Supply and Demand Shifts in the Shorting Market

Using proprietary data on stock loan fees and quantities from a large institutional investor, we examine the link between the shorting market and stock prices. Employing a unique identification strategy, we isolate shifts in the supply and demand for shorting. We find that shorting demand is an important predictor of future stock returns: An increase in shorting demand leads to negative abnormal returns of 2.98% in the following month. Second, we show that our results are stronger in environments with less public information flow, suggesting that the shorting market is an important mechanism for private information revelation.     

THE IMPACT OF CHILDCARE COSTS ON THE FULL-TIME/PART-TIME EMPLOYMENT DECISIONS OF AUSTRALIAN MOTHERS

Using data from the HILDA (Household Income and Labour Dynamics), this paper examines the implications of childcare costs on maternal employment status by distinguishing between full-time and part-time work. Our empirical approach uses an ordered probit model taking into account the endogeneity associated with both wages and childcare costs. Results indicate that childcare costs have a statistically insignificant effect on the decision to work either full time or part time. Moreover, the reported elasticities of part-time and full-time work with respect to childcare costs are relatively low. Finally, our results indicate that Australian mothers respond to an increase in wages by increasing both their full-time and part-time employment. Conversely, an increase in the number of young children (particularly under four years of age) and an increase in non-labour income reduce the likelihood of the mother is observed to be working.     

Private Benefits of Control, Ownership, and the Cross-listing Decision

This paper investigates how a foreign firm's decision to cross-list on a U.S. stock exchange is related to the consumption of private benefits of control by its controlling shareholders. Theory has proposed that when private benefits are high, controlling shareholders are less likely to choose to cross-list in the United States because of constraints on the consumption of private benefits resulting from such listings. Using several proxies for private benefits related to the control and cash flow ownership rights of controlling shareholders, we find support for this hypothesis with a sample of more than 4,000 firms from 31 countries.     

Higher Order Effects in Asset Pricing Models with Long‐Run Risks

This paper shows that the latest generation of asset pricing models with long‐run risk exhibit economically significant nonlinearities, and thus the ubiquitous Campbell‐Shiller log‐linearization can generate large numerical errors. These errors translate in turn to considerable errors in the model predictions, for example, for the magnitude of the equity premium or return predictability. We demonstrate that these nonlinearities arise from the presence of multiple highly persistent processes, which cause the exogenous states to attain values far away from their long‐run means with nonnegligible probability. These extreme values have a significant impact on asset price dynamics.     

Resource Allocation Decisions in Audit Engagements*

Abstract. We examine the empirical relationship between auditors' resource allocations and selected engagement characteristics. Our measure of resources is hours of grades of labor (partner, manager, etc.) “charged” to audit activities (planning, internal control evaluation, etc.). Engagement characteristics examined are client size, industry affiliation, client complexity, risk, auditor provision of management advisory services to the auditee, and degree of control reliance. The data were obtained from publicly available sources and a survey developed and administered by an international public accounting firm. We find the cross-sectional variation in the labor charged to various audit activities can be explained by engagement characteristics found to be important in prior studies on audit fees, total labor inputs, and the mix of labor inputs. Measures of client size, industry, complexity, risk, and services provided are associated with changes in the allocation of labor among audit activities. We find no substitution of internal control review/testing for substantive testing on reliance audits. Task assignments vary by rank. Measures of client size, complexity, risk, and services provided are associated with activity-specific changes in the labor mix.     

BOOK REVIEWS

OCCASIONAL PAPERS IN INDUSTRIAL RELATIONS DEVELOPING EMPLOYEE RELATIONS by Peter Warr, Stephen Fineman, Nigel Nicholson and Roy Payne A CROSS-CULTURAL STUDY OF A MULTINATIONAL COMPANY: Attitudinal responses to participative management by Dietrich L. Schaupp POWER, INNOVATION AND PROBLEM-SOLVING IN PERSONNEL MANAGEMENT by Karen Legge A PARTICIPATIVE APPROACH TO COMPUTER SYSTEMS DESIGN F. H. M. Blackler and A. A. Brown JOB REDESIGN AND MANAGEMENT CONTROL: STUDIES IN BRITISH LEYLAND AND VOLVO by David Pace and John Hunter DIRECT PARTICIPATION IN ACTION: THE NEW BUREAUCRACY By Enid Mumford and Don Henshall THE CASE FOR WORKERS CO-OPS by Robert Oakeshott Routledge and Kegan Paul SOCIALISM AND SHOP FLOOR POWER by Alan Fox Fabian CONFLICT AND DEMOCRACY Studies in Trade Union Government by John Hemingway