A commentary on ‘The long road to publishing: A user-friendly exposé’

Many of the pressing questions currently facing accounting education researchers are best addressed through experimental research. For example, experiments are useful in testing the effect of innovative educational practices on student learning. The purpose of this paper is to briefly review the literature addressing sources of invalidity which may cloud the results of experiments and describe several procedures which are helpful in controlling for these sources of invalidity. Examples are provided, from published accounting education research studies, which illustrate how researchers have attempted to address several of these threats to validity. Experiments must be carefully planned and designed, so the experiment on completion fulfills the objectives of the researcher. Although experiments are more difficult to conduct in the educational environment than in a scientist's laboratory, many procedures are available to assist accounting education researchers in designing tightly controlled experiments.     

<Emphasis Type="Bold">Measuring the market response to going concern modifications: the importance of disclosure timing</Emphasis>

Auditor going concern modifications (GCMs) are intended to provide market participants with information related to financial distress, and prior research suggests that the disclosure of a GCM elicits a substantial negative market reaction from investors. In this study, we investigate the market reaction to GCMs in a contemporary disclosure regime and consider whether the observed market reaction is confounded by other material disclosures. We find that the majority of GCMs are issued concurrently with earnings announcements (EAs) and that EAs in the year of new GCMs elicit large negative cumulative abnormal returns (CARs). We also find that CARs surrounding GCMs are significantly more negative when GCMs are disclosed with EAs versus following EAs. We then evaluate whether GCMs convey distress that is incremental to EA disclosures by measuring i) the market reaction to GCMs disclosed following EAs, and ii) whether EA CARs are substantially more negative for companies disclosing GCMs with EAs as opposed to after EAs. In both cases, we find that the incremental market response to GCMs is statistically weak and much smaller in economic magnitude than is suggested by prior research. Finally, we find that management disclosures in EAs, rather than the presence of a GCM, appear to convey information that investors use to anticipate bankruptcy. Taken together, these findings suggest that GCMs are confounded by other significant disclosures and that the informational benefits of GCM reporting are significantly smaller than previously thought.     

FROM COMPETITION TO REGULATION: THE SIX-YEAR BATTLE TO REGULATE CALIFORNIA'S INSURANCE MARKETS

Abstract: The passage of California's Proposition 103 in November 1988 changed the State's regulatory structure for insurers from a competitive to a heavily regulated system. The six-year legal battle that followed resulted in several California Supreme Court and United States Supreme Court rulings and an ultimate implementation of rate roll backs on property-liability insurers on November 22, 1994. The study examines both property-liability and life insurers' returns. While only property-liability insurers are affected by the rale rollback and prior approval rate regulation, both life and property-liability insurers are affected by the proposition's other provisions. This paper examines the effect of successive changes on both types of insurance companies and analyzes the differential impact of the changes in regulatory structure.     

Technology transfers and the clean development mechanism in a North–South general equilibrium model

This paper analyses the potential welfare gains of introducing a technology transfer from Annex I to non-Annex I in order to mitigate greenhouse gas emissions. Our analysis is based on a numerical general equilibrium model for a world-economy comprising two regions; North (Annex I) and South (non-Annex I). In a cooperative equilibrium, a technology transfer from the North to the South is clearly desirable from the perspective of a ‘global social planner’, since the welfare gain for the South outweighs the welfare loss for the North. However, if the regions do not cooperate, then the incentives to introduce the technology transfer appear to be relatively weak from the perspective of the North; at least if we allow for Southern abatement in the pre-transfer Nash equilibrium. Finally, by adding the emission reductions associated with the Kyoto agreement, our results show that the technology transfer leads to higher welfare in both regions.     

Compound Voids and Unproductive Entrepreneurship: The Rise of the “English Fever” in China

China has emerged as an economic power due, in part, to government policies that opened China to the world and created a modern consumer culture. One of these policies is the advancement of English-language education, including private providers, which has spawned the “English Fever” phenomenon. We use the unique context of the private English-language education industry in China to illustrate the concept of “compound (institutional) voids” and their relationship to unproductive entrepreneurship. Our contribution is in untangling some of the complexities related to institutional relationships, and in describing how compound voids increase the likelihood of rent-seeking behavior.