Ownership, Investor Protection and Earnings Expectations

Abstract:  This study examines the interactive influence of corporate ownership, corporate governance and investor protection on the incorporation of current value shocks in the accounting earnings of European companies. This influence is investigated not only by means of the association between current news and current earnings but also with respect to the association of the same news with expected future earnings, and its persistence. Consistent with the contractual explanation of accounting conservatism, it is shown that the accounting behaviour examined is a function of the demand created by shareholders, and that the institutional arrangements in force are of lesser significance in the presence of widely held ownership. On the other hand, greater separation between supervision and management and stronger investor protection are seen to be influential under close ownership, as these are shown to curb aggressive accounting in the form of a persistently lower recognition of bad news in earnings. Evidence is also provided that stricter corporate governance practices in Europe can substitute for weaknesses in investor protection provisions in law.     

The Risk Premium, Exchange Rate Expectations, and the Forward Exchange Rate: Estimates for the Yen–Dollar Rate

The hypothesis that the forward rate is an unbiased predictor of the future spot rate has been rejected in many empirical studies. The rejection of this hypothesis could occur because market behavior is inconsistent with rational–expectations or because there exists a risk premium. Equations describing the forward premium and the change in the exchange rate are estimated jointly, and tests of both the rational–expectations and no–risk–premium hypotheses are conducted. Empirical estimates, obtained using quarterly data for the yen–dollar exchange rate, reject the rational–expectations hypothesis and suggest that there exists a time–varying risk premium.     

The Savings Rate Debate: Does the Dependency Hypothesis Hold for Australia and Canada?

Australia and Canada have both experienced a long-run increase in aggregate savings rates over the past century from below 10 per cent to rates exceeding 20 per cent. Two recent studies have concluded that demographic change played the predominant role in driving this long-run trend for both nations, one of which implies that a declining child dependency burden caused savings rates to increase over time. New results obtained by using a cointegration approach show that savings rates were driven by increases in real income in the long run. In the short run, increases in the working-age population in Canada increased the savings rate. In Australia, baby booms and busts occurred simultaneously with savings booms and busts. Contrary to recent work, there is no significant evidence to support a child dependency burden on savings for Australia or Canada over the last century.     

Cyclical fluctuations in the Israeli housing market

While public construction in Israel is of a magnitude sufficient to exert effective housing market countercyclical influence, it has often had the opposite effect. This phenomenon is viewed with particular concern, given that economywide recessions of past decades have been precipitated by significant downturns in the construction industry. This paper describes specification and estimation of a simultaneous-equation structural model of the Israeli housing market. Results of the analysis indicate the importance of disaggregation by public and private sectors as well as the significance of mortgage availability and price, substitution and income effects, disruptions caused by war and the like in an explanation of cyclical phenomenon.     

The impact of crisis on managerial behavior

Crises emerge in definable stages, not all at once. If the symptoms of these stages can be spotted, the firm is able to begin to deal with the crisis sooner, and thus with more chance of success.     

Some refinements in austrian trade-cycle theory

Changes in the apparent rate of interest have different effects upon different types of firms, causing the onset of the business cycle to be initiated in specialty suppliers to high-order capital goods manufacturers. These specialty manufacturers utilize bank loans to finance inventories, so they are sensitive to changes in market rates, while consumer-goods manufacturers finance capital projects using long-term sources of funds, which are less sensitive. The abandonment of capital projects by lower-order manufacturers is also less sensitive to interest rate movements than the manufacturing operations of the high-order suppliers.     

The Reconstruction of Industrial Relations in the Privatized Water Industry

Abstract : The article examines changes in industrial relations in the recently privatized water authorities, and argues that the development of new industrial relations procedures and practices has involved a substantial reconstruction of the old public-sector industrial relations framework. However, change has by no means been uniform throughout the ten new water plcs, and comparisons are made to highlight the diversity of management response to the new environment created by privatization. In explaining the scope and pace of change, the paper argues that the early move to single-employer bargaining and the opportunities for comparisons of performance within the new regulatory framework are important explanatory factors.     

The asymptotic relative efficiencies of tests and the derivatives of their power functions

Abstract

For comparing two consistent tests of a simple null hypothesis H ₀ : θ = θ₀ against a given alternative hypothesis H ₀ : θ = θ₁, the measure most frequently used is the asymptotic relative efficiency (ARE), due to Pitman (1948). The ARE is defined as the limit of the reciprocal of the ratio of sample sizes required to attain the same power. The limit is taken as sample sizes tend to infinity and simultaneously θ₁ → θ₀, this being necessary to keep the powers of the tests bounded away from 1.