Protection and skills: Does trade policy favor low‐skill workers?

Many believe that international trade barriers in rich nations help low‐skill workers. Also, the empirical endogenous protection literature strongly implies that protection decreases with skill levels. This paper presents evidence against this conventional wisdom. Regressions based on a political economy model with search frictions and unemployment imply that protection and skill levels actually have a mound‐shaped relationship: industries with skills in the middle range get more protection than industries at either end of the distribution. Apparently, the politics of trade policy trump social concerns, rendering protection less “progressive” than is commonly believed.     

Competition in shared markets and Major League Baseball broadcast viewership

This work evaluates the cross-quality elasticity of related products in the context of local market Nielsen Local People Meter ratings of Major League Baseball (MLB) regular season broadcasts from 2010 through 2013 from six teams in three shared markets. We employ a fixed effects panel regression with multi-way error clustering, finding that fans exhibit nuanced behaviour related to the absolute quality and relative quality of the two local teams. Our estimates imply quality-related competition for viewership between teams in the face of large disparities in quality. However, when both teams are of high quality, viewership increased beyond what own-team success would predict alone for the competing team. The competitive effects are largely dominated by the spillover effects. These findings point to complementary effects of team success beyond own-team interest, and bring about an important nuance in the literature on market definition, competition and substitution in sport.     

Large‐Scale Buy‐to‐Rent Investors in the Single‐Family Housing Market: The Emergence of a New Asset Class

In 2012, several large firms began purchasing single‐family homes, creating large portfolios of rental property, and securitizing these investments in capital markets. We present the first systematic evidence on this new investor activity in order to shed light on the factors that have supported its emergence. Three key factors were the ample supply of property for sale, tight mortgage financing and a decrease in acquisition and managerial costs brought about by technological advances. In addition, we show that buy‐to‐rent investors appear to have supported house prices in the neighborhoods where they concentrated.     

Evidence of differing market responses to beating analysts’ targets through tax expense decreases

Returns are positive when firms meet or beat analysts’ consensus forecasts, but negative when firms miss. Prior research finds little substantial discount for managing earnings to beat the forecasts via accruals generally. We consider whether the market reward for beating the forecast is smaller when firms use tax expense decreases, which are visible and transparent at the earnings announcement date, unlike accruals. When firms beat analysts’ forecasts by decreasing their tax expense relative to the third-quarter rate, the market discounts the reward by an economically significant amount: approximately 86%. We document lower persistence of current-year tax changes for those firms that decrease tax expense to beat the target. The observed discount for beating the forecast only because of a third to fourth quarter tax decrease may reflect market perceptions of the lack of persistence of the decrease.     

Does FIN 48 Improve Firms' Estimates of Tax Reserves?

This paper examines whether the increased accounting guidance and reporting requirements of FIN 48 impact the adequacy and accuracy of tax reserves and the effect of auditor‐provided tax services on tax reserves. While we do not find FIN 48 affected the adequacy or accuracy of tax reserves on average, FIN 48 eliminated the differences in the tax reserve adequacy of firms with and without auditor‐provided tax services that existed prior to its adoption. We also find evidence of less premature releasing of tax reserves post‐FIN 48. Our evidence is consistent with an increase in the comparability of reserves for firms that do and do not purchase auditor‐provided tax services, consistent with one of the FASB's objectives for FIN 48.     

Opportunistic shirking behaviour during unpaid overtime

We identify the presence of shirking by Major League Baseball umpires during indefinite unpaid overtime, as defined by extra innings. In the presence of new information about expected game length, umpires exert biases in ball and strike calls consistent with opportunistically reducing the likelihood of working additional time. General implications with respect to the effectiveness of salaried workers during unpaid overtime hours are discussed.     

Antitakeover provisions in corporate spin-offs

We analyze the relation between antitakeover provisions (ATPs) and the performance of spin-off firms. We find that firms protected by more ATPs before spin-offs have higher abnormal announcement returns and greater improvements in post-spin-off operating performance than firms with fewer ATPs. Further, firms that reduce the number of ATPs after spin-offs have greater improvements in operating performance than firms that do not reduce the number of ATPs. Finally, CEOs of pre-spin-off firms tend to retain more ATPs in parent firms and assign fewer ATPs to the spun-off units if they remain as the CEOs of the parents but not the spun-off units. Overall, our results indicate a positive relation between ATPs and the value gains to spin-offs.     

Beliefs regarding fundamental value and optimal investing

Standard optimal portfolio selection models take no account of the special information that active investors believe they possess. For example, active investors who believe they can place bounds on the price of a security will want to use that information when assessing risk and expected return in order to construct an optimal portfolio. In this paper, we use two continuous-time models to analyze how placing boundaries on the price of a stock affects assessed risk, expected returns, and the optimal holdings of an active investor, and how those vary as a function of the relation between the stock price and the boundaries. In particular, the optimal strategy takes significant long/short positions as the price nears its lower/upper boundary.