‘RE‐OPENING THE BLACK BOX’: THE STORY OF IMPLEMENTING A RISK ANALYSIS METHOD IN A FRENCH LOCAL GOVERNMENT

This research is a study of the implementation of a risk analysis method (RAM) in a French local government. Based on the sociology of translation framework, this study shows that the success of the implementation of this management device is due to the transformation of its initial characteristics. Indeed, the RAM was initially designed to analyze the risks of outsourcing public services and thereby to aid elected officials with decision making. But in the hands of the actors in charge of its implementation, it progressively became a means for the members of the administrative services to inform elected officials about the consequences of their choices. This paper thus describes the ‘trajectory’ of this management device in a local government and, in doing so, emphasizes how it progressively became what it is (and what it is not) at present in this local government.     

When Does Information Asymmetry Affect the Cost of Capital?

This paper examines when information asymmetry among investors affects the cost of capital in excess of standard risk factors. When equity markets are perfectly competitive, information asymmetry has no separate effect on the cost of capital. When markets are imperfect, information asymmetry can have a separate effect on firms’ cost of capital. Consistent with our prediction, we find that information asymmetry has a positive relation with firms’ cost of capital in excess of standard risk factors when markets are imperfect and no relation when markets approximate perfect competition. Overall, our results show that the degree of market competition is an important conditioning variable to consider when examining the relation between information asymmetry and cost of capital.     

The Federal Reserve and the 2007–2009 Financial Crisis: Treating a Virus with Antibiotics? Evidence from the Commercial Paper Market

The two main explanations for the crisis in the commercial paper (CP) market are credit concerns and liquidity issues. The CP market is not homogeneous in terms of credit quality, maturities and types of issues. We find that lower credit‐quality CP suffered more during the crisis. Additionally, we find little evidence that Federal Reserve (Fed) liquidity facilities reduced the impact of the crisis, but that when the Fed became a lender in the CP market, the crisis pressures were dramatically reduced. We conclude that the crisis in the money markets is related more to increases in credit risk. Liquidity is a secondary issue.     

Longevity Risk Management in Singapore's National Pension System

Although annuities are a theoretically appealing way to manage longevity risk, in the real world relatively few consumers purchase them at retirement. To counteract the possibility of retirees outliving their assets, Singapore's Central Provident Fund, a national defined contribution pension scheme, has recently mandated annuitization of workers’ retirement assets. More significantly, the government has entered the insurance market as a public‐sector provider for such annuities. This article evaluates the money's worth of life annuities and discusses the impact of the government mandate and its role as an annuity provider on the insurance market.     

Sell‐Side Analyst Bias When Investment Banks Have Privileged Access to the Board

Research on analyst bias typically identifies affiliation with reference to a subset of the mandates that could give rise to incentives for bias in a multifunction investment bank. This paper develops a new measure of affiliation based upon the UK practice of corporate broking. An advantage of this approach is that affiliation is no longer restricted to isolated equity issuance events as it is an ongoing activity. This research shows that prior US evidence regarding the “Global Settlement” is robust to this new measure and application in the United Kingdom rather than solely the United States. The paper uses a hazard rate methodology focusing on the timeliness of revisions to address selection bias concerns.     

Measures of the Timeliness of Earnings

We explore relationships among four measures of ‘timeliness’ in the financial accounting research literature: the Ball and Brown (1968) measure; Dyer and McHugh's (1975) reporting lag; the Khan and Watts (2009) measure; and the Beekes and Brown (2006) measure. There are good reasons why the measures might be related and also why they might differ. Thus we examine the extent to which they are empirically related, using data for a sample of Australian companies over the period 1994 to 2005. Overall, we find the four measures share a common label, ‘timeliness’, but not much else.     

Simple formulas for standard errors that cluster by both firm and time

When estimating finance panel regressions, it is common practice to adjust standard errors for correlation either across firms or across time. These procedures are valid only if the residuals are correlated either across time or across firms, but not across both. This paper shows that it is very easy to calculate standard errors that are robust to simultaneous correlation along two dimensions, such as firms and time. The covariance estimator is equal to the estimator that clusters by firm, plus the estimator that clusters by time, minus the usual heteroskedasticity-robust ordinary least squares (OLS) covariance matrix. Any statistical package with a clustering command can be used to easily calculate these standard errors.