cssi/SciSciGPT-SciSciNet huggingface dataset:
When and Why do IPO Firms Manage Earnings

There is significant disagreement about whether, when, and why IPO firms manage earnings. We precisely identify the timing and motives behind earnings management by IPO firms. The period around an IPO is characterized by two events: the IPO itself and the lockup expiration. Both the raising of capital at the IPO and the exit by pre-IPO shareholders at lockup expiration create incentives for firms to manage earnings. To disentangle the effect of these events, we examine quarterly, rather than annual, abnormal accruals. We find no evidence of income-increasing earnings management before the IPO. However, IPO firms exhibit positive abnormal accruals in the quarter before and the quarter of the lockup expiration. Positive abnormal accruals are concentrated in less scrutinized firms and firms with high selling by pre-IPO shareholders. Moreover, we find that these accruals subsequently reverse and that such reversals contribute to long-run IPO underperformance.
Identification and estimation of Gaussian affine term structure models

a b s t r a c t This paper develops new results for identification and estimation of Gaussian affine term structure models. We establish that three popular canonical representations are unidentified, and demonstrate how unidentified regions can complicate numerical optimization. A separate contribution of the paper is the proposal of minimum-chi-square estimation as an alternative to MLE. We show that, although it is asymptotically equivalent to MLE, it can be much easier to compute. In some cases, MCSE allows researchers to recognize with certainty whether a given estimate represents a global maximum of the likelihood function and makes feasible the computation of small-sample standard errors.
Optimal Corporate Governance in the Presence of an Activist Investor

We provide a model of governance in which a board arbitrates between an activist investor and a manager facing reputational concerns. The optimal level of internal board governance depends on both the severity of the agency conflict and the strength of external governance. Internal governance creates a certification effect, so greater intervention by the board can lead to worse managerial behavior. Internal and external governance are substitutes when external governance is weak (the board commits to an interventionist policy to induce participation from the activist) and complements when external governance is strong (the board relies to a greater extent on the activist's information). The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.
A Theory of the Dynamics of Entangled Political Economy with Application to the Federal Reserve

This paper develops the theory of entangled political economy by outlining a process by which the political-economic order can become increasingly entangled. The theory posits that a Big Player polity organization, a key feature of which is a lack of a hard budget constraint, exports this feature to the economy organizations it oversees. The channel through which it does so is the repeated interactions of economy and polity organizations’ agents during times of crisis. The actions of the Federal Reserve, in particular its bailing out of large financial houses in the latter part of the 20th century and the most recent financial crisis, are used as a historical illustration of this theory. The paper also discusses the possibility of constitutional craftsmanship as a solution to the undesirable consequences that accompany increased economy-polity entanglement.
Lessons from Fiascos in Russian Corporate Governance

"Bad corporate governance" is often invoked to explain poor enterprise performance, but the catch phrase is never precisely defined - neither its consequences for the real economy, nor its causes in particular countries has been adequately explained. This paper uses Russian enterprise examples to address these open questions in corporate governance theory. We define corporate governance by looking to the economic functions of the firm rather than to any particular set of national corporate laws. Firms exhibit good corporate governance when their managers maximize residuals and, in the case of investor-owned firms, make pro rata distributions to shareholders. First, using this definition, we develop a typology that shows the channels through which bad corporate governance can inflict damage on the real economy. The topology helps identify vulnerabilities to corporate governance problems that may appear in any country and it suggests a new way to tailor policy responses. Second, we explain the causes of poor corporate performance in Russia by looking to the particular conditions prevailing at privatization - untenable initial firm boundaries and insider allocation of firm shares - and the bargaining dynamics that followed. The focus on initial conditions helps expand a comparative corporate governance literature built on United States, Western European, and Japanese models. Lessons from Russian fiascos counsel caution as to "stakeholder" proposals - including labor or local communities in formal corporate governance - and generate testable hypotheses regarding potential losses from the multiple large block share ownerships typical of many U.S. firms, especially close corporations.
The Known Unknowns of the Business Tax Reforms Proposed in the House Republican Blueprint

This set of slides raises important issues and questions concerning the potential effects of a border-adjusted destination-based cash flow tax (DBCFT) as proposed in the 2016 House Blueprint “A Better Way.” This will form the basis for an article forthcoming in the Columbia Tax Journal. Citations have been omitted here.
Collaborative Approaches Needed to Close the Big Data Skills Gap

The big data and analytics talent discussion has largely focused on a single role – the data scientist. However, the need is much broader than data scientists. Data has become a strategic business asset. Every professional occupation must adapt to this new mindset. Universities in partnership with industry must move quickly to ensure that the graduates they produce have the required skills for the age of big data. Existing curricula should be reviewed and adapted to ensure relevance. New curricula and degree programs are needed to meet the needs of industry.
Dynamic pricing and advertising for web content providers

The accumulated evidence indicates that pure revenue models, such as free-access models and pure subscription fee-based models, are not sufficient to support the survival of online information sellers. Hence, hybrid models based on a combination of subscription fees and advertising revenues are replacing the pure revenue models. In response to increasing interest in hybrid models, we study the problem of dynamic pricing of web content on a site where revenue is generated from subscription fee as well as advertisements. We use the optimal control theory to solve the problem and obtain the subscription fee and the advertisement level over time. We first consider the case when the subscription fee can vary over time, but the advertisement level stays the same. Then we extend it by optimizing both the subscription fee and the advertisement level dynamically. We also present several analytical and numerical results that provide important managerial insights.
SIMULATION‐BASED PORTFOLIO OPTIMIZATION FOR LARGE PORTFOLIOS WITH TRANSACTION COSTS

We consider a portfolio optimization problem where the investor’s objective is to maximize the long-term expected growth rate, in the presence of proportional transaction costs. This problem belongs to the class of stochastic control problems with singular controls ,w hich are usually solved by computing solutions to related partial differential equations called the free-boundary Hamilton–Jacobi–Bellman (HJB) equations. The dimensionality of the HJB equals the number of stocks in the portfolio. The runtime of existing solution methods grow super-exponentially with dimension, making them unsuitable to compute optimal solutions to portfolio optimization problems with even four stocks. In this work we first present a boundary update procedure that converts the free boundary problem into a sequence of fixed boundary problems. Then by combining simulation with the boundary update procedure, we provide a computational scheme whose runtime, as shown by the numerical tests, scales polynomially in dimension. The results are compared and corroborated against existing methods that scale super-exponentially in dimension. The method presented herein enables the first ever computational solution to free-boundary problems in dimensions greater than three.
Financial and Capital Account Liberalization in the Pacific Basin: Korea and Taiwan During the 1980's

This paper presents an alternative method of testing for financial capital mobility in the absence of forward exchange markets. A model of domestic interest rate determination during liberalization is applied to Korean and Taiwanese data. A variety fo diagnostic and recursive tests are used to isolate structural breaks in the data. It is shown that Korean interest rates behave as if determined domestically until late 1988 or early 1989, while Taiwanese rates exhibit this behavior until early 1989. Thereafter, these economies' interest rates appear tightly linked to the Euro Yen rate. These results contrast with those obtained by Reisen and Yeches (1993) which indicated a single opening and closing for Korea, and no structural break for Taiwan. They also differ from those results of Jwa (1994) indicating two temporary openings for Korea. Greater integraton of these domestic markets with world financial markets suggests that it will be more difficult for these countries to stabilize their economies in the f...
The Rise of Rule Four Institutions: Voluntary Standards, Certification and Labeling Systems

Voluntary standards, certification and labeling mechanisms are one of many forms of private governance institutions that have been developed in recent years to permit communities to govern without government. These institutions enhance efficiency by internalizing externalized social costs and meeting consumer preferences associated with risk. This article advances the existing literature in three ways. First, the article observes that, as a descriptive matter, voluntary standards, certification and labeling systems are “Rule 4” institutions, systems; they permit parties to pursue a Coasian solution to externalities by facilitating the exchange of entitlements. Drawing from Calabresi and Melamed’s seminal article, “Property Rules, Liability Rules and Inalienability Rules: One View of the Cathedral,” the article explains how voluntary standards, certification and labeling systems, by lowering their steep transaction and information costs, permit consumers to trade entitlements. Second, the article observes that these systems are developed primarily in response to government void and government failure, and that this belies the central premise of the Coase theorem - that the main obstacle to internalizing externalities through private sector solutions is the lack of properly defined property rights. These systems permit the exchange of entitlements, not by allocating or defining property rights, but by addressing knowledge problems and collective action problems, suggesting that these are the true impediments to reaching Pareto efficient allocations of resources through Coasian exchanges. Third, the article argues that where governments have adopted voluntary standards certification and labeling systems to counteract their own allocation of entitlements, an overhaul of existing law to change the original allocation may be in order.
Inefficient Credit Booms

This paper studies the welfare properties of competitive equilibria in an economy with financial frictions hit by aggregate shocks. In particular, it shows that competitive financial contracts can result in excessive borrowing ex ante and excessive volatility ex post. Even though from a first-best perspective the equilibrium always displays under-borrowing, from a second-best point of view excessive borrowing can arise. The inefficiency is due to the combination of limited commitment in financial contracts and the fact that asset prices are determined in a spot market. This generates a pecuniary externality that is not internalized in private contracts. The model provides a framework to evaluate preventive policies, which can be used during a credit boom to reduce the expected costs of a financial crisis. Copyright 2008, Wiley-Blackwell.
Varieties of Social Discipline: Collective Action in a Law Firm

How can actors whose interests diverge and potentially conflict be encouraged to cooperate? That is a central problem for all societies, polities, and economies. Two solutions have dominated the sphere of production: markets and bureaucracies. Markets allow producers to use contracts to exchange factors of production (including labour) and sell their products and services to ultimate consumers. The producers themselves tend to be organized bureaucratically (today mostly as private companies). But both markets and bureaucracies seem ill-suited to productive processes characterized by complexity, uncertain quality, high variability, and a constant need for innovation.' Examples include medical care, knowledge (both production through research and reproduction in schools and universities), marketing (advertising and public relations), religion, culture (both high and low), architecture, accounting, consulting and law, the subject of this book. It is possible to produce legal services using either markets or bureaucracies. Some sole practitioners rent most of the necessary inputs from outsiders: office, furniture, library (real or virtual), secretary, fact investigation, research, writing, even 'per diem' and 'of counsel' court appearances. (The divided profession and ban on barrister partnerships mandated such arrangements.) But as Oliver Williamson has shown, efficiencies often can be achieved by bringing these inputs within the firm.2
Voting Power without Responsibility or Risk: How Should Proxy Reform Address the Decoupling of Economic and Voting Rights

The regulation of proxy voting resides at an uncomfortable intersection between federal and state law. Although state law controls the holding of annual meetings to elect directors and the corporate governance aspects of proxy voting, the federal securities laws control the solicitation of proxies. Since at least 1977 shareholder activists have been trying to persuade the Securities and Exchange Committee (“SEC”) to revise the proxy solicitation disseminated by a public corporation to allow competing shareholder nominees to be included in opposition to the board of directors’ nominees. Although the SEC has proposed rules to this effect, such rules have not yet been adopted. An SEC rule permitting some shareholder access to management’s proxy is probably inevitable during the administration of Mary Schapiro as SEC Chair. If a shareholder access rule goes forward, one of the issues the SEC will have to address is which shareholders should be granted such access. The growth of derivatives and various trading strategies by some investors have led to a decoupling of economic and voting rights in public corporations, permitting proxy voting by shareholders with little or no economic interest in the shares they vote. Such voting is referred to as “empty voting.” If the SEC engages in proxy reform to allow competing director nominees to appear on the same ballot, the problems of empty voting in a proxy contest are likely to be exacerbated unless the SEC addresses this issue. But the question of whether economic rights need to be aligned with voting rights in order for voting rights to be valid, would appear to be a state law, rather than a federal law, issue. Further, a recent Delaware Supreme Court case suggests that the Delaware courts are prepared to referee the skirmishes between institutional shareholders and corporate boards with regard to shareholder nominations, and recently enacted legislation in Delaware likewise would deal with shareholder proposals to amend by-laws to allow for shareholder nominees in a company proxy. Therefore, even if the SEC has authority with regard to granting some shareholders access to a company’s proxy, there is a policy question as to whether such regulation of corporate internal affairs is wise.
Does Nonprofit Ownership Matter

In recent years, policymakers have increasingly questioned whether nonprofit institutions, particularly hospitals, merit tax exemption. They argue that nonprofit hospitals differ little from their for-profit counterparts in the provision of charity care and, therefore, should either lose their tax-exempt status or adhere to new, strict, and specific requirements to provide free services for the poor. In this Article, I present evidence that hospital ownership - whether it is for-profit, nonprofit, or government owned - has a significant effect on the mix of medical services it offers. Despite notoriously weak enforcement mechanisms, nonprofit hospitals act in the public interest by providing services that are unlikely to be offered by the other types of hospitals. Imposing onerous charity requirements or limiting nonprofit tax exemptions may have severe and unintended consequences for all patients, including the well-insured.
Multidimensional butterfly factorization

Abstract This paper introduces the multidimensional butterfly factorization as a data-sparse representation of multidimensional kernel matrices that satisfy the complementary low-rank property. This factorization approximates such a kernel matrix of size N × N with a product of O ( log ⁡ N ) sparse matrices, each of which contains O ( N ) nonzero entries. We also propose efficient algorithms for constructing this factorization when either (i) a fast algorithm for applying the kernel matrix and its adjoint is available or (ii) every entry of the kernel matrix can be evaluated in O ( 1 ) operations. For the kernel matrices of multidimensional Fourier integral operators, for which the complementary low-rank property is not satisfied due to a singularity at the origin, we extend this factorization by combining it with either a polar coordinate transformation or a multiscale decomposition of the integration domain to overcome the singularity. Numerical results are provided to demonstrate the efficiency of the proposed algorithms.
Developing Countries, Dispute Settlement, and the Advisory Centre on WTO Law

Critical appraisals of the current and potential benefits from developing country engagement in the World Trade Organization (WTO) focus mainly on the Doha Round of negotiations. This paper examines developing country participation in the WTO dispute settlement system to enforce foreign market access rights already negotiated in earlier multilateral rounds. The dispute data from 1995 through 2008 reveal three notable trends: developing countries sustained rate of self-enforcement actions despite declining use of the Dispute Settlement Understanding (DSU) by developed countries, developing countries increased use of the DSU to self-enforce their access to the markets of developing as well as developed country markets, and the prevalence of disputes targeting highly observable causes of lost foreign market access, such as antidumping, countervailing duties, and safeguards. The paper also examines potential impacts of the Advisory Centre on WTO Law (ACWL) into the WTO system in 2001. A close look at the data reveals evidence on at least three channels through which the ACWL may be enhancing developing countries' ability to self-enforce foreign market access: increased initiation of sole-complainant cases, more extensive pursuit of the DSU legal process for any given case, and initiation of disputes over smaller values of lost trade.
AN ESTIMATE OF AVERAGE INCOME AND INEQUALITY IN BYZANTIUM AROUND YEAR 1000

Using recent economic statistics from the peak period of Byzantine political and economic influence, we estimate the average income around the year 1000 to have been about 6 nomismata per capita per annum. This is then translated into current prices using two independent methods. They both yield an estimate around $PPP 640–680 in 1990 international prices. It is argued that this amount is some 20 percent below an average estimate of Roman incomes at the time of Augustus (around year one). Assuming that most of income differences in Byzantium were due to the differences in average incomes between social classes, we estimate the Gini coefficient to have been in the range between 40 and 45.
Horizontal Product Differentiation in Auctions and Multilateral Negotiations

We experimentally compare first-price auctions and multilateral negotiations after introducing horizontal product differentiation into a standard procurement setting. Both institutions yield identical surplus for the buyer, a difference from prior findings with homogeneous products that results from differentiation's influence on sellers' pricing behaviour. The data are consistent with this finding being driven by concessions from low-cost sellers in response to differentiation reducing their likelihood of being the buyer's surplus-maximizing trading partner. Further analysis shows that introducing product differentiation increases the intensity of price competition among sellers, which contrasts with the conventional wisdom that product differentiation softens competition.
Dictionaries Fail: The Volcker Rule's Reliance on Definitions Renders it Ineffective and a New Solution is Needed to Adequately Regulate Proprietary Trading

In the wake of the recent financial crisis, Congress enacted legislation to regulate the proprietary trading activities of Wall Street banks. The Volcker Rule, passed into law as section 619 of the DoddFrank Act, bans proprietary trading for deposit-taking banks and bankholding companies with deposit-taking subsidiaries or affiliates. It nevertheless allows these institutions to continue to trade on behalf of customers, a category of transactions necessary for the healthy functioning of both the U.S. and global financial systems. The Rule proposes that regulators devise rules to distinguish between permissible, often client-facing trades, and impermissible proprietary trades. The rules rely on definitions and metrics to form bright-line distinctions. The thesis of this article is that such a system is doomed to fail because of inherent methodological flaws. This article analyzes the regulation of banking entities under the Glass-Steagall Act of 1933 in order to demonstrate the successful implementation of a structure-based regulatory regime that separated investment banks from commercial banks. As a result, proprietary trading activities were structurally insulated from institutional access to the Federal Reserve Bank’s Discount Window. This article acknowledges the argument that a return to a Glass-Steagall-style regulatory regime is infeasible following the passage of the GrammLeach-Bliley Act of 1999, which gave rise to modern financial institutions. This explains why the Volcker Rule focuses on transactions instead of structure. This article concludes by proposing an alternative regulatory plan that would sidestep the problem-laden task of attempting to distinguish proprietary from non-proprietary trading on a bright-line basis; instead, the proposed regime would focus on regulating all sales and trading activities together on a structural level. The plan would cleave trading operations from the banking entities’ structures by separating them into subsidiary entities with independent capitalization and ownership. This plan is engineered to isolate traders from the moral hazards created by institutional access to the Federal Reserve Discount Window. Furthermore, it would shackle the continuance of their client-serving operations to the risks taken in their proprietary books. WINTER 2011 DICTIONARIES FAIL
ENDOGENOUS FORMATION OF COMPETITIVE RESEARCH SHARING JOINT VENTURES

Research sharing is an important objective of many research joint ventures. When partners share R&D but do not maximize joint profits, large consortia are more profitable than small ones, and joint ventures prefer dispersed rivals. For much of the spillover space, a coalition formation game that permits limited membership predicts that at most, three joint ventures form. Research-sharing joint ventures improve welfare when spillovers are low, and banning research sharing joint ventures is beneficial for high spillovers. With imperfect research sharing and low spillovers, allowing only research sharing is the best industry-wide joint venture alternative for consumer surplus. ANALYSES OF RESEARCH JOINT VENTURES have principally focused on two motivationsFsharing complementary technology or expertise, and internalizing research spillover externalities. In case studies and surveys, the management literature has focused on the importance of gaining access to complementary expertise, while theoretical work in industrial organization has emphasized internalizing spillovers as the main benefit of collaborative research. This article extends prior game-theoretic models in order to examine the effects of research sharing on welfare and on firm incentives to form joint ventures. Recognizing that research sharing among partners may be imperfect, and that firms frequently can limit venture membership (thereby inducing competition from one or more rival consortia), this work establishes that research sharing joint ventures often improve surplus, even when spillovers are not internalized. In an influential article, d’Aspremont and Jacquemin [1988] model research joint ventures as inducing duopolist partners to choose research
Strategy for labor

[Editor’s Note: What follows is an unofficial transcript of an off-the-record conversa-tion among three of the labor movement’s leading strategists. The meeting was con-vened by C, or “cooperationist,” who had been for over ten years the president of a local union, part of a major industrial union, representing 3,000 employees who had been hired to staff a new manufacturing plant in a Southern town (“Newplant”). New-plant had been widely touted as a breakthrough in U.S. labor-management relations because it was consciously designed to promote greater participation of production and maintenance workers in business decisions and a “comanagement” role for local union officials alongside traditional management. In bitterly contested local elections last year, C was voted out of office and now serves in a staff capacity at the AFL-C10. A, or “adversarialist,” perhaps surprisingly a longstanding friend of C, is the research director of another industrial union. A was very active in the Students for a Democ-ratic Society in the 1960s, and after graduating from Oberlin College began his career as a labor organizer, working for a succession of unions that had been active in the McGovern wing of the Democratic Party. S, or “stay the course,” is the highly respected chief of staff for a national union representing government workers. Section headings and parenthetical references are supplied by the editor and do not appear in the original transcript.]
Lawyers in the Moral Maze

This article overviews the various forms of lawyer complicity in illegal or immoral behavior by corporate managers in the corporate scandals of the last three years, but focuses primarily on the question of why lawyers so often seemed willing to engage in or ignore behavior that presumably violated their own personal moral codes (whether religious or secular) as well as their professional role morality. The article draws on Robert Jackall's Moral Mazes (1988) for an answer derived from the sociology of corporate bureaucracies. Jackall's case studies of corporate managers found that managers adhered to the moral "rules-in-use" developed in their social setting to facilitate their own survival and success. These rules emphasized an ethos of unrelenting pragmatism, flexibility and cynicism that placed great weight on group loyalty. By adopting their social setting's actual moral rules-in-use, managers tended to bracket other moral considerations, removing such considerations as a potential obstacle to illegal or immoral behavior. Applying Jackall's concept of socially-defined moral rules-in-use to corporate in-house counsel and lawyers in large firms, the article concludes that the social settings in which lawyers operate can produce a similar bracketing of moral concerns and, even more important, the type of professional role morality that should check managerial wrongdoing. The potential impact of the SEC's new professional standards for lawyers is assessed pessimistically in light of this phenomenon.
Restoring (and Risking) Interest in International Law

Jack Goldsmith of Harvard Law School and Eric Posner of the University of Chicago Law School articulate a comprehensive and engaging theory of state behaviors in their new book, “The Limits of International Law,” but with several internal flaws. Their book uses rational choice theory to explain how states act rationally to maximize their interests, and how, in doing so, states align themselves (sometimes) with international law. This book review argues that while Limits is a skilled and pioneering work that deserves to be taken seriously, it also suffers from tensions and over-generalizations that undermine its claims. As a result, I posit, Limits may be construed to undermine the importance of international law, thereby diminishing respect for it in the U.S. and abroad. The review concludes that the insights of Limits must be refined and clarified through deeper theoretical analysis and through examination of specific episodes of state behavior.
Development of a high-time/spatial resolution self-impedance probe for measurements in laboratory and space plasmas

Plasma impedance probes are often used in laboratory experiments as well as in space to make measurements of important plasma parameters such as the electron density. Conventional impedance probe methods involve sweeping the frequency applied to the probe through a range containing the plasma frequency, which can take on the order of a second to complete. This acquisition time leads to very low spatial resolution when making measurements from sounding rockets in the ionosphere. A high-time resolution impedance probe is under development at the U.S. Naval Research Laboratory with the goal of increasing the spatial resolution of measurements in space. To achieve this, a short-time Gaussian monopulse with a center frequency of 40 MHz and containing a full spectrum of frequencies is applied to an electrically short dipole antenna. Laboratory experiments were performed with the Gaussian monopulse triggered once every 10 µs and averaged over ten shots, equating to a spatial resolution of 13 cm for a typical sounding rocket speed. This paper discusses the development of the new high-time/spatial resolution self-impedance probe and illustrates that the short-time pulse method yields results that match well with data taken using conventional methods. It is shown that plasma parameters such as the electron density, sheath frequency, and electron–neutral collision frequency can also be derived from the data. In addition, data from the high-time/spatial resolution impedance probe are shown to compare well with those from theoretical impedance models.
Financial constraints, real options and corporate cash holdings

Purpose – A large body of empirical literature has identified the key drivers of corporate cash holdings. The extant literature posits that the existence of real options significantly influences a firm's demand for liquidity. The literature, however, has relied on indirect proxies to assess this influence. The purpose of this paper is to provide a direct method for assessing this hypothesis. It is posited that firms with valuable real options hold excess cash and liquid assets, relative to firms lacking such opportunities.Design/methodology/approach – The author utilizes a procedure originally proposed by Copeland and Antikarov to identify firms with valuable real options. This procedure assumes that an option's value will rise with its underlying uncertainty and with firm's managerial flexibility, i.e. discretion over the timely exercise of the option. Without a large cash hoard, a firm with “in‐the‐money” real options may face “financing constraints” that result in foregone or delayed exercise of these ...
Particle Projection Using a Complex Langevin Method

Using complex stochastic quantization, we implement a particle-number projection technique on the partition function of spin-1/2 fermions at finite temperature on the lattice. We discuss the method, its application towards obtaining the thermal properties of finite Fermi systems in three spatial dimensions, and results for the first five virial coefficients of one-dimensional, attractively interacting fermions.
Limited Attention and the Allocation of Effort in Securities Trading

While limited attention has been analyzed in a variety of economic and psychological settings, its impact on financial markets is not well understood. In this paper, we examine individual NYSE specialist portfolios and test whether liquidity provision is affected as specialists allocate their attention across stocks. Our results indicate that specialists allocate effort toward their most active stocks during periods of increased activity, resulting in less frequent price improvement and increased transaction costs for their remaining assigned stocks. Thus, the allocation of effort due to limited attention has a significant impact on liquidity provision in securities markets.
Accounting Discretion and Managerial Conservatism: An intertemporal analysis *

Accounting discretion and the principle of conservatism are two salient features embedded in financial reporting systems. Arguably, the practice of conservative accounting choices can never be well understood without incorporating their effect on future periods (the intertemporal effect). This paper provides one explanation for managerial conservatism in a two-period agency model with hidden information (a binary project type) and hidden actions (the agent's efforts). A piece-wise linear incentive scheme with accounting earnings as the performance measure is employed. The agent's discretion is the choice of a depreciation method. Discretion is valuable if and only if the agent's marginal productivity of a “bad” project is greater than that of a “good” project, but not to an extreme degree. A conservative depreciation method decreases current compensation in exchange for a “bet” on future compensation and, hence, serves as a commitment device for the agent to signal that the prospect is indeed good. The accounting mechanism replicates the performance of the optimal direct mechanism.
Leaning against the wind: Macroprudential policy in Asia

In recent years, many countries have adopted macroprudential measures to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. Using a newly constructed database on macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions for the period 2000–2013, the paper formulates various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are assessed through an event study, cross-country macro panel regressions, and bank-level micro panel regressions. The analysis suggests that housing-related macroprudential instruments-particularly loan-to-value ratio caps and housing tax measures—have helped curb housing price growth, credit growth, and bank leverage in Asia.
On Curbing Obesity

Public policies to combat obesity (with the notable exception of Let’s Move, initiated by Michelle Obama) tend to focus on reducing caloric intake (dieting). These efforts often fail and have some negative side effects and multiple economic and human costs. To the extent that we are dealing with individuals (rather than with societal factors) a more effective policy would give more weight to exercise as compared to dieting and, above all, focus on parents (and thus on young children) rather than on adults. This is the case because as children become adults, their BMI is set to a very considerable extent.
The Environmentalist Attack on Environmental Law

This essay reviews two books written by leading scholars that express profound dissatisfaction with the ability of environmental law to actually protect the environment. Mary Wood’s “Nature’s Trust: Environmental Law for a New Ecological Age” calls for “deep change in environmental law,” emphasizing the roles that agency issuance of permits to modify the environment and excessive deference to agency decisions play in ongoing environmental destruction. Wood proposes a “Nature’s Trust” built on the public trust doctrine to empower courts to play a much more aggressive role in overseeing environmental decisionmaking. In “Green Governance: Ecological Survival, Human Rights, and the Law of the Commons,” Burns Weston and David Bollier identify the state/market alliance is the problem, and their solution is decentralized governance based on informal norms. Both books are especially effective in identifying the shortcomings in how environmental law actually operates today. But their proposed solutions are likely to fall short absent a more fundamental transformation on how we imagine the natural environment and humanity’s relationship to it. The public trust doctrine and the commons have been part of the fabric of the law for centuries, yet they have failed to accomplish the environmental goals that Wood, Weston, and Bollier hope to achieve now. And if we do experience a fundamental transformation in environmental thinking, then the existing environmental laws may finally fulfill their original purposes.
The Rise of US Anti-dumping Activity in Historical Perspective

Empirical studies of anti-dumping activity focus almost exclusively on the period since 1980. This paper puts recent US anti-dumping experience in historical context by studying the determinants of annual case filings over the past half century. The conventional view that few anti-dumping cases existed prior to 1980 is not correct, although most did not result in the imposition of duties. The increased number of cases in recent decades largely reflects petitions that target multiple-source countries; the number of imported products involved has actually fallen since the mid-1980s. The annual number of anti-dumping cases is influenced by the unemployment rate, the exchange rate, import penetration (closely related to the decline in average tariffs), and changes in the anti-dumping law and its enforcement in the early 1980s.
Financing and Investment Efficiency, Information Quality, and Accounting Biases

In this paper, we investigate the effect of accounting biases on firms' financing decisions and the role of accounting biases in endogenous information quality. We show that in industries with generally low-profit prospects, a downward-biased accounting system performs better than a neutral accounting system, and a more downward bias helps mitigate both investment and financing inefficiency; whereas for industries with generally high-profit prospects, an upward-biased accounting system is better than a neutral accounting system, and a more upward bias helps improve financing efficiency. In addition, we find that a more downward-biased accounting system motivates good firms to exert more effort to improve the information quality, which improves overall efficiency. This paper was accepted by Mary Barth, accounting.
Justice Scalia's Hat Trick and the Supreme Court's Flawed Understanding of Twenty-First Century Arbitration

The Supreme Court has decided more than two dozen cases under the Federal Arbitration Act (FAA) since 2000 – arising primarily from commercial, consumer, employment, or securities disputes. Those decisions, particularly those interpreting FAA §2, have contributed to the Court’s modern arbitration jurisprudence that creates a strong national policy favoring arbitration, enforces agreements to arbitrate against virtually any defense, pushes many individual claims into arbitration against the will of one or more parties, and suppresses other claims, particularly those of small dollar value. Yet, those decisions describe the arbitration process as practiced when Congress enacted the FAA in 1925; not the process as practiced in the twenty-first century. This paper explores the dichotomy between the Supreme Court’s theoretical understanding of arbitration on which its FAA jurisprudence is based and the reality of the current and varied practice of arbitration. This paper identifies language from recent Supreme Court arbitration cases to demonstrate that the Court’s current depiction of arbitration is oversimplified and out-of-date. The Court’s uninformed and out-of-touch decisions have crafted a legal framework regulating an arbitration process that largely no longer exists.This paper argues that the Court’s flawed understanding of arbitration has fueled its misinterpretation of the FAA, harmed disputants and contributed to the widely-held perception that arbitration is unfair. This, in turn, has led to a shift away from arbitration as a favored method of dispute resolution for those who have a choice, while forcing the process on those without a choice.
The evolution and vitality of merger presumptions: A decision-theoretic approach

[A] merger which produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market is so inherently likely to lessen competition substantially that it must be enjoined in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects. Philadelphia National Bank1
Derivative Ruination in the 1990s: Les Apparences sont Trompeuses

A spectacular financial revolution spanning 20 years created new securities deriving from other securities, which trade in volumes of trillions of dollars in markets, now thought to be the largest and more important in the world. Known as swaps, swaptions, index futures, puttable bonds, collateralized mortgage obligations, stripped bonds, options, and futures, among other exotic names, these financial contracts were designed as a means of laying off risk involving conventional business transactions. This article details massive abuses in the proper use of these insurance products, which resulted in billions of dollars of speculation losses suffered by Procter & Gamble, Gibson Greeting Cards, Orange County California, Metallgesellschaft AG, various-public employees' retirement funds—and which brought down one of Europe's oldest merchant banks, Barings PLC. © 2001 John Wiley & Sons, Inc.
Enduring Equity in the Close Corporation

Much has changed since the summer of 1976—famously, the nation’s Bicentennial, but also the date of Wilkes v. Springside Nursing Home, Inc.,2 the focus of this Symposium. In mid-2010, for example, South Africa was the site of a peaceful if exuberant World Cup Soccer tournament,3 whereas in mid-1976, South African po­ lice opened fire on crowds protesting the government’s harrowing apartheid policies.4 Unemployment stood at 7.7% in 19765—higher than usual, but not the August 2010, stubborn rate of 9.7%.6 The
Liquidity Constraints and Imperfect Information in Subprime Lending

ditions for precisely the population that is most likely to have a difficult time obtaining credit, those with low incomes and poor credit histories. These consumers, who typically cannot qualify for regular bank loans, comprise the so-called subprime market. Because the company we study originates subprime loans, its loan applications and transaction records provide an unusual win dow into the consumption and borrowing behavior of households that are rationed in primary credit markets. Moreover, we track loan repayments, allowing us to analyze the difficulties in lending to the subprime population. We begin by documenting the importance of short-term liquidity constraints for individuals in our sample. We present two pieces of evidence. Both are based on purchasing behavior and indicate a high sensitivity to cash-on-hand. First, we document a dramatic degree of demand seasonality associated with tax rebates. Overall demand is almost 50 percent higher during tax rebate season than during other parts of the year. This seasonal effect varies with household
Constitutional Remedies For Underinclusive Statutes: A Critical Appraisal of Heckler v. Mathews

The power of the federal courts to remedy injuries caused by constitutional violations is a fundamental assumption of our constitutional scheme. The Supreme Court's equal protection decisions of the past generation illustrate the extent to which we take this power completely for granted. When confronted with a statute that denies a litigant's fifth or fourteenth amendment right to equal treatment, the Court has rarely limited itself to a simple declaration that the statute is unconstitutional. Such declarations, rather, have been routinely accompanied by awards of often substantial relief to the persons injured by the unconstitutional inequality. The author analyzes Heckler v. Matthews as it informs this area of law.
Collateral damage: Exchange controls and international trade

Abstract While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable.
Monetary policy transparency and financial market forecasts in South Africa

The transparency of monetary policy in South Africa has increased substantially since the end of the 1990s. But little empirical work has been done to examine the economic benefits of the increased transparency. This paper shows that, in recent years, South African private sector forecasters have become better able to forecast interest rates, are less surprised by reserve bank policy announcements, and are less diverse in the cross-sectional variety of their interest rate forecasts. In addition, there is some evidence that the accuracy of inflation forecasts has increased. The improvements in interest rate and inflation forecasts have exceeded those in real output forecasts, suggesting that increases in monetary policy transparency are likely to have played a role.
Detecting Latent Heterogeneity

We address the task of determining, from statistical averages alone, whether a population under study consists of several subpopulations, unknown to the investigator, each responding to a given tre...