Housing Starts in Canada, Japan, and the United States: Do Forecasters Herd?

Recent price trends in housing markets may reflect herding of market participants. A natural question is whether such herding, to the extent that it occurred, reflects herding in forecasts of professional forecasters. Using survey data for Canada, Japan, and the United States, we did not find evidence of forecaster herding. On the contrary, forecasters anti-herd and, thereby, tend to intentionally scatter their forecasts around the consensus forecast. The extent of anti-herding seems to vary over time. For Canada and the United States, we found that more pronounced anti-herding leads to lower forecast accuracy.     

Are corruption and corporate tax avoidance in the United States related?

Review of Accounting Studies - We examine whether state-level corruption and corporate tax avoidance in the United States (U.S) are related. Using a sample of 36,078 U.S. firm-year...     

Where Is the Market? Evidence from Cross-Listings in the United States

We analyze the location of stock trading for firms with a UScross-listing. The fraction of trading that occurs in the UnitedStates tends to be larger for companies from countries thatare geographically close to the United States and feature lowfinancial development and poor insider trading protection. Forcompanies based in developed countries, trading volume in theUnited States is larger if the company is small, volatile, andtechnology-oriented, while this does not apply to emerging countryfirms. The domestic turnover rate increases in the cross-listingyear and remains higher for firms based in developed markets,but not for emerging market firms. Domestic trading volume actuallydeclines for companies from countries with poor enforcementof insider trading regulation.     

Why regulate private firm disclosure and auditing?

Private firms face differing financial disclosure and auditing regulations around the world. In the US and Canada, for example, private firms are generally neither required to disclose their financial results nor have their financial statements audited. By contrast, many firms with limited liability in most other countries are required to file at least some financial information publicly and are also required to have their financial statements audited. This paper discusses and analyzes the reasons for differential financial reporting regulation of private firms. We first discuss various definitions of a private firm. Next, we examine theoretical arguments for regulating the financial reporting of these firms, particularly related to public disclosure and auditing. We then provide new survey-based evidence of firms’ and standard setters’ views of regulation. We conclude by identifying future research opportunities.     

InsurTech in the United States and Germany—What are the drivers behind the different business models?

Comparing the InsurTech ecosystems of the United States and Germany (Europe), there are significant regional differences in the choice of business models. While many InsurTechs in the United States have opted for the business model of a fully licensed insurer, this business model is much less common in Europe. In Europe, many InsurTechs seem to shy away from applying for a license as an insurer and limit themselves to the business model of a broker or a managing general agent. This paper analyzes the factors that influence an InsurTech's choice of business model when deciding whether or not to apply for an insurance license. It examines the impact of different local market environments on these decisions, as well as the role that access to venture capital plays in business model decisions and how regulators and their actions influence the decision-making process.     

Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States

We assess the impact of bank deregulation on the distribution of income in the United States. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved bank performance. Exploiting the cross‐state, cross‐time variation in the timing of branch deregulation, we find that deregulation materially tightened the distribution of income by boosting incomes in the lower part of the income distribution while having little impact on incomes above the median. Bank deregulation tightened the distribution of income by increasing the relative wage rates and working hours of unskilled workers.     

Venture capital investment practices in Europe and the United States

This article focuses on the investment practices and contract behavior of venture capitalists in relation to their portfolio companies. Using a unique self-collected data set, we provide new evidence on the venture capital industry in Europe and the United States. Important differences are identified between the two, particularly with respect to the use of convertible securities, replacement of former management, stage financing, deal syndication, and duration of exit stage. The most striking difference involves the use of convertible securities, which are used far less often in Europe than in the United States. These differences suggest that European venture capitalists engage in less monitoring and thus adopt a more hands-off approach to their portfolio companies as compared to US venture capitalists.

Has the correlation of inflation and stock prices changed in the United States over the last two centuries?

The relationship between stock prices and the inflation can be either negative or positive, depending on the strengths of various theoretical channels at work. In this study, we examine the dynamic conditional correlations of stock prices and inflation in the United States over the period of 1791–2015 under a time-varying framework. The results of our empirical analysis reveal that correlations between the inflation and stock prices in the United States evolve heterogeneously overtime. In particular, the correlations are significantly positive in the 1840s, 1860s, 1930s and 2011, and significantly negative otherwise. The policy implications of these findings are then discussed.     

Is the willingness to take risks contagious? A comparison of immigrants and native-born in the United States

A number of studies have shown that immigrants are more willing to take risks than native-born populations. In this paper, we measure if the willingness to take risks is contagious and if this effect is different for immigrants and native-born individuals in the United States. We suggest that the willingness to take risks may be contagious, like emotions and generosity, i.e. an individual may be more willing to take risks if others make risky decisions. We measure if contagion has a stronger effect on willingness to take risks among immigrants than native populations using a variety of vignettes, specifically in the domains of career, financial investment, and health. Respondents were randomly assigned either to a control or experimental condition. In the experimental condition, we attempted to induce risk-taking by suggesting that other individuals made risky decisions in the lottery-choice tasks (a ‘risk shift condition’). Contrary to expectations, the risk shift condition had a positive effect on willingness to take risks among native-born, while a negative effect or no effect was found among immigrants (conservative shift). Native-born found the situations more beneficial in the risk shift condition than in the control condition, while immigrants found them less beneficial in the risk shift condition. The conservative shift was found among immigrants, as well as males and self-employed. Risk shift condition reduced the sense of power among power-motivated individuals (males and immigrants), which produced a less optimistic evaluation of risky situations. While taking into consideration that others make risky decisions, immigrants and males perceived situations as less beneficial for them. The results of the experiment have some implications for our understanding of the link between a sense of power and the willingness to take risks.     

Smoke and Mirrors? Disclosures in the Marijuana Industry in Canada

Licensed producers (LPs) of marijuana in Canada are embedded in a highly competitive industry where they raise funds from investors to finance their growth. They face substantial risks from the uncertain legal status of marijuana and from its unsettled health and safety consequences. We argue that this context stands to have implications for the disclosures of firms in the marijuana industry. We rely on a multicase study of three large Canadian LPs to explore their mandatory and voluntary disclosures during the third quarter of 2018. We find that their mandatory interim disclosures are largely consistent with disclosure rules that target marijuana operations. We also find that they make voluntary disclosures relevant for their context (e.g., about risks from legal, health, and safety consequences), and that there is variation in these disclosures. We use our findings as a springboard for discussing the antecedents of mandatory and voluntary disclosures in the marijuana industry (i.e., proprietary costs, investor interest, detection costs of selective disclosures), and their consequence (i.e., lack of comparability). We offer suggestions for future research.     

Equity financing and innovation: Is Europe different from the United States?

During the mid and late 1990s young, high-tech firms in the US experienced a supply shift in both internal and external equity fueling a finance-driven boom in corporate R&D. This paper examines whether R&D spending in Europe in a similar way was sensitive to fluctuations in the supply of internal and external equity during the late 1990s and early 2000s. I conjecture that UK and Continental Europe, due to their different financial systems, differ in terms of equity supply. I estimate dynamic R&D regression models for UK and Continental European high-tech firms separately and find significant joint cash-flow effects for newly listed firms in both samples. However, only new firms in the UK experienced a joint external equity effect as well. The findings of this paper suggest a channel through which market-based financial systems outperform the bank-based economies of Continental Europe.     

Has NAFTA Increased Labor Market Integration between the United States and Mexico?

This article analyzes three criteria for labor market integrationbetween Mexico and the United States before and since the NorthAmerican Free Trade Agreement: the responsiveness of Mexicanwages to US wage shocks, the speed at which relative wages returnto a long-run differential, and changes in the rate of convergenceof absolute wages. Tests for increased integration using thesethree criteria generate mixed results, which are then exploredby directly incorporating trade, foreign direct investment (FDI),and migration. The results suggest that trade and FDI did infact positively contribute to integration but that the increasein border enforcement depressed Mexican wages, masking the positivebenefits.     

Why do private firms adopt IFRS?

Do private firms voluntarily adopt IFRS? If so, why? Answers to these questions have been very limited so far, mainly due to the absence of financial data on private firms. In this paper, I exploit the German setting where the financial statements of private firms are widely available. I estimate multi-period logit regressions on the choice between national GAAP and IFRS for the consolidated financial statements of nearly 3000 German private firms with more than 14,000 firm-years in the period 1998–2010. My results suggest that the expected net benefits of IFRS adoption vary substantially across the group of private firms, depending on their financing needs, governance system, and organizational and informational complexity. Specifically, I find that private firms using IFRS have more growth opportunities, are more leveraged, are externally rated, seek to raise external capital by issuing public bonds or equity, are registered as a stock corporation, are characterized by private equity (PE) involvement, have more international sales and operations, and have a Big Five auditor. These insights should be of great interest to both preparers and regulators in the current debate about the future of financial reporting in private firms.     

International Stock Return Predictability: What Is the Role of the United States?

We investigate lead‐lag relationships among monthly country stock returns and identify a leading role for the United States: lagged U.S. returns significantly predict returns in numerous non‐U.S. industrialized countries, while lagged non‐U.S. returns display limited predictive ability with respect to U.S. returns. We estimate a news‐diffusion model, and the results indicate that return shocks arising in the United States are only fully reflected in equity prices outside of the United States with a lag, consistent with a gradual information diffusion explanation of the predictive power of lagged U.S. returns.     

Preparing for the unknown… unknowns: ‘doomsday’ prepping and disaster risk anxiety in the United States

This article examines the collapse-based thinking energising ‘doomsday’ prepping: a growing American phenomenon centred on storing food, water and weapons for the purpose of surviving disasters. Existing understandings of prepping indicate that its practitioners are driven to prepare by peculiar and delusional certainty that apocalyptic collapse will occur in the near future. This view, however, has not yet been tested by empirical research. This article draws on ethnography with 39 preppers in 18 American states to present a new understanding of this phenomenon, as it shows prepping consistently being practiced in the absence of both apocalyptic predictions and certainty regarding the future occurrence of disaster. Demonstrating that preppers’ activities are undergirded by precautionary projections around numerous non-apocalyptic ‘threats’, the article argues that prepping principally responds to uncertain anxieties around disaster risks. Moreover, it establishes that these imprecise anxieties are regularly influenced by preppers’ consumption of disaster-based speculation in mainstream news media – showing that their concerns tend to emerge in response to numerous disaster risks that are widely reported and recognised in wider American culture, rather than marginal conceptions of ‘threats’. The article, therefore, contends that, rather than being a marginal apocalyptic practice, prepping is a phenomenon with clear, previously unacknowledged links to broader risk communications and concerns in the twenty-first century United States – one that must be understood as a reflection of the broader resonance of disaster-based speculation and uncertainty in this cultural context.     

Why do small businesses have difficulty in accessing bank financing?

This study investigates bank financing to small and medium-size enterprises (SMEs) and evaluates whether the difficulties of SMEs in accessing bank financing during a period of financial crisis are due to a reduction in the supply of credit, or to a decrease in the demand for credit. The results show that the macroeconomic setting matters: demand effects are unlikely to drive the decline in the stock of bank loans, while the supply of credit causes SMEs difficulties in accessing bank credit. During a crisis period, in particular, an increase in the risk of lenders leads to the reduced supply of credit and credit rationing (i.e. the bank lending channel). In a post-crisis period, SMEs with increased risk and decreased profits have great difficulties in securing bank loans (i.e. the borrower balance sheet channel). Taken together, these results suggest that supply effects initially emerge through the bank-lending channel and then shift to the borrower balance sheet channel over a period of financial crisis.     

Business Cycle Synchronization of Turkey with the Eurozone and the United States: What Has Changed Since 2001?

Using wavelet methodology, we make a detailed spectral analysis of the business cycle synchronization of the Turkish economy with the eurozone and the United States. We take into account the dramatic change in the main economic indicators in the Turkish economy after the 2001 financial crisis. We find that the correlation of Turkish cycles with the cycles of the eurozone and the United States increased substantially after 2001. Moreover, the correlation of the Turkish cycles with the U.S. cycles is not lower than that with the euro cycles after 2001. Accordingly, analyzing the effect of international developments should not be confined to the trade channel. We submit that capital flows offer a reasonable explanation for the high correlation with the United States.     

Why do firms issue private equity repeatedly? On the motives and information content of multiple PIPE offerings

This study examines why private equity issues tend to be a repeated source of financing for public firms. We test the recent operational needs theory of public equity issuance within the context of repeated private equity issues. We find that repeated PIPE issuers burn through cash quickly and do not reach the standards of information transparency or profitability needed for a successful public equity offering. This has implications for investor composition and the market response to a PIPE. Initial PIPE offerings are characterized by substantial diversity in investor type. In successive transactions firms increasingly rely upon hedge funds, who extract greater price discounts and more often require cash flow rights as opposed to control rights. As firms select a path of repeated PIPEs to raise funds, successive issues become uninformative to the market. We conclude that, for small public firms, the same motive underlies public equity offerings and repeated private equity offerings—an acute need for cash.