large scale deployment of renewables for electricity generation comparisons of resource assessments suggest that sufficient renewable energy resources are available to allow for large scale deployment of renewable energy technologies economic analysis identifies barriers to the adoption of renewable energy sources resulting from i market structure ii competition in an uneven playing field and iii various non marketplace barriers however even if these barriers are removed the problem of technology lock out remains the key policy response is strategic deployment coupled with increased r d support to accelerate the pace of improvement through market experience this paper suggests significant contributions from various technologies are possible but does not assess their optimal or maximal market share copyright 2005 oxford university press

an analysis of feed in tariff remuneration models implications for renewable energy investment recent experience from around the world suggests that feed in tariffs fits are the most effective policy to encourage the rapid and sustained deployment of renewable energy there are several different ways to structure a fit policy each with its own strengths and weaknesses this paper presents an overview of seven different ways to structure the remuneration of a fit policy divided into two broad categories those in which remuneration is dependent on the electricity price and those that remain independent from it this paper examines the advantages and disadvantages of these different fit models and concludes with an analysis of these design options with a focus on their implications both for investors and for society

an equilibrium model of incentive contracts in the presence of information manipulation abstract this paper develops an agency model in which stock based compensation is a double edged sword inducing managers to exert productive effort but also to divert valuable firm resources to misrepresent performance we examine how the potential for manipulation affects the equilibrium level of pay for performance sensitivity and derive several new cross sectional implications that are consistent with recent empirical studies in addition we analyze the impact of recent regulatory changes contained in the sarbanes oxley act of 2002 and show how policies intended to increase firm value by reducing misrepresentation can actually reduce firm value or increase the upward bias in manipulated disclosures

dynamic pricing of electricity as both a regulator and an academic fred kahn argued that end use electricity consumers should face prices that reflect the time varying marginal costs of generating electricity this has been very slow to happen in the us even in light of recent technological advances that have lowered costs and improved functionality for meters and automated demand response technologies we describe these recent developments and discuss the remaining barriers to the proliferation of time varying electricity pricing

time of use rates vs hopkinson tariffs redux an analysis of the choice of rate structures in a regulated electricity distribution company abstract recent proposals to restructure the electricity industry in north america may effect the disintegration of a vertically integrated company into several smaller entities including distribution companies discos we explore whether time of use tou pricing or a hopkinson tariff would be more suitable for a regulated disco focusing on the economic efficiency of these alternative rate structures we argue that a hopkinson tariff with demand subscription is superior to tou rates as it can better handle the limited load diversity of local transmission and distribution td demands made on the contemporary disco while finessing the problem of endogenous marginal costs of local td capacity

incentives discretion and asset valuation in closed end mutual funds this paper studies earnings management using 363 closed end mutual fund firm years of data closed end fund assets consist of unrestricted and restricted securities and realized and unrealized income while unrestricted securities are not subject to earnings management restricted security values are largely discretionary managerial valuation of restricted securities is modeled as contingent on unrestricted returns relative to a performance benchmark four unrestricted performance regions are identified known multi period compensation incentives become the basis for hypothesizing earnings management behaviors in the regions in the form of restricted security valuation across several benchmarks the results are consistent with multi period maximization rather than simpler single period compensation maximization or income smoothing funds with extreme unrestricted performance show relatively larger income decreasing earnings management and funds with slightly below benchmark returns show relatively larger income increasing earnings management than those slightly above these results clarify the relationship between complex earnings management behavior and managerial incentives

political cost incentives for earnings management in the cable television industry abstract this study tests political costs theory by examining the cable television industry during periods of congressional scrutiny earnings management is measured using discretionary accruals and data are consistent with managerial incentives to mitigate the effects of political scrutiny and potential industry reregulation tests are also done using within sample comparisons of firms firms for which proposed regulations are expected to be more harmful have greater income decreasing accruals and for some tests firms for which cable television operations are more important have greater income decreasing accruals test results are robust to the inclusion of control variables for firm performance and size

the design of multidimensional auctions procurement auctions usually require the bid to specify several characteristics of the contract to be fulfilled in this article i study the design of such mechanisms allowing for a special case of correlation of the firm s costs i describe the properties of optimal mechanisms and study the design of multidimensional auctions contrary to the independent costs model to implement the optimal outcome the procurer will need to use a two stage auction in the first stage the procurer selects one firm in the second stage he bargains to readjust the level of quality to be provided

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

factors associated with the year end decline in working capital working capital is an important indicator of firm operational efficiency all else being equal lower levels signal greater efficiency managers are thus likely to be motivated to report lower levels of working capital at times of greater external attention we find that working capital levels decrease in the fourth fiscal quarter significantly more than expected conditional on seasonal changes in economic activity the decrease subsequently reverses in the following first fiscal quarter evidence indicates that firms manage down year end working capital through transactions that increase year end operating cash flow and that firms spread this activity over all working capital accounts finally the temporary decrease in year end working capital is correlated with compensation benchmarks and analysts annual cash flow forecasts the temporary drop is also more pronounced for firms with industry dominance this paper was accepted by mary barth accounting

the relation between earnings based measures in firm debt contracts and ceo pay sensitivity to earnings abstract i investigate how implicit incentives provided by earnings based debt covenants affect the structure of ceo compensation contracts this provides a new and unique view of how the ceo s incentives are shaped by not only his compensation contract but also debt contracts i find when debt contracts contain an earnings based covenant the ceo s pay sensitivity to earnings is muted additionally i find some evidence that pay sensitivity to earnings varies with earnings based covenant slack this study provides evidence consistent with shareholders rebalancing the ceo s earnings incentives in the presence of earnings based covenants thereby tilting incentives away from earnings performance

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

bonus pools and the informativeness principle abstract previous work on moral hazard problems has shown that under certain conditions bonus contracts create optimal individual incentives for risk neutral workers in our paper we demonstrate that if a firm employs at least two workers it may further benefit from combining worker compensation via a bonus pool contract and relative performance evaluation such combination leads to saved rents under a wide class of luck distributions in addition if the employer is wealth constrained complementing individual bonus contracts by the possibility of pooling bonuses can increase the set of implementable effort levels all our results hold even though workers outputs are technically and stochastically independent so that in view of holmstrom s informativeness principle individual bonus contracts would be expected to dominate bonus pool contracts

nonlinear dynamics in discretionary accruals an analysis of bank loan loss provisions abstract several studies have analyzed discretionary accruals to address earnings smoothing behaviors in the banking industry we argue that the characteristic link between accruals and earnings may be nonlinear since both the incentives to manipulate income and the practical way to do so depend partially on the relative size of earnings given a sample of 15 268 us banks over the period 1996 2011 the main results in this paper suggest that depending on the size of earnings bank managers tend to engage in earnings decreasing strategies when earnings are negative big bath use earnings increasing strategies when earnings are positive and use provisions as a smoothing device when earnings are positive and substantial cookie jar accounting this evidence which cannot be explained by the earnings smoothing hypothesis is consistent with the compensation theory neglecting nonlinear patterns in the econometric modeling of these accruals may lead to misleading conclusions regarding the characteristic strategies used in earnings management

empirical tests of budget ratcheting and its effect on managers discretionary accrual choices abstract in this paper we investigate whether budgets ratchet using business unit data from a large multinational corporation we find evidence consistent with ratcheting where favorable budget variances result in performance budget increases that are larger than decreases associated with unfavorable variances of the same magnitude we argue that under ratcheting the cost of reporting positive transitory earnings surprises outweigh the short term benefits of the current period bonus consequently we hypothesize that managers make income decreasing discretionary accruals to offset transitory earnings surprises beyond the level expected under fixed budgets using a proxy for transitory earnings surprise we find evidence consistent with this hypothesis

substitutes or complements a configurational examination of corporate governance mechanisms we conduct an exploratory qualitative comparative case analysis of the s p 1500 firms with the aim of elaborating theory on how corporate governance mechanisms work together effectively to do so we integrate extant theory and research to specify the bundle of mechanisms that operate to mitigate the agency problem among publicly traded corporations and review what previous research has said about how these mechanisms combine we then use the fuzzy set approach to qualitative comparitive analysis qca to explore the combinations of governance mechanisms that exist among the s p 1500 firms that achieve high and not high profitability our findings suggest that high profits result when ceo incentive alignment and monitoring mechanisms work together as complements rather than as substitutes furthermore they show that high profits are obtained when both internal and external monitoring mechanisms are present at the same time however monitoring mechanisms evidently combine in complex ways such that the

the asymmetric relationship between executive earnings management and compensation a panel threshold regression approach abstractprior research shows that chief executive officers ceos are rewarded for their earnings management we re examine this issue using a panel threshold regression approach which allows the effect of earnings management on the ceo compensation to change across the level of earnings management and ceo compensation our results show that the effect of ceos discretionary accounting choices on their compensation is not homogeneous across various degrees of earnings management and compensation in particular for firms with moderate inordinate levels of earnings management and ceo compensation earnings management is rewarded penalized

debt covenant violation and manipulation of accruals abstract this paper examines the abnormal accruals of a sample of 94 firms that reported debt covenant violations in annual reports we expect debt covenant restrictions to influence accounting choices in the year preceding and the year of violation time series and cross sectional models are used to estimate normal accruals in the year prior to violation both models indicate that abnormal total and working capital accruals are significantly positive in the year of violation there is evidence of positive abnormal working capital accruals after controlling for management changes and auditor going concern qualifications

empirical research on accounting choice abstract we review research from the 1990s that examines the determinants and consequences of accounting choice structuring our analysis around the three types of market imperfections that influence managers choices agency costs information asymmetries and externalities affecting non contracting parties we conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge we discuss opportunities for future research recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters

design of an economically efficient feed in tariff structure for renewable energy development abstract evidence suggests albeit tentatively that feed in tariffs fits are more effective than alternative support schemes in promoting renewable energy technologies rets fits provide long term financial stability for investors in rets which at the prevailing market price of electricity are not currently cost efficient enough to compete with traditional fossil fuel technologies on the other hand if not properly designed fits can be economically inefficient as is widely regarded to have been the case under the public utility regulatory policies act of 1978 purpa under purpa too high a guaranteed price led to the creation of so called purpa machines poorly performing generating units that could survive financially only because of heavy subsidies that came at the expense of retail customers similarly because of their adverse impacts on retail electricity rates german fits have been subject to increasing political pressure from utilities and customers in this paper we propose an innovative two part fit consisting of both a capacity payment and a market based energy payment which can be used to meet the renewables policy goals of regulators our two part tariff design draws on the strengths of traditional fits relies on market mechanisms is easy to implement and avoids the problems caused by distorting wholesale energy markets through above market energy payments the approach is modeled on forward capacity market designs that have been recently implemented by several regional transmission organizations in the usa to address needs for new generating capacity to ensure system reliability

envisaging feed in tariffs for solar photovoltaic electricity european lessons for canada abstract while it is widely agreed that support schemes need to be put in place to promote the use of renewable electricity there is less consensus as to what are the best kinds of strategies to use what is attracting increasing attention in canada is a system of renewable portfolio standards in this all power suppliers are under an obligation to ensure that a certain percentage of the electricity they generate is from renewable resources they can either generate that electricity themselves or purchase green certificates from those who have used renewables to generate electricity recent experience from europe however suggests that a whole hearted commitment to this single strategy could be premature and potentially damaging for the development of all kinds of renewable electricity in canada solar photovoltaics included on the other side of the atlantic ocean the use of so called feed in tariffs that is an obligation for utilities to purchase at a set price the electricity generated by any renewable energy resource is widely credited with accelerating the development of renewable electricity in many countries the purpose of this article is to reflect upon this european experience with feed in tariffs to stimulate discussions regarding what promise they might hold for the development of solar photovoltaic electricity in canada the article is divided into three main sections in the first section policies to promote renewable electricity presently in place in different parts of canada are reviewed attention is then focused more specifically in the second section of this article upon feed in tariffs after defining and describing this alternative system experiences in the countries of the european union are reviewed the main strengths and weaknesses of feed in tariffs in the european experience are also examined the focus then moves back to canada in the third section of the article in this a system of feed in tariffs is proposed for the province of ontario in order to provide just one example of the kind of support that could be forthcoming

curtailment of renewable generation economic optimality and incentives the loss from curtailing generation based on renewable energy sources is generally seen as an unacceptable solution by the public the main argument is that it is a loss of green energy and an economic loss to curtail generation with near zero marginal costs however this view could lead to overinvestment in grid infrastructure and underinvestment in renewable energy sources this article argues that some curtailment of fluctuating variable generation is optimal we address the possible contributions to total curtailment from involuntary and voluntary curtailment the costs of curtailment in terms of lost generation are discussed based on market price and support levels including the rationale for compensating generators for losses the extent of actual curtailment is illustrated by examples from different global markets in general both the value of the curtailed energy and the amount of curtailed energy relative to total fluctuating generation is low but rising single generators may be affected considerably if insufficient compensation measures are in place in the future optimal curtailment will increase along with an increased share of fluctuating renewable generation extending renewable generation comparatively cheaply can be achieved by the installation of additional capacity at offshore locations until optimal curtailment levels are reached

climate policies and induced technological change which to choose the carrot or the stick policies to reduce emissions of greenhousegases such as co2 will affect the rate andpattern of technological change in alternativeenergy supply and other production processes imperfections in markets for non pollutingtechnologies imply that a decentralised economydoes not deliver a socially optimal outcome and this could justify policy interventionssuch as subsidies this paper considers thewelfare effects of technology subsidies as partof a carbon abatement policy package we arguethat the presence of spillovers in alternativeenergy technologies does not necessarily implythat subsidy policies are welfare improving weillustrate this point in the context of ageneral equilibrium model with two forms ofcarbon free energy an existing alternative energy which is a substitute for carbon basedfuels and new vintage energy which providesa carbon free replacement for existing energyservices subsidisation of alternative energyon the grounds of spillover effects can bewelfare worsening if it crowds out new vintagetechnologies

low or no subsidy proposing a regional power grid based wind power feed in tariff benchmark price mechanism in china abstract the chinese government plans to adopt a low or no subsidy policy mechanism on renewable energy power development in the future to achieve a balance between reducing financial burden on the government and ensuring profitability of investors as well as to account for the regional differences in china a novel regional wind power grid feed in tariff benchmark price mechanism by net present value npv method and real option ro method is proposed in this paper the results voice support on the appropriateness of gradually decreasing the wind feed in tariff fit benchmark price to as low as the coal fired fit the proposed fit price level is presented as a price range on the basis of a guaranteed internal rate of return irr falls in between 8 to 15 for wind power investors the results indicate that the current fit price should be readjusted and redistributed although the fit price in central and south china grids is recommended to be relatively high the npv of wind farm project value in six regional grids are at the same level

managing interacting accounting measures to meet multiple objectives a study of lifo firms abstract using a sample of lifo users we examine the strengths and weaknesses of adopting a simultaneous equations approach to study managers adjustments of interacting accounting measures that meet multiple objectives we focus on the importance of considering differences in the costs and the effectiveness of adjusting accounting measures in addition we examine managers objectives in subsequent years and how adjustments reversals affect those objectives although generally consistent with earlier studies of lifo inventory adjustments our results indicate that modelling interacting accounting measures such as other current accruals and depreciation leads to differing conclusions about the role of taxes

annual bonus schemes and the manipulation of earnings abstract using confidential data of executive specific short term bonus plans we investigate the extent to which executives manipulate earnings to maximize the present value of bonus plan payments as such this paper extends the work of healy 1985 like healy we find evidence consistent with the hypothesis that managers manipulate earnings downwards when their bonuses are at their maximum unlike healy we find no evidence that managers manipulate earnings downwards when earnings are below the minimum necessary to receive any bonus we demonstrate that healy s results at the lower bound are likely to be induced by his methodology

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

a two part feed in tariff for intermittent electricity generation abstract as electricity generation from intermittent energy sources wind sun tides is gaining momentum it becomes increasingly important to price these electricity sources efficiently conventional flat feed in tariffs ignore the heterogeneity of these sources taking into account the degree of substitutability or complementarity of these sources with respect to each other and with respect to stochastic demand variations this paper derives optimal pricing instruments composed of a feed in tariff fit and a capacity augmentation tariff cat an empirical analysis looks at wind and solar farms operating in ontario in order to determine the optimal use of fit cat pricing the magnitude of optimal price differentiation turns out to be economically significant furthermore the emergence of grid scale electricity storage underscores the need to price energy and capacity separately

an explanation for accounting income smoothing it is widely believed that corporate managers often engage in income smoothing taking actions to dampen fluctuations in their firms publicly reported net income one reason given for this is that managers think that investors pay more for a firm with a smoother income stream see ronen and sadan 1981 while there have been many empirical studies attempting to document whether or not income smoothing actually occurs there has been little exploration of why a manager might rationally want to smooth his firm s income explaining why smoothing might be observed and how it can result in an increased stock price is the focus of this paper in two recent studies lambert 1984 and dye 1988 demonstrate in agency settings that a risk averse manager who is precluded from borrowing and lending in the capital markets has an incentive to smooth his firm s reported income in this paper in contrast it is shown that within a market setting an incentive exists for a manager to smooth income that is independent of either risk aversion or restricted access to capital markets the market setting is also useful in that it allows for the analysis of the effect of income smoothing on stock prices it is shown here that if a manager can choose which of two periods to recognize certain income he may prefer the choice that is expected to

asymmetric stationarity in national stock market indices an mtar analysis a procedure is developed using a momentum threshold autoregressive model and asymmetric stationarity tests designed to identify periods of asymmetric stationary divergences from nonstationary paths in time series and is applied to major national stock indices the results reveal the existence of asymmetric stationary periods in each of these indices these results suggest an explanation for the counterintuitive positive forecasting results of technical traders for various time periods we explore this possibility further by using a representative moving average technical trading strategy and find significantly different results higher returns when information from the procedure is incorporated into a trading rule

when and how should infant industries be protected abstract this paper develops and analyzes a welfare maximizing model of infant industry protection the domestic infant industry is competitive and experiences dynamic learning effects that are external to firms the competitive foreign industry is mature and produces a good that is an imperfect substitute for the domestic good a government planner can protect the infant industry using domestic production subsidies tariffs or quotas in order to maximize domestic welfare over time as protection is not always optimal although the domestic industry experiences a learning externality the paper shows how the decision to protect the industry should depend on the industry s learning potential the shape of the learning curve and the degree of substitutability between domestic and foreign goods assuming some reasonable restrictions on the flexibility over time of the policy instruments the paper subsequently compares the effectiveness of the different instruments given such restrictions the paper shows that quotas induce higher welfare levels than tariffs in some cases the dominance of the quota is so pronounced that it compensates for any amount of government revenue loss related to the administration of the quota including the case of a voluntary export restraint where no revenue is collected in similar cases the quota may even be preferred to a domestic production subsidy

how do nonprofit hospitals manage earnings abstract we hypothesize that unlike for profit firms nonprofit hospitals have incentives to manage earnings to a range just above zero we consider two ways managers can achieve this they can adjust discretionary spending hoerger t j 1991 profit variability in for profit and not for profit hospitals journal of health economics 10 259 289 and or they can adjust accounting accruals using the flexibility inherent in generally accepted accounting principles gaap to test our hypothesis we use regressions as well as tests of the distribution of earnings by burgstahler and dichev burgstahler d dichev i 1997 earnings management to avoid earnings decreases and losses journal of accounting and economics 24 99 126 on a sample of 1 204 hospitals and 8 179 hospital year observations our tests support the use of discretionary spending and accounting accrual management like hoerger 1991 we find evidence that nonprofit hospitals adjust discretionary spending to manage earnings however we also find significant use of discretionary accruals e g adjustments to the third party allowance and allowance for doubtful accounts to meet earnings objectives these findings have two important implications first the previous evidence by hoerger that nonprofit hospitals show less variation in income may at least partly be explained by an accounting phenomenon second our findings provide guidance to users of these financial statements in predicting the direction of likely bias in reported earnings

on interdependent supergames multimarket contact concavity and collusion abstract following bernheim and whinston 1990 this paper addresses the effects of multimarket contact on firms ability to collude real world imperfections tend to make firms objective function strictly concave and market supergames interdependent firms payoffs in each market depend on how they are doing in others then multimarket contact always facilitates collusion it may even make collusion sustainable in all markets when otherwise it would not be sustainable in any the effects of conglomeration are discussed multigame contact is shown to facilitate cooperation in supergames other than oligopolies as long as agents objective function is submodular in material payoffs journal of economic literature classification numbers c72 d43 l13 l21

implicit contracts and the explanatory power of top executive compensation for future performance recent research suggests that implicit incentive contracts may be based on performance measures that are observable only to the contracting parties we derive and test implications of this insight for the relationship between executive compensation and firm performance if corporate boards optimally use both observable and unobservable to outsiders measures of executive performance and the unobservable measures are correlated with future firm performance then unexplained variation in current compensation should predict future variation in firm performance further compensation should be more positively associated with future performance when observable measures are less useful for contracting our results are consistent with these hypotheses

cross border trade in electricity this paper develops a novel economic theory of two way trade in a homogenous good electricity in this model of reciprocal load smoothing international trade provides insurance as electricity demand is stochastic and correlated across jurisdictions electric utilities can reduce their cost during peak periods by importing cheaper off peak electricity from neighbouring jurisdictions two way trade emerges in the presence of strongly convex marginal costs observed trade between canadian provinces and us states strongly supports the theoretical model reciprocal load smoothing provides an economic rationale for integrating north america s fragmented interconnections into a continental supergrid if technological progress in long distance bulk transmission continues to reduce costs

how to deal with negative power price spikes flexible voluntary curtailment agreements for large scale integration of wind for the large scale integration of electricity from renewable energy sources res e the german system seems to reach its limits in 2009 the electricity wholesale market experienced serious negative prices at times of high wind and low demand the feed in system in germany consists of a fixed feed in price a take off obligation and a res priority rule and in practice only very restrictive use of res e curtailment exactly the latter is the problem we argue that the overall performance of the system would improve seriously by lifting the restrictions on the use of voluntary curtailment agreements while retaining the priority rule as such since generators of res e can only improve under this system reform investment conditions improve leading to higher installed res e capacity this in turn implies that reduced wind output due to curtailment can actually be offset by higher wind output in all periods in which there is no problem

managerial incentives and collusive behavior abstract i characterize the effects of empirically observed managerial incentives on long run oligopolistic competition when managers have a preference for smooth time paths of profits as revealed by the empirical literature on income smoothing manager led firms can sustain collusive agreements at lower discount factors capped bonus plans and incumbency rents with termination threats make collusion supportable at any discount factor independent of contracts duration when managers have these preferences incentives and demand fluctuates price wars during booms need not occur the most collusive price may then be pro cyclical

additional evidence on bonus plans and income management abstract we extend healy 1985 by examining the relation between discretionary accruals and bonus plan bounds for a sample of 102 firms for the 1980 1990 period contrary to healy we find that when earnings before discretionary accruals fall below the lower bound managers select income increasing discretionary accruals and vice versa we believe that our results are more consistent with the income smoothing hypothesis than with healy s bonus hypothesis however mechanical selection bias in portfolio formation cannot be entirely ruled out as an alternative explanation for our results

the effects of expected and unexpected inflation on the variability of relative prices abstract we estimate the effects of expected and unexpected inflation on relative price variability expected inflation is prominent in explaining price variability within a market whereas unexpected inflation becomes more important when that variability is between different markets

smoothing income in anticipation of future earnings abstract recent theory argues that concern about job security creates an incentive for managers to smooth earnings in consideration of both current and future relative performance we find support for this theory our evidence suggests that when current earnings are poor and expected future earnings are good managers borrow earnings from the future for use in the current period conversely when current earnings are good and expected future earnings are poor managers save current earnings for possible use in the future however sensitivity analysis indicates that we cannot rule out selection bias as a potential alternative explanation for our findings

do hedge funds manage their reported returns f or funds with high incentives and more opportunities to inflate returns we find that i returns during december are significantly higher than returns during the rest of the year even after controlling for risk in both the time series and the cross section and ii this december spike is greater than for funds with lower incentives and fewer opportunities to inflate returns these results suggest that hedge funds manage their returns upward in an opportunistic fashion in order to earn higher fees finally we find strong evidence that funds inflate december returns by underreporting returns earlier in the year but only weak evidence that funds borrow from january returns in the following year jel g10 g19 g23 g30

the politics of renewable energy policies the case of feed in tariffs in ontario canada designing and implementing a renewable energy policy involves political decisions and actors yet most research on renewable energy policies comparatively evaluates instruments from an economic or technical perspective this paper presents a case study of ontario s feed in tariff policies between 1997 and 2012 to analyze how the political process affects renewable energy policy design and implementation ontario s policy although initially successful has met with increasing resistance over time the case reveals key political tensions that arise during implementation first high level support for a policy does not necessarily translate into widespread public support particularly for local deployment second the government often struggles under asymmetric information during price setting which may weaken the policy s legitimacy with the public due to higher costs third there is an unacknowledged tension that governments must navigate between policy stability to spur investment and adaptive policymaking to improve policy design fourth when multiple jurisdictions pursue the same policies simultaneously international political conflict over jobs and innovation may occur these implementation tensions result from political choices during policy design and present underappreciated challenges to transforming the electricity system governments need to critically recognize the political dimension of renewable energy policies to secure sustained political support

the optimal shape of compensation contracts with earnings management the research question of why earnings management occurs is decomposed into two questions in this article which component of executive compensation generates incentives for earnings management and why is the compensation structured that way in the first place we first use as a dynamic stochastic equilibrium model to show that big bath and earning overstatement can co exist as equilibrium financial reporting strategies when thresholds are used in compensation contracts in order to understand the use of performance thresholds as a prevailing compensation strategy in practice we then derive the optimal compensation contract when the manager is privately informed about economic earnings and his expertise in managing earnings equilibria exist in which the inactive region below a threshold in compensation should be economically significant