Intra-regional wage variation and regional disparity in the relative earnings of blacks

Studies of the relative earnings of Blacks in the U.S. have found that the ratio of Black to White male earnings is lower in the South than in the rest of the U.S. In this paper, it is argued that the usual methods of estimating earnings ratios are distorted by the omission of variables that generate equalizing wage differences which are place-specific. The results support this contention. It is concluded that the Black-White earnings ratio is only about 2.5 percent lower in the South than outside the South. It is not significantly different for those with less than 16 years of work experience.     

Twin Data vs. Longitudinal Data to Control for Unobserved Variables in Earnings Functions – Which Are the Differences?*

This paper compares two different approaches empirically to control for unobserved characteristics when estimating the effect of marriage on male and female earnings: the longitudinal and the twins approach. The estimates were obtained by exploiting the longitudinal dimension of a large sample of Swedish twins, so that longitudinal and twin‐based estimates could be obtained in the same sample. The two approaches lead to different conclusions both regarding the role of unobserved characteristics in the cross‐sectional earnings–marriage relationship and the effect of marriage on earnings. The paper investigates three potential explanations of this difference.     

International Differences in GAAP and the Pricing of Earnings

This study investigates the information content of two alternative accounting earnings measures constructed under U.K. and U.S. GAAP. The analysis is based on the 20-F SEC filings by U.K. domiciled companies having ADRs listed in the U.S. The research design involves testing the association between U.K. stock returns and alternative accounting numbers. The evidence suggests that, for the sample examined, U.K. GAAP earnings changes have incremental information content after controlling for U.S. GAAP earnings changes, but that earnings levels measured under U.S. GAAP have some independent incremental information content after controlling for U.K. GAAP earnings. The results are consistent with GAAP adjustments having a significant transitory component. The empirical results display explanatory power which is broadly consistent with previous work and the GAAP earnings adjustments add marginally to the ability of earnings to explain returns.     

Analyzing the gender pay gap

Empirical research on gender pay gaps has traditionally focused on the role of gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e., labor market discrimination). This paper explores the determinants of the gender pay gap and argues for the importance of an additional factor, wage structure, the array of prices set for labor market skills and the rewards received for employment in favored sectors. Drawing on our previous work we illustrate the impact of wage structure by presenting empirical results analyzing its effect on international differences in the gender gap and trends over time in the gender differential in the U.S.     

How do the ownership structure and board of directors' features impact earnings management? The Spanish case

This paper examines how the ownership structure and board of directors' features determine the managerial opportunistic behavior exemplified in the management of accounting earnings. This study contributes to the literature by investigating the relationship of firm‐level and country‐level corporate governance systems on the earnings management in the Spanish corporate sector. Results reveal that the varying efficiency of the corporate governance systems is reflected in the way in which accounting discretion is performed. We found evidence that earnings management is reduced as the voting rights of the controlling shareholder increased and that there is an inverse U‐shaped relationship between insiders' ownership and the earnings manipulation. Regarding the board characteristics, we observe that larger, independent boards, those with a larger proportion of female members, and those with an audit committee compounded by a greater proportion of outside independent directors oversee managers more efficiently, constraining their capacity to manage earnings. To the contrary, board duality increases the likelihood of opportunistic manipulation of financial reporting. We found that when the institutional environment improves in the Spanish context, the discretionary power of the corporate sector to overstate the financial statements is reduced. The findings prove the necessity of reinforcing the rules and regulations toward a more transparent disclosure of the financial statements.     

Capital Market Reactions to Accounting Earnings Announcements in an International Context

This study examines the association of four factors with U.S. securities market reactions to annual earnings announcements by non-U.S. multinational corporations and by a control sample of U.S. firms. The four factors examined are firm size, the magnitude of earnings change, timeliness, and the presence or absence of a concurrent dividend announcement. The non-U.S. corporations are from five countries - Israel, Japan, Netherlands, Philippines, and United Kingdom. Results for the group of non-U.S. firms indicate that firm size and timeliness are significant explanatory variables. For the control sample of U.S. firms, only size is significant.     

Labor force participation

Trends in U.S. female and male labor force participation are outlined, particularly for the post-World War II period. Potential causes of these trends are then discussed, both those that operate on the demand side and those that operate on the supply side of the labor market, along with some discussion of alternative approaches to modeling these employment changes. Effects of these trends and future direction of changes are also considered.     

Earnings Benchmarks and the Information Content of Quarterly Foreign Earnings of U.S. Multinational Companies

The meeting of earnings benchmarks is considered important for investors. The chief financial officers of U.S. companies state that the three most important earnings thresholds to meet are the earnings in the same quarter last year, the analysts' earnings forecast for the current quarter, and zero earnings. These earnings benchmarks have been defined in terms of total earnings. For U.S. multinational firms, total earnings consist primarily of domestic earnings and foreign earnings. We conduct an event study where we examine (1) the stock market reaction to meeting or beating quarterly domestic and foreign earnings benchmarks and (2) the market reaction to the changes in quarterly domestic and foreign earnings, while we control for meeting or beating the analysts' earnings forecast and the analysts' earnings forecast surprise. We find that the quarterly financial statement disclosure of domestic and foreign earnings under Statement of Financial Accounting Standards No. 131 supplies investors with valuable information that was not previously disseminated through financial analysts or other sources. The stock market reaction to meeting or beating foreign earnings from the same quarter in the prior year is stronger than the market reaction to meeting or beating domestic earnings from the same quarter in the prior year.     

Merger Premia and National Differences in Accounting for Goodwill

We examine the effects of international accounting diversity on the market for corporate control with particular reference to whether national differences in the treatment of purchased goodwill are associated with differences in premia offered by U.K. as opposed to U.S. acquirers of U.S. targets. We find merger premia associated with U.K. acquisitions to be consistently higher than those for U.S. acquisitions. Moreover, higher premiums offered by U.K. acquirors appear to be associated with not having to amortize goodwill to earnings. The evidence provided here suggests that national differences in accounting impact differentially on managerial behavior.     

Flat tax reform: A quantitative exploration

This paper explores quantitatively the general equilibrium implications of a revenue neutral tax reform in which the current income and capital income tax structure in the U.S. is replaced by a flat tax, as proposed by Hall and Rabushka (1995), (The Flat Tax, 2nd ed. Hoover). The central aspects of such reform, the impact of tax reform on capital accumulation and labor supply, as well as its distributional consequences, are analyzed in a dynamic general equilibrium model. Main results are that, (i) the elimination of the actual taxation of capital income has an important and positive effect on capital accumulation; (ii) mean labor hours are relatively constant across tax systems, but aggregate labor in efficiency units increases; (iii) in all circumstances analyzed, the distributions of earnings, income and especially wealth become more concentrated.     

Analysts' Earnings Forecasts and the Value Relevance of 20-F Reconciliations from non-U.S. to U.S. GAAP

This study extends existing research into the value relevance of reconciliations to U.S. GAAP by examining the role of analysts' earnings forecasts in explaining potential market reactions to the earnings reconciliation. One possible reason why the evidence on the value relevance of the earnings reconciliation is weak is that earnings are forecast by analysts. Their forecasts may pre-empt some of the information content of the earnings reconciliation disclosures. Our findings indicate that analysts' forecasts are value relevant and that they play a pre-emptive role for some firms. For others, however, the earnings reconciliation has information content that is not pre-empted by analysts' forecasts.     

Life-cycle variations in the association between current and lifetime earnings: Evidence for German natives and guest workers

In many economic models a central variable of interest is lifetime or permanent income which is not observed in survey data sets and typically proxied by annual income information. To assess the quality of such approximations, we use a unique source of lifetime earnings — the German pension system — and focus on two important issues that have been largely ignored in the existing literature. The first is how to deal with zero income observations in the analysis of women. The second is whether these approximations differ between natives and guest workers. For female earners, we find that estimates of the associations between current and lifetime income are highly sensitive to the treatment of zero earnings. The reason turns out to be the highly cyclical nature of the labor supply behavior of mothers. Furthermore, immigrants' income proxies are prone to significantly larger attenuation biases over the entire life-cycle. This result is explained by the larger share of annual income variance attributable to the transitory income component for immigrants. Averaging income over up to 15 years alleviates the attenuation bias as well as the difference in biases between natives and guest workers.     

Slowdown of credit flows in Jordan in the wake of the global financial crisis: Supply or demand driven?

This paper estimates a disequilibrium model of credit supply and demand to evaluate the relative role of these factors in the slowdown of credit flows in the Jordanian economy in the wake of the global financial crisis. The empirical analysis suggests that the credit stagnation is mainly driven by the restricted credit supply amid tighter monetary policy conditions in Jordan relative to the United States, as evidenced by the widened interest differential between the Central Bank of Jordan (CBJ) re-discount and the U.S. Federal Reserve funds rates. Although it appears that demand side factors related to the slowdown of economic activity have also had an impact, their role has been relatively modest. The estimation results imply that economic policies targeted towards stimulating the supply of credit are likely to be a more effective tool for expanding credit flows relative to demand stimulating policies.     

Gender and ethnic earnings gaps in seven West African cities

In this paper, we measure, compare and analyse gender and ethnic earnings gaps in seven West African capitals using data from an original series of urban household surveys. Our results show that gender earnings gaps are large in all the cities in our sample with significant variations across cities. Cities with large gender earnings gaps are also where gender education gaps are wider and where the female labour market participation is highest. Decomposition of the gender gaps shows that differences in characteristics explain around 40% of the raw gender gap on average, but this varies somewhat across cities. The results of the full decomposition of the gender earnings gaps suggest that differences in sector allocation contribute, on average, to one third of gender earnings gaps. Gender gaps are very wide in the informal sector and differences in micro-firm characteristics also account for differences in self-employment earnings. In contrast to the large gender earnings gaps measured in the seven cities, majority ethnic groups do not appear to be in a systematically advantageous position on the urban labour markets in our sample of cities, and observed gaps are small compared with gender gaps. Looking at more detailed levels of ethnic disaggregation, ethnic earnings differentials are found to be systematically smaller than gender differentials. Moreover, none of the minority “favoured” groups seem to have any relation to the ethnicity of the Head of State at the time of the survey. Holding productive characteristics constant, some unexplained differences persist however.     

Women and poverty: Beyond earnings and welfare

Women’s poverty rates are higher than men’s, with single mothers having extremely high poverty rates. This article first briefly examines poverty measures and U.S. poverty rates among men and women. The author then describes and evaluates three categories of economic research on poverty: the lack or inadequacy of employment and earnings; family structure and welfare; and earnings capacities, care-giving responsibilities and employment. Finally the author assesses the policies to alleviate women’s poverty derived from these explanations.     

A Comparitive Study of the Use of Financial Graphs in the Corporate Annual Reports of Major U.S. and U.K. Companies

The use of graphs to disclose information in corporate annual reports represents a significant dimension in financial disclosure management. Surprisingly, no inter-country comparative analysis of this area of voluntary disclosure has been conducted. This study compares the graphical reporting practices in the 1990 annual reports of 176 leading U.S. and U.K. industrial companies. Ninety-two per cent of U.S. companies use graphs compared with 80% of U.K. companies; the mean number of graphs per company being 13.0 and 7.7, respectively. Sales, an earnings measure, earnings per share and dividends per share are the four most frequently graphed aggregate financial performance variables in both countries. Significant differences in several of the variables graphed are found and explained in terms of environmental factors. In both countries, evidence of graphical information manipulation exists in the form of selectivity, measurement distortion, and presentational enhancement. Moderate evidence supports the hypothesis that U.K. companies are more likely than U.S. companies to adopt interpretative shading. Regulators need to clarify the responsibilities of directors and auditors by setting graphical guidelines.     

HR's role in corporate governance: Present and prospective

Corporate wrongdoing is damaging investor confidence and tarnishing the credibility of the U.S. business community, guilty and innocent alike. Some misdeeds are clearly criminal, others simply unethical or damaging to reputations. They range from “massaging” numbers (“managed earnings”), which tests the limits of financial prudence, to outright fraud. Caught in the limelight are U.S. corporate giants representing some of the world's best‐known brands and most famous CEOs, many only yesterday lionized in the business press. We have explored this issue from the perspective of the HR function through a survey of the senior HR professionals who attended the Human Resources Forum. The survey was augmented with focus groups. Our purpose was to understand current practices, attitudes, and behaviors with respect to legal standards and professional and ethical codes. We also explored the roles of the CEO, HR leadership, and the HR function in minimizing ethical breaches that have diminished investor and public trust. We hope to shed light on the responsibilities, actions, and risks of the HR function and its leadership now and in the future. © 2004 Wiley Periodicals, Inc.     

Discrimination Against Women Reconsidered

Sexist earnings differences must not be confused with wage discrimination; wage discrimination against females is only one source of the large sexist earnings gap. The author agrees that his calculations of adjusted earnings ratios do not capture all changes in relative productivity between male and female workers.His present value estimates compared male and female earnings during entire productive lives, from labor market entrance to retirement. Hence they do reflect earnings variations at all age levels and thus the average experience of females with comparable educational attainment.     

The Effect of Exchange Rate Changes on Geographic Segment Earnings of U.S.-Based Multinationals

This study examines the ability of exchange rate changes to aid in the explanation and prediction of the geographic segment earnings of U.S.-based multinational corporations. In order to evaluate the potential usefulness of geographic segment earnings disclosures, it is important to understand the effect that currency changes should be expected to have on these earnings. Two types of exchange rate effects are examined. These include the mechanical translation effects of an exchange rate change, as well as the operating effects. A sample of geographic segment earnings disclosures is developed for two geographic locations (Canada and Europe) and six industries in which adequate country-industry specific subsamples can be identified. Because the factors that impact exchange rate exposure tend to depend on country, industry, or both, provision is made for country, industry, and country-industry specific sensitivity to currency changes. Regressions and nonparametric analyses are performed to determine whether exchange rate changes can help explain the geographic segment earnings within these samples. Results indicate that the accounting-based translation effect that is typically modeled as the impact of exchange rate changes on earnings does not adequately capture the effect of exchange rate changes on segment earnings. Operating effects of past and current exchange rate changes do help explain earnings for geographic segments located in Europe and in four industries. Prediction models which are country or country-industry specific are able to outperform a random-walk prediction of geographic segment earnings in some circumstances.     

Accuracy, Bias, and Dispersion in Analysts' Earnings Forecasts: The Case of Cross-Listed Foreign Firms

This paper examines differences in analysts' earnings forecast characteristics for foreign incorporated non-U.S. firms cross-listed in the U.S. stock markets relative to a control sample of purely domestic firms. Examining summary earnings forecasts over the calendar years 1984 through 1989, this paper provides evidence that there are statistically significant differences in bias and accuracy between domestic and cross-listed foreign firms. Consistent with prior research, we find a horizon effect in accuracy; i.e., accuracy improves as we get closer to the actual earnings announcement for both types of firms. However, the differences in accuracy between the cross-listed and domestic firms persist only in the earlier forecast horizons where analysts' forecasts are less accurate for foreign cross-listed firms compared with domestic firms. The evidence is also consistent with analysts' exhibiting less optimism with respect to cross-listed foreign firms compared with the domestic firms. Finally, the paper also documents that there is a greater consensus among analysts for foreign cross-listed firms than for domestic firms.