has been widely blamed as the primary factor likely to frighten off overseas investors it is amongst fdi supplying nations that the effects of sovereign yields seem most pronounced policymakers in countries seeking to attract fdi should not only be attentive to domestic conditions but also be aware of the financing environment that multinational enterprises mnes encounter in their home countries and how this might impact on their choices

why development fails the evaluation gap in nepal s subsistence agriculture abstract the rationality of farmer decision making within traditional environments is widely accepted this paper introduces a conceptual model for delineating interactions among income employment and nutrition that explain in large part the living standards in a developing agricultural economy given farmer rationality any development effort requires intervention to remove barriers among these components of the standard of living a case study of nepal shows that promotion of horticultural crops and government investment in infrastructure and education could dramatically improve living standards even under traditional agricultural production technology however the government did not correctly identify barriers to the long run realization of these goals until recently the study concludes that the rationality of government programmes themselves must be subjected to additional scrutiny

the greek debt crisis likely causes mechanics and outcomes we use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for greek government bonds we argue that the crisis itself and its escalating nature are very likely to be the result of i steady deterioration of greek macroeconomic fundamentals over 2001 09 to levels inconsistent with long term emu participation and ii a double shift in markets expectations from a regime of credible commitment to future emu participation under an implicit emu german guarantee of greek fiscal liabilities to a regime of non credible emu commitment without fiscal guarantees respectively occurring in november 2009 and february march 2010 we argue that the risk of contagion to other periphery emu countries is significant and that without extensive structural reforms the sustainability of the emu is in question

an empirical examination of debt covenant restrictions and accounting related debt proxies abstract prior studies of discretionary accounting choices have generally relied on one or more proxy variables to measure closeness to debt covenant restrictions without actually examining the existence or extent of restrictive covenants this study tests the validity of the most commonly used proxy the debt equity ratio by examining its relation to actual debt covenant restrictions for a random sample of u s firms the results indicate that several versions of the debt equity ratio capture the existence and tightness of retained earnings restrictionsand the existence of net tangible asset and working capital restrictions but are unrelated to four other covenant restrictions

a macro financial analysis of the euro area sovereign bond market abstract we estimate the fundamental component of euro area sovereign bond yield spreads i e the part of bond spreads that can be justified by country specific economic factors euro area economic fundamentals and international influences the yield spread decomposition is achieved using a multi market no arbitrage affine term structure model with a unique pricing kernel more specifically we use the canonical representation proposed by joslin et al 2011 and introduce next to standard spanned factors a set of unspanned macro factors as in joslin et al forthcoming the model is applied to yield curve data from belgium france germany italy and spain over the period 2005 2013 overall our results show that economic fundamentals are the dominant drivers behind sovereign bond spreads nevertheless shocks unrelated to the fundamental component of the spread have played an important role in the dynamics of bond spreads since the intensification of the sovereign debt crisis in the summer of 2011

how does liquidity affect government bond yields the paper explores the determinants of yield differentials between sovereign bonds using euro area data there is a common trend in yield differentials which is correlated with a measure of aggregate risk in contrast liquidity differentials display sizeable heterogeneity and no common factor we propose a simple model with endogenous liquidity demand where a bond s liquidity premium depends both on its transaction cost and on investment opportunities the model predicts that yield differentials should increase in both liquidity and risk with an interaction term of the opposite sign testing these predictions on daily data we find that the aggregate risk factor is consistently priced liquidity differentials are priced for a subset of countries and their interaction with the risk factor is in line with the model s prediction and crucial to detect their effect

firms off balance sheet and hybrid debt financing evidence from their book tax reporting differences we match large u s corporations tax returns during 1989 2001 to their financial statements to construct a firm level proxy of firms use of off balance sheet and hybrid debt financing we find that firms with less favorable prior period standard poor s s p bond ratings or higher leverage ratios in comparison to their industry report greater amounts of interest expense on their tax returns than to investors and creditors on their financial statements these between firm results are consistent with credit constrained firms using more structured financing arrangements our within firm tests also suggest that firms use more structured financing arrangements when they enter into contractual loan agreements that provide incentives to manage debt ratings specifically we find that after controlling for s p bond rating and industry adjusted leverage our sample firms report greater amounts of interest expenses for tax than for financial statement purposes when they enter into performance pricing contracts that use senior debt rating covenants to set interest rates furthermore we find that the greatest book tax reporting changes occur when firms become closer to violating these debt rating covenants these latter findings are consistent with firms contractual debt covenants influencing their use of off balance sheet and hybrid debt financing

empirical tax research in accounting this paper traces the development of archival microeconomic based empirical income tax research in accounting over the last 15 years the paper details three major areas of research i the coordination of tax and non tax factors ii the effects of taxes on asset prices and iii the taxation of multijurisdictional international and interstate commerce methodological concerns of particular interest to this field also are discussed the paper concludes with a discussion of possible directions for future research r 2001 elsevier science b v all rights reserved jel classification m41 h25 k34 g32 f23

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

sovereign bond yield spreads a time varying coefficient approach abstract we study the determinants of sovereign bond yield spreads across 10 emu countries between q1 1999 and q1 2010 we apply a semiparametric time varying coefficient model to identify to what extent an observed change in the yield spread is due to a shift in macroeconomic fundamentals or due to altering risk pricing we find that at the beginning of emu the government debt level and the general investors risk aversion had a significant impact on interest differentials in the subsequent years however financial markets paid less attention to the fiscal position of a country and the safe haven status of germany diminished in importance by the end of 2006 two years before the fall of lehman brothers financial markets began to grant germany safe haven status again one year later when financial turmoil began the market reaction to fiscal loosening increased considerably the altering in risk pricing over time period confirms the need of time varying coefficient models in this context

aggregation of test statistics abstract in the preceding paper christie provides three tests to facilitate formal inferences in survey papers that examine related empirical studies those tests reinforce the view that accounting technique choice is related to variables that may proxy for contracting and monitoring costs in the market and political processes however the contribution of the tests is limited because the fundamental question of the relation between the empirical regularities and the theory remains unexamined

rational and self fulfilling balance of payments crises speculative attacks on a pegged exchange rate must sometimes occur ifasset price paths are to be free of abnormal profit opportunities suchattacks are fully rational as they reflect the market s response to aregime breakdown that is inevitable the authors shows that under someexpectations about policy balance of payments crises can also be purely self fulfilling events in such cases even a permanently viableregime may collapse and the economy will possess multiple equilibriacorresponding to different subjective assessments of the probability ofa crisis the behavior of the domestic interest rate will naturally reflect the possibility of a speculative attack copyright 1986 by american economic association

can the east asian model of development be generalized abstract export led growth has become increasingly popular among analysts and some governments as a development strategy besides contrasting its virtues to the distortions of the import substitution model popular through the 1960s advocates of the model frequently illustrate its merits by pointing to the remarkable success of its most prominent practitioners the east asian gang of four hong kong korea singapore and taiwan this study explores a possible limitation of the model known as the fallacy of composition while the model may work well if pursued by a limited number of countries it may break down if a large majority of developing countries seeks to pursue it at the same time because the resulting outpouring of manufactured exports might be more than western markets could absorb protectionist response might be the result of attempts to generalize the east asian export model of growth

basic human needs the plateau curve abstract the satisfaction of basic human needs in developing countries follows a nonlinear curve relative to per capita income asymptotically approaching a limiting level within this general relationship some countries are more efficient than others in improving basic needs at lower per capita income levels infant mortality rates in 116 countries from 1950 to 1980 are analyzed to identify factors affecting a country s efficiency in reaching infant mortality targets relative to its gross domestic product per capita the determinants of efficiency include export structure internal distribution late development and access to education implications for development policy are discussed

subsistence economies and unsustainable development and trade some simple theory three possible development patterns for subsistence economies with a restricted range of resources are explored in this paper the models may be particularly relevant to small island countries for example in the pacific ocean in the first model it is shown that neither international trade nor an advanced sector is sustainable in the long run in the type of subsistence economy envisaged both international trade and advanced sectors eventually disappear as population levels increase in the second model the possibility is explored that export opportunities may foster unsustainable development it may sustain population levels that cannot be maintained should the demand for exported goods collapse there is a high risk of such a collapse in small subsistence economies with their restricted resource basis the third case which has similarities with the previous one except that collapse comes about by exhaustion of supply rather than deterioration in demand is development made possible by the export

accounting discretion in fair value estimates an examination of sfas 142 goodwill impairments this study examines statement of financial accounting standards 142 adoption decisions focusing on the trade off between recording certain current goodwill impairment charges below the line and uncertain future impairment charges included in income from continuing operations we examine several potentially important economic incentives that firms face when making this accounting choice we find evidence suggesting that firms equity market concerns affect their preference for above the line vs below the line accounting treatment and firms debt contracting bonus turnover and exchange delisting incentives affect their decisions to accelerate or delay expense recognition our study contributes to the accounting choice literature by examining managers use of discretion when adopting a mandatory accounting change and by developing and testing explicit cross sectional hypotheses of the determinants of firms preferences for immediate below the line versus delayed above the line expense recognition

determinants of sovereign bond yield spreads in the emu an optimal currency area perspective in the light of the recent financial crisis we take a panel cointegration approach that allows for structural breaks to the analysis of the determinants of sovereign bond yield spreads in nine economies of the european monetary union we find evidence for a level break in the cointegrating relationship moreover results show that i fiscal imbalances namely expected government debt to gdp differentials are the main long run drivers of sovereign spreads ii liquidity risks and cumulated inflation differentials have non negligible weights but iii all conclusions are ultimately connected to whether or not the sample of countries is composed of members of an optimal currency area oca in particular we establish i that results are overall driven by those countries not passing the oca test and ii that investors closely monitor and severely punish the deterioration of expected debt positions of those economies exhibiting significant gaps in competitiveness

who borrows from the lender of last resort understanding why banks borrow from the lender of last resort lolr during a nancial crisis is crucial to understanding the macroeconomic impact of such largescale interventions we document a strong divergence among banks take up of lolr assistance during the nancial crisis in the euro area as banks which borrowed heavily also used increasingly risky collateral we propose four explanations for this divergence

middle income classes and food crises the new food feed competition famine was averted the novelty was that a 3 shortfall in grain production led to a 250 price increase this specific manifestation of the food crisis was the result of the congruence of an old force population pressure with new ones the income explosion and income inequality in a world in which the economic distance between the rich and the poor grows ever greater even minor food shortages are likely to assume major proportions the agricultural price instability that will ensue represents a major threat to the food security of less developed countries examination of the ingredients of modern food crises can help explain some of the new ramifications of the age old problem of world hunger the three elements that are reflected in the food demand situation are population incomes and prices to avoid needless complexity i will reserve my examination of prices to the end population and incomes deserve more detailed analysis

analysing the link between environmental performance and sovereign credit risk this study investigates the effects of a country s environmental performance on sovereign credit risk we use sovereign credit default swap cds spreads for a large panel of countries to analyse w