The Contribution of Associate's Degree Holders to U.S. Earnings,Labor Quality,Productivity, and Overall Economic Growth

There is substantial evidence on the importance of education as a driver of earnings, productivity, and economic growth. However, knowledge of the specific role of associate's degrees in U.S. economic growth is limited. We analyze the sources of U.S. economic growth and identify the contribution of associate's degree holders to improvements in earnings, labor quality, productivity, and overall economic growth. We find evidence that substitution toward workers with associate's degrees has increased U.S. earnings, aggregate labor quality, and productivity, and that these effects are concentrated in the health care, trade, and government sectors. While the average educational attainment of people entering the labor force has plateaued, our results suggest that shifting workers from some college to associate degrees could improve earnings, the quality of the workforce, productivity, and growth, potentially without more time spent in school.     

Institutions,Capital, and Growth

The international development community has encouraged investment in physical and human capital as a precursor to economic progress. Recent evidence shows, however, that increases in capital do not always lead to increases in output. We develop a growth model where the allocation and productivity of capital depends on a country's institutions. We find that increases in physical and human capital lead to output growth only in countries with good institutions. In countries with bad institutions, increases in capital lead to negative growth rates because additions to the capital stock tend to be employed in rent‐seeking and other socially unproductive activities.     

Influence of a Wife's Working Status on Her Husband's Accumulation of Human Capital

Japanese household‐level data consisting of husband's earnings, wife's working status and their schooling levels are used to test three hypotheses, with particular consideration given to the time‐consuming process of human capital accumulation within marriages. The empirical results supports the following hypotheses: (i) a non‐working wife's schooling has a greater positive effect on her husband's earnings than a working wife's schooling; and (ii) the effect of a non‐working wife's schooling increases with the length of marriage, whereas the effect of a working wife's schooling does not change over the course of marriage.     

MD&A Quality as Measured by the SEC and Analysts' Earnings Forecasts*

This study examines the predictive value of Management Discussion and Analysis (MD&A) information. More specifically, this study tests the association between properties of analysts' earnings forecasts and MD&A quality, where MD&A quality is measured by the Securities Exchange Commission (SEC). We find that high MD&A ratings are associated with less error and less dispersion in analysts' earnings forecasts after controlling for many other expected influences on analysts' forecasts. We also find that estimated regression coefficients are consistent with MD&A information having a substantial effect on earnings forecasts. Finally, we find our results are driven by forward-looking disclosures about capital expenditures and operations, and also by historical disclosures about capital expenditures. These findings are consistent with the suggestion by many constituencies (including the SEC) that the type of information found in high quality MD&A is particularly relevant for predicting earnings.     

Public Company Audits and City‐Specific Labor Characteristics

Prior research emphasizes the centrality of audit offices in understanding auditing practices, and documents significant interoffice variation in audit outcomes based on industry expertise and office size. Our study examines how two city‐specific labor characteristics also affect audit offices and local audit markets: the city's average educational attainment, and the number of accountants in a city, which proxy for a city's human capital. Our argument draws on the urban economics literature and predicts that the level of human capital in a city is positively associated with an audit office's ability to conduct high‐quality audits. As expected, there is a positive association between audit quality (quality of audited earnings and accuracy of going‐concern reports) and average education level in the city in which the lead engagement office is located. This association is generally significant for both Big 4 and non‐Big 4 offices, but is relatively stronger for non‐Big 4 firms that are more tied to local labor markets. A company is also more likely to choose a non‐Big 4 auditor in cities with higher educational levels and relatively more accountants, and there is evidence of higher non‐Big 4 audit fees as a city's education level increases. Collectively, these results suggest that local labor characteristics affect audit offices, audit quality, and the ability of non‐Big 4 auditors to compete with Big 4 auditors in the audits of public companies.     

How will China shape the world economy?

We will provide an outlook for China's role in the world economy over the coming decades, an exercise which would not be possible without an analysis of the prospects for China's continued economic growth. Based on international and historical comparisons, we argue that today's China meets all three key conditions for continued economic growth, including a stable government that is supportive of a market economy; high and increasing quality of human capital, and openness to developed economies. Dependent on China's continued growth, we explore how China will impact many other economies through trade and investment, creating winners and losers in the world economy. Moreover, we argue that China will become a more active player in changing global economic governance not only through participating in reforms of existing institutions but also by leading efforts to establish new ones.     

Inferring Accounting Information from Corporate Financing Choices: An Examination of Security Issuances in the Banking Industry*

This study examines the impact of regulatory capital and several of its determinants (i.e., earnings, loan loss provisions, charge‐offs and growth) on bank managers' financing decisions and investors' interpretations of those decisions. The analysis is related to two streams of research. We add to the corporate finance literature that seeks to explain the market's reaction to security issuances by developing and testing a refined set of predictions of the demand for debt and equity capital using a sample of capital‐regulated firms (banks). We extend the accounting literature that links regulatory capital‐management decisions with bank performance by examining whether investors infer that performance. We find that bank managers' financing choices reflect their private information regarding the levels of regulatory capital, earnings, and charge‐offs in the issuance year. We document a negative market reaction to capital‐increasing issuances and a positive reaction to capital‐decreasing issuances. A cross‐sectional analysis of that market reaction indicates that investors infer managers' expectations of earnings in the issuance year.     

Economic returns to English proficiency for college graduates in mainland China

The present study examines the economic returns to English proficiency for college graduates in Mainland China, paths through which English proficiency may affect earnings, and possible moderation effects and crowding-out effects of English proficiency on other human capital. The analysis results indicate that English proficiency had significant effects on college graduates' starting salaries, their probability of changing permanent residence status from rural to urban, and their future earning potential. Possible reasons for the economic returns to English proficiency include increased chances of working in the employment sector where the average income was higher than in the other sectors and improved opportunities of landing job interviews. English proficiency may mitigate the effects of GPA rankings on salaries. Meanwhile, it did not seem to have been achieved at the expense of other important human capital investments. The results have policy implications as well as contributing to the literature.     

Multiple Forces Driving China＇s Economic Development： A New Analytic Framework

Based on economic growth theory and the World Bank's analytical framework relating to the quality of growth, the present paper constructs a framework that encompasses physical, international, human, natural and knowledge capital to synthetically interpret economic development. After defining the five types of capital and total capital, we analyze the dynamic changes of these types of capital in China and in other countries. The results show that since China's reform and opening up, knowledge, international, human and physical capital have grown rapidly, with speeds of growth higher than that of economic growth. As the five types of capital have all increased at varying paces, the savings level of total capital in China has quadrupled in 25 years and overtook that of the USA in the 1990s. The changes in the five types of capital and total capital reveal that there are progressively multiple driving forces behind China's rapid economic development. Implications for China's long-term economic development are thereby raised.     

公司治理、大股东资金占用与盈余质量

论文从大股东资金占用行为的影响因素与行为后果两个角度出发,研究公司治理机制与大股东资金占用行为的关系以及大股东资金占用行为与盈余质量的相关关系。研究结果发现：第一大股东控制程度越高,其占用上市公司资金的可能性越大并且这种现象在国有控股上市公司中更为严重,公司治理综合水平对大股东资金占用程度起到了有效的抑制作用,大股东这种资金占用行为对企业盈余质量具有显著的影响。     

Equity‐Based Compensation of Outside Directors and Corporate Disclosure Quality

We examine the relationship between a firm's disclosure quality and equity‐based compensation of independent members of the board of directors. The dimensions of disclosure quality we focus on are management's earnings guidance and information flowthrough financial analysts. Using both levels and changes specifications, we find the average ratio of equity‐based pay to total pay of independent board members to be positively related to a firm's disclosure quality. Our findings are robust to the inclusion of management's equity‐based compensation, other governance measures, and financial controls, and robust to instrumental variable tests of endogeneity. Furthermore, we find directors’ equity‐based compensation to be negatively associated with the firm's cost of equity capital. Our results are consistent with equity‐based compensation providing incentives to independent directors to push for better disclosure quality.     

COLONIALISM AND LONG‐RUN GROWTH IN AUSTRALIA: AN EXAMINATION OF INSTITUTIONAL CHANGE IN VICTORIA'S WATER SECTOR DURING THE NINETEENTH CENTURY

Institutional change in water rights in the nineteenth century Australian colony of Victoria raised institutional efficiency, which contributed to long‐run economic growth. High‐quality human capital and the extension of voting rights (franchise) were crucial for efficient institutional change in the water sector. Quality human capital (literacy) appeared to increase the rural population's awareness of the economic impact of the existing structure of water rights that may have constrained growth in the agricultural sector and reduced investment incentives. Extension of the franchise allowed the rural population to exert political pressure for enactment of change in water rights, which resulted in efficiency‐enhancing policies and efficient institutions. The findings show these two factors were more important than Victoria's British colonial heritage in determining whether growth‐enhancing institutional change took place.     

Health Status and Earnings of Migrant Workers from Rural China

The migration of rural laborers into cities for employment has been one of the main driving forces of China's economic growth over the past three decades. Based on a dataset collected by the Ministry of Agriculture of China from 2003 to 2007, this paper examines the impact of health on the earnings of migrant workers engaging in physically‐intensive work requiring good health. Our findings indicate that a poor health status not only weakens the incentive of rural laborers to participate in the migrant labor force but also significantly reduces their earnings. A migrant worker in poor health only earns 67 percent of what a healthy worker makes. Among all the human capital characteristics and family economic factors, health status is the most influential on earnings for less educated workers. Labor productivity has a greater impact on earnings than the annual number of days that a person works. Ongoing health‐care reforms aimed at the improvement of the health‐care services available to rural laborers are urged to help reduce poverty in rural China.     

Do Shareholders Assess Managers' Use of Accruals to Manage Earnings as a Negative Signal of Trustworthiness Even When Its Outcome Serves Shareholders' Interests?*

We examine how shareholders' trust in managers is affected by (i) the outcome of earnings management (inconsistent vs. consistent with shareholders' interests) and (ii) the method of earnings management (accruals vs. real methods). Using a controlled experiment, we predict and find that trust is impaired when the outcome of earnings management suggests that managers have put their interests above shareholders' interests and/or when the method of earnings management suggests that managers misreported the firm's economic performance. We argue that shareholders assess managers putting their interests above shareholders' interests as a signal of untrustworthiness because it involves a transfer of the firm's resources away from shareholders to managers. We argue that shareholders also assess managers' use of accruals to manage earnings as a signal of untrustworthiness because, in this instance, managers misreport the firm's economic performance. Finally, we show that trust mediates the combined effects of the outcome of earnings management and the method of earnings management on investment decisions. Our study incrementally contributes to the literature by highlighting the adverse implications of managers' use of accruals to manage earnings even when its outcome serves shareholders' interests.     

Returns to military service in off-farm wage employment: Evidence from rural China

This paper studies the returns to military service in off-farm wage employment and the implications of military service on the rural-urban transition in rural China. We exploit government-induced variations in aggregate enrollment rates as our instrumental variable. Using data from the China Family Panel Studies, we find a substantial positive effect of military service on off-farm wage employment and earnings for men of rural origin, which is comparable in magnitude to the estimated returns to a college education in China. We also provide evidence that the earnings premium is likely to be explained by improved access to urban formal employment, political and human capital accumulation. However, in spite of the off-farm employment gain for all cohorts, we find that the positive earnings premium of military service is mainly concentrated among the pre-1970 cohort.     

Commitment and Cost of Equity Capital: An Examination of Timely Balance Sheet Disclosure in Earnings Announcements

In this paper, I examine the relation between disclosure commitment and cost of equity capital using accelerated earnings announcement disclosures as a measure of commitment. In settings characterized by imperfect market competition, I find that firms which consistently disclose balance sheet detail in relatively timely earnings announcements have lower costs of capital compared to other firms. This result is statistically significant and economically meaningful, and is robust to various alternative measurements for cost of capital, and alternative designs addressing endogeneity and underlying information quality. Overall, this result is important because it highlights additional dimensions of disclosure commitment (consistency and timeliness), while incorporating important features from theoretical models (information quality and market competition). In particular, my results suggest that consistency and timeliness are salient features of firms' disclosure behavior that have predictable and robust relations with capital market outcomes. This result is robust to controlling for underlying information quality; however, consistent with theory, it is conditional on low levels of market competition.     

Determinants of Managerial Earnings Guidance Prior to Regulation Fair Disclosure and Bias in Analysts' Earnings Forecasts*

Prior to Regulation Fair Disclosure (“Reg FD”), some management privately guided analyst earnings estimates, often through detailed reviews of analysts' earnings models. In this paper I use proprietary survey data from the National Investor Relations Institute to identify firms that reviewed analysts' earnings models prior to Reg FD and those that did not. Under the maintained assumption that firms conducting reviews guided analysts' earnings forecasts, I document firm characteristics associated with the decision to provide private earnings guidance. Then I document the characteristics of “guided” versus “unguided” analyst earnings forecasts. Findings demonstrate an association between several firm characteristics and guidance practices: managers are more likely to review analyst earnings models when the firm's stock is highly followed by analysts and largely held by institutions, when the firm's market‐to‐book ratio is high, and its earnings are important to valuation but hard to predict because its business is complex. A comparison of guided and unguided quarterly forecasts indicates that guided analyst estimates are more accurate, but also more frequently pessimistic. An examination of analysts' annual earnings forecasts over the fiscal year does not distinguish between guidance and no‐guidance firms; both experience a “walk‐down” in annual estimates. To distinguish between guidance and no‐guidance firms, one must examine quarterly earnings news: unguided analysts walk down their annual estimates when the majority of the quarterly earnings news is negative; guided analysts walk down their annual estimates even though the majority of the quarterly earnings news is positive.     

Earnings Management Using the Valuation Allowance for Deferred Tax Assets under SFAS No. 109*

Statement of Financial Accounting Standards No. 109 (SFAS No. 109) allows firms to use their discretion to set arbitrarily high valuation allowances against deferred tax assets. Firms can then later use these "hidden reserves" to manage earnings. Our evidence indicates that most banks do not record a valuation allowance to manage earnings, but rather to follow the guidelines of SFAS No. 109. However, if the bank is sufficiently well capitalized to absorb the current‐period impact on capital, then the amount of the valuation allowance increases with a bank's capital. In later years, bank managers adjust the valuation allowance to smooth earnings. The magnitude of the discretionary adjustment increases with the deviation of unadjusted earnings from the forecast or historical earnings.     

Human capital quality and the regional economic growth: Evidence from China

China's economic development has advanced from a high-speed to a high-quality growth stage in recent years. The optimization and upgrading of the economic structure require high-quality human capital to support an innovation-driven economy. In this paper, a general equilibrium model of human capital (Xiang & Yeaple, 2018) is applied to estimate the cognitive and non-cognitive productivities based on Chinese provincial-level macro-data and individual labor's micro-data from 2008 to 2017. The weighted power mean of cognitive and non-cognitive productivities helps calculate the provincial-level human capital quality index (HCQI), which provides a realistic estimate of human capital quality. We find that the improvement of the HCQI leads to convergence in economic growth in China's provinces. HCQI can help explain the differences in economic growth levels in different regions of China. Our study provides a constructive step in understanding cognitive and non-cognitive abilities and HCQI in China, which could help guide education investment policy in China and its provinces.     

The long-term and intergenerational effects of early-life hunger experience on human capital and labor market outcomes

Using individual-level retrospective data on early-life hunger experience from China, we investigate the long-term effects of early nutritional deprivation on one's own and adult children's human capital and labor market outcomes. With an instrumental variable approach, we find that hunger experience lowers educational attainment and job quality of the first generation. But this negative impact on human capital does not transmit to the second generation, possibly due to parents' compensatory behavior of human capital investment and extra attention given to children. Our findings imply that the negative impact of non-extreme nutritional adversities on human capital and labor market outcomes are likely to decrease over generations.