Measuring Financial Literacy

Financial literacy (or financial knowledge) is typically an input to model the need for financial education and explain variation in financial outcomes. Defining and appropriately measuring financial literacy is essential to understand educational impact as well as barriers to effective financial choice. This article summarizes the broad range of financial literacy measures used in research over the last decade. An overview of the meaning and measurement of financial literacy is presented to highlight current limitations and assist researchers in establishing standardized, commonly accepted financial literacy instruments.     

La Femme Media Inc.: Identifying and Managing Audit Engagement Risk Factors

La Femme Media Inc. (“La Femme”) is a privately owned Canadian publishing company that produces several small periodicals and a popular women’s monthly magazine. The company’s founder and majority shareholder has announced his plans to retire in the upcoming year with plans to sell his 80 percent share of the company to a minority shareholder who has not taken an active role in the business. Students are required to take on the role of the audit senior and draft a planning memo for the partner outlining the risks associated with this engagement and analyzing all significant audit and accounting issues.     

Political Rescaling and Municipal Cultural Public Policies: A Comparison of France and Québec

Do territories change public policies? This would appear to be a rather unusual research orientation. It is even a reversal of the most commonly accepted approaches to the study of territorial public action, which tend to look at this issue from the opposite perspective, that is, in examining how public policies affect territories. The municipal reforms that have simultaneously occurred in Québec and France since the late 1990s afford an excellent opportunity to consider this inversion of the issues. To do so, we take as our theme culture and municipal cultural policies. We try to define and understand to what extent there exist in Québec and France retroactive links between municipal restructuring and municipal decisions about cultural facilities and activities and, more generally, municipal cultural intervention in the urban milieu. This comparative analysis of the cases of France and Québec focuses on discourse as well as achievements. First, we look at the changes arising from institutional reforms in the supply of cultural activities, budgets devoted to culture, and cultural policies. We then consider culture as a vector in the construction of a new municipal institution and a new municipal territory.     

Determinants of the Time Series of Earnings and Implications for Earnings Quality*

This paper examines whether differences in accrual accounting methods across balance sheet accounts influence the time‐series process of earnings. We define earnings quality as the responsiveness of earnings to shifts in permanent earnings and predict that responsiveness will increase in a firm's use of variable rate debt, where accruals move directly with shifts in interest rates. We also predict that responsiveness will decrease in a firm's investment in property plant and equipment because depreciation is largely predetermined and does not respond to shifts in opportunity costs. </P><P>To test these hypotheses, we regress earnings on lagged earnings and a proxy for permanent earnings (that is, the implied dividend annuity in lagged equity value). Within the context of an adjustment cost model, this regression captures the responsiveness of earnings by the coefficient on lagged price and by one minus the coefficient on lagged earnings. Consistent with this framework, we find the unconstrained estimated coefficients on these two variables to be negatively correlated. Furthermore, consistent with our hypotheses, we find that the coefficient on lagged earnings (lagged price) is positively (negatively) associated with the relative magnitude and life of fixed assets on the balance sheet and negatively (positively) associated with the relative magnitude of variable rate debt on the balance sheet.</P>     

Merger Negotiations with Stock Market Feedback

Do preoffer target stock price runups increase bidder takeover costs? We present model‐based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies. Rational deal anticipation implies a relation between target runups and markups (offer value minus runup) that is greater than minus one‐for‐one and inherently nonlinear. If merger negotiations force bidders to raise the offer with the runup—a costly feedback loop where bidders pay twice for anticipated target synergies—markups become strictly increasing in runups. Large‐sample tests support rational deal anticipation in runups while rejecting the costly feedback loop.