Optimal internal control regulation: Standards,penalties, and leniency in enforcement

To protect investors, regulators increasingly rely on regulating firms’ internal controls over financial reporting, but they punish noncompliance only if an internal control weakness enabled accounting manipulation. In other words, enforcement is manipulation-contingent. We develop an economic model with a manager who sequentially chooses internal control quality and manipulative effort, and a welfare-maximizing regulator who determines an internal control standard, the penalty size for internal control weaknesses, and when to invoke such a penalty. Internal control regulation under manipulation-contingent enforcement not only provides incentives to invest in internal controls, but also improves manipulation deterrence when there are internal control weaknesses. The optimal regulation takes advantage of this additional deterrence effect by using a very strict internal control standard and an intermediate penalty that is only levied in the event of accounting manipulation. Overall, we rationalize why the commitment to lenient enforcement of internal control regulation is optimal.     

Financial penalties and bank performance

This paper investigates the impact of financial penalties on the profitability and stock performance of banks. Using a unique dataset of 671 financial penalties imposed on 68 international listed banks over the period 2007 to 2014, we find a negative relation between financial penalties and pre-tax profitability but no relation with after-tax profitability. This result is explained by tax savings, as banks are allowed to deduct specific financial penalties from their taxable income. Moreover, our empirical analysis of the stock performance shows a positive relation between financial penalties and buy-and-hold returns, indicating that investors are pleased that cases are closed, that the banks successfully manage the consequences of misconduct, and that the financial penalties imposed are smaller than the accrued economic gains from the banks’ misconduct. This argument is supported by the positive abnormal returns accompanying on the announcement of a financial penalty.     

Securities regulation,household equity ownership,and trust in the stock market

Review of Accounting Studies - Using aggregate data from national accounts, we study whether strengthening and harmonizing securities regulation across the European Union increases household equity...     

资产证券化绝非不良资产证券化

资产证券化作为一种金融创新,在世界范围内达到了广泛运用.我国不少学者建议将其用于不良资产处理,但是从资产证券化的逻辑结构,不良资产自身的特点,我国的经济环境、法制环境,国外的经验和不良资产证券化给资产证券化市场及我国经济带来的消极影响入手,得出目前不宜将银行不良资产证券化的结论,建议以其他方式处理银行不良资产.     

Non-GAAP earnings disclosures around regulation G – The case of “implicit non-GAAP reporting”

We identify a phenomenon related to non-GAAP earnings disclosure and examine its prevalence around Regulation G (RegG). Specifically, we analyze to what extent firms only disclose adjustments to GAAP earnings instead of entire adjusted earnings figures thereby not providing the ideal non-GAAP to GAAP reconciliation promoted by RegG. We refer to this reporting behavior as “implicit non-GAAP reporting” and ask three different questions: How is “implicit non-GAAP reporting” related with the adoption of RegG? What type of firm reports implicit non-GAAP measures? What are the motives for “implicit non-GAAP reporting” post-RegG? Our analyses yield three key findings. First, the frequency of “implicit non-GAAP reporting” spikes after the regulatory intervention but to a lesser degree also existed before. Second, during the post-RegG time period, the prevalence of “implicit non-GAAP reporting” is much higher among firms who only started to report non-GAAP earnings after RegG was enacted (starters) than among those, which continued to disclose non-GAAP earnings across the regulatory intervention (continuers). Third, we show that only for starters, “implicit non-GAAP reporting” is associated with motives of beating analyst earnings forecasts as well as experiencing GAAP losses. Our study provides important insights for regulators, firms and academics into "implicit non-GAAP reporting" by examining properties and determinants of implicit vs. explicit non-GAAP earnings for different types of firms around RegG.     

Optimal capital growth with convex shortfall penalties

The optimal capital growth strategy or Kelly strategy has many desirable properties such as maximizing the asymptotic long-run growth of capital. However, it has considerable short-run risk since the utility is logarithmic, with essentially zero Arrow–Pratt risk aversion. It is common to control risk with a Value-at-Risk (VaR) constraint defined on the end of horizon wealth. A more effective approach is to impose a VaR constraint at each time on the wealth path. In this paper, we provide a method to obtain the maximum growth while staying above an ex-ante discrete time wealth path with high probability, where shortfalls below the path are penalized with a convex function of the shortfall. The effect of the path VaR condition and shortfall penalties is a lower growth rate than the Kelly strategy, but the downside risk is under control. The asset price dynamics are defined by a model with Markov transitions between several market regimes and geometric Brownian motion for prices within a regime. The stochastic investment model is reformulated as a deterministic programme which allows the calculation of the optimal constrained growth wagers at discrete points in time.     

证券衍生品种法制构建与《证券法》修改

本文提出，《证券法》修改时应明确证券衍生品种的法律地位，并应考虑证券衍生品种的特殊性，相关发行、上市、交易、产品认定等环节的具体制度设计应为证券衍生品种的发展留下应有的法律空间。本文认为，证券衍生品种交易场所定位于证券交易所是合理的。     

The clock is ticking on readmission penalties

Hospital leaders who are considering initiatives to reduce readmissions by improving discharge processes and postdischarge care should begin with five action steps: Ascertain the hospital's Medicare 30-day readmission rates from July 1, 2011, to June 30, 2012. Based on these numbers, estimate the potential readmission penalties the organization may face. Identify a clear strategy or program for the organization to reduce 30-day readmissions and avoid Medicare penalties. Determine the overall direct and indirect costs of this strategy or program. Calculate the potential ROI of the initiative.     

Statistical Arbitrage and Securities Prices

This article introduces the concept of a statistical arbitrageopportunity (SAO). In a finite-horizon economy, a SAO is a zero-costtrading strategy for which (i) the expected payoff is positive,and (ii) the conditional expected payoff in each final stateof the economy is nonnegative. Unlike a pure arbitrage opportunity,a SAO can have negative payoffs provided that the average payoffin each final state is nonnegative. If the pricing kernel inthe economy is path independent, then no SAOs can exist. Furthermore,ruling out SAOs imposes a novel martingale-type restrictionon the dynamics of securities prices. The important propertiesof the restriction are that it (1) is model-free, in the sensethat it requires no parametric assumptions about the true equilibriummodel, (2) can be tested in samples affected by selection biases,such as the peso problem, and (3) continues to hold when investors'beliefs are mistaken. The article argues that one can use thenew restriction to empirically resolve the joint hypothesisproblem present in the traditional tests of the efficient markethypothesis.     

“财政依赖”与证券市场

近年来，有关经济增长的争论多了起来。特别是在经历了世纪之交、中国加入WTO后，世界经济和国际政治风云变幻，有关中国经济能否持续增长的争论就更加沸沸扬扬了。……     

银行资产证券化问题研究

资产证券化是国际商业银行业务发展的重要内容之一，在我国尚未开展相关业务，为尽快与国际接轨，有必要对此进行认真研究。     

评估诚信与证券市场

一段时间来,颇有争议的一些集团公司以商标、品牌、专利等无形资产从上市公司套现,或是通过资产置换等途径侵占上市公司利益的事件频频发生,这些事件都或多或少地将资产评估牵连在内.一时间,评估机构的公证、诚信问题成为社会关注的热点.