cssi/SciSciGPT-SciSciNet huggingface dataset:
Social approval, competition and cooperation

Non-monetary rewards are frequently used to promote pro-social behaviors, and these behaviors often result in approval from one’s peers. Nevertheless, we know little about how peer-approval, and particularly competition for peer-approval, influences people’s decisions to cooperate. This paper provides experimental evidence suggesting that people in peer-approval competitions value social approval more when it leads to unique and durable rewards. Our evidence suggests that such rewards act as a signaling mechanism, thereby contributing to the value of approval. We show that this signaling mechanism generates cooperation at least as effectively as cash rewards. Our findings point to the potential value of developing new mechanisms that rely on small non-monetary rewards to promote generosity in groups.
The state of nature and the evolution of political preferences

ment but have always been a group-living species. Rules have evolved with humans and were never "created" de novo. Evolved rules have implications for contemporary governance. Human groups have always been in conflict, and rules distinguish between group members and outsiders. These rules have proved remarkably flexible. Some rules regulate private conduct of group members. Although the desirability of these rules today is unclear, I argue that a libertarian regime would have been unstable, which may explain why there are few persons with tastes for libertarian governments. This analysis further explains why utility functions contain elements of envy. Rules of property, contract, and hierarchy are well developed and universal among humans.
No news is good news: An asymmetric model of changing volatility in stock returns

Abstract It seems plausible that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. We develop a formal model of this volatility feedback effect using a simple model of changing variance (a quadratic generalized autoregressive conditionally heteroskedastic, or QGARCH, model). Our model is asymmetric and helps to explain the negative skewness and excess kurtosis of U.S. monthly and daily stock returns over the period 1926–1988. We find that volatility feedback normally has little effect on returns, but it can be important during periods of high volatility.
Evidence from impending bankrupt firms that long horizon institutional investors are informed about future firm value

A key assumption in many accounting and finance studies is that long horizon institutional investors are informed shareholders. Yet past empirical research finds no evidence that these institutions anticipate major corporate events, including earnings-based events. I find that long horizon institutions are better informed in that they sell more shares of impending bankrupt firms than of matched distress firms at least one quarter ahead of bankruptcy. Share sales are greater in impending bankrupt firms whose shareholders ultimately lose all of their equity. In additional analyses, I document greater share sales by long horizon institutions with supposedly superior information processing abilities and/or access to corporate management. Share sales are significantly less in the post Regulation FD era. Overall, my findings support the validity of the common assumption that long horizon institutions are informed. Regulation FD appears to mitigate (but not eliminate) their information advantage.
Retiring the Deadliest Enemies Model of Tribal-State Relations

State governments have long been described as the "deadliest enemies" of Indian people and Indian tribes, even with now-Chief Justice Roberts famously reversing the description in a 1997 Supreme Court brief to describe Indian tribes as the perpetrator - the "dead[ly] enemies" of states. The Constitutional common law rule resulting from this description prevents states from engaging with Indian tribes absent Congressional consent. But this view of tribal-state relations dates back to the first 100 years of American Constitutional jurisprudence and Indian affairs, when states and Indian tribes engaged in oft-horrific and genocidal violence. The "deadliest enemies" model of tribal-state relations has long passed and transformed into political and legal disputes. Outside of litigation, these disputes often are resolved via intergovernmental agreement. However, the bright-line rule resulting from the "deadliest enemies" model operates as a barrier to the development of peaceable tribal-state relationships. This short Essay argues for the retirement of the "deadliest enemies" model.
Is Earnings Nonresponse Ignorable

Abstract Earnings nonresponse in the Current Population Survey is roughly 30% in the monthly surveys and 20% in the March survey. If nonresponse is ignorable, unbiased estimates can be achieved by omitting nonrespondents. Little is known about whether CPS nonresponse is ignorable. Using sample frame measures to identify selection, we find clear-cut evidence among men but limited evidence among women for negative selection into response. Wage equation slope coefficients are affected little by selection, but because of intercept shifts, wages for men and, to a lesser extent, women are understated, as are gender gaps. Selection is least severe among household heads.
Multinational Class Actions Under Federal Securities Law: Managing Jurisdictional Conflict

This article examines a form of securities class action that is growing increasingly popular in U.S. courts: the foreign cubed action, brought against a foreign issuer on behalf of a class that includes foreign investors who purchased securities on a foreign exchange. These cases are becoming an important part of the regulatory landscape (as evidenced by recent high-profile lawsuits involving issuers such as Vivendi, Bayer and Royal Ahold), and they create the potential for particularly severe conflict with other countries on the question of how best to regulate global economic activity. Yet they point out quite clearly that the traditional conduct and effects tests for subject-matter jurisdiction are inadequate to the task of delimiting the reach of U.S. securities laws in the global capital markets. The article draws on a study of almost 50 foreign cubed claims. It analyzes the arguments made by foreign investors seeking to justify the application of U.S. law to their claims - arguments that base an expansive theory of regulatory jurisdiction on the interconnections among the world's capital markets. It then turns to judicial disposition of such claims, examining the various stages of litigation (including class certification) at which courts confront jurisdictional questions and identifying a series of assumptions that courts make in attempting to draw jurisdictional lines. It then uses those assumptions to predict how courts will respond to multinational class actions in the continued absence of legislative guidance regarding subject-matter jurisdiction under the securities laws.
Budgeting during a Recession Phase of the Business Cycle: The Georgia Experience

This article describes the impact of the nation-wide recession on Georgia revenue and spending decisions in the 2002 and 2003 fiscal years. The state's strong economy and conservative revenue estimating practices historically provided a hedge against revenue shortfalls during a recession phase of the business cycle. However, when state revenue collections for FY 2002 were 5 percent less than collections for the prior fiscal year, several gap-closing measures became necessary, including state agency spending reductions and substitution of bond proceeds for tax revenues. These revenue and expenditure gap-closing measures were intended to enable the governor to achieve his policy initiatives while maintaining a balanced budget. The state's Rainy Day Fund remained full and was held in reserve for budget balancing in FY 2004, if necessary. Budget balancing during the current recession has been made possible by the state's practice of not overcommitting to program increases and tax cuts during the expansion phase of the business cycle, and by effectively framing the issue of fiscal restraint.
GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA

It is shown that the volume of trade can be decomposed into proportional proxies for stochastic flows of good news and bad news into the market. Positive (good) information flows are assumed to increase the price of a financial vehicle while negative (bad) information flows decrease the price. For the majority of a sample of ten split-stocks it is shown that the proposed decomposition explains more GARCH than volume itself. Using the proposed decomposition, the variance of returns for younger split stocks reacts asymmetrically to good news flowing into the market, while the variance for older split-stocks reacts symmetrically to good news and bad news.
Symmetric Separating Equilibria in English Auctions

Abstract We characterize the set of perfect Bayesian equilibria in symmetric separating strategies in the model of English auctions given by P. R. Milgrom and R. J. Weber (1982, Econometrica 50, 1089–1122). There is a continuum of such equilibria. The equilibrium derived by Milgrom and Weber is that in which bids are maximal. Only in the case of pure private values does a restriction to weakly undominated strategies select a unique equilibrium. This has important implications for empirical studies of English auctions, particularly outside the pure private values paradigm. Journal of Economic Literature Classification Numbers: D44, D82.
Lon Fuller and the Moral Value of the Rule of Law

I defend Lon Fuller’s view that the rule of law has conditional non-instrumental as well as instrumental moral value. The rule of law is conditionally non-instrumentally valuable in virtue of how a legal system structures political relationships.
Customers and cash: How relationships affect suppliers' cash holdings

If one customer accounts for a large portion of a supplier's sales, then the loss of that one customer can cripple the supplier's financial health. As a precaution against the additional operating risk induced by being in an important relationship with a customer, I find that suppliers in such relationships hold more cash on average than suppliers that are not in important relationships. Additionally, supplier's cash holdings increase proportionately with the importance of their customer relationships. Being in an important relationship affects cash holdings and leverage differently, indicating that firms manage cash and debt for different purposes. I find that suppliers in relationships primarily accrue cash through issuance of stock as opposed to debt or retained earnings. The results highlight the importance of understanding buyer–supplier relationships when evaluating a firm's financing policy.
The virtues of opaque prose: How lay beliefs about fluency influence perceptions of quality☆

Instructors tell their students to write clearly. This prescription meshes with our intuition, wins confirmation in scores of books on writing, and finds empirical confirmation in research on perceptual fluency: People like content that is easy to process. Nevertheless, in some circumstances people expect content to be difficult, and ease might be interpreted as a lack of quality. We investigate this possibility by asking people to judge the quality of written text which varies in fluency (through the manipulation of font and facial feedback). Across three studies, disfluent content was judged to be of higher quality when it was thought to come from a source focused on conveying information than one designed to maximize enjoyment.
Re-Emerging Markets

Recent research shows that emerging markets are distinguished by high returns and low covariances with global market factors. To check whether these results can be attributed to their recent emergence, we simulate a simple, general model of global markets with a realistic survival process. The simulations reveal a number of new effects. We find that pre-emergence returns are systematically lower than post-emergence returns, and that the brevity of a market history is related to the bias in returns as well as to the world beta. These patterns are confirmed by an empirical analysis of emerging and submerged markets.
Institutions, Inertia and European Union Research Policy

Explanations of the failure of integration are a natural preserve of intergovernmentalism. It is not difficult to blame the failure to integrate on recalcitrant states — and they are in fact often largely responsible. This article examines how European institutions can impede deeper integration. It sets out an analytical framework that distinguishes three pathways of institutional resistance to change, and applies the framework to the case of EU research policy. In the face of American scientific and technological superiority, European leaders have long articulated the goal of better research policy co-ordination. But distinct national research policies persist; no significant supranational integration has taken place. The institutionalization of EU research policy in the framework programme (FP) — a funding stream for researchers alongside much larger national programmes — is part of the reason. Since the 1980s, increasingly large and complex programmes have absorbed the administrative and political energies of the Commission and generated clienteles attached to the status quo. European institutional legacies, and not simply national interests, have undercut efforts to create a ‘European Research Area’ marked by the better co-ordination and integration of national policies.
Toward Effective Implementation of 11 U.S.C. § 522(d)(11)(E): Invigorating a Powerful Bankruptcy Exemption

Uriel Rabinovitz* This Note explores how bankruptcy courts have analyzed and applied the 11 U.S.C. § 522(d)(11)(E) bankruptcy exemption and the confusion generated by its conflicting interpretations. This Note reviews and scrutinizes the history of the Bankruptcy Law, its goals and purposes, the differences between its underlying themes, and specific mechanisms involved in the implementation of bankruptcy exemptions. With a broader understanding of the rationale behind bankruptcy laws in combination with the relevant legislative history, this Note sets the stage and advocates for an increased consistency in the analysis and application of the 11 U.S.C. § 522(d)(11)(E) exemption.
The Impact of Inflation on Budgetary Discipline

Abstract This paper views the budgetary process as a limited contingencies contract between the Treasury and the ministers, allowing a minister to ask for budget revisions. Upon costly verification by the Treasury, the minister may obtain extra funds. For significant state verification costs and for low volatility, the contract is non-contingent. For volatility significant enough, the contract becomes state-contingent — it reduces the initial allocation, and reduces the threshold associated with budgetary revisions. In volatile economics, the projected revenue understates the realized budget, and the average budget error is positive. The model's predictions are confirmed using data from Latin America.
Subadditivity, patience, and utility: The effects of dividing time intervals ☆

Abstract Previous work has demonstrated that time discounting is subadditive: individuals exhibit more impatience evaluating a delay as divided into sub-intervals. This paper argues that subdivision affects both components of intertemporal choice, the utility function as well as the intertemporal discount function. In my first experiment, I demonstrate that differential concavity of utility for gains and convexity for losses implies that the discounting of losses is even more subadditive than the discounting of gains. Individuals display even more relative impatience over divided time intervals for negative amounts of money than for positive amounts of money. My second experiment utilizes alternative elicitation methods, which impose an intertemporal status quo, to highlight these utility effects. Subadditivity is stronger when delaying an early gain than for hastening a later gain. The reverse pattern holds for losses; discounting is more subadditive when hastening a later loss than for delaying an earlier loss.
Why Do Temporary Help Firms Provide Free General Skills Training

The majority of U. S. temporary help supply (THS) firms offer nominally free, unrestricted computer skills training, a practice inconsistent with the competitive model of training. I propose and test a model in which firms offer general training to induce self-selection and perform screening of worker ability. The model implies, and the data confirm, that firms providing training attract higher ability workers yet pay them lower wages after training. Thus, beyond providing spot market labor, THS firms sell information about worker quality to their clients. The rapid growth of THS employment suggests that demand for worker screening is rising.
An upper limit on the initial temperature of the radiation-dominated Universe

Gravitational waves (GWs) are produced by colliding particles through the gravitational analogue of electromagnetic bremsstrahlung. We calculate the contribution of free-free emission in the radiation-dominated Universe to the stochastic GW background. We find that the energy density of the resulting GW radiation is heavily dependent on the number of elementary particles, $N_{\mathrm{tot}}$, and the maximum initial temperature, $T_{\mathrm{max}}$. We rule out $N_{\mathrm{tot}}\gtrsim N_{\mathrm{SM}}$ for $T_{\mathrm{max}}\sim T_{\mathrm{Planck}}\approx10^{19}$ GeV and $N_{\mathrm{tot}}\gtrsim10^{13}\times N_{\mathrm{SM}}$ for $T_{\mathrm{max}}\sim10^{16}$ GeV, where $N_{\mathrm{SM}}$ is the number of particles in the Standard Model. In the case of inflation, existing cosmological data constrain $T_{\mathrm{max}}\lesssim10^{16}$ GeV. However, alternative models to inflation such as bouncing cosmologies allow for $T_{\mathrm{max}}$ near $T_{\mathrm{Planck}}$. At the energy scales we are considering, the extra number of particles arise naturally in models of extra dimensions.
Information and communications technologies, strategic asymmetry and national security

In the history of warfare, there are a number of examples of strategic uses of asymmetric technologies. Consistent with history and theory, individuals, organizations and nations have spotted opportunities to employ information and communications technologies to gain and exploit asymmetric advantages and to counter asymmetric weaknesses. This article discusses various asymmetries associated with institutions, nations and organizations that influence the ICT-national security nexus. Regulative, normative and cognitive institutions in a country provide various mechanisms that affect the nature of positive and negative asymmetries. Nations and organizations also differ in terms of their capability to assimilate ICT tools to gain positive asymmetries and deal with vulnerabilities of negative asymmetries. Integrative approaches that combine policy and technological measures at various levels are likely to make the world more secure.
Equal Protection Under Algorithms: A New Statistical and Legal Framework

In this paper, we provide a new statistical and legal framework to understand the legality and fairness of predictive algorithms under the Equal Protection Clause. We begin by reviewing the main legal concerns regarding the use of protected characteristics such as race and the correlates of protected characteristics such as criminal history. The use of race and non-race correlates in predictive algorithms generates direct and proxy effects of race, respectively, that can lead to racial disparities that many view as unwarranted and discriminatory. These effects have led to the mainstream legal consensus that the use of race and non-race correlates in predictive algorithms is both problematic and potentially unconstitutional under the Equal Protection Clause. This mainstream position is also reflected in practice, with all commonly-used predictive algorithms excluding race and many excluding non-race correlates such as employment and education. In the second part of the paper, we challenge the mainstream legal position that the use of a protected characteristic always violates the Equal Protection Clause. We first develop a statistical framework that formalizes exactly how the direct and proxy effects of race can lead to algorithmic predictions that disadvantage minorities relative to non-minorities. While an overly formalistic legal solution requires exclusion of race and all potential non-race correlates, we show that this type of algorithm is unlikely to work in practice because nearly all algorithmic inputs are correlated with race. We then show that there are two simple statistical solutions that can eliminate the direct and proxy effects of race, and which are implementable even when all inputs are correlated with race. We argue that our proposed algorithms uphold the principles of the Equal Protection doctrine because they ensure that individuals are not treated differently on the basis of membership in a protected class, in stark contrast to commonly-used algorithms that unfairly disadvantage minorities despite the exclusion of race. We conclude by empirically testing our proposed algorithms in the context of the New York City pretrial system. We show that nearly all commonly-used algorithms violate certain principles underlying the Equal Protection Clause by including variables that are correlated with race, generating substantial proxy effects that unfairly disadvantage blacks relative to whites. Both of our proposed algorithms substantially reduce the number of black defendants detained compared to these commonly-used algorithms by eliminating these proxy effects. These findings suggest a fundamental rethinking of the Equal Protection doctrine as it applies to predictive algorithms and the folly of relying on commonly-used algorithms.
Climate Change and Water Transfers

Climate change adaptation is all about water. Although some governments have begun to plan for severe water disruptions, many have not. The consequences of inaction, however, may be dire. As a report of the U.N. Environment Programme warns, “countries that adopt a ‘wait and see’ approach potentially risk the lives of their people, their ecosystems and their economies.” In the United States, according to one study, nearly 60% of the states are unprepared to deal with the impending crisis. Responding to this void, we offer what we believe is the first comprehensive, state-by-state survey of water allocation law and its efforts to ensure an adequate water supply in the face of a changing climate. In particular, we focus on one specific allocation mechanism — “water transfer” — because it is both widely considered and broadly controversial as a climate adaptation strategy. Through this article, we seek to make three unique contributions to the literature. First, we parse the opaque usage of the phrase “water transfer” and construct a typology of its three most prominent meanings. Second, we have conducted an empirical review of water transfer statutes, and present our raw data in table form, grouped by state and by transfer type. Finally, we have categorized state transfer statutes along a continuum, from measures that restrict transfers, to those that mitigate transfer impacts, to those that encourage transfers. Overall, we offer to legislators a “toolkit” of options, arrayed along a logical continuum.
Evaluating the information in the federal reserve stress tests

Abstract We present evidence that the Federal Reserve stress tests produce information about both the stress-tested bank holding companies and the overall state of the banking industry. Our evidence goes beyond a standard event study, which cannot differentiate between small abnormal returns and large, but opposite-signed, abnormal stock returns. We find that stress test disclosures are associated with significantly higher absolute abnormal returns, as well as higher abnormal trading volume. More levered and riskier holding companies seem to be more affected by the stress test information. We find no evidence that stress test disclosures have reduced the production of private information. After disclosure begins, stress tested firms attract equity analysts without changing analysts’ forecast dispersions or their mean forecast error.
The Crisis of Secular Liberalism and the Constitutional State in Comparative Perspective: Religion, Rule of Law, and Democratic Organization of Religion Privileging States

Religion has returned to the secular state; does crisis result? Conflating variations of Marxist-Leninist states, whose godless communism” of the 20th century sought to marginalize religion as a political adversary, with the Westphalian state that sought to avoid sectarian conflict by separating the institutional state from the apparatus of religion, modern secular liberal theory has long problematized the role of religion in modern “secular” states. Critics of secular liberal modernity never fully accepted its premises and “post” modernists have sought to undo to “reform” the structures of secular liberalism to provide for a larger space for “religion” in politics and economics. This Article considers the issue of the “return” of religion from a comparative constitutional perspective. Its central premise is that where institutional religion is both protected and engaged in political life through which it seeks to harmonize institutional state and religious government, the resulting system tends to advantage a privileged religion in political life over its political rivals. This has implications for the way in which the fundamental ordering premises of liberal societies are understood and applied— rule of law, direct democracy, popular sovereignty, the protection of foreigners and the approaches to the interpretation of constitutional text. These implications contain lessons that might be considered by the United States as it seeks to carve a privileged role for religion while protecting its status as something special that cannot be touched by politics. The Article develops this thesis by weaving together several stories from developing and developed states where religion has acquired a more privileged role. These illustrate the ways that blasphemy and apostasy laws and the incorporation of religious values skew the
A Reference Dependent Representation with Subjective Tastes

Experimental and empirical evidence documents instances where the presence of an inferior option in a menu increases the attractiveness of the better options from that menu and thus distorts the normative ranking across menus. We analyze the case when besides this so called context effects bias there is also a concern for flexibility in the spirit of the literature initiated by Kreps (1979) and Dekel, Lipman and Rustichini (2001). Since the context effects bias and the desire for flexibility both increase the inclination of a decision maker to choose larger menus, the analysis allows the disentangling of the effect of the behavioral bias from the effect of the rational desire from flexibility. We find a weak condition on the set of ex post preferences under which the two effects are identifiable. We show that our representation is essentially unique. From a pedagogical viewpoint, our paper provides a novel methodology of identifying probabilities on the state space of subjective uncertainty introduced by Dekel, Lipman and Rustichini (2001) when this state space is infinite. This method renders the infinite state space essentially finite with respect to a certain salient property.
Regional Economic Arrangements and the Rule of Law in the Americas: The Human Rights Face of Free Trade Agreements

In the 2003 Conference on Legal and Policy Issues in the Americas and in courses and seminars taught at the University of Florida College of Law since 2001, the College’s International Trade Law Program has explored the more visible and controversial linkages between international trade law and non-trade issues that span a broad range of vital interests that may collectively be described as human rights law.
THE EFFECT OF INHERITANCE RECEIPT ON RETIREMENT

Abstract This paper provides new evidence on how wealth shocks influence retirement behavior. Economic theory generally posits that leisure is a normal good, yet it is difficult to obtain reliable empirical estimates of the wealth effect because wealth is correlated with numerous unobservable characteristics that affect labor supply. We use inheritance receipt as a wealth shock and find that it is associated with a significant increase in the probability of retirement, especially when the inheritance is unexpected. This evidence has important implications for how public policies, such as pension or tax reform, may influence retirement behavior through the wealth effect.
Foreword: The Legacy of St. George Tucker

St. George Tucker was one of the more influential jurists, legal scholars, and legal educators of late eighteenth- and early nineteenth-century America. This essay provides an introduction to this William and Mary Law Review symposium on Tucker and his influence on American law. In addition to serving as both a state and federal judge, and a law professor at William and Mary, Tucker made his mark as an important legal scholar. Although he would eventually be eclipsed in prominence by Joseph Story and James Kent, Tucker was the most significant legal scholar of the early nineteenth century, particularly after publication of his five-volume edition of William Blackstone’s Commentaries on the Laws of England in 1803. Tucker’s Blackstone included eight hundred pages of essays on a variety of legal and political topics and more than one thousand footnotes in which Tucker examined Blackstone in light of American and Virginian law. Tucker’s edition of Blackstone, known as “America’s Blackstone,” soon became the leading legal text in the United States, enjoying wide circulation throughout the country. Indeed, Tucker’s Blackstone, the first major legal treatise on American law, was one of the most influential legal works of the early ninet! eenth century, and the only treatise on American constitutional law until the1820s. Because Tucker wrote many of the essays that appeared in his edition of Blackstone during the early 1790s, and was quite familiar with the ratification controversy and the contemporary debates over the Bill of Rights, his essays on the Constitution offer a fascinating eighteenth-century perspective on the meaning of our central constitutional texts. The United States Supreme Court has cited Tucker’s Blackstone in more than forty cases as authority for eighteenth-century understandings of certain points of law including recent cases addressing state sovereign immunity and the ability of states to impose term limits on members of Congress. This symposium on St. George Tucker seeks to renew scholarly interest in one of the more compelling jurists, legal scholars, and legal educators of early America.
Innovation After the Revolution: Foreign Sovereign Bond Contracts Since 2003

Practitioners and academics agree: bond contract terms are highly standardized and hard to change. The dominant theory of contract change, based on network and learning analysis, posits that market participants value uniformity. Everyone uses standard terms; everyone knows what they mean. Market participants who trade boilerplate contracts have no trouble pricing them. Lawyers who draft contract boilerplate can predict how judges might interpret it. The down side of boilerplate is excess uniformity: change is Key points
Candidate quality, pressure group endorsements and the nature of political advertising

Abstract Candidates may vary in quality, where quality is some characteristic orthogonal to policy. This “simple modification” has for the most part defied integration into the Downsian framework. Here we add the following complicating factors. We consider the possibility that there are uninformed voters who are ignorant of the candidates' relative quality. However, a pressure group with inside information regarding the quality of the candidates may endorse one of the candidates as the high-quality candidate. We assume that the uninformed voters behave rationally in the presence of this endorsement. We demonstrate that truth telling by the pressure group is an equilibrium outcome. We also show that campaign endorsements by the pressure group are generally welfare improving even though the pressure group takes advantage of its private information.
Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report

The U.S. Securities and Exchange Commission (SEC) recently made timely reviews of quarterly financial statements mandatory for all registrants. The objective is to improve corporate quarterly reporting. However, formal review reports are not required to be included in 10‐Q filings, and may not even be issued by auditors. A priori, one would expect these reports to be useful to investors if they imply added auditor diligence or if they contain modifications to the standard report. We find that only 5.7 percent of the companies in our sample attached the auditor's review report in their 10‐Q filings. Also the majority of these reports are “clean,” suggesting that clients may not be disclosing the reports when they are modified. After controlling for factors such as auditor type, agency costs, capital market transactions, and company size, we find a significant negative association between auditors' litigation risk and disclosure of the review report. In addition, we find that the disclosure of the review re...
Detection and Severity Classifications of Sarbanes-Oxley Section 404 Internal Control Deficiencies

ABSTRACT: We examine detection and severity classification of internal control deficiencies (ICD) identified under Section 404 of the Sarbanes-Oxley Act of 2002. While the cost/benefit balance of auditor testing of internal controls is highly controversial, prior research has not examined auditor versus client detection of ICD, nor has it examined factors auditors consider in judging ICD severity. We find that auditors detect about three-fourths of unremediated ICD, usually though control testing. This finding contrasts with extant research inferring control deficiency detection effectiveness from publicly available data, underscoring the value of Section 404 auditor testing in improving financial reporting quality. Auditors judge greater severity when a misstatement has already occurred. In the absence of a misstatement, severity is contingent on client and ICD characteristics, implying a more complex and nuanced judgment process without objective evidence of control failure. We also find that clients of...
Clarifying (Opportunity) Costs

Opportunity cost is widely considered to be a fundamental concept in economics. But the definition of the term continues to be both unclear and controversial. I describe how the term is widely used in two distinct ways, both in academic and non-academic contexts. I propose a practical way for educators to clarify the concept and related terminology.
Optimal consumption and asset allocation with unknown income growth

Abstract Recent empirical evidence supports the view that the income process has an individual-specific growth rate component [Baker, M., 1997. Growth-rate heterogeneity and the covariance structure of life-cycle earnings. Journal of Labor Economics 15, 338–375; Guvenen, F., 2007b. Learning your earning: Are labor income shocks really very persistent? American Economic Review 97, 687–712; Huggett, M., Ventura, G., Yaron, A., 2007. Sources of life-cycle inequality. Working paper, University of Pennsylvania]. Moreover, the individual-specific growth component may be stochastic. Motivated by these empirical observations, I study an individual's optimal consumption–saving and portfolio choice problem when he does not observe his income growth. As in standard income fluctuation problems, the individual cannot fully insure himself against income shocks. In addition to the standard income-risk-induced precautionary saving demand, the individual also has learning-induced precautionary saving demand, which is greater when belief is more uncertain. With constant unobserved income growth, changes in belief are not predictable. However, with stationary stochastic income growth, belief is no longer a martingale. Mean reversion of belief reduces hedging demand on average and in turn mitigates the impact of estimation risk on consumption–saving and portfolio decisions.
A Review of Academic Research on the Reporting of Cash Flows from Operations

SYNOPSIS: We provide a comprehensive review of academic research related to direct method cash flow presentation. While many financial statement users have stated a preference for the direct method, few accounting standard setters around the world have required it and, given a choice, most entities present operating cash flows using the indirect method. Our review indicates that academic research has generally found direct method cash flow information to be decision useful. Also, research finds that direct method information is reflected in stock prices indicating that users appear to utilize this information when available. However, there are, as of yet, no studies detailing how this information makes its way into stock prices. Finally, the evidence we review suggests that direct method information is economically significant and that the recurring benefits that many firms derive from providing direct method information likely exceed recurring costs. Our review should be of interest to academics research...
The Psychology of Intertemporal Preferences

The focus in this chapter is on the psychological foundation of intertemporal decisions and the consequences for people’s decisions and behaviors. Rather than simply update the numerous excellent past reviews with a focus on the discounting phenomena, the emphasis in this chapter is on recent developments in uncovering the psychology underlying intertemporal preferences, understanding differences in discount rates across people and contexts, and using discounting to understand a broad range of intertemporal decisions and behaviors. The current chapter will therefore mainly focus on recent empirical findings with an emphasis on the psychological mechanisms underlying these findings. In particular, we examine the basic effects in the context of the different psychological mechanisms proposed in the literature. We conclude by pointing to open questions and the need to better map the match between the multiple psychological drivers and the types of intertemporal decisions they predominantly govern.
The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly

We argue that high accruals are likely to be the outcome of rules with an income statement perspective, while low accruals are likely to be the outcome of rules with a balance sheet perspective, and that this has implications for the properties of earnings. Specifically, earnings persistence is affected both by the magnitude and sign of the accruals. Accruals improve the persistence of earnings relative to cash flows in high accrual firms, but reduce earnings persistence in low accrual firms. We show that the low persistence of earnings in low accrual firms is primarily driven by special items. We then show that special item-low accrual firms have higher future stock returns than other low accrual firms. This is consistent with investors misunderstanding the transitory nature of special items. Further analysis reveals that special item-low accrual firms have poor past performance and declines in investor recognition (analyst coverage and institutional holdings). Special items continue to explain future returns after controlling for these factors.
Court-Ordered Busing and Housing Prices: The Case of Pasadena and San Marino

In 1970, the Federal District Court ordered that no school in the Pasadena School District would be allowed to open with a “majority minority population.” To comply with this order, Pasadena began busing many of its minority students to other within-district schools with smaller minority populations. This article will examine the effect of this integration policy on housing prices, using home sales data gathered from within the Pasadena and San Marino Unified School Districts (busing was not implemented in the latter district). The results indicate that the busing policy does not have a significant effect on the house prices.
Consumer financial education and financial capability

The purpose of this study was to explore potential effects of financial education on the financial capability of American consumers. Data from the 2012 National Financial Capability Study were used to test the hypothesis that financial education is positively associated with financial capability. Four financial literacy and behaviour variables were used to form a financial capability index. Multivariate linear regression results showed that, after controlling for demographic and financial variables, respondents who ever received financial education had higher scores in all financial capability indicators (objective financial literacy, subjective financial literacy, desirable financial behaviour, perceived financial capability and the financial capability index). In addition, high school, college and workplace financial education variables showed positive associations with these financial capability indicators. Additional state comparison analyses provided evidence suggesting high school financial education may have direct impacts and spillover effects on consumer financial capability.
Legal Causation and Responsibility for Causing Harm

In the legal setting, “cause” is composed of at least two distinct components, of which only one is related to “causality” as scientists understand it.I argue that the alleged separation of the social issue of “scope of responsibility” from the objective question of scientific causality is illusory. “Scientific causality” also plays an essential social role in the legal setting.
Title VI and the Warren County Protests

One part of the 1982 civil rights struggle against building a Polychlorinated Biphenyls ("PCB") landfill in Warren County, North Carolina, was a suit by the National Association for the Advancement of Colored People ("NAACP") under Title VI of the 1964 Civil Rights Act. Although the suit was unsuccessful, the Warren County protests led to a 1983 General Accounting Office study and a 1987 United Church of Christ's Commission on Racial Justice (CRJ) study, both of which found that hazardous waste facilities were more likely to be located in minority communities. The Warren County protests and the two studies helped build a broader environmental justice and civil rights movement that eventually led to President Clinton's requirement that federal agencies ensure that their grant recipients comply with Title VI. Community protests similar to those in Warren County are valuable in winning Title VI cases like Shintech, but revitalizing Title VI as an effective statute to protect minority groups requires a broader national movement for social justice that can influence national elections.
Evidence from seven countries on whether inventories smooth aggregate output

Abstract Casual examination of annual postwar data on inventories and aggregate output for seven developed countries - Canada, France, West Germany, Italy, Japan, United Kingdom, United States - suggests that in these countries the primary function of aggregate inventories is not to smooth aggregate output in the face of aggregate demand shocks. Japan is a possible exception to this generalization.
Voting as a Rational Choice: Why and How People Vote To Improve the Well-Being of Others

For voters with ‘social’ preferences, the expected utility of voting is approximately independent of the size of the electorate, suggesting that rational voter turnouts can be substantial even in large elections. Less important elections are predicted to have lower turnout, but a feedback mechanism keeps turnout at a reasonable level under a wide range of conditions. The main contributions of this paper are: (1) to show how, for an individual with both selfish and social preferences, the social preferences will dominate and make it rational for a typical person to vote even in large elections; (2) to show that rational socially motivated voting has a feedback mechanism that stabilizes turnout at reasonable levels (e.g.,50% of the electorate); (3) to link the rational social-utility model of voter turnout with survey findings on socially motivated vote choice.
Socialization: Insights from Social Cognition

Socialization is the process by which individuals are assisted to become members of their social groups. Findings from social cognition and cross-cultural psychology offer two major insights into the socialization process. First, basic social cognitive principles imply that the immediate environment functions as a socialization agent by activating and inhibiting knowledge structures and thereby shaping cognition and behavior. Second, because the immediate environment factors into cognition and behavior, socialization efforts should involve the modification of the environment for optimal effect. We discuss various examples of socialization through the configuration of the immediate environment, such as rituals and use of physical artifacts. Our review links basic social cognitive mechanisms to socialization processes, which are customarily treated at higher levels of analysis. How do children come to act like other members of their groups? How do immigrants become part of a new culture, and how do people adapt to their occupational roles? All these questions are about the process of socialization, most broadly defined as ‘the way in which individuals are assisted in becoming members of one or more social groups’ (Grusec & Hastings, 2007, p.1). Even though socialization is not a prominent concept in social psychology, ideas emanating from social cognition research are ripe with implications for understanding the socialization process. In this article, we will spell out the implications of social cognitive principles on socialization. Research in social cognition has revealed a great deal about how people process mental representations of social knowledge (e.g., Smith, 1998; Macrae & Bodenhausen, 2000). Social and cross-cultural psychologists built on these ideas and have shown how cultural knowledge and identity can fruitfully be conceptualized as mental representations like any other social information (e.g., Hong & Chiu, 2001; Lehman, Chiu, & Schaller, 2004). In this article, we adopt these cognitive conceptualizations of culture and identity as complex and loose knowledge structures, and define socialization as the process by which individuals are helped to acquire, maintain, and apply these knowledge structures. This social cognitive perspective offers two major insights to our understanding of socialization: