Disclosure of Private Information and Reduction of Uncertainty: Environmental Liabilities in the Chemical Industry

We investigate the potential uncertainty-reducing role of accounting information in the context of contingent Superfund liability valuation. We first develop theoretical arguments for the way reduction of uncertainty regarding these contingent liabilities is expected to affect security prices. Empirical proxies are developed for two types of uncertainty surrounding contingent Superfund liabilities: site uncertainty and allocation uncertainty. In a valuation framework, we then investigate whether financial statement disclosures and accruals reduce uncertainty and thereby affect security valuation. Specifically, we analyze the interaction of private information contained in firm disclosures and accruals with inherent uncertainty surrounding contingent Superfund liabilities. Results suggest that in a regulatory environment allowing substantial reporting discretion, firm-provided financial statement information affects valuation of contingent Superfund liabilities by reducing uncertainty. Further, we find that information revealed through accruals versus disclosures is differentially effective at reducing site and allocation uncertainty.     

Corporate philanthropy in a politically uncertain environment: does it bring tangible benefits to a firm? Evidence from China

We examine the impact of political uncertainty on a firm’s corporate philanthropy (CP) contribution and the associated direct tangible benefits of CP to a firm. Specifically, we examine two testable hypotheses. (1) When facing political uncertainty, a firm makes more CP, and (2) after a firm makes CP contributions during a period of uncertainty, it will obtain future tangible benefits. Using a sample of Chinese listed firms, we document that a firm, on average, increases its CP significantly during a period of political uncertainty (e.g. when there is a new local communist party secretary or mayor). In addition, we report that, on average, a firm’s donation in year t is positively correlated with its amount of government subsidies, corporate income tax reduction, and short- and long-term bank loan amounts in year t?+?1. The findings are robust compared to those of placebo tests and fixed effect models, as well as when using an alternative measure of political uncertainty. We observe that the results are more pronounced among non-state-owned enterprises (non-SOEs) than those among SOEs, corroborating the notion that during a period of political uncertainty, non-SOEs are more willing to build political connections with new city leaders through CP than are SOEs.     

Analyst Optimism and Incentives under Market Uncertainty

We examine how analysts’ changing incentives driven by changes in market uncertainty affect their forecast optimism. Analysts issue more optimistically biased earnings forecasts and buy recommendations under high market uncertainty (VIX). The lower reputational costs and larger benefits of optimistic output explain the increased optimistic output: Analysts are less likely to be penalized for inaccuracy and can stimulate more trading activity from optimistically biased output when market uncertainty is high. We find that the likelihood of analysts’ turnover decreases, while the trading volume associated with optimistic output increases, with VIX. No evidence suggests that analysts’ self‐selection affects our findings on optimism and market uncertainty.     

Dealing with prognostic uncertainty

How do professional futurists contend with prognostic uncertainty? There is an impressive body of medical-sociological research on how medical staff deals with uncertainty. We have used these insights to study patterns and manners in foresight practice that might not be evident otherwise. The question “Do professional futurists use approaches to deal with uncertainty that resemble those of medical staff?” is addressed by ongoing ethnographic research in Dutch foresight practice. The observed manners are grouped into four analytic categories: the construction of solidity, numeric discourse, communication habits and experience as anchor. In this paper, the construction of solidity and experience as anchor are described in detail. It is further more suggested that “certainification” is a possible upshot of these manners in use.     

Pension Wealth Uncertainty

Using a representative sample of Italian investors, we measure the uncertainty of social security benefits by eliciting for each individual the subjective distribution of the replacement rate as a summary indicator of pension uncertainty. We find that pension uncertainty varies across individuals in a way that is consistent with what one would expect a priori, given different information sets and pension schemes. In particular, individuals who are a long way from retirement, and thus face more career uncertainty, report more subjective pension uncertainty. Since expectations reveal information about people's understanding of pension reforms, our findings suggest that they should also be an important determinant of how people respond to reforms.     

Consumption and Equilibrium Interest Rates in Stochastic Production Economies

In this paper, we analyze the behavior of equilibrium real interest rates in an identical consumer economy in which the preferences are represented by time additive logarithmic utility functions and production technologies are Cobb-Douglas with stochastic constant returns to scale. The following main results are established.

• (i) When there is no relative price uncertainty, it is shown that the equilibrium interest rate exhibits a mean reverting tendency. A nontrivial steady state distribution is found to exist for the equilibrium interest rate. The properties of the equilibrium interest rate are also derived and discussed.
• (ii) In a multigood economy, even with additive preferences across goods, the equilibrium interest rates depend explicitly on relative prices. The substitution possibilities in production technologies induce this result. This is in contrast to the findings of Richard and Sundaresan 11 who show that the analytical general equilibrium term structure of interest rates formula of Cox, Ingersoll, and Ross 5 is unaffected by the introduction of relative price uncertainty when the technologies are linear and hence involve no substitution.

Furthermore, we relate our results to those of Cox, Ingersoll, and Ross 5 , Breeden 3 , and Richard and Sundaresan 11 with special emphasis on stochastic production and realtive price uncertainty.     

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.     

Interruption, interrogation, integration and interaction as process: How PNS informs interdisciplinary curriculum design

We focus on the decision to include PNS in the curriculum for a first year tertiary environments degree. Building on case studies that described complex environmental issues, we understood PNS actions to require a critical gaze at our disciplines and then a process for change. We used the idea of disrupting—or interrupting—the established ways of reading the literature and ‘accepted stories’ of what occurred. The interruption allowed the creation of a space in the academic discourse to question the interpretation- and discipline-based assumptions underpinning subject discussions. This opening of a place for questions about the various case study situations allowed students to act as extended peer communities and to acknowledge other stakeholders in to the discussion. The commonest interruptions were to recast the issue as part of a wider and more complex system, to acknowledge uncertainty and to consider the drivers and risks in scaling up and down within systems and sub-systems. We actively promoted interdisciplinarity and extending science as cornerstones to dissolving paradigms and to facilitating negotiation of innovative ways of ‘seeing and knowing’.     

Quality in risk reporting on energy issues in German news media

In media coverage, the context of the German energy transition, also referred to as Energiewende, casts a spotlight not only on various technology options (e.g. wind or coal power) but also on more abstract topics such as security of supply or electricity prices. Thereby, the public’s assessment of energy-related issues may greatly rely on perceived risks. Focusing on the quality of energy-related risk reporting, this contribution therefore is intended to explore the German print and TV media discourse on energy options or topics. In our sample, one in three articles connects an energy option or topic with an evident or potential unwanted event. Although the media’s effect on actual risk perception involves some controversies, researchers tend to criticize the media as being susceptible to framing and for failing to place unwanted events in perspective, e.g. by not presenting the corresponding likelihood of occurrence, which is necessary to define risk. If this critique holds true, accurate public risk assessment is partly hampered because media coverage implies uncertainty rather than providing all information available. We examined seven indicators of quality reporting derived from literature research: intensity, likelihood, controllability, desired uncertainty, sensationalism, emotional language, and type of unwanted event. Based on German energy media coverage in 2013, we found a relatively high occurrence of intensity and controllability, whereas likelihood and desired uncertainty were reported less often. By aggregating the indicators into a risk-reporting quality index, we did not observe a poor quality of risk reporting on energy issues. In contrast to previous research, the overall quality of energy-related risk reporting can be assessed as at least moderate, implying that the media depicts risks more precisely than assumed. The occurrence of quality indicators thereby significantly depends on the type of unwanted event rather than on the energy option considered.     

Optimal capital and risk allocations for law- and cash-invariant convex functions

In this paper we provide a complete solution to the existence and characterization problem of optimal capital and risk allocations for not necessarily monotone, law-invariant convex risk measures on the model space L ^p for any p∈[1,∞]. Our main result says that the capital and risk allocation problem always admits a solution via contracts whose payoffs are defined as increasing Lipschitz-continuous functions of the aggregate risk. Filipović is supported by WWTF (Vienna Science and Technology Fund). Svindland gratefully acknowledges financial support from Munich Re Grant for doctoral students and hospitality of the Research Unit of Financial and Actuarial Mathematics, Vienna University of Technology. We thank Beatrice Acciaio and Walter Schachermayer for fruitful discussions and an anonymous referee for helpful remarks.     

Stochastic Dominance and Conditional Expectation—An Insurance Theoretical Approach

We show that the relation of second order stochastic dominance, which has found widespread use in models of economic behavior under uncertainty, may be described in terms of conditional expectation. If a distribution G second order stochastically dominates another distribution F, then there are random variables g and f with distributions G and F, respectively, such that g can be obtained from f by iterated conditional expectation. In terms of insurance, this shows that the less risky distribution can be obtained by a sequence of insurance contracts each one insuring against the residual risk left over from the previous contracts.     

Convergence of utility functions and convergence of optimal strategies

In this paper we study the stability (in the L ^p as well as for the almost sure convergence sense) of the optimal investment-consumption strategy with respect to the choice of the utility function.Received: February 2003, The authors want to thank an anonymous referee as well as an associate editor for their useful comments and suggestions (in particular, the development on the speed of convergence). The authors also thank R. A. Dana for helpful discussions and W. Schachermayer for careful reading.     

Types of investor uncertainty and the cost of equity capital

We jointly test the effects of two types of investor uncertainty, one related to future firm performance and unrelated to accruals (cash flow uncertainty) and one directly related to accrual estimation errors (accounting quality uncertainty). Distinct from prior studies, our uncertainty estimates are based on a matched‐firm design that minimizes the mechanical relationship between the two uncertainty variables. We find a strong negative relationship between cash flow uncertainty and multiple estimates of the cost of equity capital. With respect to accounting quality uncertainty, we find a strong positive association with both expected stock returns and implied costs of equity, but only in settings that control for cash flow uncertainty. Collectively, our results suggest the need to consider different types of investor uncertainty when examining how investor uncertainty affects the cost of equity capital.     

THE CONTRIBUTION OF INFLATION UNCERTAINTY TO THE VARIABLE IMPACTS OF MONEY ON STOCK PRICES

This paper examines the effects of inflation uncertainty on the lag structure between money growth and stock prices. Using a varying parameter model and the Livingston survey data 1 1 Livingston, J. A., “Inflation Expectations Surveys.” Published twice annually, Philadelphia Sunday Bulletin (1948–1971), Philadelphia Inquirer (1972 on).
as a proxy for inflation uncertainty, the results suggest that only current money growth influences stock prices. However, a large percentage of this positive impact can be expected to be offset by inflation uncertainty prevailing at the time.     

IAS 39: Underlying Principles

There has been much recent debate about the merits of certain aspects of the IASB's recent improvements to IAS 39 Financial Instruments – Recognition and Measurement. Many have sought changes to IAS 39 and lengthy discussions have taken place to determine whether proposed changes are appropriate. These discussions have often focused on the practical effects of the proposed changes – an aspect that is certainly worthy of in-depth consideration. However, the IASB has also focused discussions on whether proposed changes are consistent with the principles underlying the standard. This article seeks to highlight those principles underlying the recognition, measurement and hedge accounting aspects of IAS 39, and their consequences for the resultant accounting requirements as a means to enhance understanding of the reasons why the IASB may find it difficult to accept certain proposed changes.     

Italian consumers’ attitudes towards food risks: self-protective and non-self-protective profiles for effective risk communication

The study aims to assess Italian consumers’ attitudes towards food risks and seeks to outline their socio-demographic and behavioural characteristics on the basis of their attitudes (self-protective and non-self-protective) towards food risks. Using the Computer-assisted telephone interviewing survey method, a sample of 1000 Italian consumers was interviewed on risk perception issues and general eating habits. Factor analyses on the consumers’ propensities to read the label when buying a food product for the first time, their propensities to seek food-related information and their perceived levels of exposure to food risks have enabled us to define Italian consumers’ attitudes towards food risks. Distinguishing between consumers with more self-protective attitudes and those with less self-protective attitudes and identifying their distinctive socio-demographic and behavioural characteristics (e.g. gender, age, the frequency with which respondents do grocery shopping and the channels used for further inquiry) are crucial for communication campaigns aimed at reducing consumers’ exposure to food risks.     

Extrapolating understanding of food risk perceptions to emerging food safety cases

Important determinants of risk perceptions associated with foods are the extent to which the potential hazards are perceived to have technological or naturally occurring origins, together with the acute vs. chronic dimension in which the potential hazard is presented (acute or chronic). This study presents a case study analysis based on an extensive literature review examining how these hazard characteristics affect people’s risk and benefit perceptions, and associated attitudes and behaviors. The cases include E. coli incidences (outbreaks linked to fresh spinach and fenugreek sprouts), contamination of fish by environmental pollutants, (organochlorine contaminants in farmed salmon), radioactive contamination of food following a nuclear accident (the Fukushima accident in Japan), and GM salmon destined for the human food chain. The analysis of the cases over the acute vs. chronic dimension suggests that longitudinal quantification of the relationship between risk perceptions and impacts is important for both acute and chronic food safety, but this has infrequently been applied to chronic hazards. Technologies applied to food production tend to potentially be associated with higher levels of risk perception, linked to perceptions that the risk is unnatural. However, for some risks (e.g. those involving biological irreversibility), moral or ethical concerns may be more important determinants of consumer responses than risk or benefit perceptions. (Lack of) trust has been highlighted in all of the cases suggesting transparent and honest risk–benefit communications following the occurrence of a food safety incident. Implications for optimizing associated risk communication strategies, additional research linking risk perception, and other quantitative measures, including comparisons in time and space, are suggested.     

Media risk communication – what was said by whom and how was it interpreted

The purpose of this paper is to provide some insight into the level and type of media coverage that food risks received and consider the translation of press releases into media articles. Past scientific messages dealing with two food risks (Salmonella and Genetically Modified (GM) potatoes) were collected from various Irish media sources over a defined period. In addition, press releases and helpline data were collected. All data pieces were subsequently coded. Based on the audit it is clear that island of Ireland journalists are generally balanced with regard to their reporting on Salmonella. In most cases where press releases could be linked to the newspaper articles, the press release was represented fairly accurately. This brings into clear focus the need by those issuing press releases to be very clear on the meaning of their message. Journalists are using the press releases as the basis for articles therefore vague terms and overemphasis on a particular finding can result in what may appear as a sensational article. In the case of GMs more sensational hooks were used to draw attention to the articles. Thus communicators need to be aware of the characteristics of the risk they are communicating about when designing and delivering a risk message.