Commemorating the 50‐Year Anniversary of Ball and Brown (1968): The Evolution of Capital Market Research over the Past 50 Years

We commemorate the 50th anniversary of Ball and Brown [1968] by chronicling its impact on capital market research in accounting. We trace the evolution of various research paths that post–Ball and Brown [1968] researchers took as they sought to build on the foundation laid by Ball and Brown [1968] to create a body of research on the usefulness, timeliness, and other properties of accounting numbers. We discuss how those paths often link back to the groundwork laid and questions originally posed in Ball and Brown [1968].     

PRICES AND ENDOGENOUS MARKET STRUCTURE IN OFFICE SUPPLY SUPERSTORES*

We consider the relationship between prices and market structure for office supply superstores in the U.S. which was central to the Federal Trade Commission's opposition to the merger of Staples and Office Depot. Due to potential biases in a standard regression, we employ a two‐stage approach in which a model of endogenous market structure provides correction terms for a second stage price regression. Using a cross‐section of data on market structures and Staples' prices, we find that excluding the correction term substantially distorts the importance of competitors as the two‐stage model yields stronger negative relationships between prices and market structure variables.     

WAL-MART, LEISURE, AND CULTURE

This essay contributes to the debate about the alleged spillover effects associated with Wal-Mart's growth. Combining county-level data on Wal-Mart entry and location from 1985 through 1998 with individual-level data on leisure activities, we estimate a positive relationship between Wal-Mart penetration and participation in activities involving inputs that can be bought at Wal-Mart. The relationship between Wal-Mart penetration and activities that do not involve inputs that can be bought at Wal-Mart is negative in most cases but may be positive or zero for "cultural" activities such as attending classical music concerts and visiting art galleries. The evidence is consistent with the thesis that deeper Wal-Mart penetration expands consumption possibilities. ( JEL A13, D00, C12, Z11, Z13)     

Final Offer Arbitration: Better Theory Than Practice

The theory of final offer arbitration promises more than its actual performance delivers, based on admittedly limited experience. There is no showing that fewer negotiations reach impasse than would occur under conventional arbitration. There is evidence, however, that final offer arbitration does tend to produce awards less equitable than warranted by the positions and strengths of the parties, particularly when there are multiple issues at impasse and when arbitrators may select only one overall package or another. This tendency is built-in to the process, since the whole point of final offer arbitration is deterrence, with little or no concern for getting a good settlement through arbitration. “Bad” awards cannot fail to generate irritation and to have a corrosive effect on responsible contract administration. It is possible that such awards, and their effects, will be accepted as the necessary price of a final offer selection system. What seems more likely, however, is that the system will be modified along the lines of those in Eugene and Michigan. Those modifications can be expected to have two effects. First, they will make it more likely that the parties will be able to reach their own agreement by encouraging mediation and further negotiations, even after arbitration has been invoked. Second, they will increase the possibility of an acceptable arbitrated settlement by allowing the arbitrator greater flexibility in making an award. By doing these things, however, the deterrent effect of final offer selection will be substantially weakened, and what will be left will be a useful form of mediation-arbitration but not a substitute for the strike which contains an equivalent incentive to negotiate.     

DETERMINANTS OF CHILD SUPPORT: A PILOT SURVEY OF ABSENT PARENTS

The proportion of children living in single-parent households has risen dramatically during the past two decades. Approximately half of these children live in poverty. A major factor in this impoverishment is non-custodial parents'failure to provide child support. Much is known about child support behavior from the custodial parent's perspective, but little research has focused on the noncustodial parent's perspective. The Survey of Absent Parents (SOAP) was initiated to remedy this gap. This paper describes the results of the SOAP pilot survey of linked custodial and non-custodial parents in three counties in Florida and three counties in Ohio. It reports the results of multivariate analyses of the predictors of (i) child support award levels, (ii) child support payments as reported by custodial and non-custodial parents, and (Hi) compliance with child support awards as reported by custodial and non-custodial parents. The results indicate that custodial and non-custodial parents have very different perspectives on how much child support is paid. The main factors predicting payments across these two populations are (i) the non-custodial parent's situation measured by his current income and marital status, (ii) the custodial parent's situation measured by her current income–excluding child support payments–and marital status, (Hi) program interventions such as formulas used to set award levels, payment through the court, and wage withholding, and (iv) the warmth of the relationships between the former partners and between the father and the child.