The influence of culture on accountants' application of financial reporting rules

The objective of this study is to examine the influence of national culture on accountants' application of accounting rules. Based on a refinement of Gray's (1988 ) framework, this study hypothesizes Greek accountants will be more likely (less likely) to recognize contingent liabilities (assets) than U.S. accountants (H1). It also hypothesizes that Greek accountants will be less likely to disclose the existence of both contingent assets and liabilities than U.S. accountants (H2). The results do not support H1. No significant differences are found between Greek and U.S. accountants' recognition decisions involving both contingent assets and liabilities. However, supplemental analyses show that U.S. accountants consistently exhibited more conservatism than Greek accountants. In line with expectations, Greek accountants are less likely to disclose information (i.e., were more secretive) than U.S. accountants, providing strong support for H2. Implications for both research and practice also are discussed.     

Job Training, New Technology and Labour Turnover

Vocational training incidence for those at work is frequently financed partly or wholly by employers, who then lose part of their investment return if workers migrate to other firms. We investigate the incidence of training and the incidence of job-to-job mobility for a large sample of British workers in 1984 and 1989. We also analyse the role of sectoral technology characteristics in influencing patterns of both training and inter-firm mobility.
Our results demonstrate that job-to-job mobility is highest for the young and higher for those with formal educational qualifications than for the unskilled. These are also characteristics which engender a higher training propensity; so, unavoidably, private gains to training for employers are below social gains for these young people. Public-sector workers have high training rates but low mobility; this perhaps explains the lack of perception of the poaching problem by successive governments. Sectoral R&D activity is associated with more training and less mobility for men; in contrast, women are more likely to train and are less mobile if the rate of adoption of innovation is rapid.     

Cephalon, Inc. Taking risk management theory seriously

Cephalon Inc., a biotech firm, bought call options on its own stock to meet its conditional cash flow needs. We analyze this decision by using the cash flow hedging concepts of Froot et al., (1993. Journal of Finance 5, 1629–1658). We identify the managerial analyses necessary to apply this theory and discuss managerial considerations absent from the theory. We find that managers consider deadweight costs of risk management, which theory tends to ignore. Theory provides little guidance in how to measure these and other deadweight costs. Finally, uncertainty about the availability of external financing and accounting considerations are critical considerations by managers.     

Dividend Policies and Dividend Announcement Effects for Real Estate Investment Trusts

Previous research on real estate investment trusts (REITs) assumes that their dividend policies are determined solely by tax regulations. We observe, however, that REITs often pay out more dividends than are required by tax rules. This paper examines the dividend policies of REITs by drawing inferences from agency-cost theory and tests for the determinants of REIT dividend payout ratios. The study also considers whether the stock market responds differently to the dividend announcement effects of equity and mortgage REITs based on asymmetric information. Our results support agency-cost explanations for dividend policy and suggest a differential announcement effect.     

Foreign Aid Heterogeneity: Issues and Agenda

The present paper serves as an introduction to this special issue providing a justification for, and linking and introducing to the articles that follow. A central message emanating from the papers included in this special issue is that it is not sufficient to double aid efforts by simply raising and transferring more money. Substantial effort needs to be taken in order to delve deeper into the various routes and transmission mechanisms through which the various types of aid operate. And this is a timely as well as important issue in view of recent calls (as well as concerns) for another “big push” approach in development aid. JEL no. F35     

Rationalizability, Strong Rationality, and Expectational Stability

We examine the connection between two stability concepts of rational expectations equilibria: expectational stability, based on the convergence of iterations of expectations, and strong rationality, based on uniqueness of the rationalizable solutions of an associated game with restrictions on beliefs. To compare the concepts we embed a standard expectations model in a game-theoretic framework. It is shown that the two stability concepts coincide when agents are homogeneous. For the general case of heterogeneous agents we show that expectational stability is a necessary condition for strong rationality and we provide a sufficient condition for the latter. Journal of Economic Literature Classification Numbers: C72, C62.     

Institutional Ownership and the Liquidity of Common Stock Offerings

This paper investigates the extent to which institutional ownership of equity affects the market's response to announcements of new issues of common stock. We find that the absolute magnitude of the share price reaction is negatively related to the level of institutional ownership in the announcing firm. These results are consistent with the argument that the information acquisition activities of institutional investors reduce preannouncement information asymmetries between managers and the capital market.     

PRIOR UNCERTAINTY,ANALYST BIAS,AND SUBSEQUENT ABNORMAL RETURNS

In this paper we examine the relation between analysts' overoptimism and uncertainty as proxied by the standard deviation of earnings forecasts. We find a positive relation between overoptimism and uncertainty, but very little or no optimism when uncertainty is low. If the uncertainty surrounding a firm is high, analysts have fewer reputational concerns when they act on their inclinations to issue optimistic forecasts. Portfolio strategies based on these findings generate abnormal returns. The results suggest that greater prior uncertainty leads to higher analyst optimism, which in turn causes market overvaluation and profitable portfolio strategies.