Hicksian Income in the Conceptual Framework

In seeking to replace accounting conventions by concepts in the pursuit of principles‐based standards, the FASB/IASB joint project on the conceptual framework has grounded its approach on a well‐known definition of income by Hicks. We welcome the use of theories by accounting standard setters and practitioners, if theories are considered in their entirety. Cherry‐picking parts of a theory to serve the immediate aims of standard setters risks distortion. Misunderstanding and misinterpretation of the selected elements of a theory increase the distortion even more. We argue that the Boards have selectively picked from, misquoted, misunderstood and misapplied Hicksian concepts of income. We explore some alternative approaches to income suggested by Hicks and by other writers, and their relevance to current debates over the Boards' conceptual framework and standards. Our conclusions about how accounting concepts and conventions should be related differ from those of the Boards. Executive stock options (ESOs) provide an illustrative case study.     

Relationship between Tobacco Advertising and Youth Smoking: Assessing the Effectiveness of a School‐Based,Antismoking Intervention Program

A significant consumer issue today concerns tobacco advertising and youth smoking behavior and what is being done in the interest of these young consumers to reduce smoking. Since the Master Settlement Agreement earmarked resources for consumer education, progress is being made researching the effectiveness of antismoking advertising and of school‐based, antismoking interventions. This paper explores the effectiveness and potential of one such program to encourage additional interdisciplinary research attention and to provide direction in reducing smoking uptake behavior among youth.     

Residential Electricity Demand in Rural Areas: The Role of Conservation Actions,Engineering Factors and Economic Variables

A model of residential electricity demand using economic, engineering, and conservation variables was tested using data from a sample of rural residential customers served by eighteen rural electric membership cooperatives in central and southern Indiana. Electricity usage was found to be dependent upon past energy conservation efforts, even when household income, electricity prices, appliance stocks, space heating and cooling stocks, and housing characteristics were taken into account. The investigation also developed a ranking of receptivity to alternative conservation strategies. It supports public and private policies which are directed toward improving consumer attitudes toward energy conservation.     

Explaining Forward Exchange Bias…Intraday

Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of fixed-rate crisis, since it suggests an immunity to the central bank's interest rate defense. In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs. That is, currencies under attack should typically appreciate intraday. Using data on intraday exchange rate changes within the European Monetary System, we find this prediction is borne out.     

Accounting and the credibility of management forecasts*

Abstract. This paper develops and analyzes a signaling model in which a firm discloses privately held information to investors via a forecast. The forecast is constrained by the extent to which the accounting system reflects the private information, and the extent to which estimates regarding the private information are available from other sources, such as financial analysts. The market assesses the credibility of the forecast in setting the price of the firm's stock. A partially separating equilibrium is presented. The implications of the equilibrium are consistent with empirical regularities concerning the market's reaction to management forecasts. In particular, a majority of management forecasts contain good news, forecasts containing bad news are more credible than forecasts containing good news, and stock price reactions are stronger for firms that are not followed by financial analysts. Analysis of investor returns suggests that although a more effective accounting system reduces the variance of returns, it also skews them to the left. Thus, the largest losses are from investments in firms with the most effective accounting systems. Résumé. L'auteur élabore et analyse un modèle indicateur dans lequel une entreprise communique aux investisseurs, par le truchement d'une prévision, l'information qu'elle détient à titre privilégiée. La prévision est sous contrainte dans la mesure où le système comptable reflète l'information privilégiée et les estimations relatives à l'information privilégiée peuvent être obtenues auprès d'autres sources, comme celle des analystes financiers. Le marché évalue la crédibilité de la prévision en fixant le cours de l'action de l'entreprise. L'auteur présente un équilibre partiellement intercalaire. Les conséquences de cet équilibre sont conformes à celles régulièrement observées dans les études empiriques relatives à la réaction du marché aux prévisions de la direction. On note en particulier que la majorité des prévisions de la direction renferment de l'information positive, que les prévisions qui renferment de l'information négative sont plus crédibles que les prévisions contenant de l'information positive et que les réactions touchant le cours de l'action sont plus fortes pour les entreprises qui ne sont pas suivies par des analystes financiers. L'analyse des rendements obtenus par les investisseurs laisse croire que même si un système comptable plus efficace réduit la variance des rendements, il les rend asymétriques vers la gauche. Les pertes les plus importantes sont donc liées aux investissements dans des entreprises ayant les systèmes comptables les plus efficaces.     

SCHOOL-TO-WORK EXPERIENCE OF HISPANIC YOUTH

Selected studies based on the National Longitudinal Surveys of Youth Labor Market Experiences (NLS) and the High School and Beyond Surveys (HS&B) offer both consistent and conflicting findings about the experience of Hispanics in school and work. Non-high school completion, college attendance, and the link between education and economic gains varied by the sample selected, gender and ethnic group, and model specification. Methodological complexities prevent a meaningful synthesis of the findings. This paper focuses on these research complexities in an attempt to translate the findings into policy statements that could improve Hispanics' school-to-work experience.     

Caractéristiques du secteur de la vérification au Canada*

Résumé. Les auteurs examinent certaines des questions fondamentales relatives à la concentration, à l'intensité de la concurrence et aux rendements d'échelle du secteur canadien de la vérification. Selon les résultats de leurs travaux, il pourrait être plus approprié de construire les indices de concentration en fonction des «sept grands» qu'en fonction des «huit grands» cabinets comme le veut la tradition. Les auteurs en viennent également à la conclusion que le secteur est assujetti à long terme à des rendements d'échelle constants et que le marché des services de vérification est assez concurrentiel.     

THE ECONOMICS OF COMPENSATING PROPERTY OWNERS

Using command-and-control regulation of land use to produce a public good (as opposed to preventing physical off-property harms) without compensating the landowner can be expected to produce two unintended consequences: (i) management actions by landowners to reduce the land's attractiveness for production of the public good being sought and (ii) regulatory decisions made as though more costly regulation were costless. Higher costs imposed by the second consequence feed back to worsen the first. Examples from enforcement of current Endangered Species Act regulations provide illustrations. The paper uses a graphical framework to emphasize the qualitative difference between regulatory control without compensation on one hand and the rental or purchase of results on the other. Some low-cost, highly successful habitat preservation programs utilizing voluntary action would be more difficult to sustain if the habitat were for listed species under the current ESA.     

Efficiency and Equity in Education

In education as elsewhere state dominance represses intellectual enquiry. In Britain the new secretary of state for education is the first politician to stimulate discussion of parental choice through the voucher system. American Professors Aronson and Hilley show how it could work in the USA.