Classificatory income smoothing: The impact of a change in regime of reporting financial performance

Financial Reporting Standard No. 3 (FRS3) regulated the reporting of financial performance by UK firms from 1993 until the adoption of International Financial Reporting Standards in 2005. FRS3 outlawed extraordinary items, but allowed a clearer distinction between recurring and transitory income by giving firms discretion over the classifications of unusual (i.e. exceptional) items and the option to disclose alternative EPS. Through these provisions FRS3 increased the scope for classificatory choices as a means to highlight persistent profitability. We examine the impact of FRS3 on classificatory smoothing by UK firms and document a significant rise in this practice post-FRS3. We find that this increase is due mainly to deviations of net income from expected earnings inducing a significantly higher level of classificatory smoothing post-FRS3. Additional analysis shows that earnings are substantially more persistent at the pre-exceptional level post-FRS3. Overall, our results suggest greater use of classificatory choices to highlight sustainable profitability after the change in performance reporting regime.     

Ethnicity,acculturation, and the importance of product attributes

This investigation examined the relationship between subcultural group membership and the importance of various product attributes in purchase decisions. Subcultural group membership was defined on the basis of Hispanic ethnicity and level of assessed acculturation. The results indicate that cost considerations such as price and the availability of credit best distinguish these groups. This is particularly meaningful, given that these results persist even when income level is statistically controlled. The second major purpose of the investigation was to test the appropriateness of the traditional progressive learning model of acculturation within the specific buyer behavioral context of product attribute importance. The findings clearly indicate support for this model.     

Estimation of Agricultural Production Functfons on a World-Wide Basis

Agricultural production is becoming increasingly capital and research intensive. Hayami and Ruttan, along with others, have developed and applied the metaproduction functional approach to the examination of this phenomenon on a worldwide basis. Limitations to the approach derive from a restrictive functional form chosen for estimation, and from a restrictive specification of agricultural capital and land. This study addresses those difficulties by use of the flexible translog functional form for estimation and by specifying an overall agricultural capital index and a land measure incorporating differences in the quality of land (agricultural natural resource) endowments. Estimation results indicate that agricultural comparative advantage in production is likely shifting to developed countries relative to LDC's due to capital constraints in the latter. Also agricultural potential (i.e., land endowments) do not serve to differentiate nations on the basis of agricultural production. Investment in agriculture, including land improvement, is key to the determination of comparative advantage. La production agricole fait appelle de plus en plus a beaucoup de re-cherches et de capitaux. Hayami et Ruttan, avec d'autres, ont developpe et appliqué l'approche fonctionnelle métaproduction pour examiner ce phénomena à l‘échelle du monde. Les limitations de cette approache provienneent de la forme fonctionnelle restrictive choisie pour l'estimation, et de la spécification restrictive de capitaux et terres agricoles. Cette étude traite ces difficultés en utilisant la formule “translog’ fonctionnelle adaptable pour l'estimation et en spécificant un indice du capital agricole global et une mesure de terre qui incorpore les différences du qualité des terres agricoles (ressources agricoles naturelles). Tous les résultats estimatifs indiquent que l'avantage comparatif agricole de production s'incline vers les pays développés parraport aux PMD dû aux constraintes de capitaux dans ces derniers. Aussi la capacité agricole (c'est à dire la richesse des sols) ne sert pas à différencier les nations sur le plan de production agricole. L'investissement dans l'agriculte, notamment l'amélioration de terre, est la cief pour déterminer l'avantage comparatif.     

ECONOMIC PERSPECTIVES ON EDUCATIONAL POLICY: INTRODUCTION

The two papers that follow both deal with prospects for achieving efficiency in education. Psacharopoulos identifies the extent of government-induced distortions directly or indirectly related to education, and assesses the likely effects of such distortions on social welfare. He concludes that, among other things, governments should not attempt directly to provide or manage schooling services. Levin's article focuses upon one particular management decision…namely, extending the length of the school day and increasing the number of school days per year. He argues that mechanically increasing school sessions through legislative acts or through administrative mandates does not appear, in itself, to be a promising use of scarce resources.     

Subcultural influences on family decisionmaking

This investigation assessed Mexican-American and Anglo wives' perceptions of family decisionmaking roles for the purchase of eight different goods and services. This comparison was used to explore the impact ethnic subculture plays in consumer behavior. The findings indicate that ethnicity significantly affects wives' perceptions of family decisionmaking roles for expensive items, and that this is not just due to common associations with other variables. This is an under researched area in which cross-national differences and basic socioeconomic disparities are often inaccurately attributed to culture.