Municipalizing American Waterworks, 1897-1915

We consider three explanations for public ownership: publicinterest, regulation, and a transaction cost interpretation.We employ a large dataset containing information on the municipalacquisition of U.S. private water companies between 1897 and1915. Those data allow us to isolate the effects of high waterrates, water quality, financial difficulties, extensivenessof distribution system, and the like in determining the probabilityof subsequent municipal takeover of companies that were privatein 1897. After controlling for such factors, we find evidenceconsistent with a transaction cost interpretation of municipalacquisition. We find relatively little support for regulation-basedor public interest interpretations. Our evidence indicates thatmunicipalities were unable to credibly precommit to not expropriatingvalue from private water companies once investments were made,resulting in a rational reduction in investment in water provisionby private companies. Local governments, in turn, used thisrational underinvestment as a pretext for municipalizing privatewater companies.     

The integration of the real estate market and the stock market: Some preliminary evidence

The current study investigates whether the commercial real estate market is segmented from the stock market using the framework of Jorion and Schwartz (1986). Evidence is found to support the hypothesis that segmentation does exist as the result of indirect barriers such as the cost, amount, and quality of information for real estate rather than legal constraints. However, this evidence is contingent on whether real estate returns are computed with appraised values or imputed sale prices and on which market proxy is chosen.     

Negative evaluation of conservation agriculture: perspectives from African smallholder farmers

Despite more than three decades of promotion, conservation agriculture (CA) has not been widely adopted by smallholder farmer in sub-Saharan Africa. This low rate of adoption reflects substantial negative evaluation of CA by many smallholder farmers, the causes of which have not been adequately explored in an in-depth, qualitative manner. Hence, we implement the Livelihoods Platforms Approach to explore directly with negatively evaluating farmers the reasons why they chose not to implement CA using semi-structured interviews with 35 farmers from 23 communities in 6 African countries. While there are issues with perceived benefit and relevance, the primary driver of negative evaluation of CA was found to be the feasibility of implementation. The required resources to implement CA (financial, physical, human and informational) are limited by community and institutional constraints which appear unlikely to be overcome through interventions targeted at addressing household resources. More positive evaluation of CA by smallholder farmers requires: (1) development of financially viable CA adoption pathways; (2) incorporation of wider livelihood objectives into a CA ‘package’; (3) re-evaluation of current extension policy; and (4) development of CA-complementary agricultural policies. Without addressing these issues, the potential benefits of CA adoption are unlikely to be achieved in African smallholder systems.     

14-Week quarters

Many firms define their fiscal quarters as 13-week periods so that each fiscal year contains 52 weeks, which leaves out one or two day(s) a year. To compensate, one extra week is added every fifth or sixth year and, consequently, one quarter therein comprises 14 weeks. We find evidence of predictable forecast errors and stock returns in 14-week quarters, suggesting that analysts and investors do not, on average, adjust their expectations for the extra week. The ease with which 14-week quarters can be predicted, and expectations adjusted, suggests a surprising lack of effort on the part of analysts and investors.     

Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequences

Abstract

This study examines the determinants and consequences of voluntary adoption of non-local accounting principles (non-local GAAP) by firms listed and domiciled in the European Union (EU). We restrict ourselves to the two predominant internationally accepted sets of accounting standards: International Accounting Standards (IAS) and United States generally accepted accounting principles (US GAAP). We have used various sources to identify EU firms that use non-local GAAP. We examine the 1999 annual reports of all these firms, because accounting standard choices in more recent years may be affected by the announcement of the proposal by the European Commission in February 2001 to mandate IAS usage from 2005 on. The maintained hypothesis is that firms that voluntarily adopt IAS or US GAAP expect to experience net benefits from adoption. The finding that 133 non-financial firms in the EU voluntarily used non-local GAAP in 1999 suggests that the majority of listed EU firms does not expect to benefit from non-local GAAP adoption. By studying the characteristics of non-local GAAP adopters this study provides insight into the determinants of non-local GAAP adoption. We find that firms voluntarily using non-local GAAP are more likely to be listed on a US exchange, the EASDAQ exchange in Brussels, and have more geographically dispersed operations. Furthermore, they are more likely to be domiciled in a country with lower quality financial reporting and where IAS is explicitly allowed as an alternative to local GAAP. We also study whether non-local GAAP adopters have lower levels of information asymmetry, a much cited benefit of using more transparent financial reporting, than non-adopters. We examine three proxies for information asymmetry: analyst following, cost of equity capital, and uncertainty among analysts and investors (forecast dispersion and stock return volatility). We document a positive effect of non-local GAAP adoption on analyst following, but fail to find evidence of a lower cost of capital for non-local GAAP adopters. Contrary to expectations, uncertainty among analysts and investors appears to be higher for firms using IAS or US GAAP than for firms using local GAAP. However, by comparing ‘early’ and ‘late’ adopters, we find some evidence that suggests that benefits take some time to fully materialise.     

Reporting Frequency, Information Precision and Private Information Acquisition

Abstract:  This study examines whether the choice between quarterly and semiannual reporting affects the precision of investors' information and their private information acquisition activities. In the first part of this study, we show that a firm's reporting frequency has no effect on the average precision of investors' information. However, our analysis of announcement-period price variance and share turnover shows that an increase in reporting frequency does make interim and annual financial reports a more important component of investors' information set, relative to other sources of information. In particular, the results of this analysis suggest that investors of semiannual reporters hold more precise pre-announcement information than investors of quarterly reporters. In the second part of our study, we test one explanation for this finding. We argue that an increase in a firm's reporting frequency reduces investors' incentives to acquire private information between consecutive announcement dates and, consequently, should reduce information asymmetry among investors, increase share liquidity, and stimulate trading. Consistent with this reasoning, we find that quarterly reporters have lower average bid-ask spreads and higher abnormal share turnover than semiannual reporters.     

The relative information content of operating and financing cash flow in the proposed cash flow statement

This study compares the relative information content of the new specifications of operating and financing cash flow as proposed jointly by the IASB and the FASB with the specifications in SFAS No. 95. A unique feature of the study is the use of the Siegel and Biddle (1994) test of relative information content. The results indicate that the proposed operating cash flow measure has less relative information content than the current measure, and the results for financing cash flow are consistent with equity investors finding no significant difference between the current and proposed measures.