Do artificial income smoothing and real income smoothing contribute to firm value equivalently?

This paper examines the potential impacts of artificial smoothing (abnormal accruals) and real smoothing (derivatives) on firm value. We find that the value of the firm decreases with the magnitude of abnormal accruals and increases with the level of derivative use. Moreover, the accrual discount is more pronounced in firms with weak investor protection and the hedging premium is greater for poorly governed firms. These results suggest that although managers can engage in real smoothing to improve the informativeness of firms’ earnings and thus reduce agency costs, they might use artificial techniques to cosmetically improve the income stream in order to expropriate minority shareholders. In further support of agency theories, we report that poor corporate governance motivates the use of abnormal accruals and discourages derivative use.     

Explaining Welfare Reform: Public Choice and the Labor Market

This paper seeks to identify factors which could plausibly have led to the contractionary welfare reform initiatives begun at the state and federal levels in the U.S. in the 1990s, initiatives concentrated on the AFDC program. A review of aggregate time series evidence, cross-section regression research, and studies of attitudes toward welfare spending and toward welfare recipients suggests a role for three types of factors. First, a major expansion of the U.S. welfare system in the late 1980s in terms of expenditures and caseloads may have led voters to desire to retrench by cutting back on the AFDC program, even though that program was not primarily responsible for the expansion. Second, declines in the relative and absolute levels of household income, wages, and employment rates among the disadvantaged population may have driven up caseloads and costs, increased the social distance of voters from the poor, heightened concern with work incentives, and may have led, more generally, to a decrease in the perceived deservingness of the poor. Third, a surge of births to unmarried mothers in the 1980s is suggested, by cross-sectional and attitudinal evidence, to have led to a reduction in voter support for the AFDC program.     

The dynamics of job separation: The case of federal employees

In this paper we develop a model of workers' quit decisions. Using panel data on a sample of US Federal government employees we use maximum-likelihood techniques to determine how much of the observed decline in quits with job tenure is a result of declining individual quit propensities (‘state dependence’) rather than dynamic sample self-selection (‘heterogeneity’). The latter is found to be much more important than the former. The effects of relative Federal government wages and other variables on quits are also estimated. The results are useful for analysing Federal compensation policies.     

Unemployment insurance and the distribution of unemployment spells

In this paper administrative data from the unemployment-insurance (UI) system are used to examine the distribution of unemployment spells. Hazard plots of the data reveal a strong clustering around the benefit exhaustion point. In addition, estimation of the effects of the exhaustion point and of the UI benefit level on spell lengths obtained with a non-parametric proportional-hazards model - estimated by direct maximization of the general likelihood function - shows significant effects of both. However, the effect of the exhaustion point on the hazard is not proportional, making detection of its effect somewhat difficult.     

ESTIMATING THE IMPACT OF BEEF IMPORT RESTRICTIONS IN THE US IMPORT MARKET

A beef import model is specified and estimated using disequilibrium econometrics. The statistical significance of the model suggests that disequilibrium has historically existed in the US beef import market. Surplus analysis based on the disequilibrium framework indicates that a welfare loss has been incurred as a result of the quota and associated voluntary restraint programmes that have existed in that market.     

Application of mean–Gini stochastic efficiency analysis

This article adds to the information base concerning the applicability of mean–Gini stochastic efficiency analysis in agriculture. The mean–Gini efficient set of decisions is characterized rigorously in terms of its corresponding absolute risk aversion. In an empirical analysis, the mean–Gini efficient set of decisions is derived for four studies from the literature and compared to the second degree stochastic dominance efficient set. An alternative quantitative measure of risk aversion is used to gain insight in a visceral sense to the risk preferences associated with mean–Gini efficient decisions.     

Accruals Management to Achieve Earnings Benchmarks: A Comparison of Pre-managed Profit and Loss Firms

Abstract:  This study examines whether firms with profits before accruals management are more likely than firms with losses before accruals management to meet or exceed earnings benchmarks when pre-managed earnings are below those benchmarks. We extend Brown (2001) by documenting that the differential propensity to achieve earnings benchmarks by profitable and nonprofitable firms results from differential accruals management behavior. We find that firms with profits before accruals management are more likely than firms with losses before accruals management to have pre-managed earnings below both analysts' forecasts and prior period earnings and reported earnings above these benchmarks.     

The effects of grants-in-aid on state and local expenditures: The case of AFDC

This paper develops econometric methods to estimate the effect of the piecewise-linear budget constraints created by grant formulas in which the subsidy rate is not constant over expenditures (e.g. closed-end grants). The methods are applied to the AFDC program. The results show that, because of the kinked nature of the grant formula, (1) the present federal formula actually increases cross-state inequality in AFDC benefits, (2) several subsidy rates in the formula actually reduce benefits, and (3) the so-called ‘flypaper’ effect disappears.     

A NEW INDEX TO VALUE IN-KIND BENEFITS

In this paper we present a new approach to valuing in-kind benefits and a new index for that valuation. This approach is both individual (or family) specific and assigns a value to benefits for all those eligible for them, whether or not the benefits are actually used. The value is based on observed characteristics of the individual (and family) and location-specific factors likely to influence the value. The index is created for individuals and can be aggregated to obtain a family-specific value. An example of health insurance is used to demonstrate the approach. It is found that the value that single women with children place on health insurance depends on their own health status, the health status of their children, and their poverty status, among other factors.     

The effect of the U.S. welfare system on marital status

"An issue of long-standing importance in the U.S. welfare system has been its lack of neutrality with respect to family composition, which generally provides payments only to female-headed families--that is, families with no able-bodied male present. Using data from 1969 to 1985 to examine the issue, this study finds that (1) the simple cross-sectional correlations between marital status and welfare benefits are almost always in the expected direction but are generally weak in significance; (2) that the magnitude and significance of the correlations have nevertheless grown over time; and (3) that the correlations for men are no weaker and usually stronger, especially for blacks, than those for women."