bluuebunny/crossref_metadata_2025 huggingface dataset:
THE INTEGRATION OF EUROPEAN STOCK MARKETS: THE CASE OF THE BANKS
Authors: Forbes Wiliam P.
Published: December 2006

This paper presents an analysis of the degree of integration in the security market for European banks' stock using daily data for the period 30th November, 1987‐28th October, 1988. In particular we study eight banks located in four European states, Germany, the Netherlands, Switzerland and the United Kingdom. Some degree of integration might be expected to be present as a consequence of a common regulatory regime incorporated in the Second European Banking Directive and common capital adequacy requirements. We find strong evidence that a high degree of integration does exist, at least amongst EC states. This suggests that the benefits claimed for capital market deregulation, with its associated ‘convergence criteria’ requirements, may already be being enjoyed by EC states.
A NOTE ON THE OPTIMAL CUTOFF POINT IN BANKRUPTCY PREDICTION MODELS
Authors: Hsieh Su‐Jane
Published: December 2006

A modified Bayesian decision model is derived in the study to systematically estimate an optimal cutoff point for bankruptcy prediction models. In addition, a loss function is implemented in the model so that the total error costs instead of the total error probability is minimized. Any dichotomous classification problem with unequal error costs would find this decision model useful.
EARNINGS MANAGEMENT AND CORPORATE OWNERSHIP STRUCTURE: AN EXAMINATION OF EXTRAORDINARY ITEM REPORTING
Authors: Dempsey Stephen J. , Hunt Herbert G. , Schroeder Nicholas W.
Published: December 2006

This study examines the empirical relation between a three‐way classification of corporate ownership structure and earnings management through the use of extraordinary item (EI) reporting. The EI reporting decisions examined are those made during 1960‐1966, a time period when US reporting standards allowed considerable management discretion with respect to both the classification of EIs and their placement in the financial statements (i.e., income. versus retained earnings statement). Overall, the results provide strong support for income‐increasing behavior by non‐owner managers. Importantly, the results also suggest that the three‐way ownership classification scheme used in this study is superior to the dichotomous owner‐controlled/managercontrolled classification typically used in accounting studies.
A REGRET‐THEORETIC EXPLANATION OF CORPORATE DIVIDEND POLICY
Authors: Ghosh Chinmoy
Published: December 2006

This paper uses Regret Theory to explain some survey results on managers' dividend policy decisions under uncertainty. Regret Theory suggests that when an individual chooses an action from a number of uncertain alternatives, his decision is influenced by the potential post‐decision regret (pride) he feels on his inabilty (ability) to select the option with the best outcome. Based on this premise, we argue that (1) the decision to pay dividends and simultaneously raise venture capital from external sources is attributable to managerial aversion for regret at the failure of a risky investment opportunity implemented with internal funds generated by a conservative dividend policy; and (2) the decision to support dividends with borrowed funds when earnings are declining is motivated by the prospect that an improvement in the firm's financial condition will make the managers proud that their judgment has helped avert a potential crisis for the firm without any wealth loss to its shareholders.
A NOTE ON TAXATION AND THE LEASING DISCOUNT RATES
Authors: Pointon John
Published: December 2006

It is demonstrated that the discount rate for taxes in the traditional formula for the after‐tax cost of debt is misspecified for the UK situation. Several new formulae are derived for the after‐tax costs for specific periods, including the accounting period and the tax lag. Iterative solution methods are not required.
DETERMINANTS OF GOODWILL AMORTIZATION PERIOD
Authors: Hall Steven C.
Published: December 2006

This study investigates whether economic consequences have an effect on the length of the period over which goodwill is amortized. It finds that there is a significant relationship between the size of the firm and the length of the amortization period. It also finds, when the only firms included in the sample are those reporting debt covenant restrictions dependent in part on goodwill accounting, evidence that the length of the amortization period for goodwill is related to the firm's leverage.
EQUITY CAPITAL, PROFIT SHARING CONTRACTS, AND INVESTMENT: THEORY AND EVIDENCE
Authors: Bashir A. , Darrat A.F. , Suliman M.O.
Published: December 2006

The potential effect of financial variables on the level of investment is among the key issues in contemporary financial economics. Some researchers have claimed that there is an inherent risk in the Islamic profit‐and‐loss sharing scheme that replaces the western fixed‐interest rate system. This paper argues that such concerns are baseless. In an Islamic framework, equity capital (i.e., strong financial position) and the profit‐sharing ratio are primary determinants of investment. It is shown that both factors could enhance the firm's business reputation and its investment activities. The paper, in so doing, constructs a two‐period equilibrium model of profit‐sharing contracts. An optimal solution for the investment function is derived for the banking firm. Besides equity capital and the profit‐sharing ratio, other relevant determinants of investment are also considered, including depreciation and expected inflation. Moreover, unlike most previous research in this area, the resultant investment (and profitsharing ratio) functions are subjected to empirical testing using data from a representative Islamic bank.
THE ASSOCIATION BETWEEN EXECUTIVE SUCCESSION AND DISCRETIONARY ACCOUNTING CHANGES: EARNINGS MANAGEMENT OR DIFFERENT PERSPECTIVES?
Authors: Lasalle Randall E. , Jones Scott K. , Jain Rohit
Published: December 2006

This paper investigates the association of executive changes with both income increasing and decreasing accounting changes. Two potential explanations for the hypothesis that firms with changes in CEOs are more likely to make accounting changes are examined. The earnings management explanation holds that new management intervenes in the financial reporting process in order to alter perceptions of effectiveness. The different perspectives explanation holds that managements have different tastes, perspectives, or views of the world than the predecessor. Evidence supports the different perspectives explanation.
HEDGED DIVIDEND CAPTURE AND EX‐DAY RETURNS: AN EMPIRICAL UPDATE
Authors: Dubofsky David A. , Kannan Srinivasan
Published: December 2006

We find that the magnitude of abnormal ex‐day returns exhibited by US equities diminished in 1987 and 1988, subsequent to the US Tax Reform Act of 1986. We also report the results of a dividend capture strategy, hedged with the sale of stock index futures contracts. Hedging removes more than 50 percent of the risk of dividend capture, and even after transactions costs, can provide returns in excess of buying and holding the market portfolio of equities.
THE CONCEPT OF COMPUTATION OF EARNED ECONOMIC INCOME: A COMMENT
Authors: Skinner R.C.
Published: December 2006

Four criticisms are made of Grinyer's concept of earned economic income. It is argued that (a) the relationship between his approach and other discounted cash flow methods has been insufficiently explained; (b) he has overlooked some relevant prior work; (c) he places more weight on the matching principle than it can bear; and (d) his procedure is likely to suffer from the same defects as conventional accounting methods. Since even sophisticated matching approaches to the depreciation and valuation of fixed assets appear to fail, the use of market‐value based methods is advocated.
AMERICAN EXCHANGE OPTIONS AND A PUT‐CALL TRANSFORMATION: A NOTE
Authors: Bjerksund Petter , Stensland Gunnar
Published: December 2006

This note presents the following two results. First, the finite‐lived American option to exchange one asset for another is transformed into a finite‐lived American call, for which a large set of excellent PC‐based programmes is available. And second, the finite‐lived American put is transformed into acorresponding call. Thus, it is unnecessary to develop and implement a separate numerical method for the American put.
AUDITOR CHANGE ANNOUNCEMENTS AND DISPERSION OF INVESTOR EXPECTATIONS
Authors: Hagigi Moshe , Kluger Brian D. , Shields David
Published: December 2006

The effect of auditor change announcements on the dispersion of investor expectations is investigated by using two approaches. First, the consensus effect (Holthausen and Verrecchia, 1990) is measured by examining unanticipated trading volume change. We show that auditor change announcements provide information to the market, and that the consensus effect dominates the informedness effect. Second, the reduction in information asymmetry (Glosten and Milgrom, 1985) due to auditor change announcements is demonstrated by a reduction in proportional bid‐ask spread, which is not driven by increased trading volume. Thus, auditor change announcements reduce dispersion of investor beliefs in that they are both information asymmetry‐reducing and consensus‐increasing. Finally, we show that the type of auditor change (Big‐Eight to Non‐Big‐Eight, Non‐Big‐Eight to Big‐Eight, or Within‐Class) has no impact on the dispersion‐reducing effect of auditor change announcements.
THE EFFECT OF SFAS 87 ON CORPORATE FUNDING OF DEFINED BENEFIT PENSION PLANS
Authors: Harper Robert M. , Strawser Jerry R.
Published: December 2006

Statement of Financia1 Accounting Standards No. 87 (SFAS 87) modifies the method of accounting for pensions by requiring companies sponsoring defined benefit pension plans to (1) recognize a balance sheet liability for unfunded pension benefits and (2) disclose their obligation for pension benefits based on expected future compensation levels (the projected benefit obligation). These requirements may affect users' perceptions of a company's financial position, especially if these plans are underfunded. This research examines whether the requirements of SFAS 87 result in increased funding of corporate pension plans to counteract possible adverse perceptions of users about these plans. The results indicate that early adopters (companies adopting SFAS 87 in 1985 and 1986) increased the funding of their defined benefit pension plans in response to SFAS 87; however, later adopters did not do so. These findings provide evidence that companies may alter economic policies when faced with significant changes in financial disclosure requirements. Further analysis suggests that the effect of SFAS 87 on the pension expense recognized by the sample companies provided impetus for early adoption of this pronouncement.
RISK MANAGEMENT TECHNIQUES EMPLOYED WITHIN THE U.S. CREDIT UNION INDUSTRY
Authors: Reichert Alan K. , Rubens Jack H.
Published: December 2006

This paper reports the findings of a national survey regarding the financial management practices of United States credit unions. The US credit union industry is clearly in a period of transition. The study indicates that the way in which credit unions approach financial management may have a decided impact on how successful the industry adjusts to deregulated marketplaces. The research highlights the importance of managed growth through selective product diversification, identification of profitable market niches, and the use of modern risk management techniques.
REGIME CHANGES IN STOCK RETURNS
Authors: Chou Nan‐Ting , DeGennaro Ramon P.
Published: December 2006

This paper studies three sources of instability in parameter estimates of stock return models (1) time‐varying expected mean returns, (2) time‐varying return volatility and (3) changing institutional factors. We model United States stock returns as a function of a constant expected return and financing costs resulting from an institutional feature, delayed delivery. We examine two eight‐year periods and find that both contain a regime shift driven by an abrupt change in volatility. The first occurs during an international monetary crisis amid important Watergate developments. The second is on the first trading day after the reappointment of Paul Volcker as the chairman of the United States Federal Reserve Board.
MARKET EFFICIENCY IN DEVELOPING COUNTRIES: A CASE STUDY OF THE NAIROBI STOCK EXCHANGE
Authors: Dickinson John P. , Muragu Kinandu
Published: December 2006

This study extends evidence on the efficiency of stock markets in developing countries using data from the Nairobi Stock Exchange (NSE), and also addresses some methodological issues which have contributed to the sparseness of similar studies. Evidence is provided that small markets such as the NSE may provide empirical results consistent with weak‐form efficiency. This evidence holds for the NSE irrespective of whether bid‐, ask‐, or market‐price series are used in conducting the study.
INFORMATION CONTENT OF FINANCIAL LEVERAGE: A COMMENT
Authors: Park Manyong
Published: December 2006

Kim, Chen and Nance in a previous article in this journal (January 1992) classified sample firms into two groups based on the relationship between change in stock prices and financial leverage to test the existence of optimal financial leverage. The inherent weakness of this methodology is that interpretation of test results on the existence of optimal financial leverage can be misleading in the case of serious confounding events.
DURATION MOMENTS AND YIELD CURVE MOVEMENTS
Authors: Kornbluth J.S.H. , Salkin G.R.
Published: December 2006

In this paper we will analyze the relationship between the value and duration moments of a cash flow and movements in the yield curve. We will show that for changes in the yield curve which can be related to tn, the 1st order changes in the net present value of a cash flow are linearly dependent on the n+ lth duration moments, and that the 2nd order changes are dependent on the sum of duration moments of order 2n+ 1 and 2n+ 2. We will use this relationship to tilt tracking portfolios so as to protect them against specific changes in the yield curve.
TRADITIONAL VERSUS OPERATING CASH FLOW IN FAILURE PREDICTION
Authors: Laitinen Erkki K.
Published: December 2006

Prior empirical evidence shows that accrual and cash based flow ratios (traditional and operating cash flows) refer to different financial dimensions. This leads to different predictive abilities in failure prediction. The purpose of this study is to analyse the behaviour of failing and nonfailing firms in terms of accruals and deferrals (adjustment entries) to show the distinctive nature of the ratios. This analysis is made conceptually and empirically. The degree and order of the use of adjustment entries is presupposed to depend on four kinds of factors (revenue of expenditure adjustment, direction of adjustment, cost of adjustment, and maximum size of adjustment). The empirical results show that traditional cash flow is a more stable and reliable predictor of failure than operating cash flow. The most important adjustment entries used by failing firms were to decrease inventories and accounts receivable and, in the last phase, to increase accounts payable.
SOME ANALYTICS OF WHY CONDITIONAL IRRs CAN CONTAIN GROWTH RATE RELATED MEASUREMENT ERROR
Authors: Stark Andrew W.
Published: December 2006

This paper investigates the consequences of incorrectly modelling the investment outflow/benefit inflow relationship on estimates of the internal rate of return (IRR) prepared by using cash recovery rates (CRRs). The main result of this paper is that CRR‐based estimates of the IRR will contain such bias if and only if either the duration of the assumed shape of the investment outflow/benefit inflow relationship is less than the duration of the true investment outflow/benefit inflow relationship for all rates of interest or the duration of the assumed shape of the investment outflowlbenefit inflow relationship is greater than the duration of the true investment outflowlbenefit inflow relationship for all rates of interest. This result is then applied to the case where both the true and the assumed shape of the investment outflow/benefit inflow relationships have benefit inflows that change exponentially over time. It is shown that if the exponential rate of change is mis‐specified the resulting CRR‐based estimate of the IRR will contain systematic bias monotonically related to the rate of growth.
ON VARIANCE AND LOWER PARTIAL MOMENT BETAS THE EQUIVALENCE OF SYSTEMATIC RISK MEASURES
Authors: Chow K. Victor , Denning Karen C.
Published: December 2006

The market equilibrium mean‐lower partial moment (LPM) model may serve as an alternative to the traditional mean‐variance (MV) CAPM for security analysis. It appears that the merits of the MV‐CAPM vis‐à‐vis the mean‐LPM model continue to be debated (see Nantell and Price, 1979; Price, Price and Nantell, 1982; and Homaifer and Gaddy, 1990). This paper demonstrates that from a theoretical perspective the two models are equivalent for general riskaverse investors. This modeling consistency is based on the fact that all return distributions which yield the mean‐LPM equilibrium model must permit two‐fund portfolio separation, and the well‐known MV‐CAPM is the direct pricing result of the two‐fund portfolio separation. Hence any debate about the bias of systematic risk measures between the mean‐LPM model and the MV‐CAPM is meaningless. Nevertheless, although the economic equilibrium results of the models are identical, this does not indicate that the LPM portfolio theory is redundant or irrelevant. It may be that some behavioral perspective, sensitivity to downside risk is more appropriate than variance as a risk proxy.
A MODIFIED METHOD FOR INFERRING THE EFFECTIVE BID‐ASK SPREAD FROM SECURITY RETURNS
Authors: Hsia Chi‐Cheng , Fuller Beverly R. , Kao G. Wenchi
Published: December 2006

This paper presents a modified method for inferring the effective bid‐ask spread from security returns in an eMicient market. The Modified Method removes from security returns the systematic effect of market movements and makes use of the equivalence properties of the moving average process and serial covariance function. The Modified Method is tested with the CRSP daily, weekly, and monthly returns data. The results show that the spread estimates are non‐negative and sample time‐interval independent. The results are compared with those of Roll (1984) and Amihud and Mendelson (1986).
THE EXPECTATIONS HYPOTHESIS OF THE TERM STRUCTURE IN EUROCURRENCY MARKETS
Authors: Mougoué Mbodja , Szakmary Andrew C.
Published: December 2006

This paper uses daily eurocurrency deposit rates for six currencies to extend previous research on the expectations hypothesis of the term structure. The reported results confirm earlier findings that the behavior of long term interest rates is perverse. For example, it is shown that in the case of five‐year eurocurrency deposits denominated in US dollars, German marks and Swiss francs, the coefficient relating the excess holding period return to the yield spread between long and short term securities exceeds one, implying that long term rates tend to move in a direction opposite to the prediction of the expectations hypothesis. This study also employs a variety of techniques to examine the temporal stability of the coefficient in both the long and short maturity regressions used in testing the expectations hypothesis. While we do find instability, the nature of the parameter variation is markedly different from that found in foreign exchange markets when similar tests are employed.
MACROECONOMIC FACTORS, THE APT AND THE UK STOCKMARKET
Authors: Clare Andrew D. , Thomas Stephen H.
Published: December 2006

This paper examines the macroeconomic sources of risk priced in the UK stockmarket between 1983 and 1990 using monthly data on 840 stocks to form both beta‐sorted and market value sorted portfolios using the methodology proposed by Chen, Roll and Ross (1986) and Chan, Chen and Hsieh (1985) for the US. We find that several intuitively plausible macroeconomic variables were priced over this period using the beta sorted portfolios and that once these variables are included there is little role for the return on the market. However, when the market value sorted portfolios were used only inflation and a measure of equity market ‘expense’ relative to gilts was priced; furthermore with the market value sorted portfolios a role for the market return was found.
ON THE FUNCTIONAL FORM OF EARNINGS AND STOCK PRICES: INTERNATIONAL EVIDENCE AND IMPLICATIONS FOR THE E/P ANOMALY
Authors: Booth G. Geoffrey , Martikainen Teppo , Perttunen Jukka , Yli‐Olli Paavo
Published: December 2006

This paper examines the functional form of earnings and stock prices on US and Finnish stock markets. Although the functional specification of the components of financial ratios based on purely accounting numbers has received considerable attention, the functional form of earnings and stock prices has not been investigated carefully enough. This investigation is, however, important because of the common use of E/P ratio in financial statement analysis. The empirical evidence provided by this study indicates that the proportional relationship between earnings and stock prices is rejected in both countries. In addition, it is discovered that this deviation from proportionality is a major factor producing the so‐called E/P anomaly in these two countries.
SEASONED EQUITY OFFERINGS: THE CASE OF ALL‐EQUITY FIRMS
Authors: Sant Rajiv , Ferris Stephen P.
Published: December 2006

Three theories have been widely proposed to explain the significant negative market response to the announcement of a new equity issue. By observing a similar negative effect in a sample of zero and near zero long‐term debt firms, we are able to conclude that the capital structure hypothesis is not the sole explanation. Regressions of announcement period abnormal returns against subsequent cashflow change while controlling for price pressure effects provide evidence in support of the information hypothesis. Decomposition of the sample by issue purpose reveals a differential impact at the time of announcement consistent with an information‐based explanation.
A NOTE ON FIRM SIZE, INFORMATION AVAILABILITY AND MARKET REACTIONS TO US STOCK OWNERSHIP REPORTING ANNOUNCEMENTS
Authors: Reburn James Patrick
Published: December 2006

This note examines cross‐sectional differences in market reaction to five percent stock ownership reporting announcements. The results presented here document an inverse relationship between firm size and market reaction. Specifically, the announcement day market reaction is 310 percent larger for a portfolio of small firms compared to a portfolio of large firms.
PRODUCTION LOANS
Authors: Schnabel Jacques A.
Published: December 2006

In this paper, agency problems between stockholders and debtholders are considered in a simple model of the firm's optimal production decision. It is shown that in the presence of debt financing other than a production loan, the firm is motivated to underproduce, an agency problem analogous to Myers' classic underinvestment problem. If a production loan is employed in lieu of these other forms of debt, the underproduction problem is rectified.
THE REGULATION EFFECT OF CREDIT RATINGS ON BOND INTEREST YIELD: THE CASE OF JUNK BONDS
Authors: Brister Bill M. , Kennedy Robert E. , Liu Pu
Published: December 2006

This paper examines the ‘regulation effect’ of bond ratings of yield. It is shown that the high yield premia on ‘speculative bonds’ not only reflect the high probability of default, but also contain an effect of regulation. A multiple discriminant analysis (MDA) technique is used to separate the default component of yield premium from the regulation effect. The results in the study suggest that non‐regulated investors, by taking advantage of the regulation effect, may earn an extra premium on a diversified portfolio of ‘speculative bonds’, at least for the period under this study (from January 1982‐June 1987).
AN EMPIRICAL STUDY OF THE INCREMENTAL PREDICTIVE ABILITY OF BEAVER'S NAIVE OPERATING FLOW MEASURE USING FOUR‐STATE ORDINAL MODELS OF FINANCIAL DISTRESS
Authors: Ward Terry J.
Published: December 2006

The purpose of this paper is to determine why net income adjusted for depreciation and amortization (NOF) is a strong predictor of financial distress. This paper develops four‐state ordinal financial distress models lagged one, two, and three years before financial distress to test NOF, instead of using dichotomous bankrupt and nonbankrupt models. The results of this paper suggest that NOF is a strong predictor of financial distress because NOF is an alternative measure of economic income, not because NOF is a naive measure of operating cash flow. For this study, NOF is even a better measure of economic income than net income.
UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS
Authors: Davidson Wallace N. , Cheng Louis T.W.
Published: December 2006

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.
CONDITIONAL HETEROSKEDASTICITY AND THE WEEKEND EFFECT IN S&P 500 INDEX FUTURES
Authors: Najand Mohammad , Yung Kenneth
Published: December 2006

Conflicting results have been reported regarding the existence of a weekend effect in S&P 500 index futures. Given the numerous evidence in recent research that asset returns are affected by conditional heteroskedasticity and have fat‐tailed distributions, this paper re‐examines the existence of a weekend effect in S&P 500 index futures by using a GARCH model. The results generated by the new methodology support the conclusion of Cornell (1985) that there is no weekend effect in S&P 500 index futures.
EXTRAORDINARY ITEMS AND INCOME SMOOTHING: A POSITIVE ACCOUNTING APPROACH
Authors: Beattie Vivien , Brown Stephen , Ewers David , John Brian , Manson Stuart , Thomas Dylan , Turner Michael
Published: December 2006

This is an empirical study of single‐period income smoothing which uses an incentives‐based model to explain classificatory choices. An index is constructed to measure the smoothing effect of these choices. Weighted least squares regression results indicate that classificatory choices consistent with smoothing are more likely to be observed in firms with high earnings variability, high dividend payout, substantial managerial holdings of share options and diffuse share ownership. The existence of material scope for smoothing strengthens these findings. The model as a whole is statistically significant and, although the proportion of variability in smoothing explained is modest, it compares very favourably with other accounting choice studies. The relationship between smoothing and alternative earnings management strategies, including big bath accounting, is explored.
INVESTMENT TRUST DISCOUNTS AND ABNORMAL RETURNS: UK EVIDENCE
Authors: Cheng A. , Copeland L. , O'Hanlon J.
Published: December 2006

Attempts to explain the apparent anomaly of the discount to Net Asset Value of investment trust (or closed‐end fund) shares have had little success. The present study of UK monthly data finds that investment trust shares selected on the basis of high (low) discounts tend to experience high (low) abnormal returns in the year following selection, which implies mean reversion in the discounts and hence market inefficiency. Furthermore, evidence is presented that the Net Asset Value and the price of investment trust shares are cointegrated, which implies the existence of profitable trading rules based on the identification of Error Correction Mechanisms.
THE DAY‐OF‐THE‐WEEK ANOMALY: THE TORONTO STOCK EXCHANGE EXPERIENCE
Authors: Athanassakos George , Robinson Michael J.
Published: December 2006

This paper studies the day‐of‐the‐week effect employing Canadian stock returns from January 1, 1975 to June 30, 1989. The study finds that, as opposed to large capitalization stocks, low capitalization (thinly‐traded) stocks tend to have a larger negative return on Tuesday rather than on Monday ‐ possibly due to lags in the price adjustment of these stocks following the release of negative information. Two main issues are investigated in an attempt to explain the day‐of‐the‐week effect and its persistence over time: (a) the role of dividends, and (b) the role of information flows. The study finds that firms are much more likely to go ex‐dividend on Monday than on any other day of the week; however, after correcting for the dividend effect, Monday's returns are still significantly negative. With respect to information flows, we find evidence consistent with an information‐flows‐related explanation of the day‐of‐the‐week effect, particularly with the idea that macro announcements cause negative Monday returns.
THE ADOPTION OF PARTIAL DEFERRAL IN THE UK, 1977–78: EVIDENCE ON AN ACCOUNTING CHOICE
Authors: Arnold A. J.
Published: December 2006

This study uses logit analysis to test the relationship between the UK deferred tax accounting decision in 1977–78, when SSAP 11 had been withdrawn and not yet replaced by SSAP 15, and a number of variables or corporate charac‐teristics drawn from the largely American accounting policy choice and the more specific UK deferred tax literatures. The findings, of a significant association between several of these variables and the UK deferred tax accounting decision of 1977–78, suggest that further tests of the determinants of accounting policy choice in the UK should include variables that reflect direct, indirect and neutral managerial interests.
INTERIM EARNINGS MANAGEMENT AND THE FOURTH QUARTER GOOD NEWS EFFECT
Authors: Dempsey Stephen J.
Published: December 2006

This paper presents evidence of a larger return reaction (variance) to fourth quarter announcements that induce contemporaneously positive returns. The results are consistent with: (i) audited annual announcements being marginally more informative for reports that corroborate previously unaudited interim good news claims, and (ii) the level of marginal informativeness being a decreasing function of interim auditor involvement (proxied by firm size). The good news effect is robust over time, and sensitivity analyses fail to support competing explanations for the effect attributable to report timing differences or comparatively noisy fourth quarter bad news reports.
FINANCIAL REPORTING BY FOUR UK CLEARING BANKS: A CASH FLOW EXIT PRICE (CaFE) APPROACH
Authors: Wearing R.T.
Published: December 2006

This paper examines the published accounts of the four main UK clearing banks during the 1980s and investigates some of the economic factors with which the banks had to contend. A particular focus concerns less developed country (LDC) debt, provisions against losses on the clearing banks’ LDC debt portfolios and factors which might influence the timing of provisions. We find a significant and positive association between share returns and future changes in cash flow plus adjustment for exit price changes, and suggest that this measure may be more closely associated with market expectations than changes in reported profit.
INFORMATION CONTENT OF QUALIFIED AUDIT OPINIONS FOR OVER‐THE‐COUNTER FIRMS
Authors: Ameen Elsie C. , Chan Kam , Guffey Daryl M.
Published: December 2006

This study investigates the information content of the initial public announce‐ment of an audit qualification for a sample of American firms traded over‐the‐counter. These firms have smaller predisclosure information sets than New York Stock Exchange (NYSE) and American Stock Exchange (ASE) firms. The results of research focusing on NYSE and ASE firms cannot, therefore, be extended to the over‐the‐counter (OTC) market. When the qualification is not confined to a ‘bad news’ scenario, a significant market reaction to the announcement is found, indicating that audit qualification announcements for OTC firms do, indeed, have information content.
FINANCIAL RATIO ADJUSTMENT DYNAMICS AND INTEREST RATE EXPECTATIONS
Authors: Chen Carl R. , Ainina Fall
Published: December 2006

This paper re‐examines the financial ratio adjustment model by (1) respecifying the model such that the speed of adjustment coefficient follows a dynamic adjustment process in response to some kind of economic shocks, and (2) proposing a joint estimation of firms within the same industry to capture unobservable industry effects. Examining six financial ratios within seven industries that contain 85 firms, our results reveal that a joint estimation method substantially improves the traditional model based upon an OLS method and that economic shocks, measured by changes in interest rate expectations, affect the speed of adjustment coefficients for over one‐third of the sampling firms.
EARNINGS SIGNALS AND INTER‐FIRM INFORMATION TRANSFERS
Authors: Bannister James W.
Published: December 2006

Three potential determinants of inter‐firm information transfer at earnings announcement dates are examined. They are: (1) the correlation of the announcing and nonannouncing firms’ information signals, (2) the information contained in the announcing firm's signal, and (3) the pre‐announcement level of uncertainty for the nonannouncing firm. These determinants expand the scope of information transfer studies by (1) moving beyond standard industry definitions and (2) including a measure of the uncertainty related to the market's expectation for the forthcoming signal of the nonannouncer. The results suggest that these three determinants are jointly associated with the return movement of the nonannouncing firms.
THE POWER OF TESTS OF FUND MANAGER PERFORMANCE
Authors: Ashton D.J.
Published: December 2006

Recent work in this and other journals has re‐examined the econometric pro‐cedures which are used to investigate the performance of fund managers. This has resulted in considerable refinement of the methodology used to assess whether fund managers can time the relative proportions of equity and fixed interest securities in their portfolios. In this paper the power of these refine‐ments is examined. It is shown that at the level of forecasting ability observed in market professionals, a statistically significant superior performance is unlikely to be found in ex‐post investigations of the performance of individual fund managers. It is argued though that this observed level of forecasting ability is still sufficient to produce a significant improvement in the returns on managed funds.
STOCK INDEX FUTURES HEDGING: HEDGE RATIO ESTIMATION, DURATION EFFECTS, EXPIRATION EFFECTS AND HEDGE RATIO STABILITY
Authors: Holmes Phil
Published: December 2006

This paper examines hedging effectiveness for the FTSE‐100 Stock Index futures contract from 1984 to 1992. It investigates the appropriate econometric technique to use in estimating minimum variance hedge ratios by undertaking estimations using OLS, an ECM and GARCH. Simple OLS outperforms more complex econometric techniques. Additionally, the paper examines the impact ofhedge duration and time to expiration on estimated hedge ratios and hedge ratio stability over time. It is shown that hedge ratios and hedging effectiveness increase with hedge duration, hedge ratios approach unity as expiration approaches and while hedge ratios vary over time they are stationary.
BOOK REVIEWS
Authors: Newson John
Published: December 2006

Influences on Parent Behaviour. Lois Meek Stolz

Concilium Paedopsychiatricum. Proceedings of the 3rd European Congress of Pedopsychiatry. H. Stutte and H. Harbauer (Eds.).

Human Motivation. M. D. Vernon.

Psychiatry for Social Workers. 1st Edn. A. Munro and W. McCollogh.

Clinical Psychiatry. 3rd Edn. Eliot Slater and Martin Roth.

The Basic Fault. Michael Balint.

Pupil and Teacher—an Introduction to Educational Psychology. James Maxwell.

Children's Games in Street and Playgroup. Iona and Peter Opie.

Child Welfare: Services and Perspectives. 2nd Edn. Dorothy Zeitz.

A Time to Heal. Corrective Socialization: A Treatment Approach to Childhood Schizophrenia. William Goldfarb, Irving Mintz and Katharine W. Stroock.

Speech Delay: Its Treatment by Speech Play. Michael Craft.

Persönlichkeitsstörungen im Kindesalter. P. G. Kiss and Lucy P. Liebermann.

Society Without the Father. A. Mitscherlich (Translated by E. Mosbacher).

The Role of Learning in Psychotherapy. Ed. Ruth Porter
THE DEVELOPMENT OF AESTHETIC SENSITIVITY IN CHILDREN
Authors: Eysenck H.J.
Published: December 2006

Five hundred and twenty‐seven male and 544 female children, aged 7–15, and 400 male and 400 female art and non‐art students were administered a shortened version of the Maitland Graves Design Judgement test. Of the 40 items used, a scale of 22 items was selected on the basis of factor analysis, and a comparison of the scores of the art and non‐art groups; this scale had high internal reliability, both for the students and the children. The scores of the children on this scale increased with increasing age, but the increase was small, although statistically very significant, and irregular; non‐art students scored higher than the children, and art students higher than non‐art students. Personality questionnaire scores were found to correlate with aesthetic sensitivity in the children. No correlations were found between sensitivity and amount of formal art teaching received at school. This, together with the relatively high scores achieved by quite young children of 7 and 8, suggests that sensitivity is not due to formal training in visual arts.
ABSOLUTE AND RELATIVE CODES IN YOUNG CHILDREN
Authors: Lawrenson Wendy , Bryant P. E.
Published: December 2006

This paper considers whether pre‐school children can perceive and remember quantity relations, and compares the relative ease of relational and absolute codes for these children. The methods used in former experiments which seem to suggest that young children cannot code relations such as “larger” and “smaller” are criticized. An experiment with 120 4‐yr‐old children is described which avoids the weaknesses of these earlier experiments. The results of this experiment, which directly compares relative and absolute tasks, strongly suggest, (i) that pre‐school children code quantity relations very well, and (ii) that, contrary to previous suggestions, these children find it easier to code relations than to code absolute values.
A NOTE ON THE EFFECTS OF GROUP AND INDIVIDUAL CONTINGENCIES UPON DEVIANT CLASSROOM BEHAVIOR
Authors: Greenberg David J. , O'Donnell William J.
Published: December 2006

A 6‐yr‐old male's disruptive classroom behavior was modified by a combined use of individual and group contingencies. When a tantrum occurred the child was put into an adjoining cloakroom. The deviant child, as well as the entire class, was rewarded with candy for periods of non‐tantrum behavior. Although only tantrum behavior was focused upon, by the time the tantrums had decreased substantially, other deviant classroom behaviors had also decreased significantly and the deviant child's peer relationships and school work had improved.
PSYCHIATRIC PATIENTS SEEN AS CHILDREN AND ADULTS: CHILDHOOD PREDICTORS OF ADULT ILLNESS
Authors: Mellsop Graham W.
Published: December 2006

Of the 3370 children referred to the Department of Psychiatry, Royal Children's Hospital, Melbourne, during the decade 1 January 1945 to 31 December 1954 and who were born prior to 1946, 12 per cent were, as adults, patients of the Victorian Mental Health Department between June 1961 and June 1969. This represents a fourfold increase in expected rate. Wheel the mentally subnormal were excluded from consideration the rate was 3 times greater than expected. Of the non subnormal diagnostic, groups, male personality disorders had the worst prognosis. Comparing the children on such variables as reason for referral, behaviour complained of, age at onset of symptoms, age at presentation, duration of symptoms, social class and amount of treatment, little of predictive value emerged.
SEVERE DEPRIVATION IN TWINS: A CASE STUDY
Authors: Koluchová Jarmila
Published: December 2006

The author reports an unusual case of deprivation. Monozygotic twin boys were reared from age 18 months to 7 yr in social isolation by a psychopathic stepmother and an inadequate father. On discovery, their mental age level was 3 yr, hilt after treatment, a period in a children's home and approximately 2 yr in a good foster‐home, they had made remarkable progress and now appear about average for their age. Forensic aspects of the case are discussed, as arc features of the foster‐home placement, and the significance of twins hip in the recovery. Residual effects of deprivation will be studied by an extended follow‐up.

Because of the criminal behaviour of the stepmother the children were exposed to living conditions which resembled those of an experimental situation. From the human standpoint, of course, it was an extremely cruel and unrepeatable experiment. From the scientific point of view, however, it was also a very valuable our. It will be important, therefore, to follow up the ease over a long period, in the hope of contributing to a solution of some of the problems associated with mental deprivation.
DIVERGENT THINKING IN BOYS AND GIRLS*
Authors: Bhavnani Reena , Hutt Corinne
Published: December 2006

Despite many findings of consistent sex differences in verbal and non‐verbal skills, there has been no systematic investigation of the performance of girls and boys on tests of creativity. This is particularly puzzling in view of the unequivocal superiority of the female in terms of verbal fluency. A study of the responses of 60 boys and 60 girls between 71/2 and 91/2 yr of age on the Wallach‐Kogan tests revealed that the girls scored higher than the boys on the Fluency measure but not on the Originality measure. The results are interpreted in terms of the differential development of verbal and non‐verbal skills in the two sexes and the “divergent cognitive style”–the latter apparently being more a characteristic of the male than of tin‐female.
SOCIAL CLASS, INTELLIGENCE AND THE DEVELOPMENT OF CHILDREN'S PLAY INTERESTS
Authors: Kniveton Bromley H. , Pike Celia L. R.
Published: December 2006

An experiment is described which investigates the effect of social class and intelligence on the play behaviour of 51/2‐year‐old boys during a 75 min period. Interest in their play was assessed using a variety of measures: (1) flitting; (2) number of toys played with; (3) level of constructiveness of play; and (4) verbal interaction with experimenter. The results showed: (1) there was no significant difference in amount of Hitting between social class groups; (2) middle‐class children played with more toys than working‐class children; (3) social class, intelligence and time in the play situation interacted in their influence on constructiveness of play but had no effect on “normal play”. Constructiveness decreased with time and was interpreted as a symptom of boredom; (4) as predicted, middle‐class children talked with the experimenter more than working‐class children.
COGNITIVE CHANGES IN THE ADOLESCENT SLOW LEARNER
Authors: Brown Roy I.
Published: December 2006

This investigation tends Co support the Clarke hypothesis that subjects from “adverse” environments arc likely to show greater cognitive growth than persons from “less adverse” homes. However, the present study indicates that increments in cognitive growth are not necessarily dependent on removal from the “adverse” environment. Explanation may involve maturation, in the form of secondary and compensatory growth, and change from school to work environments. Because of large increments in intelligence in children from “less adverse” homes leaving comprehensive schools there may be reason to suggest that school environment may play an important though at present limited role in cognitive development.
REVERSAL AND EXTRADIMENSIONAL SHIFTS IN TWO SOCIOEGONOMIC GROUPS OF PRESCHOOL CHILDREN*
Authors: Bobula Katherine A. , Heye Helene , Nolan J. Dennis
Published: December 2006

Low and middle socio economic status preschool children learned color and form discriminations, followed by either reversal (R) or extradimensional (ED) shifts. The low socioeconomic status children learned the original discrimination somewhat more slowly than did the middle class children. The middle class children learned the R shift significantly faster than the ED shift but the lower class children did not. However, the lower class children learned the extradimensional shift significantly faster than did the middle class children, whereas there was no difference between the two socioeconomic groups in speed of reversal learning.
COGNITIVE STYLES IN ADOLESCENTS PREVIOUSLY DIAGNOSED AS HYPERACTIVE*
Authors: Cohen Nancy J. , Weiss Gabrielle , Minde Klaus
Published: December 2006

Four cognitive styles were studied in 20 adolescent boys previously diagnosed as hyperactive and 20 normal controls. The results indicated that the hyperactives were not impaired in their ability to perform on tasks involving highly overlearned abilities, i.e., color naming and reading color words, even under distracting conditions. They were deficient, however, in their approach to tasks in which there was a greater degree of response uncertainty. Hyperactives took less lime to reflect over a problem solution when a number of alternative solutions were available and had greater difficulty isolating a simple figure hidden in a complex background.
CHILDREN WHO HAVE BEEN “IN CARE” ‐AN EPIDEMIOLOGICAL STUDY
Authors: Wolkind Stephen , Rutter Michael
Published: December 2006

An epidemiological study of psychiatric disorder among 10 to 11‐year‐old children in two communities showed a strong association in boys between antisocial disorder and a history of a short period in foster‐care or in a Children's Home. This association was much less evident in girls. At the time of study, years after the period “in care”, most of the children were living in large families characterised by parental discord. It is suggested that it is this long‐term family disturbance which leads to the antisocial disorder rather than the short‐period of care per se. The reason for the sex difference in susceptibility to family discord requires further study. The findings also suggest the need for preventive treatment for families seeking short‐term placement “in care”.
THE HIGH LANDS DEPENDENCY QUESTIONNAIRE (H.D.Q.): AN ADMINISTERED VERSION FOR USE WITH THE MOTHERS OF SCHOOL CHILDREN
Authors: Berg Ian , Mcguire Ralph , Whelan Edward
Published: December 2006

A questionnaire concerned with dependency in the mother‐child relationship, and intended for use in child psychiatry, was described. It was administered to the mothers of 116 randomly selected junior and secondary school children in the general population, stratified into age, sex, social class and school groupings, in order to investigate its reliability and construct validity as a basis for clinical use. The inter‐rater and test‐retest reliability seemed to be satisfactory. Principal component factor analyses were carried out separately on junior and secondary school children. At least two meaningful dimensions were revealed; a factor concerned with attachment to mother and a factor more specific to the notion of dependency involving reliance on mother in practical matters. Sex differences of statistical significance were found between factor scores; and separate principal component analyses were referred to for boys and girls in the secondary school group. The calculation of factor (then called subscale) scores was made easier by the provision of approximate raw score factor weights. Some evidence for the validity of the questionnaire was provided when a group of school phobic cases was investigated.