bluuebunny/crossref_metadata_2025 huggingface dataset:
THE INFORMATION CONTENT OF INFLATION‐ADJUSTED FINANCIAL STATEMENTS
Authors: Brayshaw R.E. , Miro A.R.O.
Published: December 2006

This paper seeks to examine whether current cost accounting information provides additional useful information to users of accounts by examining the impact of such information on stockmarket activity. The statistical tests compare the share price movement of companies reporting current cost informa‐ tion with a control group of matched companies reporting only historic cost information. Wherever possible allowance is made for the impact of other information released at the same time as accounting information. The results seem to indicate that the release of current cost information had no traceable effects on the share market prices of the companies concerned.
TESTING THE FISHERIAN HYPOTHESIS: SOME METHODOLOGICAL ISSUES AND FURTHER EVIDENCE FOR THE UK
Authors: Peel David A. , Pope Peter F.
Published: December 2006

The relationship between common stock returns and actual, expected and unexpected inflation has been subject to considerable scrutiny recently. The objectives of this paper are threefold. First, it is suggested that the Fisherian hypothesis of anticipated stock market returns has been subjected to inappropriate tests in some previous work. Second, the Fisherian hypothesis is developed into an ex post form which is suitable for estimation and which will avoid the difficulties in previous work. Thirdly, estimates of the model are reported using UK data which give some support to the hypothesis.
LOAN DEFAULT RISK, RETURN ON EQUITY AND SIZE EFFECTS AND OWNERSHIP CONTROL ‐ EMPIRICAL EVIDENCE ON SAVINGS AND LOANS ASSOCIATIONS IN THE USA
Authors: Bulmash Samuel B.
Published: December 2006

This study examines how size interacts with the ownership factor in determin‐ ing which intermediary is more efficient in terms of loan default risk and return on equity when Mutual and Stock Savings and Loan Associations in the USA are compared. Economies of scale in the Savings and Loan Industry in the USA are suggested. Stock associations are found to be more efficient in utiliz‐ ing those economies and outperform mutuals at each size category except for the smallest associations. These findings have important policy implications for conversions from mutual stock ownership and for chartering new associations.
THE TRUE AND FAIR VIEW DOCTRINE: A SEARCH FOR EXPLICATION
Authors: Rutherford B. A.
Published: December 2006

This paper examines the true and fair view doctrine as currently employed by British accountants. It argues that the doctrine lacks a satisfactory explication; that the use of ‘professional judgement’ cannot provide an acceptable substitute for explication; that the unexplicated doctrine does not serve the interests of the public or the profession; and that the profession should consider using compliance with generally accepted accounting principles as its test for the quality of financial reporting, either instead of or as an explication for the true and fair view doctrine.
STOCK MARKET SEASONALITY AND TAXES: AN EXAMINATION OF THE TAX‐LOSS SELLING HYPOTHESIS
Authors: Van Den Bergh W. M. , Wessels R. E.
Published: December 2006

Recent empirical studies have found evidence that supports the tax loss selling explanation of seasonal effects in stock returns. Using other test procedures, the present authors conclude that the support found in other studies is likely to be the result of spurious correlation between returns of stocks selected as tax‐loss selling candidates and the January returns of these stocks.
OPTIMAL PORTFOLIO DIVERSIFICATION AND THE EFFECTS OF DIFFERING INTRA SAMPLE MEASURES OF RETURN
Authors: Board J. L. G. , Sutcliffe C. M. S.
Published: December 2006

It is shown that share returns series constructed from averaged data lead to biased estimates of the mean, variance and covariances of the underlying returns series. The computed variances and covariances will be only 2/3rds of their true values, whilst the mean will be reduced by 1/6th of the true variance. It is shown that this leads to distortions in the mean‐variance efficient frontier and the implied investment proportions. A number of studies of international portfolio diversification have used averaged data and, therefore, an empirical study of IPD is reported which investigates the magnitude of the biases and the extent to which they can be corrected.
GROUP EFFECTS AND BETA NONSTATIONARITY
Authors: Chen Son‐Nan , Keown Arthur J.
Published: December 2006

Recent evidence indicates that while random diversification can lead to the elimination of the majority of systematic risk, the systematic selection of securities can result in significant group effects blocking this dissipation of unsystematic risk. The group effects associated with investment in growth, cyclical, stable and oil stocks found by Farrell and Martin and Klemkosky were reexamined while allowing for beta nonstationarity. It was found that the beta nonstationarity effect, while quite large for individual stocks and small portfolios tended diversify away quite quickly. It was further found that much of what has in the past been termed a group effect is actually the result of beta nonstationarity.
ESTIMATING THE INTERNAL RATE OF RETURN FROM PUBLISHED FINANCIAL STATEMENTS: A REPLY
Authors: Salmi Timo , Ruuhela Reijo
Published: December 2006

In estimating the long‐range profitability of a business firm two different assumptions have been made on the shape of the distrubtion of contributions from the capital investments making up the firm. Assumptions need not be proved. In a steady‐state the two contribution distributions yield equal numerical results. Recent results without the need of different contribution distributions are referred to.
HOW DO SMALL FIRMS MAKE INVENTORY ACCOUNTING CHOICES?
Authors: Kuo Horng‐Ching
Published: December 2006

In the past, the attention of studies on inventory method choices has invariably been focused on large firms' motivations to use LIFO. Small firms' inventory accounting decisions are different from those of large firms due to the fact that there are differences in financial reporting considerations. This study examines small firms' inventory accounting choices from the perspective of three major factors (firm size, risk, and managerial ownership). It was found that firm size, financial risk, and the interaction effect between financial risk and business risk are significantly correlated with the LIFO choice for small firms.
SHAREHOLDER WEALTH EFFECTS OF MANAGEMENT CHANGES
Authors: Mahajan Arvind , Lummer Scott
Published: December 2006

This paper analyzes the direction and magnitude of changes in stock prices resulting from the announcement of various types of changes in senior corporate management over a twelve‐year period. We find support for the view that instability resulting from executive succession adversely affects organizational performance. Furthermore, our results imply a clear preference by the market for a change in composition of the previous management team over its further entrenchment and a perception by the market that senior corporate executives and the board of directors may not be solely motivated by considerations of shareholder wealth maximization.
EFFECTS OF SMALL BUSINESS ACCOUNTING BASES AND ACCOUNTANT SERVICE LEVELS ON LOAN OFFICER DECISIONS
Authors: Baker William M. , Cunningham Gary M.
Published: December 2006

This study examines effects of four combinations of accounting bases and service levels — GAAP and income tax bases, and audit and review service levels — on loan officers' decisions, both separately and in interaction. It examines effects on loan decisions and perceptions of interest rates, default risk, confidence, and usefulness. The interaction of accounting basis and service level significantly affects perceived confidence but does not affect other decisions. Accounting basis and service level separately affect interest rates, default risk, and report usefulness, but do not affect the loan decision.
RETURNS TO SHAREHOLDERS IN SUCCESSFULLY DEFENDED TAKEOVER BIDS: UK EVIDENCE 1975–1984
Authors: Parkinson Christine , Dobbins Richard
Published: December 2006

This study examines the economic performance of target and bidding companies where the target successfully defended a hostile takeover bid in the period 1975–1984. Returns to shareholders in both target and bidding companies are measured for the six months preceding the bid, and for the twenty‐four months after the bid. The study finds that the significant gains obtained by shareholders in the target company around the time of the bid announcement are not lost after the failure of the bid. In apparent defiance of the efficient market hypothesis abnormal returns continue for the two years after the bid. As for the bidding company, the small positive abnormal returns to its shareholders are also sustained after the bid.
DISCLOSURE IN JAPANESE CORPORATE ANNUAL REPORTS
Authors: Cooke T.E.
Published: December 2006

This paper reports the results of a survey of disclosure in the annual reports of unlisted and listed corporations in Japan, a country that many argue has a unique environment. The paper attempts to investigate differences between companies in the extent of disclosure in their Commercial Code (CC) and Securities and Exchange Law (SEL) accounts respectively. The survey finds that there is a significant difference in disclosure by multiple listed companies in their CC accounts compared with domestically listed corporations and unlisted enterprises. It is also found that there is a significant difference in disclosure between multiple listed and domestically listed entities in their SEL accounts. However, there was no significant difference in disclosure between the TSE (Tokyo Stock Exchange) group and the unlisted group in their CC accounts.
STOCK RETURNS AND CLASSIFICATION PATTERN OF FIRM‐SPECIFIC FINANCIAL VARIABLES: EMPIRICAL EVIDENCE WITH FINNISH DATA
Authors: Martikainen Teppo
Published: December 2006

This paper incorporates the findings of empirical classification patterns of financial ratios to studies investigating the relation between stock returns and financial factors of a firm. The empirical results indicate that the relevant information of the investigated financial characteristics of a firm can be presented in one factor, with respect to which single financial ratios seem not to have incremental information content in the Finnish stock market. In crossindustry sample this factor is reported to be leverage. However, when studying purely industrial firms, the most important factor consists of ratios representing several a priori characteristics of a firm.
LEVERAGE, RESOURCE ALLOCATION AND GROWTH
Authors: Ghosh Dilip K. , Sherman Robert G.
Published: December 2006

The effects of resource allocation on firms comprising the competitive economy are examined within the structure of a simple general equilibrium model. The study shows that capital structure of a firm is independent of its value, — a result that can be characterized as the mirror‐image of the celebrated Modigliani‐Miller proposition. The structure of present analysis highlights how costs of capital assets change, what affects the prices of the firms, and how these changes are reflected in the operations of the firms in an overall economic set up. The paper then establishes that if debt is increased, and the (relatively) levered firm expands, its stock price goes up and the (relatively) less levered firm shrinks and moves in the opposite direction in all respects. The appropriate conditions for profitable leveraged buyout are spelled out, and other conditions are also specified as to when merger is unprofitable. Finally, the paper is concluded with some thoughts on possible future research along the lines outlined in this work.
COST‐VOLUME‐PROFIT ANALYSIS UNDER UNCERTAINTY WHEN THE FIRM HAS PRODUCTION FLEXIBILITY
Authors: Chung Kee H.
Published: December 2006

This study examines the behavior of the firm which faces uncertainty in demand but can adjust its output once the uncertainty is resolved, using contingentclaims analysis. The paper finds that (i) the optimal output of the firm with ex post adjustment capability is less than that of the firm without production flexibility; (ii) the optimal ex ante output increases with the higher interest rate; (iii) the greater the marginal cost associated with the expost adjustment and/or salvage value, the greater the optimal ex ante output; and (iv) the effect of demand volatility and production lead time on the optimal ex ante output could be either positive or negative. Based upon the study's findings, some important managerial decision implications are discussed.
OPTIONS LISTING, MARKET LIQUIDITY AND STOCK BEHAVIOUR: SOME CANADIAN EVIDENCE
Authors: Chamberlain Trevor W. , Cheung C. Sherman , Kwan Clarence C.Y.
Published: December 2006

This study examines the price behaviour, trading volume and liquidity of stocks in the Canadian market at the time of options listing. Unlike some studies examining similar effects in the United States, the present one finds no evidence to indicate that either daily return volatility or trading volume is affected by the listing. Similarly, liquidity, as measured by the bid‐ask spread, is unaffected. At the same time, cross‐sectional tests indicate an inverse relationship between before‐to‐after trading volume and the before‐to‐after bid‐ask spread.
THE OVERNIGHT AND DAILY TRANSMISSION OF STOCK INDEX FUTURES PRICES BETWEEN MAJOR INTERNATIONAL MARKETS
Authors: Becker Kent G. , Finnerty Joseph E. , Tucker Alan L.
Published: December 2006

Stock index futures prices for the world's major equity markets, Japan, the UK and the US, are used to examine the interaction of international equity markets. By using stock index futures prices, we avoid the nonsynchronous data problem inherent with opening and closing market averages. We find that the US is the dominant world market; overnight returns in Japan and the UK are greatly influenced by the US daily returns. In contrast, the Japanese market has no impact on the overnight or daily returns in the UK, while the UK daily performance has a small influence on Japanese overnight returns. Slight evidence of over‐reaction at the opening of Japanese futures exists as the daily Nikkei returns are negatively related to the US returns.
AN EMPIRICAL INVESTIGATION OF STOCK MARKET VALUATION OF CORPORATE PROJECTED PENSION LIABILITIES
Authors: Gopalakrishnan V. , Sugrue Timothy F.
Published: December 2006

This study extends the work of Landsman (1986) by making use of the newly available projected benefit pension obligations (PBO) information. Our analysis documents that investors perceive pension assets and pension liabilities, respectively, as corporate assets and liabilities. We also developed and tested a decomposition model of pension obligations by examining the market valuation of the three components of PBO: vested, non‐vested and future salary progression. Our results indicate that future salary progression is indeed considered by market participants as a liability of the firm. The results of the study have important implications for accounting policy making.
THE CONCEPT AND COMPUTATION OF EARNED ECONOMIC INCOME: A REPLY
Authors: Grinyer John R.
Published: December 2006

Skinner criticises the present author for (a) failing to discuss IRR methods, (b) placing too much reliance on the matching principle, (c) developing a procedure with the same defects as conventional accounting methods, and (d) overlooking relevant prior work. Although it does not affect the EEI analysis, (d) is in part accepted. Criticisms (a) to (c) are not however well founded within the context of the EEI analyses to date.
A SUGGESTED SIMPLE PROCEDURE TO OBTAIN BLUE ESTIMATOR OF GLOBAL BETA
Authors: Prakash Arun J. , Reside Mary Ann , Smyser Michael W.
Published: December 2006

Common stocks are typically traded on numerous exchanges both domestically and internationally. The price behaviour of stocks traded in multimarket settings provides investors with additional information regarding the risk characteristics of those shares. In this paper we provide a simple procedure to obtain the best linear unbiased (BLUE) estimator of relevant systematic risk (beta) of a stock by incorporating as much information as is possibly available in the market place.
TESTING THE PRESENT VALUE MODEL OF EQUITY PRICES FOR THE UK STOCK MARKET
Authors: Mills Terence C.
Published: December 2006

This paper applies present value tests to the UK stock market. Using monthly data from 1965 to 1990 on real equity price and dividend indices, it is found that the restrictions imposed by the present value model on a vector autoregression comprised of the ‘spread’ between prices and dividends and the change in real dividends can be rejected both for the complete sample period and for a shorter sample which omits the early years of dividend control and the run up to and aftermath of the stock market ‘Crash’ of October 1987. These tests are supplemented by informal methods for evaluating the ‘fit’ of the present value model: the observed spread is found to move ‘too much’, so that deviations from the model are persistent and long‐lasting.
INTERNATIONAL LISTINGS, THE SECURITY MARKET LINE AND CAPITAL MARKET INTEGRATION: THE CASE OF US LISTINGS ON THE LONDON STOCK EXCHANGE
Authors: Varela Oscar , Lee Sang H.
Published: December 2006

This paper examines for international capital market segmentation by testing for changes (both inter‐temporally and inter‐beta) in the parameters of the riskreturn pricing relationship caused by the listing of US stocks on the London Stock Exchange (LSE) between 1965 and 1987. It is hypothesized that international listings reduce the negative effects associated with barriers to international investments, help integrate world markets and therefore decrease internationally listed stock's required returns. Significant negative deviations from the Sharpe‐Lintner (SL) pre‐listing pricing relationship during the postlisting period are therefore expected, primarily caused by decreases in the intercept parameter. We find, in support of the hypothesis, significant negative deviations from the predictions of SL for our sample, although they do not appear to have an intertemporal dimension. These deviations are largely associated both with decreases in the value of the SL model's intercept parameter and with low beta firms, and point toward some integration benefits from US listings on the LSE.
AN EMPIRICAL MODEL OF CAPITAL STRUCTURE: SOME NEW EVIDENCE
Authors: Homaifar GhasseM , Zietz Joachim , Benkato Omar
Published: December 2006

Using a general autoregressive distributed lag model, we estimate the longrun steady state determinants of corporate capital structure. We find that, in the long run, the leverage ratio is related positively to the corporate tax rate and firm size and negatively to future growth opportunities and stock returns. By contrast, there appears to be no relation between leverage and the corporate tax rate on a short‐run year to year basis. Our results suggest that prior empirical evidence on capital structure is of questionable value precisely because of its failure to clearly separate the short‐run relationship between leverage and its determinants from its long‐run relationship.
EXTERNAL CAPITAL MARKET CONTROL, CORPORATE RESTRUCTURING, AND FIRM PERFORMANCE DURING THE 1980s
Authors: Zantout Zaher
Published: December 2006

The corporate restructuring activity of the 1980s, sparked by potential external capital market intervention, is believed to have been primarily directed at correcting the diversification mistakes of the 1960s and 1970s, which had led to poor corporate performance. Assuming that investor gains from corporate restructurings are unbiased expectations regarding future efficiency gains, many researchers concluded that the market for corporate control is an efficient external control mechanism and that the restructuring programs of the 1980s will, on average, be followed by substantial improvements in corporate performance. To examine whether those improvements were achieved, this paper analyzes the long‐term operating and financial performance of the 50 most aggressive US participants in the takeovers and corporate restructuring activity during the 1980s. The results support the hypothesis that the market for corporate control is an efficient external corporate control mechanism of last resort.
STOCK PRICES AND EXCESSIVE VOLATILITY: SOME EVIDENCE FOR THE FT ORDINARY SHARE INDEX
Authors: MacDonald Ronald
Published: December 2006

In this paper the efficiency of the UK stock market is examined using the FT Ordinary share price and dividend indices for the period January 1947 to June 1987. In particular, we examine the validity of the present value model of stock prices using a vector error correction model (VECM). Amongst the findings reported in the paper are that stock prices and dividends are cointegrated and the cross‐equation restrictions imposed on the VECM are strongly rejected.
SECURITIES OFFERINGS AND CAPITAL STRUCTURE THEORY
Authors: Bayless Mark E. , Diltz J. David
Published: December 2006

This paper analyzes a large sample of public security offerings to determine the motivation to issue debt or common equity. The results provide new evidence that the existence of asymmetric information plays a key role in firms' choice of security. Bankruptcy risk appears to affect the issue decision, but other traditional capital structure considerations do not. Variations in the determinants of security choice over time suggest a dynamic aspect to capital structure decisions not recognized in previous studies.
THE RELATIONSHIP BETWEEN SECURITIES YIELDS, FIRM SIZE, EARNINGS/PRICE RATIOS AND TOBIN'Sq
Authors: Badrinath S.G. , Kini Omesh
Published: December 2006

Several studies in financial economics have found a positive relationship between stock returns and firm size. This relationship persists even after controlling for various measures of risk. There is also a well documented inverse relationship between stock returns and the Price/Earnings (P/E) ratio. However, there is still substantial controversy whether the size effect subsumes the P/E effect or vice versa. In this paper, we demonstrate that neither the size nor the P/E effect subsumes the other. We introduce Tobin's q as a variable that is closely related to stock returns as well as to both the size and P/E effects and show that the size effect persists after controlling for both P/E and q, while the P/E effect becomes much smaller after controlling for size and q. This leads us to conclude that the size effect is more robust to additional controls such as Tobin's q than the P/E effect. Finally, the size effect is almost entirely a January phenomenon whereas the P/E effect is a non‐January effect.
A NOTE ON THE RELATIONSHIP BETWEEN SYSTEMATIC RISK AND GROWTH IN EARNINGS
Authors: Hamid Shahid , Prakash Arun J. , Anderson Gary A.
Published: December 2006

This paper provides a simple analytical derivation of the relationship between growth in earnings and systematic risk. Theoretically and empirically it concludes that this relationship is positive.
STRUCTURAL CHANGES IN RETURN‐GENERATING MODELS AROUND TENDER OFFERS: A NOTE
Authors: Ely David P. , Song Moon H.
Published: December 2006

This note investigates the role of changes in the parameters of return‐generating models in explaining the pattern of abnormal returns accruing to target and bidding firms around tender‐offer announcements. Employing a varyingparameter modeling approach the study finds lower abnormal returns to target firms and increased abnormal returns to bidding firms, relative to standard approaches. However, use of this approach fails to refute the common findings that mean abnormal returns are large for target firms and negligible for bidding firms.
QUANTITATIVE NON‐FINANCIAL INFORMATION AND INCOME MEASURES: THE CASE OF LONG TERM CONTRACTS
Authors: Rees William , Sutcliffe Charles
Published: December 2006

Much available numerical information is non‐financial. This information has the advantages of quantifying events that cannot be expressed in financial terms, timeliness and the avoidance of accounting procedures. This paper investigates the usefulness of quantitative non‐financial information (QNFI) as a proxy for current and future economic and accounting income. The study analyses a hypothetical firm which undertakes long term contracts. A mathematical model is constructed of the cash generation process of the company. QNFI measures are found to dominate accounting measures with regard to estimating economic income and predicting both economic and accounting income. These results are confirmed by a stochastic simulation model which allows for a more complex model.
THE EFFECT OF THE IMPLEMENTATION OF THE MULTIDIVISIONAL STRUCTURE ON SHAREHOLDER'S WEALTH: THE CONTINGENCY OF DIVERSIFICATION STRATEGY
Authors: Karpik Philip , Riahi‐Belkaoui Ahmed
Published: December 2006

This paper presents evidence on the price effect of US firms announcing the implementation of a multidivisional management structure (M‐form) and whether these effects are contingent on the existing diversification strategy (either unrelated, related, or vertical integration). Differnt patterns of excess returns and systematic risk (beta) changes are associated with different diversification strategies.
THE EFFECT OF TRADING IN EIGHTHS ON SECURITY RETURN BEHAVIOR
Authors: Ingram Robert W. , Stone Mary S. , Dugan Michael T.
Published: December 2006

Currently the equity securities of most British, Canadian and US firms trade in eighths. However, this pricing system may soon be abandoned in the US. Specifically, the US Securities and Exchange Commission (SEC) is currently studying the feasibility of changing the pricing of US securities to dollars and cents from dollars and eighths. ‘SEC officials contend that moving to a system that quotes stock prices in dollars and cents would create efficiency in the stock market that eighths and sometimes sixteenths can't permit’ (Torres and Salwen, 1991). This paper demonstrates the inefficiencies that result from constraining stocks to trade in eighths of a dollar. It describes the effects on returns and betas; then, it presents empirical evidence consistent with the effects. Systematic differences in the distributions of returns of low and high‐priced stocks are documented. The covariance of returns with a market index is shown to vary systematically across stocks of different prices and to depend on the return interval used to estimate market model parameters. The variations are explainable by an observed lag between the returns of low‐priced stocks relative to those of high‐priced stocks. The lag is partially attributable to trading in eighths. A systematic relationship that varies with share price is observed between market model residual returns and unadjusted returns. This relationship is not eliminated by using longer return intervals alone. The extent of the relationship is reduced when longer return intervals are combined with the use of a market index composed of stocks that are priced similarly to those of the securities being tested. The implications of these results for capital market studies are discussed.
THE PRE‐ANNOUNCEMENT SHARE PRICE BEHAVIOUR OF UK TAKEOVER TARGETS
Authors: Holland K. M. , Hodgkinson L.
Published: December 2006

This paper examines the sources of pre‐bid announcement abnormal returns (ARs) accruing to target companies’ shareholders. To control for publicly available information, targets are classified as either identified or unidentified. The paper finds that prior disclosure of bid related information does give rise to pre‐bid ARs. For identified targets there is no evidence that these ARs arise from trading on unpublished price sensitive information. For unidentified targets, trading on unpublished price sensitive information may give rise to ARs, although these ARs could be explained by stakebuilding. ARs do not occur prior to the first bid news item, a result contrary to previous US studies.
BANKRUPTCY DISCRIMINATION WITH REAL VARIABLES
Authors: Platt Harlan D. , Platt Marjorie B. , Pedersen Jon Gunnar
Published: December 2006

This paper reconsiders the accepted usage of nondeflated financial ratios in statistical models to differentiate between failed and nonfailed firms. Non‐deflated ratios are hypothesized to inadequately reflect inter‐temporal macroeconomic fluctuations that affect the ability of firm's to survive. Using a sample of 124 oil and gas companies between the period 1982–1988, the going concern assumption is evaluated with statistical logit models using either nondeflated or deflated financial ratios. Deflated company ratios are created by transforming data with price indices or by creating market value ratios. Empirical results suggest that a superior bankruptcy early warning model is developed for the oil and gas industry by creating real financial and reserve ratios and by introducing external factors, such as oil prices, interest rates and accounting method, as independent predictors. Overall classification accuracy is approximately 95 percent.
THE RELATIONSHIP BETWEEN DIVIDEND CHANGES AND CASH FLOW: AN EMPIRICAL ANALYSIS
Authors: Simons Kathleen
Published: December 2006

It is often assumed that cash flow affects dividend payout. This study provides evidence on the incremental information content of cash flow numbers over Profits and Previous Year's Dividends (Lintner's model) in explaining changes in cash dividends. It further examines whether different measures of cash flow differ in information content for dividend‐increasing and dividend‐decreasing firms. Lintner's model of dividend changes is robust across firms with either dividend increases or decreases. The null hypotheses, that no definition of cash flow adds to the model, could not be rejected for any of the definitions.
PROJECT HOLDING‐PERIOD RATE OF RETURN AND THE MIRR
Authors: Anderson Gary A. , Barber Joel R.
Published: December 2006

In this paper we examine the relationship between the Modified Internal Rate of Return (MIRR) and a project's expected holding‐period rate of return assuming that cash flows are reinvested at the cost of capital. When cash flows are uncertain, the MIRR overstates the expected holding‐period rate of return. The relationship between the MIRR and a project's expected holding‐period rate of return is shown to be a simple function of conventional project statistics like the coefficient of variation of the present value of random cash flows, the profitability index, the cost of capital, and the project's life.
VOLUNTARY AUDITS IN NEW YORK MARKETS IN 1927: A CASE STUDY
Authors: Merino Barbara D. , Mayper Alan G. , Sriram Ram S.
Published: December 2006

This study examines the demand for audits in the pre‐SEC period in the United States. We focus on three hypotheses ‐ monitoring, information, and capital formation ‐ to test the economic incentives prior researchers have posited led to demand for audits. We compare a sample of companies traded in three non‐NYSE markets (unregulated) to a sample of NYSE listed companies (regulated). We found that the need to raise capital did increase use of audits, but that neither the monitoring nor information hypotheses explain this early demand. Common stock ratings appeared to be a cost‐effective alternative to audits and we found little evidence that audits improved the quality of financial reports.
THE USE OF MULTIPLE INSTRUMENTS FOR MEASUREMENT OF EARNINGS FORECAST ERRORS, FIRM SIZE EFFECT AND THE QUALITY OF ANALYSTS’FORECAST ERRORS
Authors: Chung Hay Y. , Kim Jeong‐Bon
Published: December 2006

This paper develops an instrumental variables framework to form a better proxy for earnings forecast errors. The key aspect of the approach is to extract information from alternative proxies for the same underlying variable, namely a portion of realized earnings signals unexpected by the market. We use signs of various proxies for earnings forecast errors obtained from different time‐series forecasting models as multiple instruments. The results show that the instrumental variables approach is effective for reducing measurement errors inherent in various proxies for earnings forecast errors. It produces not only a smaller magnitude but also a narrower dispersion of earnings forecast errors. The paper provides evidence that the instrumental variables approach performs better for small‐firm samples than for large‐firm samples. Finally, we observe that analysts’ forecast errors seasoned with the signs of various time‐series forecast errors (as well as the signs of their own forecast errors) outperform those without seasoning. This indicates that analysts’ forecast errors can still be improved by employing the instrumental variables technique.
THE SHAREHOLDER WEALTH EFFECTS OF MONOPOLIES AND MERGERS COMMISSION DECISIONS
Authors: Forbes William
Published: December 2006

This paper presents an analysis of the policy of the UK's Monopolies and Mergers Commission using stock market data. Stock price reactions to regula‐tory intervention by the Monopolies and Mergers Commission might be expected to reflect two sorts of factors. Firstly, the impact of the intervention on the possibility of bidders extracting monopoly profits from consumers. Secondly, the possibility that the subsequent investigation of the bid by the Monopolies and Mergers Commission will raise the cost of a bid, which may not necessarily be in the shareholder's interests, and so cause such bids to be abandoned. Studying a sample of some 53 bids, investigated by the Commission in the period 1976–90, little evidence was found that the Commission halts bids that are likely to result in monopoly profits to the bidder but there was some weak evidence that non‐shareholder wealth maximising bids are abandoned as a result of the Monopolies and Mergers Commission intervention.
DIVIDENDS, DIVIDEND POLICY AND OPTION VALUATION: A NEW PERSPECTIVE
Authors: Adams Paul D. , Wyatt Steve B. , Walker Michael C.
Published: December 2006

This paper develops a model which explicitly incorporates the impact of the payment of dividends on the underlying stock into the valuation of both American and European calls and puts. Unlike earlier models, what we call the Dividend Adjustment Merton (DAM) model neither assumes arbitrary continuous dividends nor uses ad hoc methods to adjust for discrete dividend payments. Instead, it assumes the existence of a Miller and Modigliani (1961) valuation neutral dividend policy and adjusts Merton's constant proportional dividend model to incorporate any known schedule of discrete cash dividends of this type. The DAM model produces results which are equal to or superior to those of the separate models now used to value American calls (the Roll‐Geske‐Whaley model) and American puts (the Geske‐Johnson model) on dividend paying stocks. It has the virtue of being internally consistent in that the same model can be used to value both calls and puts. In developing the DAM model, the paper clarifies the role of dividends and dividend policy in determining option values. It also produces significantly tightened boundary conditions for option values.
EARNINGS EXPECTATIONS, FIRM SIZE, AND THE INFORMATIVENESS OF STOCK PRICES
Authors: Wild John J. , Kwon Sung S.
Published: December 2006

The notion that prices impound a wide array of information, including market expectations, has led to earnings forecast models conditioned on prices. Yet, presumably, analysts’ forecasts capture both public information and certain private information not previously impounded in prices. Accordingly, price‐based models are seemingly an inefficient, and less effective, source of expecta‐tions. This article investigates this hypothesis using financial analysts', price‐based, and naive forecasts. Results indicate that analysts’ forecasts (1) are at least as accurate as price‐based and naive models, and (2) yield better expectations for market tests relating returns and earnings. These inferences are robust across different information environments. The evidence suggests that analysts either possess private information or are more effective information processors, or both.
A COST MODEL OF BUILDING SOCIETIES AS PRODUCERS OF MORTGAGES AND OTHER FINANCIAL PRODUCTS
Authors: McKillop Donal G. , Glass Colin J.
Published: December 2006

This study examines the structural characteristics of UK building societies. The analysis views societies as multi‐product firms which produce both mortgage and non‐mortgage products. A two output, three input hybrid translog cost function is employed to obtain econometric measures of overall and augmented economies of scale; input‐specific and augmented input‐specific economies of scale; product‐specific scale economies; and economies of scope. The empirical analysis offers three key insights into the industry. First, there is evidence of significant augmented economies of scale for both national and regional societies. Second, only national societies are able to reap input‐specific economies of scale through the use of capital. Third, for regional and local societies, cost inefficiencies actually emerge in their production of mortgage and non‐mortgage products.
A POSSIBLE RECONCILIATION OF SOME OF THE CONFLICTING FINDINGS ON CLOSED‐END FUND DISCOUNTS: A NOTE
Authors: Deaves Richard , Krinsky Itzhak
Published: December 2006

The most obvious explanation for the closed‐end fund puzzle, the existence of managerial contribution (i.e., managerial performance less managerial fees), has been called into disrepute because of the inability of researchers to consistently document a negative relationship between such benefits and discounts. We present a model which shows that it is possible to account for some of the stylized facts without abandoning market efficiency and rationality. It is suggested that when one takes into consideration the impact of managerial contribution on the probability of open‐ending, a negative relationship between managerial contribution and discounts actually may result.
MEASUREMENT/VALUATION‐RELATED INTERPRETATIONS OF FUNDAMENTAL ACCOUNTING CONCEPTS
Authors: Vickrey Don W.
Published: December 2006

The goal of this article is to perform a necessary step in reconciling the measurement/valuation and information‐economics perspectives on accounting information. Thus, it identifies the financial‐accounting systems that can be interpreted using the language of measurement/valuation ‐ the current‐exit‐value system and a reformulated version of the current‐replacement‐cost system. In accomplishing its objective, the article provides, as far as possible, measure‐mendvaluation‐related interpretations of the concepts which logically are fundamental with respect to the current‐exit‐value, current‐replacement‐cost, and historical‐cost systems. The concepts that are considered for interpretation are total assets, total liabilities, total capital, capital maintenance, net income, and financial position.
ACCOUNTING PRACTICE AND BUSINESS FINANCE: SOME CASE STUDIES FROM THE IRON AND COAL INDUSTRY 1865—1914
Authors: Edwards John Richard , Boyns Trevor
Published: December 2006

The use of secret reserves by British companies, both to manipulate the content of published reports and to influence investor perceptions of corporate progress during the late nineteenth and early twentieth century, has been an important focus of historical enquiry. By way of contrast, relatively little attention has been devoted to the possible exploitation of fixed asset accounting practices to achieve similar financial reporting objectives. It is the aim of the present paper to help to redress this imbalance. The principal basis for the study is the archival records of four major iron and coal companies. Identified features of prudent financial policy include: a determination to restrict distributions and the level of activity to what the company could comfortably afford; and a reluctance to use loan finance. The selection of accounting practices was subordinated to the pursuit of these, and related, policy objectives. The identified use of prudent financial policies may be contrasted with Briefs (1976, p. 184) conclusion that nineteenth century companies consistently over‐estimated profitability, with a consequential stimulation of business investment and economic growth.
ACCOUNTING FOR FINANCIAL AND MANAGERIAL CAUSES OF SHORT‐TERM PRESSURES IN BRITISH CORPORATIONS
Authors: Demirag Istemi , Tylecote Andrew , Morris Ben
Published: December 2006

Short‐term pressures are defined and a distinction drawn between external S‐TP, mainly from shareholders, and internal S‐TP, from top management. A conceptual framework for analysing S‐TP is developed and empirical evidence for their existence reviewed. Although certain crude formulations of the argument for short‐termism are rejected, evidence is found for the existence of both types of S‐TP in the UK. Variations in their intensity among sectors can be accounted for partly by inherent differences in technology, and partly by differences in the behaviour of firms. Excessive diversification, particularly by acquisition, exacerbates S‐TP.
AUDIT FEES AND AUDITOR CHANGE; AN INVESTIGATION OF THE PERSISTENCE OF FEE REDUCTION BY TYPE OF CHANGE
Authors: Gregory Alan , Collier Paul
Published: December 2006

Despite concern expressed over ‘low‐balling’ or competitive price reduction in the market for audit services, the only empirical investigation of the relationship between initial audit fees, fee recovery and auditor change which has been carried out is by Simon and Francis (1988) using US cross‐sectional data, although Pong and Whittington (1994, forthcoming) examine the impact on first year fees. We investigate the impact of auditor change on cross‐sectional UK data for 1991 with the aim of discovering whether there is any evidence of price cutting and subsequent price recovery in a European, rather than a US context. We find that there is evidence of such a phenomenon, and investigate further to see whether this effect is robust with respect to the definition used of ‘auditor change’, and whether the effect varies according to whether the old auditor was a ‘Big Six’ or ‘non‐Big Six’ firm. We find that the largest reductions (controlling for auditor size) are experienced by firms changing to ‘Big Six’ firms. We further show that involuntary changes (by auditor acquisition) are associated with positive (although statistically insignificant) increases in fees, whereasvoluntary changesare associated with negative (andsignificant) feereductions. These effects are shown to be robust with respect to model specification. This suggests that fee reductions cannot be ascribed to economies of scale or scope, but is consistent with a ‘low‐balling’ model of behaviour.
UNSEASONED EQUITY OFFERINGS MBO‐IPOs vs NON‐MBO‐IPOs
Authors: Saadouni B.S. , Briston R.J. , Mallin C.A.
Published: December 2006

In this paper we examine the degree of under‐pricing of two different types of unseasoned equity offerings (IPOs), namely MBO‐IPOs and non‐MBO‐IPOs. Since, MBO‐IPOs were previously subsidiaries or divisions of publicly listed companies which were taken private by a group of managers and then reverted back to public ownership; there should be a lower level of information asymmetry between the market on the one hand and the company and its underwriters on the other. Thus, if under‐pricing is mainly the result of uncertainty about the market value of the issuing firm, the information asymmetry hypothesis would predict that, compared with the non‐MBO‐IPOs, MBO‐IPOs should exhibit a significantly lower degree of under‐pricing. The results show that MBO‐IPOs are less under‐priced than non‐MBO‐IPOs. However, the difference is not statistically significant.
EXCHANGEABLE DEBT CALLS AND SECURITY RETURNS
Authors: Ghosh Chinmoy , Varma Raj , Woolridge J. Randall
Published: December 2006

Exchangeable calls are not convertible into the calling firm's common stock but into the common stock of a target firm in which the calling firm has an ownership position. In addition to reducing leverage, exchangeables change the asset composition of the calling firm through the divestiture of the calling firm's ownership stake in the target firm. In contrast to the evidence on convertible calls, our findings indicate that announcements of exchangeable debt calls are not associated with an abnormal capital loss for the calling firm shareholders. For target firms, announcements of exchangeable calls reduce shareholder wealth. A lower probability of takeover resulting from diffusion of ownership concentration of the target firm's common stock may contribute to this result.
DURATION AND INTEREST RATE RISK FOR UNCERTAIN CASH FLOW STREAMS
Authors: Rhys Huw , Tippett Mark
Published: December 2006

This paper amends the Hicks‐Macaulay‐Samuelson duration analysis to allow for uncertainty in asset cash flows. An asset's duration measure then becomes a random variable which may possess no central moments. We show, however, that a transformed version of the duration measure is normally distributed. This can be used to make probability assessments of the sensitivity ofthe present value of an asset's cash flow stream to interest rate movements.
PROBLEM‐SOLVING STRATEGIES OF YOUNG CHILDREN
Authors: Woodward W. Mary
Published: December 2006

A complex problem, consisting of 12 graded elements, was presented to normal children of 1 1/2–5 yr and to severely subnormal children, in order to attempt to elucidate some aspects of early cognitive development. Strategies adopted have been analysed in terms of the plan and TOTE unit concepts proposed by Miller et al. It is suggested that an early phase when a repetitive behavioural sequence is directed towards an externally given end‐point, is followed by one in which the sequence is terminated at the appropriate point by the interpolation of a manipulative, or observing action after each repetition.
COMMENTARY ON KOLUCHOVA'S “SEVERE DEPRIVATION IN TWINS: A CASE STUDY”
Authors: Clarke A. D. B.
Published: December 2006

Koluchova's on‐going study of twin boys who suffered extreme deprivation between 18 months and 7 yr, and who thereafter received remedial treatment, is discussed in the context of relevant literature. Malnutrition, cruelly, neglect and considerable isolation over 51/2 yr did not predestine them permanently to the condition of severe subnormality which they manifested on discovery. Their greatly accelerated development confirms similar work and sheds some light on the interaction of constitutional and environmental factors in the formation of human characteristics. Results underline the inadequacy of theories stressing the over‐riding importance of early experiences for later growth.
FILM REVIEW
Authors: Maliphant R.
Published: December 2006

Young Children in Brief Separation–4: Thomas, 2 Years 4 Months, in foster care for 10 days. Produced by James and Joyce Robertson.
THE MENTAL HEALTH OF SIBLINGS OF GONGENITALLY ABNORMAL CHILDREN
Authors: Gath Ann
Published: December 2006

(1) An index group of 36 school‐age siblings of children with Down's Syndrome and another index group of 35 school‐age siblings of children with cleft lip/palate were compared with 71 individually matched school children. (2) Behavioural questionnaires (Rutter Scales A2 and B2) were completed by parents and teacher for all index siblings and controls. (3) No significant difference in behavioural rating was found between either index group and their controls. (4) At parental interview it was found that families of children with Down's Syndrome were experiencing more problems of management than families of children with cleft lip/palate deformities.