The impact of maturity regulation on high interest rate lenders and borrowers

The State of Maine recently imposed an additional regulation on the maturity of small loans offered by finance companies, presumably to protect the consumer. The effectively restricted the maturity of these high interest rate loans to 36 months. Within five years, the number of licensees (finance company offices) declined from 116 to 24. Within another five years, all of these lenders had completely ceased operations. Hypotheses on the effect and value to consumers of the regulation are stated operationally and tested empirically. This study includes estimation of the loan companies' cost function, (accounting) profit rates and output and a survey of the individuals directly affected by the demise of the companies. The analysis indicates (1) that the maturity restriction made ordinary operations unprofitable, (2) why this occurred, and (3) that half of the consumers did not obtain funds elsewhere.     

Stock splits in a neutral transaction cost environment: Evidence from the Athens Stock Exchange

This paper investigates the value consequences of stock splits in a market where institutional characteristics minimize the effects of price realignment and signaling. We find that despite these market conditions, stock splits by Greek firms produce positive price reaction around the announcement day. Further, split factors are directly related to pre-split price levels and deviations from average market prices. Splitting firms also realize earnings improvement which is not reversed after the stock split. Consistent with these findings, market reaction is inversely related to the post-split target price and the size of firm. We interpret this as evidence in support, respectively, of the self-selection and “attention-gathering” hypotheses. As reported in other international studies, there is no evidence of liquidity improvement.     

Anomalies in finance: What are they and what are they good for?

In the natural sciences, anomalies contribute significantly to the development of new and ultimately more successful theories. The role of anomalies in financial economics, however, has been quite different. Although at the beginning, the word was used to show deviations from the Efficient Markets Hypothesis (EMH)/Capital Asset Pricing Model (CAPM) paradigm, lately, it has been applied to a new literature that is also more accurately called Behavioral Finance (BF). This paper argues that this misuse and misapplication of the word anomaly is not a simple coincidence. It is rather a sophisticated and accordant effort to imply that although there are some unresolved deviations from the norm, the reigning paradigm is irreplaceable, and its validity needs no empirical proof. In fact, an alternative paradigm such as BF is not only insignificant but also unnecessary and even impossible.     

How accounting academicians can use citation indexing and analysis for research

With the rapid increase in the accounting research arena over the past decade there has arisen the need for new tools to facilitate the research process. This paper presents citation indexing and analysis as two such tools. It presents some of the ways in which citation indexing and analysis have been used to perform scholarly research and it shows how citation indexing and analysis can be used for conducting historical research using a simplified accounting example.