Bank Quality,Judicial Efficiency,and Loan Repayment Delays in Italy

Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm-quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.     

IPO Failure Risk

We explore the factors associated with historical IPO failures by developing an IPO failure prediction model that includes accounting information as well as proxies for the role of information intermediaries and other IPO deal–related characteristics. We document statistically significant differences in failure models applicable to nontech versus high tech IPOs, and these structural differences are largely driven by accounting‐based proxies for firms' investments in intangible assets, operating performance, and financial leverage. We also develop parsimonious, predominantly accounting‐based, strictly out‐of‐sample (i.e., no hindsight) IPO failure forecasting models for each of the two sectors. We find that our forecasts are negatively associated with one‐year post‐IPO abnormal returns. A pseudo‐hedge strategy of going short (long) in high (low) failure risk portfolios yields returns of economically significant magnitudes over the one‐year horizon, and is robust to alternative returns methodologies. Further results suggest that IPO long‐run returns anomalies may persist, but they take different forms for high‐tech and nontech IPOs.     

Contributing Authors and Institutions to the Journal of Finance: 1946–1985

Publication of the December 1985 issue of the Journal of Finance completed the Journal's first 40 years of contributions to the profession. This study identifies and summarizes the contributing authors, where they earned their doctoral degrees, and their employers at the time of publication. The authors, degree-granting institutions, and employers appearing most frequently in the Journal are ordered for the entire 40-year period and for various subperiods. Where possible, the present findings are compared with those of previously published studies.     

Truth in Investing: The Need for Legislation

This paper shows that a wide variety of techniques are used to calculate yields on consumer investment instruments. No regulation comparable to the Federal Reserve System's Truth in Lending statute (Regulation Z) exists to standardize yields on consumer investments, and thus the consumer is not given the information necessary to make proper comparisons among alternative investments. The paper reviews yield calculation methods and reinvestment assumptions; it also examines the potentially deceptive use of Treasury bill yields as the ceiling for bank and thrift accounts. In order to reduce confusion and standardize reported yields, it is proposed that disclosure be required of both the simple yield and the annualized effective yield, assuming reinvestment at the initial rate of return.     

Fixed Asset Revaluations and Managerial Incentives

The study attempts to explain why Australian companies revalue their fixed assets, when a revaluation, by itself , has no discernible direct effect on cash flows and is costly to carry out. A revaluation is hypothesised to affect contracting and political costs. It may also help resolve problems associated with information asymmetries, or be used to signal information to investors. The results support the proposition that economic forces help explain the decision to revalue assets.     

MULTI-PRODUCT COST ATTRIBUTES: A STUDY OF U.K. BUILDING SOCIETIES

A translog multi-product cost function is estimated jointlywith a derived input cost share equation to obtain estimatesof overall economies of scale and ‘augmented’ overalleconomies of scale for the United Kingdom building society industry.The ‘augmented’ measure takes into account inducedchanges in the number of building society branch offices asthe outputs vary. The parameter estimates are then used to computethe derivatives of the marginal costs of each product to testfor product-specific economies of scale and economies of scope.     

Culture Matters: How Our Culture Affects the Audit*

If the influence of national cultures on the implementation of global standards is not taken into account, the result will be inconsistent implementation at best and outright failure at worst. The experiences in fields such as medicine, peacekeeping, aviation, and environmental protection offer insight into possible difficulties with the implementation, beginning in 2010, of International Standards on Auditing (ISAs) by members of the International Federation of Accountants. Some countries may have difficulty with implementation because of the differences between their cultural assumptions and those embodied in the standards to be adopted. It is too soon to know if and where that will happen, especially because the data on first experiences will not begin to be available until 2013. However, cultural‐comparison data can be used to foresee which countries may have difficulty with implementation. But if unintended consequences do become evident, it will be important not to assume that the standards and the standard‐setting process are defective; it is more likely that practitioners will need help in interpreting the ISAs in light of their local culture. A useful first step would be for standard‐setting bodies to identify explicitly the cultural assumptions inherent in the standards they produce. The standard setters can then give that information to those responsible for standards implementation at the practitioner level to help promote consistent application of the standards globally.