the market valuation of ias versus us gaap accounting measures using form 20 f reconciliations abstract we investigate the market valuation of earnings and book value amounts prepared under ias and us gaap to provide evidence for the debate between the us sec and nyse on whether foreign firms should be allowed to list in the us using ias we find that the us gaap earnings reconciliation adjustment is value relevant and that us gaap amounts are valued differently for market value and return models but not a price per share model we also find that ias amounts are more highly associated with price per share than us gaap amounts and that us gaap amounts are more highly associated with security returns than ias amounts

the digital divide the role of political institutions in technology diffusion what factors have promoted and retarded the spread of the internet globally the internet is one example of the diffusion of technology much as other technologies the internet has diffused unevenly across countries raising concerns over a digital divide my main proposition is that its spread has been driven by neither technological nor economic factors alone rather political factors exert a powerful influence groups that believe they will lose from the internet use political institutions to enact policies that block the spread of the internet some political institutions make this easier than others data from roughly 190 countries from 1991 to 2001 showthat a country s regime type matters greatly even when controlling for other economic technological political and sociological factors democratic governments facilitate the spread of the internet relative to autocratic ones thus the spread of democracy may help reduce the digital divide

a spatial model of international conflict 1 he model presented here assumes that nations initiate conflict to change the international status quo across one or more issues to an outcome they prefer their preferences for different issue outcomes are represented by a classical spatial utility function international coalitions are formed both to enhance the chance of a successful challenge and to counter existing challenges disputes are modeled as periods of competition between two coalitions through the recruitment of additional members erosion of support for the opposing coalition and escalation of the crisis the two nation model is analyzed in detail and the existence of the core for the resulting game is proved the two main conclusions of the two nation model are that nations have a general incentive to exaggerate their issue positions in disputes and that the possibility of issue trades enhances the likelihood of compromise because scientific understanding arises from theories the explication of theories is essential for the development of scientific understanding to understand international conflictthat is the resolution of disputes between nations by coercion or the threat of coercion a theory that can explain such conflict is needed this paper will present a model drawn from rational choice theory specifically game theory that explains national actions in conflicts as strategic choices made in order to gain preferred resolutions of the international issues in dispute compared to existing game theory models of international conflict the model presented here provides an explicit description of how each nation s evaluation of the issues in dispute affects its desire to pursue compromise or conflict a more detailed sequence of escalation allowing for the detailed study of escalation strategies and a framework that can explain the timing and extent of third party interventions into ongoing crises

equality employment and budgetary restraint the trilemma of the service economy this article presents an analysis of the postindustrial economy from a political economy perspective it identifies a set of specific distributional trade offs associated with the new role played by the services sector as the chief source of employment growth in advanced democracies over the last three decades it is argued that three core policy objectives budgetary restraint wage equality and expansion of employment constitute a political trilemma that allows only two of the goals to be successfully pursued at the same time using a combination of statistical and case oriented analysis the authors demonstrate the political and economic salience of the trilemma the distributional tensions inherent in each strategy to cope with it and the political institutional constraints under which these strategies are chosen

rationality and deterrence this essay explores the relationship between deterrence theory and two distinct notions of rationality associated with it the author argues that the concept of procedural irrationality which is the basis of many critiques of contemporary deterrence theory is not necessarily inconsistent with the instrumental definition of rationality implicit in many models of deterrence he also argues that some recent rational choice models of deterrence are nonetheless deficient in their application of the rationality postulate finally he provides an outline of a possible resolution of the paradox of deterrence

the use of control groups in capital market research capital market researchers have used several different types of control groups in attempting to assess stock market reactions to accounting events in recent years the properties of various control groups have been examined to determine the sensitivity of experimental results to a particular control group gonedes 1975 1978 foster 1980 brown and warner 1980 beaver 1981 except for the brown and warner study these studies have been of an analytical nature the purpose of this study was to extend the brown and warner analysis to four alternative control groups using a particular accounting event study as an example the example involved an assessment of whether the stock market reacted to actual changes in accounting estimates the four types of control groups examined were those which have been used in previous capital market studies see section 3 one of brown and warner s main conclusions was that beyond a simple one factor market model there is no evidence that more complicated methodologies such as risk equivalent control portfolios convey any benefit our results which are based on a market setting typical of many information content studies lead to a potentially different conclusion brown and warner injected simulated market effects into randomized data and by replicating their analyses 250 times they were able to

multilateral negotiations a spatial analysis of the arab israeli dispute a model for forecasting political choices and for explaining the perceptual conditions that lead to those choices is delineated the model based on the median voter theorem and on the axioms of expected utility maximization is applied to the prospects for a multilateral peace conference in the middle east the analysis helps provide insights into the motivations behind recent actions by leaders in the soviet union the united states jordan the palestine liberation organization and israel

global pricing of equity global equity management has historically been structured around country asset allocation this approach was supported by the observations that the country factor is the major source of influence on stock price behavior and that the correlation between equity and currency is close to zero and unstable if a corporation is regarded as a portfolio of international activities however its stock price should be influenced by international factors in relation to the geographical breakdown of its activities rather than where its headquarters is located or its stock is traded we examined a large cross section of security prices and found that regional factors and currency factors have a strong influence on asset returns beyond that of domestic factors moreover the sensitivity of individual company returns to nondomestic factors is closely related to the extent of their international activities as proxied by the relative importance of foreign sales to total sales we review the implications of these findings

the structure of european stock returns analysis of the daily localcurrency returns on 105 stocks from 11 european countries over the 1986 89 period reveals the importance of various market and sector factors to stock price volatility factor analysis as well as an analysis of variance with currency market and industry factors show that national stock market factors clearly dominate stock price variances even after adjusting for currency world stock market european stock market and industry trends

issue linkages in international crisis bargaining students of international relations have long been concerned with questions regarding the impact of issue linkages on bargaining outcomes unfortunately the body of theory attempting to provide a systematic and rigorous analysis of issue linkages is woefully underdeveloped in this study i contribute to the development of this theory with a particular emphasis on accounting for cases in which issue linkage fails in international crisis bargaining the spatial model of crisis bargaining which is a formal model constituting a synthesis of the spatial theory of voting and traditional utility based bargaining theory is used to develop a theory of issue linkages and to address a number of points regarding linkage strategy that are found in the literature after demonstrating how linking issues can affect the outcome of an international crisis i argue that existing explanations for linkage failure are inadequate the majority of the paper is devoted to determining what characteristics of the issues involved and of the disputants determine the likelihood that a linkage attempt will be successful i conclude with a brief discussion relating these results to the literature on crisis management

the expected utility theory of conflict measuring theoretical progress we examine the progressivity of bruce bueno de mesquita s theory of conflict as originally developed in the war trap and as extended later bueno de mesquita offers the progressivity of the expected utility theory relative to other theories and approaches to conflict as his major defense in responding to critics bueno de mesquita essentially relies on imre lakatos definition of theoretical progress in presenting his argument a review of the literature addressing the concept of theoretical progress indicates that bueno de mesquita s application of lakatosian criteria is incomplete and that lakatos criteria are themselves flawed we review the philosophy of science literature dealing with theoretical progress or rational criteria for theory choice and evaluate the progressivity of the expected utility theory of conflict in light of criteria other than lakatos while we do recommend further elaboration of bueno de mesquita s theory we do not find it more progressive than its rivals

bringing capital back in or social democracy reconsidered employer power cross class alliances and centralization of industrial relations in denmark and sweden the political domination of social democrats in denmark and sweden beginning in the 1930s was stabilized by the absence of intense opposition by capital to reformist programs aggressively opposed by business and the right elsewhere in the world this quiescence was not a symptom of weakness or dependency rather it was a product of a class intersecting cross class alliance behind institutions of centralized industrial relations that served mutual interests of sectoral groupings dominating both union and employer confederations well organized and militant and backed by social democrats employers in the two countries used offensive multi industry lockouts to force centralization on reluctant unions analysis of these cross class alliances and their pay distributional objectives is used to challenge a widely held view that centralization and social democratic electoral strength are sources of power against capital it also occasions a reassessment of conventional understandings of farmer labor coalitions and the decline of industrial conflict in scandinavia in the 1930s according to the alternative view presented here capital was included rather than excluded from these cross class alliances and industrial conflict subsided dramatically in part because employers achieved politically what they had previously tried to achieve with the lockout

what you want depends on what you know firm preferences in an information age information has become a core input for many companies this article examines how this affects firm policy preferences in contrast to national typologies of capitalism or microeconomic expectation

changing risks in global equity portfolios given recent changes in sector and style risk and in manager betting behavior in the global equity markets we analyzed the relative importance of the major active risk drivers and the implications of their relative importance for global multimanager portfolio construction using cross sectional regressions and multimanager portfolio simulations we found that the effect of style and sector bets on active manager risk increased after 1998 and that using style balanced portfolios could have substantially reduced active risk during the 1998 2002 period most of the risk reduction however would have come from the diversification of stock sector selection risk because growth and value managers make different bets on certain sectors common bets on major countries such as japan or the united states persisted during this period but their importance decreased because of smaller benchmark relative bets and country risk in light of the changes using multiple risk control strategies to construct multimanage

does industrial structure explain the benefits of international diversification abstract we examine the influence of industrial structure on the cross sectional volatility and correlation structure of country index returns for 12 european countries between 1978 and 1992 we find that industrial structure explains very little of the cross sectional difference in country return volatility and that the low correlation between country indices is almost completely due to country specific sources of return variation diversification across countries within an industry is a much more effective tool for risk reduction than industry diversification within a country

guns butter and anarchy a state in the international system implicit in realism must allocate its limited resources between satisfying its intrinsically valued ends and the means of military power i formalize this guns versus butter problem in a simple infinite horizon model in which two states must continually decide how to allocate their resources and whether to attack the other state the analysis establishes sufficient conditions to ensure the existence of an equilibrium in which neither state attacks shows that there is a strictly pareto dominant pair of peaceful equilibrium payoffs characterizes the unique peaceful markov perfect equilibrium that yields them and describes the comparative statics of the equilibrium allocations more broadly the analysis also suggests that the notion of anarchy has little if any substantive significance distinctively related to international politics and that the problem of absolute and relative gains is superfluous

the war trap revisited a revised expected utility model the expected utility framework developed in the war trap is revised to correct several deficiencies risk taking orientations are now treated as an integral part of the model by introducing concavity or convexity into the utility functions the zero sum properties of the theory are largely eliminated and the tendency toward interpersonal comparisons of utility is removed several earlier results are replicated with the new model and with annual capabilities data new propositions are deduced that identify important limitations on conflict initiation and relationships resulting from differences in perceptions are tested support is found for the contention that the revised version of the theory of which the original model is a special case is a powerful tool for integrating many extant hypotheses about conflict and for explaining a substantial portion of the tendency for some threats to escalate to violence or warfare and for others to be resolved peacefully

earnings as an explanatory variable for returns in this paper we investigate whether the level of earnings divided by price at the beginning of the stock return period is relevant for evaluating earnings returns associations the primary model motivating this research relies on the idea that book value owners equity and market value are both stock variables indicating the wealth of the firm s equity holders the related flow variables after adjusting for dividends are respectively earnings divided by price at the beginning of the return period a p 1 and market returns it then follows that earnings divided by beginning of period price should be associated with stock returns although models based on a relation between market value and book value are used occasionally in the accounting research literature see for example landsman 1986 harris and ohlson 1987 and barth

domestic opposition and signaling in international crises this article explores the effect of domestic political competition on the escalation of international crises it combines an incomplete information model of crisis bargaining with a simple model of two party electoral choice one state has two strategic actors a government and an opposition party both of which declare openly whether they support the use of force to alter the status quo the rival state updates its beliefs and selects its strategy in response to both signals the parties payoffs depend upon a retrospective evaluation by the domestic electorate the model shows that the inclusion of a strategic opposition party decreases the ex ante probability of war by helping to reveal information about the state s preferences this finding has important implications for research on democracy and international conflict since it suggests a mechanism through which democratic states can overcome informational asymmetries which have been identified as a central obstacle to negotiation

the impact of cross listing in the united states on the precision of public and private information our study explores the source of improvement in the information environment from cross listing shares on us stock exchanges are the improvements from cross listing in the united states achieved more through public or private information channels while we find evidence that us cross listing is significantly associated with improvements in both public and private information precision the association is stronger between cross listing and improvements in private information precision this suggests that the improvement in the information environment for cross listed firms is largely due to analysts expending more effort on firm specific information discovery as opposed to broader improvements in overall public disclosure this research should influence international business scholars that improvements in the information environment do not occur solely through public information channels they also occur through investors private information search activities

empirical estimates of beta when investors face estimation risk we examine empirical implications of models of differential information that formalize the following intuition securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions the implication that beta risk for low information firms should decline as information increases is confirmed with several data sets we find such a decline over the first geveral periods subsequent to initial public offerings and initial listings there is also an abrupt risk decline at the first annual earnings announcement this paper examines several empirical implications of security return models involving differential information these models formalize the following intuition securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions the research relates to two streams of literature the first revolves around the new issues and new listings market it begins with ibbotson 1975 and includes for example ritter 1984 beatty and ritter 1986 mcconnell and sanger 1987 and muscarella and vetsuypens 1989 the second is the literature dealing with the effects of differential information on the risk assessment of low information firms this second literature is exemplified by the work of klein and bawa 1976 1977 and barry and brown 1984 1985 in our examination we focus on how increased risk associated with low information firms henceforth called estimation risk manifests itself in observed return data we explore how observed security returns to low information firms appear to researchers in relation to how they appear ex ante to investors who base their predictive distribution of security returns on incomplete information about the parameters of the return generating process we also examine data on new listings and new issues to exemplify some of the relationships the data support the most obvious and direct implication of the differential information model that the expected systematic risk of low information firms decreases as time passes and information increases our evidence as in ibbotson that risk declines with seasoning rejects a restrictive null hypothesis that information risk is diversifiable and the under

from unanimity to consensus an analysis of the negotiations at the eu s constitutional convention disputes filed at the world trade organization wto are attracting a growing number of third parties most observers argue that their participation influences the institution s rulings the authors argue that third parties undermine pretrial negotiations their influence on rulings is conditioned by this selection effect they test their hypotheses along with the conventional wisdom using a data set of wto disputes initiated through 2002 consistent with the authors argument they find that third party participation lowers the prospects for early settlement controlling for this selection effect the evidence also suggests that third party support increases the chances of a legal victory at the wto

information sharing in credit markets we present a model with adverse selection where information sharing between lenders arises endogenously lenders incentives to share information about borrowers are positively related to the mobility and heterogeneity of borrowers to the size of the credit market and to advances in information technology such incentives are instead reduced by the fear of competition from potential entrants in addition information sharing increases the volume of lending when adverse selection is so severe that safe borrowers drop out of the market these predictions are supported by international and historical evidence in the context of the consumer credit market a large body of literature on credit markets has shown that asymmetric information may prevent the efficient allocation of lending leading to credit rationing e g jaffee and russell 1976 stiglitz and weiss 1981 or to a wedge between lending and borrowing rates e g king 1986 in this literature informational asymmetries are taken to be exogenous lenders fail to observe some relevant characteristic or action of potential borrowers and have no way of learning about it in some countries however lenders can improve their knowledge about new customers by exchanging information with other lenders through information brokers generally known as credit bureaus the latter collect file and distribute the information voluntarily supplied by their members and operate on the principle of reciprocity lenders who do not provide data are denied access to the bureau s files in other countries instead these institutions do not exist the literature offers no guide to identify the factors that lead to endogenous communication between lenders this paper is an attempt to fill the gap information sharing is important for a number of reasons it may increase the degree of competitiveness within credit markets vives 1990 improve

economic integration and country allocation in europe the impact of european integration at the company and macro levels on correlations between stock market returns is analyzed a new procedure based on randomization methodology is introduced to test for the absence of country systematic differences in the return patterns of two stock markets the results indicate that stock market integration in europe is not yet complete but the comovement of european markets has increased substantially and is likely to continue to grow therefore top down managers of european equity portfolios need to look for a new strategy other than country based allocation

the association between stock returns and foreign gaap earnings versus earnings adjusted to u s gaap abstract this study examines the association between stock returns and foreign gaap earnings versus earnings adjusted to u s gaap using a sample of foreign firms with common stock or american depositary receipt adr traded in u s exchanges we compare the returns earnings relations between u s and foreign gaap based earnings results based on the ja test indicate that earnings based on foreign gaap are more closely associated with contemporaneous stock returns than earnings reconciled to u s gaap we find evidence that our results may be driven by institutional factors which are specific to foreign markets

reason and war a new specification of the expected utility model of international conflict places expected utilities within a polar coordinate system treats thirdparty choices in a manner more consistent with classical forms estimates the expected utilities derived from not challenging existing policies more fully represents the expected costs of conflict and normalizes expected utilities regardless of system size by assuming that the probability of escalation of a dispute increases monotonically with leaders expectations of gain we derive continuous functions for the probabilities of war intervention violence and peace the revised theory significantly improves our ability to discriminate between violent and nonviolent disputes and between violent disputes that escalated to warfare and those that did not in europe between 1816 and 1970 in this essay

pricing of domestic versus multinational companies world financial markets are becoming integrated hence global factors rather than domestic factors should dominate the pricing of stocks all the empirical studies published until the mid 1990s however reported that stock prices respond primarily to domestic factors in other words the pricing of a company s stock is driven predominantly by the primary location of its stock listing rather than by the nature and geographical breakdown of its activities we challenge this vision of international market pricing we have found that stock pricing at least for non u s companies is strongly influenced by the extent of the company s nondomestic activities this finding has implications for the organization of global equity research departments and for the structure of the investment process

the costs of war a rational expectations approach a model of war costs is presented that is based on the utility nations expect to derive from the war as well as on the technological gap between adversaries and the short term tactical tit for tat calculations that must occur on the battlefield this model explains nearly three quarters of the variance in battle deaths per million population per month of war experienced by war initiators approximately one quarter of the variance in war costs is accounted for by considering the position of the initiator s opponent a second model based on marginal changes in expected utility technological differences and tit for tat is shown to account for more than one third the variance regardless of whether war costs are viewed by the initiator or an opponent in a war this study therefore provides a useful explanation of war intensity and contributes to the cumulative lawlike implications of the expected utility approach on which it is based

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

the relative importance of common factors across the european equity markets abstract in this paper we try to shed additional light on the question of integration or segmentation of european equity markets by studying the statistical relevance of some intuitively appealing international factors of return the relevance of these factors is also investigated through time in order to evaluate a possible increase in market integration over the recent past

systems competition and network effects this paper discusses firm behavior market performance and the public and private institutions that arise in systems markets i e markets where consumers use compatible components together to generate benefits in such markets which include communications networks and hardware software networks popular products are inherently more valuable these network effects can drive corporate strategies and are critical in understanding innovation in many high technology markets the discussion here emphasizes the dynamics of consumer adoption decisions in the presence of network effects competition between incompatible systems and how suppliers choose which components are compatible and which are not

war and expected utility theory in his book the war trap bruce bueno de mesquita claims to offer a deductive theory of international conflict based on the assumption that foreign policy makers attempt to maximize their expected utility the theory is subjected to a systematic empirical test that seems to provide impressive confirmation the first part of this article examines bueno de mesquita s theory and argues that it cannot be derived from his assumptions the second part examines the operational version of the theory which was the one actually tested and argues that it can be more plausibly interpreted as a version of a different theory one that bueno de mesquita claims to have discredited the essay concludes by discussing the significance of this book with regard to the question of whether theories of individual rational choice can explain foreign policy decisions

computing productivity firm level evidence we explore the effect of computerization on productivity and output growth using data from 527 large us firms over 1987 1994 we find that computerization makes a contribution to measured productivity and output growth in the short term using one year differences that is consistent with normal returns to computer investments however the productivity and output contributions associated with computerization are up to five times greater over long periods using five to seven year differences the results suggest that the observed contribution of computerization is accompanied by relatively large and time consuming investments in complementary inputs such as organizational capital that may be omitted in conventional calculations of productivity the large long run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination