GENDER-BIAS IN INDIA: THE IMPORTANCE OF HOUSEHOLD FIXED-EFFECTS

This paper presents an analysis of gender patterns in intra-householdallocation of resources based on household-level consumptiondata. Invoking the assumption that households seek to equalizethe marginal utility of wealth when they allocate resourcesover the life-cycle, the paper provides a rationale for parentalbehaviour pertaining to the intertemporal allocation of goodsamong children. Estimation results based on panel data fromIndia show that controlling for the unobserved marginal utility(household-fixed) effect is crucial. Once allowance is madefor fixed effects, the results indicate that there is no longerany gender-differential in the allocation of resources.     

Emerging Evidence of Early Indian Accounting

The paper examines the extant late-eighteenth-century accounting record books of Kantababu, a Bengali property owner and silk trader. These annual records, in part destroyed by white ants and other insects, do not make up a complete set for more than any two Bengali solar years. Yet from the available evidence it is possible to make a case that some elements of the accounting systems used by Kantababu and his clerks have similarities to medieval and later European methods and to eleventh-century methods used by Cairo merchants as evidenced by documents stored in the Genizah of the Old Cairo synagogue.     

CEO DUALITY AND FIRM PERFORMANCE: WHAT'S THE FUSS?

Rising shareholder activism following poor corporate performance and a subsequent drop in shareholder value at many major U.S. corporations had rekindled interest in duality and corporate governance. Despite limited empirical evidence, duality (chairman of the board and CEO are the same individual) has been blamed, in many cases, for the poor performance, and failure of firms to adapt to a changing environment. In examining the relationship between duality and firm performance, this study considers the announcement effects of changes in duality status, accounting measures of operating performance for firms that have changed their duality structure, and long-term measures of performance for firms that have had a consistent history of a duality structure. Our results suggest that: (1) the market is indifferent to changes in a firm's duality status; (2) there is little evidence of operating performance changes around changes in duality status; and (3) there is only weak evidence that duality status affects long-term performance, after controlling for other factors that might impact that performance.     

More Powerful Portfolio Approaches to Regressing Abnormal Returns on Firm-Specific Variables for Cross-Sectional Studies

OLS regression ignores both heteroscedasticity and cross-correlations of abnormal returns; therefore, tests of regression coefficients are weak and biased. A Portfolio OLS (POLS) regression accounts for correlations and ensures unbiasedness of tests, but does not improve their power. We propose Portfolio Weighted Least Squares (PWLS) and Portfolio Constant Correlation Model (PCCM) regressions to improve the power. Both utilize the heteroscedasticity of abnormal returns in estimating the coefficients; PWLS ignores the correlations, while PCCM uses intra-and inter-industry correlations. Simulation results show that both lead to more powerful tests of regression coefficients than POLS.     

A Real Effects Perspective to Accounting Measurement and Disclosure: Implications and Insights for Future Research

Accounting measurement and disclosure rules have a significant impact on the real decisions that firms make. In this essay, we provide an analytical framework to illustrate how such real effects arise. Using this framework, we examine three specific measurement issues that remain controversial: (1) How does the measurement of investments affect a firm's investment efficiency? (2) How does the measurement and disclosure of a firm's derivative transactions affect a firm's choice of intrinsic risk exposures, risk management strategy, and the incentive to speculate? (3) How could marking‐to‐market the asset portfolios of financial institutions generate procyclical real effects? We draw upon these real effects studies to generate sharper and novel insights that we believe are useful not only for the development of accounting standards, but also for guiding future empirical research.     

A Portfolio Approach to Estimating the Average Correlation Coefficient for the Constant Correlation Model

This paper presents a portfolio approach to estimating the average correlation coefficient of a group of stocks which are considered for portfolio analysis. The average correlation coefficient has been shown to produce a better estimate of the future correlation matrix than individual pairwise correlations. The advantage of the approach described here is that it does not require the estimation of pairwise correlations for estimating their average.     

The Resiliency of the High-Yield Bond Market: The LTV Default

This paper investigates the resiliency of the new-issue high-yield bond market by examining the changes in implied default rates of such bonds before and after the largest high-yield bond default, i.e., the LTV bankruptcy. Specifically, the paper compares implied default probabilities of high-yield bonds during the post-LTV period calculated from actual new-issue yields with instrumental default probabilities calculated on the assumption that the default had not occurred. A comparison of these probabilities reveals that the market's perception of default on the high risk segment of the bond market increased significantly after the LTV bankruptcy. However, the effect was transitory, lasting only six months. Thus, the market was resilient to a major default.     

A methodological note on detecting a location shift in the distribution of abnormal returns: A nonparametric approach

Abstract. The distribution of market model residuals or other measures of prediction errors is skewed and leptokurtic. To detect a location shift in leptokurtic residuals, a nonparametric rank test may be more efficient than a parametric t-test. Event studies that use a nonparametric test generally use the sign test, the Wilcoxon test, or some variation of the Wilcoxon test. The sign and Wilcoxon test statistics are calculated from the event-period residuals, so skewness and potential cross-sectional dependencies are not accounted for, causing a concern about the reliability of these tests for event studies. In this paper we propose a Mann-Whitney (MW) rank statistic in which the rank of the event-period residual is calculated relative to the estimation-period residuals. The MW statistic is a nonparametric analogue of the standardized residual (the residual scaled by its estimated standard deviation) used in the parametric (Patell-type) t-test. The MW statistics enable us to account correctly for skewness as well as potential cross-sectional correlation, and they are more powerful than the sign, Wilcoxon, and standardized residual statistics in detecting a location shift in leptokurtic residuals. Our results are based on a Monte Carlo study of simulated residuals. We simulate cross-sectionally independent residuals (for noncontemporaneous events) and cross-sectionally correlated residuals (for contemporaneous events). Résumé. La distribution des résidus du modèle du marché ou d'autres mesures des erreurs prévisionnelles est asymétrique et leptocurtique. Un test de rang non paramétrique peut être plus efficace qu'un test t paramétrique dans la détection d'un déplacement dans les résidus leptocurtiques. Les études événementielles basées sur un test non paramétrique ont généralement recours au test des signes, au test de Wilcoxon ou à une variante du test de Wilcoxon. Les statistiques du test des signes et du test de Wilcoxon sont calculées à partir des résidus événement-période, de sorte que l'asymétrie et les dépendances transversales possibles ne sont pas prises en compte, ce qui occasionne un problème de fiabilité des tests en ce qui a trait à l'étude événementielle. Dans le présent document, les auteurs proposent une statistique de rang Mann-Whitney (MW) dans laquelle le rang des résidus événement-période est calculé par rapport aux résidus estimation-période. La statistique MW est l'équivalent non paramétrique du résidu normé (soit du résidu pondéré en fonction de son écart-type estimé) utilisé dans le test paramétrique du t (de type Patell). Les statistiques MW nous permettent de tenir compte de façon exacte de l'asymétrie ainsi que de la corrélation transversale possible, tout en étant plus puissantes que les statistiques des signes, de Wilcoxon et des résidus normés dans la détermination d'un déplacement dans les résidus leptocurtiques. Les résultats obtenus par les auteurs sont basés sur une étude de Monte Carlo des résidus? simulés. Ils simulent des résidus transversalement indépendants (pour des événements non simultanés) et des résidus transversalement corrélés (pour des événements simultanés).