Capital Markets Regulation: How Can Accounting Research Contribute?

In examining the possible contribution that accounting research can play in ensuring effective and efficient regulation of securities markets, two principal opportunities stand out. First, the role of research in informing debate about proposed regulatory intervention (ex ante contribution to regulatory debate). Second, the ability of research to inform analysis as to the effectiveness of previously implemented regulatory changes (ex post contribution to regulatory debate). In the ex ante case, there is a natural tension between the way in which regulatory initiatives often arise quickly and the inevitable passage of time required to fully appreciate the degree to which underlying problems have been correctly characterised and can be framed in a manner suitable for addressing via rigorous analytical and empirical research. It is also impossible to empirically assess the effect of regulatory intervention that has not yet occurred. Finally, if data are simply not available, then research is limited to analytical analysis and prediction. In the ex post case, there is often a natural reluctance to subject regulatory intervention to mandatory analysis, and even when a statutory requirement exists for such analysis and review, the time horizon is often far too short for meaningful analysis. In both the ex ante and ex post cases, what is unavoidable is that regulation can only be legitimately informed by research that is sufficiently rigorous so as to have robust conclusions. Assessing research on these dimensions means that transparency is required so as to allow researchers to engage in meaningful debate about the validity of the conclusions. This inevitably means that research needs to be a partnership between regulatory agencies and academia, and that when research is used to justify regulatory interventions it must be publicly available and subject to robust debate.     

THE ECONOMIC SIGNIFICANCE OF CONDITIONING INFORMATION ON PORTFOLIO EFFICIENCY IN THE PRESENCE OF COSTLY SHORT‐SELLING

The economic significance of conditioning information in the presence of costly short‐selling is investigated. Using a compact testing framework, results demonstrate that fixed‐weight stock‐bond portfolios appear inefficient with respect to stock‐bond portfolios with weights determined by extant predictors. However, this result is highly dependent on ex ante knowledge of the predictor set and the ability to short‐sell at low cost. In the absence of such conditions, fixed‐weight stock‐bond portfolios appear efficient with respect to conditioning information.     

Some approximations of n-copulas

We consider several approximations to n-copulas: the checkmin, checkerboard, Bernstein, and shuffle of min approximations. The checkerboard, Bernstein, and shuffle of min approximations have been studied in the n = 2 case. We investigate these constructions in arbitrary finite dimensions and consider some of the ways in which they converge or fail to converge to the original copula.     

FX intervention in the Yen-US dollar market: a coordination channel perspective

The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55?C76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.     

Testing for unit roots in the presence of uncertainty over both the trend and initial condition

In this paper we provide a joint treatment of two major problems that surround testing for a unit root in practice: uncertainty as to whether or not a linear deterministic trend is present in the data, and uncertainty as to whether the initial condition of the process is (asymptotically) negligible or not. We suggest decision rules based on the union of rejections of four standard unit root tests (OLS and quasi-differenced demeaned and detrended ADF unit root tests), along with information regarding the magnitude of the trend and initial condition, to allow simultaneously for both trend and initial condition uncertainty.     

The determinants of reserves disclosure in the extractive industries: evidence from Australian firms

This paper examines the determinants of reserves disclosure (RD) in the Australian extractive industries. Our regression results indicate that RD are positively associated with variables relating to corporate governance, foreign listing, existence of reserves in foreign jurisdictions, pledging of reserves in debt covenants, leverage and external (Big 4) auditor, after controlling for firm size, subindustry, shareholder concentration and development/production stage. Additional regression testing shows that the existence of reserves in foreign jurisdictions is the most important determinant of RD in Australia. This paper contributes to a better understanding of the extent and rationale behind the RD practices of Australian resource firms.     

Did securitization affect the cost of corporate debt?

This paper investigates whether the securitization of corporate bank loan facilities had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 17 basis point lower spread than that of facilities that are not subsequently securitized. We consider facility characteristics that are associated with the likelihood of securitization and estimate the extent to which these characteristics are related to spreads. We document that Term Loan B facilities, facilities of B-rated firms, and facilities originated by banks that originate CLOs are securitized more frequently than other facilities. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise similar facilities. The results are consistent with the view that securitization caused a reduction in the cost of capital.     

A test of the auditor reliability framework using lenders’ judgments

Taylor et al. (2003) challenged the longstanding notion that independence is the capstone of the audit profession by proposing a conceptual framework that emphasizes reliability, rather than independence, as the professional endgame for auditors. Although the reliability framework has attracted attention from policymakers, it has not been tested empirically in an audit context to assess its validity from a user’s perspective. The objective of this study is to test the auditor reliability framework and its formative ethical constructs (i.e., integrity, expertise, independence, objectivity, and reliability) with a sample of 168 commercial lenders. We also extend the reliability framework to examine the extent that perceived auditor reliability affects lenders’ judgments of financial reporting reliability and default risk in a hypothetical lending scenario. Finally, we evaluate the extent that lenders’ judgments are affected by auditor provision of nonaudit bookkeeping and payroll services to a prospective borrower in violation of current independence rules. The results provide strong empirical support for the relations predicted in the reliability framework. Structural equation model results indicate that auditor integrity is the foundation of the framework, directly affecting lenders’ assessments of auditor expertise, independence, objectivity, and reliability. Further, although integrity and objectivity directly affect perceived auditor reliability, independence and expertise only affects reliability indirectly through its impact on objectivity. Finally, we find that lenders perceive no decrease in auditor objectivity or reliability when existing independence rules are violated by combining audit services with nonaudit services for prospective borrowers.     

Using real-time electricity data to estimate response to time-of-use and flat rates: an application to emissions

Using a generalized McFadden specification, we estimate the determinants of hourly response for the years 2006 through 2010 for all 16 standard retail customers who were on an optional real-time electricity rate offered by Duke Energy as of 2010, and provide a method to estimate how these customers would respond to time-of-use (TOU) and flat rates. We generalize the model to allow for inter-day response, as well as threshold prices, above which individual customer response may increase or decrease. With these inclusions, we find hourly elasticity for the group of customers to be as large as ?0.7, larger than previous studies. We apply the method to examine a recent finding that time-differentiated rates could increase electric utility emissions. However, that result did not differentiate between real-time and TOU rates, and furthermore held energy use constant in comparing flat rates and time-differentiated rates. We perform a case study to examine emissions of SO₂, NOx, Hg, and CO₂ based on predicted energy use changes as well as for an energy-neutral case for real-time, TOU and flat rates. Employing energy use predictions from the model, increased energy use results in increased emissions in almost all cases. For the energy-neutral case, time-differentiated rates increase CO₂ as compared to flat rates, and the TOU rate causes a larger increase than does real-time pricing. But both rates decrease other emissions in the majority of years, particularly SO₂ In addition, time-differentiated rates reduce NOx potency by shifting it to non-daylight hours when conditions for the formation of smog are less favorable. Our application leads to the conclusion that the effect of the rates on emissions must consider total energy use as well as the shift from peak to off-peak. Furthermore, the predictions require consideration of the generating mix at a more detailed level than was contained in previous studies.     

与权力做斗争——拒绝美国国际关系研究中的实证主义

中国国际关系学的发展受到实证主义和美式方法论幽灵的威胁。如果这个幽灵得逞,中国的国际关系学将不过是美国国际关系学苍白的翻版而已。更有甚者,中国国际关系学者与为数甚少的美国学者之外的世界其他国家学者对话的能力将受到极大局限,而美国学者也缺乏与非美国学者进行对话的兴趣。一些在美国受训的中国学者强调,那种与美国式的形式建模法密切相关的实证主义和方法论胜过其他方法,因而必须为中国学界所采用。这对中国国际关系学的未来是一个非常危险的时刻。作者主张国际关系学采取反思主义研究法,拒绝国际关系研究中实证主义的谬误和美式的科学主张,并呼吁中国学者不要着迷于美国学界的资金能力和慷慨大度,而要认识到美国之外的国际关系理论建设还有更令人感兴趣的发展。