mandated disclosures under ias 36 impairment of assets and ias 38 intangible assets value relevance and impact on analysts forecasts abstractdrawing on a large sample of european firms we examine whether variant compliance levels with mandated disclosures under ias 36 impairment of assets and ias 38 intangible assets are value relevant and affect analysts forecasts our results indicate a mean median compliance level of about 84 86 but high variation among firms and disclosure levels regarding ias 36 being much lower than those regarding ias 38 in depth analysis reveals that non compliance relates mostly to proprietary information and information that reveals managers judgment and expectations furthermore we find a positive negative relationship between average disclosure levels and market values analysts forecast dispersion results however hold more specifically for disclosures related to ias 36 and these also improve analysts forecast accuracy our findings add knowledge regarding the economic consequences of mandatory disclosures have an appeal to regulators and financial statement preparers and reflect on th

geographical mobility and potential wage gain of immigrants within spain ruiz a c geographical mobility and potential wage gain of immigrants within spain regional studies geographical mobility of workers within countries can be a means of equilibrating regional economic disparities within this context a relevant topic is the mobility of foreign workers in the destination country the spanish case is interesting because spain has one of europe s fastest growing immigration rates this paper is aimed first at studying the determinants of interregional geographical mobility of immigrants in spain and second at obtaining consistent estimates of an individual s opportunity wage as a mover or a stayer findings show that an expected wage gain exerts a positive influence on mobility and leads to a better allocation of resources

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

bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

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

the information content of annual earnings releases a trading volume approach this paper reports the results of an empirical examination of the relations between the volume of securities traded the magnitude of surprises in annual earnings announcements and firm size although early trading volume studies e g beaver 1968 kiger 1972 and foster 1973 replicated basic information content studies with findings similar to those based on security prices we should not expect that security price and trading volume research will continue to yield identical results when more refined hypotheses are tested trading volume reflects investors activity by summing all market trades whereas security prices reflect an aggregation or averaging of investors beliefs as a result we will on occasion observe differences between price and volume reactions to earnings announcements as did morse 1981 this study extends the recent trend toward tests of more refined hypotheses by using a larger sample to examine the associations between unexpected earnings firm size and trading volume and testing whether such associations can be generalized across fiscal year end dates and stock exchange listing my results show a continuous positive relationship between trading

north american migration returns to skill border effects and mobility costs utilizing a utility maximizing roy type discrete choice model of worker location in canadian provinces and u s states that incorporates returns to skill amenities fixed costs distance langua

discussion of voluntary disclosure choice and earnings information transfer pownall and waymire s paper prompted a general discussion of information transfer research particularly its motivation and methodology this summary begins with a brief introduction to information transfer research it then considers motivation and methodology since the discussion related both to pownall and waymire s research specifically and to information transfer research generally these discussion comments extend to both as well

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

a comparison of event study methodologies using daily stock returns a simulation approach accounting research studies commonly use measures of abnormal security returns to test hypotheses about accounting information and policies alternative methods are used in these studies to detect abnormal performance and thereby examine the information content of identified events the ability of these methods to detect abnormal returns using simulation techniques is examined by brown and warner 1980 1984 morse 1984 addresses this issue analytically the analytical approach presumes that the event study data is generated by the process modeled while the simulation approach uses the security return data generated by the market simulation provides a tractable means of dealing with situations where an analytical approach may yield results suggesting direction but not magnitude or where such techniques are unusually cumbersome both limitations face us in this study brown and warner 1980 use monthly data to examine the comparative abilities of several combinations of return generating models and

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

contagion effects in the electric utility industry following the fukushima nuclear accident this article examines intra industry information transfers in the european and japanese electric industry in the wake of the fukushima nuclear accident for european conventional utilities the downward price drift is relatively small and transient in nature yet we find positive and lingering effects of the accident on the shares of alternative electric utilities japanese utilities were hit the hardest and the shock seems to be long lasting an interesting finding of this article is the abrupt increase decrease in the systematic risk of conventional alternative electric utilities following the event in europe we could only document a decrease in the idiosyncratic risk of conventional utilities pointing to enhanced return synchronicity in the conventional power industry in turn total risk seems to be stationary around the accident in rebuttal idiosyncratic and systematic risks and consequently total risk have substantially risen in japan since the event finally intercept values related to

the optimal initial allocation of pollution permits a relative performance approach the initial allocation of pollution permits is an important aspect of emissions trading schemes we generalize the analysis of bohringer and lange 2005 eur econ rev 49 8 2041 2055 to initial allocation mechanisms that are based on inter firm relative performance comparisons including grandfathering and auctions as well as novel mechanisms we show that using firms historical output for allocating permits is never optimal in a dynamic permit market setting while using firms historical emissions is optimal only in closed trading systems and only for a narrow class of allocation mechanisms instead it is possible to achieve social optimality by allocating permits based only on an external factor which is independent of output and emissions we then outline sufficient conditions for a socially optimal relative performance mechanism

on the design of optimal grandfathering schemes for emission allowances to meet its commitment under the kyoto protocol the eu plans to implement an emissions trading system whith grandfathering of allowances besides having distributional impacts the choice of the grandfathering scheme may affect efficiency if firms anticipate how future allocations depend on upcoming decisions in this paper we determine central design rules for optimal grandfathering within a simple two period model we find that for small open trading systems where allowance prices are exogenous first best second period grandfathering schemes must not depend on firm specific decisions in the first period second best schemes correspond to a ramsey rule of optimal tax differentiation and are generally based on both previous emissions and output however ofr closed emissions trading systems i e endogeneous allowance prices firstand second best rules coincide and must not depend on previous output levels they consist of an assignment proportional to the emissions in the first period plus a term which does not depend on firm specific decisions in either of the two periods

cap and trade programs under delayed compliance consequences of interim injections of permits virtually every analysis of cap and trade programs assumes that rms must surrender permits as they pollute however no program existing or proposed requires such continual compliance some e g the acid rain program limiting so2 emissions require compliance once a year others e g the regional greenhouse gas initiative limiting co2 emissions require compliance every three years the paths of emissions and permit prices would be invariant to compliance timing holland moore 2013 if the government never injected additional permits between successive compliance dates however virtually all emissions trading programs require such injections through either 1 interim permit auctions or 2 sales from cost containment reserves intended to cap permit prices in such cases analyses which abstract from delayed compliance may mislead policy makers for example a cost containment reserve judged sucient to cap prices at a ceiling over a year may sell out in a single day

industry information diffusion and the lead lag effect in stock returns i argue that the slow diffusion of industry information is a leading cause of the lead lag effect in stock returns i find that the lead lag effect between big firms and small firms is predominantly an intra industry phenomenon moreover this effect is driven by sluggish adjustment to negative information and is robust to alternative determinants of the lead lag effect small less competitive and neglected industries experience a more pronounced lead lag effect the lead lag effect is related to the post announcement drift of small firms following the earnings releases of big firms within the industry

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

stock return seasonalities and earnings information previous literature documents significant seasonalities in stock market returns one explanation is seasonality in earnings information if true a return index comprised solely of firms reporting earnings should exhibit stronger intertemporal seasonalities than a return index comprised of firms not reporting earnings employing all new york and american stock exchange firms over six years this study examines the seasonality of stock returns generally seasonal patterns for reporting returns are found to be similar to or slightly weaker than for nonreporting returns thus it is doubtful that earnings news seasonality induces stock return seasonality

the economics of controlling stock pollutants an efficient strategy for greenhouse gases abstract optimal control theory is applied to develop an efficient strategy to control stock pollutants such as greenhouse gases and hazardous waste the optimal strategy suggests that at any time the marginal costs of abatement should be equated with the present value of the marginal damage of timely unabated emission the optimal strategy calls for increasingly light abatement over time as the pollutant stock accumulates the optimal policy applied to greenhouse gases suggests moderate abatement efforts at present with the potential for much greater future efforts

geographic labour mobility and the cost of housing evidence from italy in recent years internal migration in italy has declined markedly notwithstanding the widening of the north south gap in terms of unemployment rates and real income here the extent to which the housing market has contributed to the decline is examined preliminary to this analysis differentials in the cost of housing between the macro areas of the country are estimated using data on the market price of houses located in 96 provincial capitals econometric evidence is provided supporting the view that the north south housing price differential is a notable factor in explaining the falling pattern of mobility the positive impact on migration from the south to the north of a wider gap in the two areas in terms of income and employment prospects has been offset by the housing price differential which has steadily risen at least from the mid 1980s onwards yet a considerable share of the decrease in mobility remains unexplained possibly owing to the heterogeneity in the composition of migration flows

invited remarks ball and brown 1968 it is a great honor for me to be at this conference and speaking to you today nick dopuch was not all that explicit when it came to a topic for this last session nick said talk about anything you like i interpreted that to mean i should talk in general terms about my early work with ray ball and its influence on the accounting literature and in particular about a paper we wrote about 20 years ago which is now commonly referred to simply as ball and brown 1968 i begin by covering the paper itself the antecedent conditions why the paper was written what we attempted to do in the paper and what was novel as far as we were concerned next i give my view of the main strands in the accounting literature since 1968 that are related to our work i conclude by offering a few thoughts on directions that the capitalmarkets based accounting literature might take in the years ahead

on the stochastic properties of carbon futures prices pricing carbon is a central concern in environmental economics due to the worldwide importance of emissions trading schemes to regulate pollution this paper documents the presence of small and large jumps in the stochastic process of the co 2 futures price the large jumps have a discrete origin i e they can arise from various demand factors or institutional decisions on the tradable permits market contrary to the existing literature we show that the stochastic process of carbon futures prices does not contain a continuous component brownian motion the results are derived by using high frequency data in the activity signature function framework todorov and tauchen in j econom 154 125 138 2010 todorov and tauchen in j bus econ stat 29 356 371 2011 the implication is that the carbon futures price should be modeled as an appropriately sampled centered levy or poisson process the pure jump behavior of the carbon price might be explained by the lower volume of trades on this allowance market compared to other highly liquid financial markets

intertemporal links in cap and trade schemes in a two period general equilibrium model i study the effects of intertemporal emission permit trading in a cap and trade scheme when firms investments in abatement have long term effects to meet their caps firms optimally choose levels of trading and investment in each period by equalizing the marginal benefit of abatement to the marginal cost of abatement in each period the fact that investments have long term effects introduces new effects investments in period 1 have both an additional benefit the reduction of emissions in period 2 and an additional cost the decrease in abatement opportunities in period 2 this changes the standard condition of equalization of marginal costs across periods for cost effectiveness without intertemporal trading some investments in period 1 are entirely driven by second period abatement needs in that case allowing intertemporal trading may reduce investment in period 1 as some long term investments are substituted by intertemporal permit trading descriptive evidence from the eu emissions trading system ets illustrates this potential effect

intertemporal permit trading for the control of greenhouse gas emissions this paper integrates two themes in the intertemporal permitliterature through the construction of an intertemporal bankingsystem for a pollutant that creates both stock and flow damages a permit banking system for the special case of a pollutant thatonly causes stock damages is also developed this latter simpler case corresponds roughly to the greenhouse gas emissionreduction regime proposed by the u s department of state as ameans of fulfilling the u s commitment to the frameworkconvention on climate change this paper shows that environmentalregulators can achieve the socially optimal level of emissionsand output through time by setting the correct total sum ofallowable emissions and specifying the correct intertemporaltrading ratio for banking and borrowing for the case ofgreenhouse gases we show that the optimal growth rate of permitprices and therefore the optimal intertemporal trading rate hasthe closed form solution equal to the ratio of current marginalstock damages to the discounted future value of marginal stockdamages less the decay rate of emissions in the atmosphere given a non optimal negotiated emission path we then derive apermit banking system that has the potential to lower net socialcosts by adjusting the intertemporal trading ratio taking intoaccount the behavior of private agents we use a simplenumerical simulation model to illustrate the potential gains fromvarious possible banking systems

unfair fair value in illiquid markets information spillover effects in times of crisis we investigate the effects of write downs on market prices and volumes under fair value accounting we also examine the prominent role that illiquidity plays in exacerbating the direct and spillove

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

the economic side effects of dangerous drug announcements immediately prior to the passage of the 1962 food and drug administration amendments there were a number of drugs recalled from markets worldwide announcements about the dangerous side effects of these drugs were associated with lower share prices for their manufacturers and the industry as a whole we perform several analyses to sort out alternative explanations for the observed declines we find that dangerous drug announcements had no effect on the sales of other drugs and did not affect the share values of european drug makers doing little business in the united states we also find that share price reductions associated with recalls in the 1970s and 1980s were confined to the manufacturers of the recalled drugs these patterns are consistent with the hypothesis that drug company shareholders viewed the recalls in the early 1960s as signals of an increase in the cost of compliance with new and more stringent drug testing requirements

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

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

how important is the financial media in global markets this article studies differences in the information content of 870 000 news announcements in 56 markets around the world in most developed markets a firm s stock price moves much more on days with public news about the firm in contrast in many emerging markets volatility is similar on news and non news days we examine several hypotheses for our findings cross country differences in stock price reactions are best explained by insider trading followed by differences in the quality of the news dissemination mechanism our findings are useful for quantifying the extent of insider trading and how the financial media affects international markets jel g14 g15 public news announcements are a major mechanism for disseminating information to investors each day the financial media releases thousands of articles covering companies in markets worldwide investors use this news to estimate assets fundamental values despite the perceived importance of the

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

joint implementation and cost effectiveness under the framework convention on climate change abstract the concept of joint implementation is the subject of ongoing negotiations under the framework convention on climate change proponents argue that allowing joint implementation of the objectives of the convention will increase the cost effectiveness with which those objectives are achieved opponents argue that allowing trade in carbon emission credits will reduce the incentive for domestic greenhouse gas emissions reductions and may undermine the commitments of the developed nations to take the lead in achieving climate stabilization this paper examines the argument for joint implementation from the standpoint of cost effectiveness it addresses the determination of incremental costs for abatement options and the assessment of cost effectiveness under complex systemic conditions using national greenhouse gas abatement costing studies from four different nations two developed nations on economy in transition and one developing nation the paper examines both the general claim for cost effectiveness of joint implementation and the implicit assumption that emissions reductions will be easier and cheaper in developing nations and economies in transition than they are in developed countries the results indicate firstly that benefits from joint implementation may be highly dependent on the level of associated transaction costs and secondly that greenhouse gas emission reductions may be considerably cheaper for some developed countries than they are for developing countries the paper stresses the need for well developed methodological guidelines under which both cost and cost effectiveness can be assessed and points to the dangers inherent in allowing ad hoc trading in emissions credits by a heterogenous community of private investors

permit banking in emission trading competition arbitrage and linkage abstract several existing or proposed climate policies have considered bankable permits in a cap and trade c t program that covers beyond a single sector e g electric power or allows the program to link to external c t programs in other regions this paper develops a model of permit banking under imperfect competition and imperfect inter temporal arbitrage in which the firms in one dominant sector can exert market power in both product and permit markets while those in other sectors or linked programs are perfectly competitive a simple analytical model is developed to generate contestable hypothesis we further extend the model to account for the physical power system institutional rules and market conditions and then apply it to the pennsylvania jersey maryland pjm market we show that if the dominant firm has market power then the permit price rises at a higher rate than the discount rate contrary to perfectly competitive permit market where the permit price rises at the discount rate following the classic hotelling s rule furthermore under a declining emissions cap system with the permits front loaded in early time periods the dominant firm has an incentive to suppress the permit prices monopsony when buying the permits in early periods and then inflate the permit prices monopoly when selling them in later periods numerical results of the pjm case are consistent with the analytical conclusion

firm size and the informational content of financial statements the capital asset pricing model has been challenged recently by several studies that point to certain anomalies in the capital market related to firm size banz 3 reported a nonlinear relation between the aggregate market value of a firm s common stock and the stock s mean return he found that firms with small market values had large and positive residual returns over a period of at least 40 years reinganum 23 found that high earning price e p stocks had higher returns than low e p ratio stocks and that after controlling for size the e p effect largely disappeared although they rejected the hypothesis that the anomalies are due to inefficiency in the capital market the two authors are not able to identify the economic factors that might explain the effect of firm size on the functioning of the capital market

soft and hard price collars in a cap and trade system a comparative analysis we use a stochastic dynamic framework to compare price collars price ceilings and floors in a cap and trade system with uncertainty in the level of baseline emissions and costs we consider soft collars which provide limited volume of additional emission allowances a reserve at the price ceiling and hard collars which provide an unlimited supply of additional allowances thereby preventing allowance prices from exceeding the price ceiling conversely allowances are removed from the market if prices fall to the floor we find that increasing the size of the reserve strictly lowers expected net present values of compliance costs however there is a diminishing effect as the allowance reserve is expanded most of the expected cost savings are achieved with a modest reserve consequently a rather limited soft price collar could provide considerable assurance about cost while preventing the possibility that emissions could spiral out of control

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

environmental disclosures regulatory costs and changes in firm value abstract union carbide s chemical leak in bhopal india during december 1984 resulted in approximately 4 000 deaths and 200 000 injuries this study examines the market reaction of chemical firms other than union carbide to this catastrophe evidence indicates that a significant negative intra industry reaction occurred however firms with more extensive environmental disclosures in their financial report prior to the chemical leak experienced a less negative reaction than firms with less extensive disclosures this result suggests that investors interpreted such disclosures as a positive sign of the firm managing its exposure to future regulatory costs

the welfare effects of allowance banking in emissions trading programs permitting allowance banking in emissions trading programs can reduce expected compliance costs by giving capped firms flexibility to adjust the time path of abatement and to hedge against future uncertainty recent literature suggests that this compliance cost dividend is significant fell and morgenstern environ resour econ 47 275 297 2010 allowance banking may yield an environmental dividend a if the growth rate of marginal damages from emissions is less than the discount rate and b if emissions are lower in the short run as firms bank permits for use in later periods a discrete stochastic dynamic programming model is considered to simulate the two dividends of allowance banking in the context of the most recent federal united states greenhouse gas cap and trade legislation simulation results show that under a range of parameter values the environmental dividend has the same order of magnitude as the compliance cost dividend under the central set of parameters allowance banking increases expected present value of benefits by about 350 million dollars per year of the program the environmental dividend however is completely eliminated if capped firms can borrow permits from future periods without limit

business cycles and emission trading with banking abstract we propose an emission cap adjustment policy for an emission trading system ets that allows banking of allowances for later use and faces business cycle uncertainty the forward looking banking decisions cause a commitment problem with respect to regulator s next period allowance supply decision we tackle the commitment problem by focusing on the markov equilibrium of the policy the equilibrium policy has a surprisingly simple structure combining features from both price and quantity instruments the regulator s ability to choose a new cap for each period does not render banking obsolete but on the contrary makes banking an integral part of the equilibrium policy using data from the eu ets to calibrate the model we solve the markov equilibrium policy for the case of carbon emissions regulation and compare markov policies with and without the possibility to bank allowances a counterfactual analysis of the eu ets during the period of 2009 2013 shows that the optimal markov policy would have led to a steadier allowance price level and a stricter emission regulation than what was actually observed in the eu ets

an intertemporal carbon emissions trading system with cap adjustment and path control abstract cap adjustment with shocks and cost effectiveness in cap and trade system has been an area of concern for regulators by a simple two period model of such system with banking and borrowing we examine how emission reduction technological changes affect the cap in three cases i e pure flow externality pure stock externality and mixed externality and identify the efficiency properties in such system with banking and borrowing we show that the effects of technological changes on cap are negative in both pure flow and pure stock externality cases in the mixed externality case the effects are uncertain which depend on the decayed rate of co2 stock the discounted rate and functions of marginal abatement costs and marginal damage in general cases the social optimum is not attainable via the cap and trade system since firms sub optimally distribute emissions across periods in a particular case if the ratio of marginal damage in period 1 to the discounted marginal damage in period 2 is exactly equal to the decayed rate the decentralized emissions of firms will lead to the social optimum finally a hybrid quantity price policy is proposed to rectify the paths of firms to be socially desirable with an effective quantity control

the intra industry effects of going private transactions we demonstrate that bids to take firms private generate significantly positive valuation effects for industry rivals of target firms these valuation effects cannot reflect either synergy or monopoly since no consolidation of operating firms is involved in such transactions participation by buyout specialists in the bid does not significantly affect these gains bids by outsiders and bids by incumbent managers generate similar valuation effects for industry rivals the effect on share prices of industry rivals is inversely related to the capitalized values of rival firms relative to the target firm we also report valuation effects for target firms we examine the implications of going private bids for the valuation of horizontal rivals of target firms we hypothesize that going private transactions reflect in part private information held by the bidder about the target firm we argue that if the financial market perceives that elements of this private information are industry wide rather than firm specific the value of the target firm s horizontal rivals should change in response to the goingprivate bid announcement 1 unlike interfirm mergers and acquisitions going private transactions do not involve a consolidation of separate operating firms consequently changes in the value of rival firms induced by goingprivate bids are due neither to the demonstration of synergies associated with a consolidation of operating firms nor to the effects of induced monopoly or collusion 2 we also report valuation effects on target firms we find that announcements of going private bids generate statistically significant positive intra industry effects industry rivals of targets of goingprivate bids receive a positive 2 day average excess return of 1 32 which is statistically significant the average 2 day excess return to target firms is 17 35 and is statistically significant we test whether participation of

the effect of three mile island on electric utility stock prices a note the impact of events on the time series properties of common stock returns has been the subject of numerous articles in the finance literature most studies have shown that capital markets are highly efficient in the sense that prices quickly adjust to publicly available information as investors act to receive a return commensurate with the level of perceived risk this note examines the effect on the stock returns of public utility firms of the three mile island tmi nuclear accident in stock valuation models based on investor rationality permanent price declines are brought about either by a decline in expected cash flows or by an increase in the rate used to discount future cash flows such a nuclear accident may directly affect investors perceptions of both the expected cash flows of utilities and their risk these future cash flows are affected because a nuclear accident may cause additional costs due to extended shutdowns or abandonment of nuclear plants expenses of responding to a nuclear accident and costs of purchasing replacement power the response of utility returns to tmi is analyzed at three levels first the risk adjusted returns for the utility experiencing the nuclear accident general public utilities gpu are measured over monthly time periods surrounding tmi the same analysis is performed on an aggregate sample of electric utility firms to assess the direction and magnitude of tmi s impact on other firms in the industry lastly the sample is divided into utilities with significant nuclear generating capacity at the time of tmi and utilities with no nuclear generating capacity so that the differential impact of the nuclear accident on nuclear and non nuclear public utilities may be assessed both a single and two index market model are used to estimate risk adjusted returns the latter index model includes an interest rate index as well as an equity market index

carbon markets 15 years after kyoto lessons learned new challenges abstract carbon markets are substantial and they are expanding there are many lessons from market experiences over the past eight years there should be fewer free allowances better management of market sensitive information and a recognition that trading systems require adjustments that have consequences for market participants and market confidence moreover the emerging market architecture features separate emissions trading systems serving distinct jurisdictions and a variety of other types of policies exist alongside the carbon markets this situation is in sharp contrast to the top down integrated global trading architecture envisioned 15 years ago by the designers of the kyoto protocol and raises a suite of new questions in this new architecture jurisdictions with emissions trading have to decide how whether and when to link with one another stakeholders and policymakers must confront how to measure the comparability of efforts among markets as well as relative to a variety of other polic

determinants of the informativeness of analyst research abstract we examine cross sectional determinants of the informativeness of analyst research i e their effect on security prices controlling for endogeneity among the factors affecting informativeness analyst reports are more informative when the potential brokerage profits are higher e g high trading volume high volatility and high institutional ownership and lower when information processing costs e g more business segments are high we also find that the informativeness of analyst research and informativeness of financial statements are complements

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

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

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

forcing firms to talk financial disclosure regulation and externalities we analyze a model of voluntary disclosure by firms and the desirability of disclosure regulation in our model disclosure is costly it has private and social value and its precision is endogenous we show that i a convexity in the value of disclosure can lead to a discontinuity in the disclosure policy ii the nash equilibrium of a voluntary disclosure game is often socially inefficient iii regulation that requires a minimal precision level sometimes but not always improves welfare iii the same is true for subsidies that change the perceived cost of disclosures and iv neither regulation method dominates the other article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

accounting information disclosure and the cost of capital in this paper we examine whether and how accounting information about a firm manifests in its cost of capital despite the forces of diversification we build a model that is consistent with the capital asset pricing model and explicitly allows for multiple securities whose cash flows are correlated we demonstrate that the quality of accounting information can influence the cost of capital both directly and indirectly the direct effect occurs because higher quality disclosures affect the firm s assessed covariances with other firms cash flows which is nondiversifiable the indirect effect occurs because higher quality disclosures affect a firm s real decisions which likely changes the firm s ratio of the expected future cash flows to the covariance of these cash flows with the sum of all the cash flows in the market we show that this effect can go in either direction but also derive conditions under which an increase in information quality leads to an unambiguous decline in the cost of capital

risk neutral models for emission allowance prices and option valuation the existence of mandatory emission trading schemes in europe and the united states and the increased liquidity of trading on futures contracts on co2 emissions allowances led naturally to the next step in the development of these markets these futures contracts are now used as underliers for a vibrant derivative market in this paper we give a rigorous analysis of a simple risk neutral reduced form model for allowance futures prices demonstrate its calibration to historical data and show how to price european call options written on these contracts this paper was accepted by haitao li guest editor finance

transitional restricted linkage between emissions trading schemes linkages between emissions trading systems are deemed an important element of the future climate policy landscape they are however difficult to agree and remain few and far between temporary restrictions on permit trading have potential to facilitate and gradually approach unrestricted full linkage we compare the relative merits of several link restrictions in this respect namely quantitative transfer limits border taxes on transfers exchange and discount rates and unilateral linkage to this end we develop a simple model to have a unifying framework which in conjunction with lessons we draw from real world experiences serves as a basis for a broader policy oriented discussion while quantitative restrictions seem to be the natural route to full linkage they can lead to uncertain distributional effects and weaken price signals these aspects are mitigated under a border permit tax but this policy seems harder to implement exchange rates have potential to adjust for programmes stringencies and raise ambition over time but can be challenging to select as experience corroborates unilateral linkage can be a convenient approach

stock market reaction to financial statement certification by bank holding company ceos in 2002 the sec mandated that the ceos of large publicly traded firms certify the accuracy of their company financial statements the sec s certi fication order provides a natural experiment that gives insight into the question of whether banks are opaque we find that the bhcs subject to the sec s order experienced positive and significant average abnormal returns from certification characteristics associated with greater opaqueness liquid asset holdings information intensive lending and split credit ratings are systematically associated with the size of abnormal returns

banking and borrowing in the eu ets a review of economic modelling current provisions and prospects for future design this article deals with the issue of banking and borrowing in the context of the european union emissions trading scheme eu ets by attempting to provide a policy oriented unifying theoretical framework after describing the main features of the eu ets the core part of the article consists of variations of an inter temporal continuous time optimization model additional elements include flexibility measures currently discussed and proposed in other emissions trading systems usa australia which include the use of safety valves minimum price auctioning or offsets from domestic or international projects

relationship between differential amounts of prior information and security return variability this study investigates the relation between stock return variability at annual earnings announcements and the amount of prior information available about a firm which is measured by both the number of security analysts annual earnings forecasts and firm size market value of common equity we find that each of these information measures is inversely related to return variability at annual earnings announcements after controlling for differences in the other this result suggests that number of security analysts earnings forecasts and firm size measure dimensions of the amount of prior information available about a firm that are not subsumed by one another the study also provides evidence using empirically generated distributions that test statistics derived from squared standardized market model prediction errors have larger means and variances for firms with few analysts forecasts or for small firms than for firms with many analysts forecasts or for large firms this result implies that the probability of obtaining large values of those test statistics is greater for firms with few analysts forecasts or for small firms therefore the probability of concluding there is increased return variability at annual earnings announcements is greater for those firms consistent with marais 1984

a tradable permit system in an intertemporal economy it is known that in an intertemporal competitive economy a tradable permit system may not achieve efficiency without setting appropriate permit interest rates i e rewards for holding permits to find the rates however we need to know in advance the path of efficient permit prices which is difficult to obtain this study intends to solve this problem in two ways first we analyze a special case in which the permit interest rates are given by a simple rule for example if the marginal abatement cost of pollution emission is constant then the appropriate rate is to equal the monetary interest rate as is the case for global warming if the damage is caused in the future far beyond the planning period of the environmental program the appropriate rate coincides with the marginal self recovery of environmental stock under certain conditions as a second approach we propose a tradable permit system with a permit bank as a mechanism by which the permit interest rates are generated endogenously without governmental intervention other than the issuance of permits however we also show that this approach raises the problem of indeterminacy of the equilibrium

does distribution matter efficiency equity and flexibility in greenhouse gas abatement this paper analyses banking and borrowing ofcarbon emission rights within the framework ofa simple integrated assessment model breaking the world economy in just two regionsit will be shown 1 increasing intertemporal flexibility in greenhouse gasabatement through banking and borrowing ofcarbon emission permits has a positive effecton welfare for regions with a poor endowment incarbon emission rights but negatively affectsrich endowed regions 2 intergenerationalfairness advocates intertemporal flexibility ingreenhouse gas abatement irrespectively of theinitial allocation of carbon rights 3 optimal carbon accumulation is not independentof the initial allocation of carbon rights different initial sharing rules clearlyinfluence the development of atmospheric carbonconcentration

alternative approaches to cost containment in a cap and trade system we compare several emissions reduction instruments including quantity policies with banking and borrowing price policies and hybrid policies safety valve and price collar using a dynamic model with stochastic baseline emissions the instruments are compared under the design goal of obtaining the same expected cumulative emissions across all options based on simulation analysis with the model parameterized to values relevant to proposed us climate mitigation policies we find that restrictions on banking and borrowing including the provision of interest rates on the borrowings can severely limit the value of the policy depending on the regulator chosen allowance issuance path although emissions taxes generally provide the lowest expected abatement costs a cap and trade system combined with either a safety valve or a price collar can be designed to provide expected abatement costs near those of a tax but with lower emissions variance than a tax consistently a price collar is more cost effective than a safety valve for a given expected cumulative emissions outcome because it encourages inexpensive abatement when abatement costs decline

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

a positive theory of flexibility in accounting standards abstract we develop a positive theory of accounting standards when standards generate network externalities and differ in the amount of reporting discretion or flexibility they provide firms we evaluate expected value maximizing firms preferences between two standards regimes rigid and flexible as the number of firms subject to each standard varies as the organization of the securities market varies and as the mapping from the underlying economics of the firms transactions to the accounting reports produced under the two standards vary we also compare firms preferences between the two regimes to the preferences of profit maximizing traders in the firms securities

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

managing permit markets to stabilize prices the political economy of environmental policy favors the use of quantity based instruments over price based instruments e g tradable permits over green taxes at least in the united states with cost uncertainty however there are clear efficiency advantages to prices in cases where the marginal damages of emissions are relatively flat such as with greenhouse gases the question arises therefore of whether one can design flexible quantity policies that mimic the behavior of price policies namely stable permit prices and abatement costs we explore a number of quantity plus policies that replicate the behavior of a price policy through rules that adjust the effective permit cap for unexpectedly low or high costs they do so without necessitating any monetary exchanges between the government and the regulated firms which can be a significant political barrier to the use of price instruments

self selection and internal migration in the united states abstract within the conceptual framework of the roy model this paper provides an empirical analysis of internal migration flows using data from the national longitudinal survey of youth the theoretical approach highlights regional differences in the returns to skills regions that pay higher returns to skills attract more skilled workers than regions that pay lower returns our empirical results suggest that interstate differences in the returns to skills are a major determinant of both the size and skill composition of internal migration flows persons whose skills are most mismatched with the reward structure offered by their current state of residence are the persons most likely to leave that state and these persons tend to relocate in states which offer higher rewards for their particular skills

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

pricing emission permits in the absence of abatement abstract if emissions are stochastic and firms are unable to control them through abatement the cap in a permit market may be exceeded or not be reached i derive a binary options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of an exceeded cap under the assumption of no abatement i apply my model to the eu ets where the rapid introduction of the market made it difficult for firms to adjust their production technology in time for the first phase the model fits the data well implying that the permit price may have been driven by firms hedging against stochastic emissions

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

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