Book Reviews

Book reviewed in this article: Real Estate Finance. By C. F. SIRMANS. Investments. By NANCY L. JACOB and R. RICHARDSON PETTIT. Homewood, Illinois: Richard D. Irwin, Inc., 1984. Pp. xxii + 973. Introduction to Financial Management. By JOHN A. HALLORAN and HOWARD P. LANSER. Glenview, Illinois: Scott, Foresman and Company, 1985. Pp. 766. Financial Institutions and Markets in a Changing World, second edition. By DONALD R. FRASER and PETER S. ROSE. Plano, Texas: Business Publications, Inc., 1984. Pp. x + 786. Money, Financial Institutions, and the Economy. By WILLIAM B. HARRISON. Plano, Texas: Business Publications, Inc., 1985. Pp. xix + 591.     

美国国际投资头寸的规模与结构变迁

20世纪80年代以来,美国的对外债权和对外债务相对快速增长,由于对外债务的增速快于对外债权的增速,形成了庞大的美国国际投资净债务头寸,美国已经由一个对外净债权国演变成一个对外净债务国,而且对外净债务还在急速膨胀。美国政府部门对外净债务是美国对外净债务头寸的主要构成部分,外国政府部门则持有大部分对美国的净债券,正是庞大的美国政府财政赤字造成了美国的对外净债务,也正是外国政府部门持有的外汇储备支撑了美国政府的财政赤字。     

Book Reviews

Book reviewed in this article: Management of Investments. By JACK CLARK FRANCIS. New York: McGraw Hill, Inc., 1983. Pp. xvii + 669. Principles of Financial Management. By BURTON A. KOLB. Plano, Texas: Business Publications, Inc., 1983. Pp. xvi + 799. Financial Institutions, Markets, and Economic Activity. By TIM S. CAMPBELL. New York: McGraw-Hill Book Company, 1982. Pp. xviii + 604. The Fed. By MAXWELL NEWTON. New York: Times Books, Inc., 1983. Pp. xiv + 336. Financial Markets and Institutions. By ROBERT D. AUERBACH. New York: MacMillan Publishing Co., Inc., 1983. Pp. xiv + 577.     

Book Reviews

Book reviewed in this article:
THE THEORY OF FINANCE, E. F. Fama and M. H. Miller
MANAGING MONEY AND FINANCE, G. P. E. Clarkson and B. J. Eliiott
MODERN FINANCIAL ACCOUNTING, G. A. Lee
REPORTING BY DIVERSIFIED COMPANIES.
MANAGEMENT CONTROL AND INFORMATION, R. Beresford Dew and Kenneth P. Gee
THE RECEDING IDEAL, G. D. Newbould and A. S. Jackson
THE MANAGEMENT OF WORKING CAPITAL, James McN. Stancill
CONTROL OF WORKING CAPITAL, Martin Grass (Editor)
EUROPEAN STOCK EXCHANGE HANDBOOK, C. H. Kent
FINANCING DECISIONS IN BUSINESS, John Freear
METHODOLOGY IN FINANCE—INVESTMENTS, James L. Bicksler, ed.
FORECASTING METHODS FOR MANAGEMENT, Steven C. Wheelwright and Spyros Makridakis
COMPUTER-AIDED DECISION MAKING, George K. Chacko
OPERATIONAL RESEARCH, G. H. Mitchell, ed.     

Book Reviews

Book reviewed in this article: Issues in Public-Utility Pricing and Regulation. Edited by MICHAEL A. CREW. Lexington, Mass.: D.C. Heath and Company, 1980. Pp. x + 225. The Economic Effects on Lessees of FASB Statement No. 13, Accounting for Leases. By A. RASHAD ABDEL-KHALIK et al. Stamford, Conn.: Financial Accounting Standards Board, 1981. Fundamentals of Managerial Finance. By RAYMOND P. NEVEU. Cincinnati: South-Western Publishing Co., 1981. Pp. viii + 552. The Property Tax Revolt: The Case of Proposition 13. Edited by GEORGE G. KAUFMAN and KENNETH T. ROSEN. Cambridge: Ballinger Publishing Company, 1981. Pp. 232 + xviii. Finance: A Conceptual Approach. By NAHUM BIGER. Toronto: Butterworths, 1981. Monetary Theory. By Laurence Harris. New York: McGraw-Hill Book Company, Economics Handbook Series, 1981. Pp. xiii + 481.     

Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms

This paper examines the relation between accounting choice and U.S. institutional investor ownership in non‐U.S. firms. We predict that U.S. investors exhibit home bias in their preference for accounting methods conforming to U.S. Generally Accepted Accounting Principles (GAAP) because such methods are more familiar, reduce information processing costs, and are perceived as higher quality. We find that firms exhibiting higher levels (changes) of U.S. GAAP conformity have greater levels (changes) of U.S. institutional ownership. Lead‐lag regressions suggest that increases in U.S. GAAP conformity precede increases in U.S. investment, but changes in U.S. institutional holdings do not precede changes in accounting methods. We also find that the positive relation between U.S. GAAP conformity and U.S. investment holds regardless of a firm's visibility to U.S. investors (e.g., American Depositary Receipt listing, stock index membership, analyst following, firm size). However, we find that U.S. GAAP conformity has a significantly greater impact among firms already visible to U.S. investors.     

Individual investors’ attitudes towards listing requirements for foreign entities on U.S. stock exchanges and the promulgation of international accounting standards

The Securities and Exchange Commission (SEC) currently requires foreign issuers of securities listed on U.S. securities exchanges to either employ U.S. generally accepted accounting principles (U.S. GAAP) or include a statement of reconciliation to U.S. GAAP if they use their home country's accounting standards. With some exceptions, they are also required to comply with the provisions of the Sarbanes-Oxley Act of 2002 (SOA). John Thain, CEO of the New York Stock Exchange, states that these requirements hamper U.S. investments, economic growth, and employment opportunities. The Chairman of the International Accounting Standards Board (IASB), Sir David Tweedie, echoed Thain's comments. An important stakeholder who is affected significantly by the U.S. listing requirements is the U.S. individual investor. Accordingly this study examines their attitudes involving the extant rules for foreign listings on U.S. exchanges and other aspects of the issue. The study also examines their perceptions regarding accounting standard promulgation authority and the use of a global set of accounting principles. The results indicate that although U.S. investors are very much in favor of the listing of foreign companies on U.S. exchanges, they also endorse the current rule requiring either employment of U.S. GAAP or reconciliation to it as well as mandatory adherence to the SOA. In the area of accounting standards, although a large majority believed that the U.S. should control the accounting standards for U.S. listings, a smaller majority also believed that there should be a universal set of accounting principles for all stock exchanges.     

BOOK REVIEWS

Book reviewed in this article: “Budgeting for Profit.” Edited By Gyan Chandra and Surendra Singhvi . Corporate Financial Decisions. By James C. T. Mao . Managerial Finance: Essentials. By Charles O. Kroncke, Erwin Esser Nemmers and Alan E. Grunwald. Financial Management: A Capital Market Approach. By John J. Clark , Margaret T. Clark, and Pieter T. Elgers . Competing for Capital—A Financial Relations Approach. By Bruce W. Marcus . International Capital Markets. Edited by Edwin J. Elton and Martin J. Gruber . International Financial Management. By Rita M. Rodriguez and E. Eugene Carter . Nine Investments Abroad and Their Impact at Home. By Robert B. Stobaugh (et. al.). The Dilemas of the Dollar. By C. Fred Bergsten .     

Book Reviews

Book reviewed in this article: The Reform of Federal Deposit Insurance: Disciplining the Government and Protecting Taxpayers. Edited by JAMES R. BARTH and R. DAN BRUMBAUGH, JR. New York: Harper Business, 1992. Pp. xxi + 310. Nonlinear Dynamics, Chaos, and Instability. By WILLIAM A. BROCK, DAVID A. HSIEH, and BLAKE LEBARON. Cambridge, MA: MIT Press, 1992. Pp. xviii + 328. Options and Financial Futures: Valuation and Uses. By DAVID A. DUBOF-SKY. New York: McGraw-Hill, 1992. Pp. xx + 699. The Economic Structure of Corporate Law. By FRANK H. EASTERBROOK and DANIEL R. FISCHEL. Cambridge, MA: Harvard University Press, 1991. Pp. viii + 370. Managing Corporate Pension Plans. By DENNIS E. LOGUE, New York: Harper Collins Inc., 1991. Pp. x + 289. Sense & Nonsense in Corporate Finance. By LOUIS LOWENSTEIN. Reading, MA: Addison-Wesley Publishing Company, Inc., 1991. Pp. viii + 263. Economics, Organization and Management. By PAUL MILGROM and JOHN ROBERTS. Englewood Cliffs, NJ: Prentice-Hall, 1992. Pp. xvii + 621.     

BOOK REVIEWS

Book reviewed in this article: Public Investment, The Rate of Return, and Optimal Fiscal Policy. By Kenneth J. Arrow and Mordecai Kurz. Making Monetary and Fiscal Policy. By G. L. Bach. Monetary Theory: Selected Readings. By R. W. Clower. An Essay on The Theory of Economic Prediction. By Lawrence R. Klein. Varieties of Monetary Experience. David Meiselman Inflation: The Problems it Creates and the Policies it Requires. By Arthur M. Okun, Henry H. Fowler, and Milton Gilbert. Growth Theory: An Exposition. By R. M. Solow. Liberalized Depreciation and Cost of Capital. By Eugene F. Brigham and James L. Pappas. Speculation, Hedging and Commodity Price Forecasts. By Walter C. Labys and C.W.J. Granger. Capital Budgeting: A Quantitative Evaluation of Investment Alternatives. By Robert V. Oakford. The Theory of Corporate Finance. By R. C. Stapleton. The Theory of Corporate Finance. By R. C. Stapleton. Investment Analysis ad Portfolio Management: Readings from British Publications. Edited by Basil Taylor. Economics of Financial Institutions and Markets. By Paul F. Smith. The Euro-Dollar Market. By E. Wayne Clendenning. Stand-by Arrangements. By Joseph Gold. The Economics of International Adjustment. Edited by Randall Hinshaw. The Responsiveness of Demand Policies to Balance of Payments: Postwar Patterns. By Michael Michaely. Foreign Investment in the Petroleum and Mineral Industries. By Raymond F. Mikesell and others. The Assessment of Land Value. Edited by Daniel M. Holland. The Analysis of Public Output, Julius Margolis Federal Tax Policy, Revised edition. By Joseph A. Pechman.     

BOOK REVIEWS

Book reviewed in this issue:
THE EVOLUTION OF CORPORATE FINANCIAL REPORTING by T.A. Lee and R.H. Parker
BEYOND THE CONVENTIONS OF ACCOUNTING by Trevor Gambling
THE EMPLOYMENT STATEMENT IN COMPANY REPORTS by E.R. Thompson and A. Knell
BUDGET PLANNING AND CONTROL SYSTEMS by Lloyd R. Amey
AN AUDIT APPROACH TO COMPUTERS by Brian Jenkins and Anthony Pinkney
AN ECONOMIC ANALYSIS OF THE FINANCIAL LEASING INDUSTRY by C.R. Tomkins, J.F. Lowe and E.J. Morgan
THE ART OF VALUATION edited by A. Woolery
FINANCIAL RATIOS: ANALYSIS AND PREDICTION by M. Tamari     

The costs and benefits of retirement policies at U.S. audit firms

The mandatory retirement age within U.S. Big 4 audit firms ranges from 55 to 62, which has attracted controversy and legal scrutiny. The potential costs of an earlier retirement age include the loss of established networks, experience, and expertise. However, studies in non-U.S. jurisdictions conclude that partners nearing retirement disengage from their work, which manifests in lower audit quality. Using intensive hand-collected data on the age of 3,148 U.S. audit partners, we provide the first evidence of the costs and benefits of mandatory retirement policies at U.S. audit firms. We find that audit quality does not vary, but that fees are significantly higher for U.S. partners approaching retirement. These findings suggest that U.S. mandatory retirement policies are forcing out experienced revenue earners that are producing audit quality equivalent to younger partners. Additional analysis reveal that partner retirements are mechanisms to promote and grow the client portfolios of younger and female audit partners, and therefore increase partner diversity. Our additional analysis of non-U.S. audit partners leading audits of U.S. listed companies shows that partners approaching retirement are associated with lower audit quality across certain measures. This suggests that the audit quality of older U.S. partners is superior to their non-U.S. counterparts.     

Book Reviews

The Theory of Money. By JURG NIEHANS. Estimation Risk and Optimal Portfolio Choice. By VIJAY S. BAWA, STEPHEN J. BROWN, and ROGER W. KLEIN. Amsterdam Basic Financial Management. By JOHN D. MARTIN, J. WILLIAM PETTY, ARTHUR J. KEOWN, and DAVID F. SCOTT, Jr. Finance. By MARVIN RAY and DAVID L. SCOTT. Problems in Public Utility Economics and Regulation. Edited by MICHAEL A. CREW. Public Budgeting in America. By THOMAS D. LYNCH. Money Hard and Soft on the International Currency Markets. By BRENDAN BROWN. Foreword by Robert Z. Aliber.     

Book Reviews

Book reviewed in this article: Option Markets. By JOHN COX and MARK RUBINSTEIN. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1985. Pp. iii + 498. Fundamentals of Investment Management, second edition. By GEOFFREY A. HIRT and STANLEY B. BLOCK. Homewood, Illinois: Richard D. Irwin, Inc., 1986. Pp. xvi + 710. International Debt: Systemic Risk and Policy Response. By WILLIAM R. CLINE. Washington, D.C.: Institute for International Economics, 1984. World Debt Crisis: International Lending on Trial. By MICHAEL P. CLAUDON (Editor). Cambridge, Massachusetts: Ballinger Publishing Company, 1986     

BOOK REVIEWS

Book reviewed in this article: Aggregate Theory and Policy: A Century of Pay. By E. H. Phelps Brown with Margaret H. Browne . Aggregate Theory and Policy: Targets and Indicators of Monetary Policy. Edited by Karl Brunner . Aggregate Theory and Policy: Bankers' Diplomacy: Monetary Stabilization in the Twenties. By Richard H. Meyer . Aggregate Theory and Policy: Industrial Market Structure and Economic Performance. By Frederic M. Scherer . Aggregate Theory and Policy: The Political Economy of Prosperity. By Arthur M. Okun . Aggregate Theory and Policy: Setting National Priorities: The 1971 Budget. By Charles L. Schultze with Edward K. Hamilton and Allen Schick . Aggregate Theory and Policy: Economic Forecasting. By Herman O. Stekler . Business Finance and Investments: An Integrated Analysis For Managerial Finance. By M. Chapman Findlay , III, and Edward E. Williams . Business Finance and Investments: Cases in Managerial Finance. By Eugene F. Brigham , Timothy J. Nantell , Robert T. Aubey , and Stephen L. Hawk . Business Finance and Investments: The Predictability of Stock Market Prices. By C. W. J. Granger and O. Morgenstern . Financial Institutions and Markets: Banking in the 1970's. By The Institute of Bankers . Financial Institutions and Markets: Mutual Funds and Other Institutional Investors: A New Perspective. By Irwin Friend , Marshall Blume and Jean Crockett . Financial Institutions and Markets: Economic Factors in the Growth of Corporation Giving. By Ralph L. Nelson . International Finance: National Interests and the Multinational Enterprise. By Jack N. Behrman . International Finance: The Joint Venture Process in International Business: India and Pakistan. By James W. C. Tomlinson . International Finance: The Case Against Floating Exchanges. By Paul Einzig . International Finance: Forward Exchange and Internal-External Equilibrium (Michigan International Business Studies Number 12), by Jay H. Levin . International Finance: The Technology Factor in International Trade. Edited by Raymond Vernon . Public Finance: Education, Income, and Human Capital. Edited by W. Lee Hansen . Public Finance: Psychological Approaches to the Study of Saving. By Folke Olander and Carl -Magnus Seipel . Public Finance: Halfway to Tax Reform. By Joseph A. Ruskay and Richard A. Osserman . Public Finance: Public Investment Planning in Civilian Nuclear Power. By John M. Vernon .     

BOOK REVIEWS

Book reviewed in this article: E. Stamp and M. Moonitz, International Auditing Standards N. V. Anthony, A. D. Barton, A. S. Carrington, M. O. Jager and C. A. Martin (editors) Readings in Advanced Financial Accounting Theory Donald H. Sanders, Computers in Business: An Introduction R. Ma and R. Mathews The Accounting Frameword, A Contemporary Emphasis Students' Companion to the Accounting Framework, A Contemporary Emphasis Teachers' Manual to the Accounting Framework, A Contemporary Emphasis F. E. Kast and J. E. Rosenzweig, Organization and Management: A Systems and Contingency Approach Ronald J. Thacker, Accounting Principles 2nd Edition     

BOOK REVIEWS

Book reviewed in this article:
MANAGEMENT CONTROL SYSTEMS: TEXT AND CASES, R.N. ANTHONY
MANAGEMENT ACCOUNTING: TEXT AND CASES. R.N. ANTHONY AND J.S. REECE
CORPORATE FINANCIAL DEClSlONS, J.C.T. MAO
CAPITAL BUDGETING TECHNIOUES, F.M. WILKES     

Relevance of U.S.-GAAP for Japanese companies

We use differences in U.S.-GAAP and Japanese-GAAP accounting measures to evaluate the value-relevance of U.S.-GAAP reports. We show data provided in U.S.-GAAP financial statements of Japanese firms is value-relevant beyond that contained in domestic-GAAP statements. Our results complement extant research and support the proposition that U.S. reporting methods provide value-relevant data. Understanding the value-relevance of data from Japanese firms is important in its own right because of the major role these firms play in intenational markets. We also provide evidence on significant transnational firms that voluntarily provide U.S.-GAAP statements.     

TRADING COSTS OF NON‐U.S. STOCKS ON THE NEW YORK STOCK EXCHANGE: THE EFFECT OF INSTITUTIONAL OWNERSHIP,ANALYST FOLLOWING,AND MARKET REGULATION

We investigate the differences in market microstructure between U.S. and non‐U.S. stocks cross‐listed on the New York Stock Exchange using a sample of 316 pairs of matched stocks. We find that non‐U.S. stocks have wider spreads and larger adverse‐selection costs than U.S. stocks even after controlling for macro‐level institutional differences. Regression analysis shows that spreads and adverse‐selection costs are negatively correlated with institutional ownership and analyst followings. Thus, the higher spreads and adverse‐selection costs for non‐U.S. stocks can be partly explained by the lower institutional ownership and analyst following of non‐U.S. stocks. In addition, we find that although the spreads and adverse‐selection costs for non‐U.S. stocks are significantly higher before the implementation of Regulation Fair Disclosure (FD), the differences become even greater after Regulation FD, suggesting that Regulation FD has improved the information environment for U.S. stocks.