Gender,productivity, and the nature of work and pay: evidence from the late nineteenth‐century tobacco industry

Women have typically been paid less than men throughout history. We investigate earnings in Swedish cigar making around 1900. Strength was unimportant, yet the gender wage gap was large. Differences in characteristics, such as age and experience, and different jobs within firms, account for two‐thirds of the gap overall, and the entire gap for piece‐rate workers. Firms were as willing to employ women as men in the better‐paying piece‐rate section, and women were willing to take those jobs. In contrast, discrimination was extensive in the time‐rate section. Men in this section benefited from greater outside opportunities and customary wages elsewhere. Theory holds that labour market discrimination will reduce profitability, and make firm survival harder, a proposition that has never been tested historically. We find that cigar firms that feminized their workforces most extensively were most likely to survive. Product market competition prevented firms employing (overpaid) men to any great extent. We argue that economic historians must interpret industry‐specific gender wage differentials in the context of workers' outside opportunities, and in the context of product markets, which can—and in this case did—limit firms' room for manoeuvre.     

The Market's Assessment of the Probability of Meeting or Beating the Consensus

We investigate to what extent the market uses information that is predictive of whether earnings will meet or beat the analyst consensus forecast of earnings (MBE henceforth): measures of a firm's incentives to engage in MBE behavior, measures of constraints on MBE, measures of past MBE practices by firm and industry, and other variables. Using the Mishkin test framework and Bonferroni‐adjusted p‐values, we document that of a total of 21 variables, the market inefficiently uses information in one difficulty measure and four other predictors, suggesting that strong empirically and theoretically grounded relationships concerning MBE behavior are more likely to be unraveled by the market. We further show that a portfolio based on the difference between the objective MBE probability and the market‐assessed MBE probability generates significant abnormal returns. The documented return anomaly is distinct from other known anomalies and cannot be fully explained by arbitrage risk or transaction costs.     

Investor Overreaction to Earnings Surprises and Post‐Earnings‐Announcement Reversals

Prior literature suggests that the market underreacts to the positive correlation in a typical firm's seasonal earnings changes, which leads to a post‐earnings‐announcement drift (PEAD) in prices. We examine the market reaction for a distinct set of firms whose seasonal earnings changes are uncorrelated and show that the market incorrectly assumes that the earnings changes of these firms are positively correlated. We also document that positive (negative) seasonal earnings changes in the current quarter are associated with negative (positive) abnormal returns in the next quarter. Thus, we observe a reversal of abnormal returns, consistent with a systematic overreaction to earnings, rather than the previously documented PEAD. Additional analysis indicates that financial analysts similarly overestimate the autocorrelation of these firms, although to a lesser extent. We also find that the magnitude of overestimation and the subsequent price reversal are inversely related to the richness of the information environment. Our results challenge the notion that investors recognize but consistently underestimate earnings correlation and provide a new perspective on the inability of prices to fully reflect the implications of current earnings for future earnings. That is, we show that investors predictably overestimate correlation when it is lacking, but underestimate it when it is present.     

Trading Prior to the Disclosure of Material Information: Evidence from Regulation Fair Disclosure Form 8‐Ks*

Regulation Fair Disclosure (Reg FD) Form 8‐K filings provide a venue where managers release information to the market as a whole that they designate as being material. Using this setting, we study trading patterns immediately prior to the public disclosure of material information. We offer three main results. First, using both intraday and daily trading data, we find abnormal trading volume of 21 percent (13 percent) in the hour (day) prior to the public disclosure, respectively. Second, we find that this pre‐disclosure abnormal trading volume is concentrated in firms that are smaller, have more growth opportunities, issue fewer voluntary disclosures, and have weaker external monitoring. Finally, we find that this pre‐disclosure volume is concentrated in subsamples in which the information relates to a firm's material contracts, a firm holds investor/analyst conferences, and there is insider trading activity in a firm's shares. Our results do not concentrate in a small number of firms or industries, and do not appear to be explained by the form through which managers first release the material information (e.g., Form 8‐K, press release, website posting, or social media). Our results are also robust to controlling for the firm's other filings and peer filings that occur around the disclosure. Overall, the trading patterns we document may show that, inconsistent with the spirit of Reg FD, a subset of investors trade on information managers deem material prior to its broad, public release.     

Mandatory IFRS Adoption and Financial Statement Comparability

This study examines whether mandatory adoption of International Financial Reporting Standards (IFRS) leads to capital market benefits through enhanced financial statement comparability. U.K. domestic standards are considered very similar to IFRS, suggesting any capital market benefits observed for U.K.‐domiciled firms are more likely attributable to improvements in comparability (i.e., better precision of across‐firm information) than to changes in information quality specific to the firm (i.e., core information quality). If IFRS adoption improves financial statement comparability, we predict this should reduce insiders' ability to benefit from private information. Consistent with these expectations, we find that abnormal returns to insider purchases ― used to proxy for private information ― are reduced following IFRS adoption. Similar results obtain across numerous subsamples and proxies used to isolate IFRS effects attributable to comparability. Together, the findings are consistent with mandatory IFRS adoption improving comparability and thus leading to capital market benefits by reducing insiders' ability to exploit private information.     

Auditor Reputation,Auditor Independence,and the Stock‐Market Impact of Andersen's Indictment on Its Client Firms*

In this paper, we study a broad sample of Arthur Andersen clients and investigate whether the decline in Andersen's reputation, due to its criminal indictment on March 14, 2002, adversely affected the stock market's perception of its audit quality. Because these reputa‐tional concerns are more of an issue if an auditor's independence is impaired, we investigate the relationship between the abnormal market returns for Andersen clients around the time of the indictment announcement and several fee‐based measures of auditor independence. Our results suggest that when news about Andersen's indictment was released, the market reacted negatively to Andersen clients. More importantly, we find that the indictment period abnormal return is significantly more negative when the market perceived the auditor's independence to be threatened. We also examine the abnormal returns when firms announced the dismissal of Andersen as an auditor. Consistent with the audit quality explanation, we document that when firms quickly dismissed Andersen, the announcement returns are significantly higher when firms switched to a Big 4 auditor than when they either switched to non‐Big 4 auditors or did not announce the identity of the replacement auditor. Our empirical results support the notion that auditor reputation and independence have a material impact on perceived audit quality and the credibility of audited financial statements, and that the market prices this.     

Firms with Inconsistently Signed Earnings Surprises: Do Potential Investors Use a Counting Heuristic?

Although prior research reports that firms that consistently beat their earnings expectations are rewarded with a market‐valuation premium, most firms are inconsistent in the sign of their benchmark performance, sometimes missing and sometimes beating. In this paper, we report the results of multiple experiments to test the idea that potential investors, evaluating firms that have inconsistent benchmark performance, use a counting heuristic to discriminate among them. Our results provide strong support for the hypothesis that these investors distinguish among firms by counting the number of beats and misses they experience over an observed time interval. The judgmental effect of this beat‐frequency is incremental to the effect of the magnitude of the beats and misses of the benchmark. Our study has implications for firm managers who have inconsistent benchmark performance, suggesting that market participants do make systematic discriminations among such inconsistent firms. It also has implications for researchers by introducing a new theoretical construct to the literature—namely, the counting heuristic.     

Monetary Policies versus Regulatory Policies: Management of Peer to Peer Market Interest Rates

This paper studies how monetary and regulatory policies manage peer to peer (P2P) interest rates. Based on selected representative monetary and regulatory policies, this paper finds that easy monetary policies reduce the demand for online loans, thus reducing the market's interest rates. Monetary policies may increase the supply of online loans through rational expectation channels or reduce the demand for online loans through bank risk‐taking channels. Normative market‐based regulatory policy enables the P2P market to return to rationality, eliminates high‐risk investors and borrowers, and subsequently reduces market interest rates. Risk disposal‐based regulatory policy reduces market supply to some extent, resulting in a small increase in interest rates. Both easy monetary policies and regulatory policies have a great impact on the normal platforms. The interest rate of high‐risk platforms is less affected by the relevant policies, which is evidence that such platforms do not behave in accordance with the financial rules in general. Monetary policies mainly affect platforms with interest rates in a relatively normal range, while regulatory policies mainly focus on platforms with abnormal interest rates.     

Entry deterrence when the potential entrant is your competitor in a different market

In this article, we present a two‐period model in which one firm operates in two markets: a monopoly and a duopoly. Assuming that this firm has private information on the cross‐price elasticity of demand between the products sold in both markets, it limits its quantity supplied in the monopoly market in order to make its rival in the other market believe that entry into the monopolized market is unprofitable. As a result of this strategy, the average prices observed in both markets increase. This result suggests that the detrimental effects of entry deterrence on consumers' welfare are stronger than those predicted by previous literature.     

Expertise Rents from Insider Trading for Financial Experts on Audit Committees

We document the existence of expertise rents by finding that financial experts on audit committees obtain higher abnormal returns from insider purchases than do non‐financial experts on audit committees. We further investigate whether information processing skills work alone or jointly with an information advantage to generate expertise rents. While financial experts on audit committees outperform financial experts on other committees, financial experts on compensation, executive, nominating, and governance committees do not outperform non‐financial experts on these committees. These findings suggest that expertise rents are domain‐specific and can be obtained only when directors have both access to private information and information processing skills. In additional testing, we find that expertise rents for financial experts on audit committees are primarily driven by non‐accounting financial experts, whose finance or supervisory experience could make them better than accounting financial experts in understanding market conditions and assessing firm risk.     

定向增发、控制权变动及其信号传递效应

 当公司再融资引起股权结构显著变动时,其必然会对公司控制权配置、竞争和转移产生重要影响,这种影响传递到资本市场会使公司股价发生相应波动。这种效应在股权高度集中公司更为明显,因为大股东是公司的实际控制人,大股东股权进而公司控制权变动传递了公司经营管理的内部信息。采用事件研究法,本文研究发现定向增发在我国具有正的公告效应;但是,定向增发对大股东控制权的影响不同其公告效应也不同：使得大股东控制权发生转移的定向增发其AAR和CAR最大,控制权强化类定向增发居次,控制权弱化类最后。可见,我国上市公司定向增发传递出了明确的公司控制权变动信号,彰显了大股东控制在上市公司中地位突出的治理角色。     

An Emerging Market's Reaction to Initial Modified Audit Opinions: Evidence from the Shanghai Stock Exchange*

This study investigates the valuation effect of modified audit opinions (MAOs) on the emerging Chinese stock market. Here, the term MAO refers to both qualified opinions and unqualified opinions with explanatory notes. The latter can be considered an alternative form of a qualified opinion in China. The institutional setting in China enables us to find compelling evidence in support of the monitoring role of independent auditing as an institution. First, we find a significantly negative association between MAOs and cumulative abnormal returns after controlling for effects of other concurrent announcements. Further, results from a by‐year analysis suggest that investors did not reach negative consensus about MAOs' valuation effect until the second year, exhibiting the learning process of a market without prior exposure to MAOs. Second, we do not observe significant differences between market reaction to non‐GAAP‐ and GAAP‐violation‐related MAOs. Third, no significant difference is found between market reaction to qualified opinions and market reaction to unqualified opinions with explanatory notes.     

Are Fundamentals Priced in the Bond Market?*

To date, the discussion of the Lev and Thiagarajan 1993 fundamentals in the prior literature has been exclusively in the context of the stock market. Our study is the first to examine the value‐relevance of these fundamentals for default risk. By focusing on the market for new bond issues, we examine the value‐relevance of the fundamental score using expected rather than realized returns. Also, by focusing on the bond market we provide a different perspective than that brought by prior studies relying solely on stock prices. We find the fundamentals to be priced in the market for new bond issues as indicators of expected future earnings and to be value‐relevant in enabling the market to discern differences in bond credit quality over and above the published bond ratings.     

Words and Numbers: Financialization and Accounting Standard Setting in the United Kingdom

How is it possible that British policymakers resisted market‐based measurement for decades while financial economic concepts of decision making and valuation still gained widespread acceptance as a justification for accounting standard setting? This study introduces the concept of “technologies of financialization” to develop the theorizing of the rise of finance in the domain of accounting. Based on a genealogical history of narrative reporting in the United Kingdom, it demonstrates how references to qualitative reporting techniques helped to address recurring crises of measurement from 1969 to 1993, and ultimately contributed to the practical acceptance of market‐based measurement in the UK standard‐setting context. The data are interpreted through a cultural economy framework that directs attention to the power of referring to financial reporting as a combination of words and numbers in sustaining its theoretical redefinition “from below”—that is, by relating it to the experience of practicing accountants rather than accounting theory. As a technology of financialization, narrative reporting made financial economic ideals of market‐based measurement, decision usefulness, and future orientation appear operable in a real‐life reporting context. Whenever measurement reached its practical limits, narratives were relied on to explain the impact of price‐level changes, frame economic decisions, and relate unobservable future cash flows to present‐day strategies and resources. The insight into how narrative reporting practices have been laced into the reasoning of capital markets for over 40 years is timely because it illustrates that narratives can also play a more encompassing role and drive the turn toward wider corporate accountability on social and environmental impacts while hard measurements in this area are still being figured out.     

Réactions du Marché d’Actions aux Chocs sur les Taux d’Intérêt de Court Terme,le Cas d’un Marché Emergent: la Bourse Régionale des Valeurs Mobilières (BRVM)

Abstract: Macroeconomics in general and interest rate policy in particular are believed, from a theoretical point of view, to act on stock market movements. This paper discusses this issue in the case of the West African stock market by studying the Regional Securities Exchange (la Bourse Régionale des Valeurs Mobilières (BRVM)) stock market reactions to interest rates innovations. Our results, based on VAR analysis, show that the BRVM stock market does not react immediately to short‐run interest rates’ innovations. Nevertheless, backed reactions occur in imminent periods: at the earliest in the second period and at the latest in the sixth period according to VAR models used. Long‐term effects of short‐term interest rates’ innovations on stock prices returns depend on models specified, on the kind of interest rate and on data frequency. Thus, the long‐term effect of central bank rent rates’ innovations is relatively more important than the one related to interbank rate's innovations. The previous situation of the market is, however, the main determinant of the change of stock prices. Our results show also that stock prices and short‐run interest rates have a similar reaction to both exchange rate and inflation rate's innovations.     

Price Discrimination in the Subscription Market for Economics Journals

We examine what factors affect the degree of price discrimination for an academic journal by analyzing data on 190 of the 208 economics journals indexed in the 2008 edition of Journal Citation Reports. We find that (i) the library‐to‐individual price ratio of a for‐profit journal is 37% higher than that of a comparable nonprofit journal because the price premium of a for‐profit journal in the library market is disproportionately larger than that in the individual market, (ii) journals with higher citations per page or impact factor are more price discriminatory, and (iii) Elsevier and Wiley‐Blackwell practice the highest degree of price discrimination of all publishers.     

The market for corporate subsidiaries in Japan: An empirical study of trades among listed firms

We investigate trades of wholly- or partially-owned subsidiaries between firms listed on the Tokyo Stock Exchange (TSE) for the years 1996–2010, to explore the economic impact in terms of strategic refocusing, stock market valuation and performance effects. By pairing both sides to each deal, we show differences in firm characteristics, returns, and subsequent performance of buying and selling firms. Unlike mergers between whole firms, most subsidiary deals straddled different industries. Most sellers were larger, more diversified and less profitable than buyers. Our event study reveals that abnormal returns were positive for buyers yet insignificantly different from zero for sellers. However, subsidiary sales in the core business earned negative returns, the more so the larger the deal. An analysis of ex-post operating results shows that the performance of sellers often declined after the trade, in particular for firms that divested a core-related subsidiary. We conclude that subsidiary trades in Japan in this period contributed importantly to strategic repositioning and a more efficient use of corporate assets.     

The Persistence of Dominant‐Firm Market Share: Raising Rivals' Cost on the New York Stock Exchange

To explain the persistence of dominant New York Stock Exchange (NYSE) market share in stock trading of listed securities from 1992 to 2002, we develop a dominant‐firm price leadership model and hypothesize that NYSE specialists raised the costs of rival market makers. The model predicts that natural and induced cost advantages will determine the NYSE's market share vis‐à‐vis the regional exchanges, electronic trading systems, and NASDAQ dealers. Empirically, NYSE market share increases with economies of scale and scope, abnormal price volatility, high asymmetric information, and with trading practices that raise rivals' costs, such as failure to display limit orders that bettered the existing quotes.     

Spatial Equilibrium of Wheat Markets in Ethiopia

Abstract: Knowledge about the extent to which spatial markets are integrated is useful to assess the impact of liberalization policies on the performance of agricultural markets in the developing countries. In turn, this would help to guide subsequent interventions aimed at improving the performance of markets. Cointegration techniques provide an analytical framework to know whether markets are integrated, by making it possible to investigate the existence and magnitude of price transmission between spatial markets. This study tries to analyze the spatial equilibrium of wheat markets in Ethiopia by employing an autoregressive distributed‐lag modeling approach to cointegration analysis on wheat prices observed during the post‐liberalization period for the central wholesale market (Addis Ababa) and for a local market (Ambo). The major finding of a stable equilibrium relationship between the price series considered provides evidence of market integration. Since intervention in local markets is generally costly and less effective, the result suggests the possibility of targeting intervention at the central wholesale market level with the objective of influencing price dynamics in the local markets.     

THE IMPACT OF M&As ON SHAREHOLDER WEALTH: EVIDENCE FROM TAIWANESE CORPORATIONS

This study, using forty‐six M&A events in Taiwan between 1987 and 1998, investigates the effects of M&As on shareholder wealth. The shareholders of the acquiring firms gain modestly positive abnormal returns around the announcement dates. We also distinguish M&As of different purposes, finding that M&As for technology‐acquiring purposes are most favored by the market, while vertical M&As are detrimental to shareholder wealth.