Contagion or Competition: Going Concern Audit Opinions for Real Estate Firms

We examine whether intra–industry information transfers from going–concern audit opinion announcements create contagion or competitive stock price reactions for other real estate firms operating in the same line of business. Using returns from publicly-traded land subdivision/development firms and Real Estate Investment Trusts, we find modest evidence supporting a competitive effect among rival firms as a result of another real estate firm announcing the receipt of a Going Concern Opinion (GCO) from its independent auditors.     

Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?

This paper provides an in depth analysis of an investor’s reluctance to realize losses and his propensity to realize gains – a behavior known as the disposition effect. Together, sophistication (static differences across investors) and trading experience (evolving behavior of a single investor) eliminate the reluctance to realize losses. However, an asymmetry exists as sophistication and trading experience reduce the propensity to realize gains by 37% (but fail to eliminate this part of the behavior.) Our research design allows us to follow an individual’s behavior from the start of his investing life/career. This ability makes it possible to track the evolution of the disposition effect as it is reduced and/or disappears. Our results are robust to alternative explanations including feedback trading, calendar effects, and frequency of observation.     

The evolution of Indian accounting standards: Its history and current status with regard to International Financial Reporting Standards

This paper addresses the adoption and applicability of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) to India. Specifically, the paper highlights some major areas where the country lacked harmonization with IAS in 1993 and the rapid congruence with IAS in the decade that followed. The attempt to achieve congruence with IAS appears to be more a by-product of the country's rapid economic growth rather than its catalyst. However, continued growth and the attraction of foreign capital to domestic ventures will depend on the transparency of the financial dealings. The Institute of the Chartered Accountants of India, (ICAI), India's standard setting body, is increasingly attempting to provide this transparency by revisions and additions to accounting standards, and by Exposure Drafts which aim to bring India more in line with International Financial Reporting Standards.     

Re‐imagining Infrastructure*

A senior executive of Booz Allen Hamilton and co‐author of a business bestseller called Megacommunities argues that the United States is locked into an obsolete pattern of dealing with infrastructure investment, even as the country's population growth and technology have raced ahead. Three of America's basic “lifeline” infrastructures—energy, transportation, and water—are nearing the end of their useful operating lives and in desperate need of modernization. U.S. capital spending on infrastructure has been inadequate, amounting to less than 2% of GDP, as compared to 9% in China and 5% in India. But if infrastructure renewal will be costly, money is not the biggest obstacle. History shows that modernizing existing infrastructures tends to be even more challenging than creating new ones because of the drag caused by legacy hardware and the associated human “software.” And so the real problems are conceptual, institutional, and political—problems whose solutions demand transformational vision and leadership that will encourage collaborative participation by both the public and private sectors. What is lacking, then, is an oversight and coordination mechanism that restores government's traditional integrating role without creating either new monopolies or a larger, more centralized government. To that end the author issues four imperatives: First is the need to rethink the form and function of our old infrastructures. Second is the need for design principles that make future infrastructures robust and adaptable as technology advances, funding changes, and the needs of our citizens evolve. Third is the need for leadership that succeeds by convening, integrating, and aligning the interests and actions of all important stakeholders. Fourth and last is the need for a national vision for America's infra‐structure that defines the function and performance of the entire system over its total lifecycle. A new kind of collaboration by different constituencies, which the author refers to as the creation of “megacommunities,” is held up as a way for stakeholders with conflicting interests to cooperate on compelling issues of national importance with a shared set of practices and protocols.     

The changing relationship between earnings expectations and earnings for value and growth stocks during Reg FD

Regulation Fair Disclosure (Reg FD) altered the voluntary disclosure practices of firms with publicly traded securities, thereby affecting relationships between value and growth stock expectations and actual earnings. The results show that earnings forecasts for both stock groups are biased but that bias is less after the introduction of Reg FD. In fact, the difference in pre/post FD forecast bias is larger for growth stocks, suggesting that before Reg FD, analysts did not just misinterpret news but consciously tried to maintain relationships with growth firm managers. However, Reg FD limited these relationships severing the monetary advantage that might be gained from manipulating forecasts.     

Are institutional investors informed? The case of dividend changes for REITS and Industrial Firms

Review of Quantitative Finance and Accounting - Prior evidence on whether institutions are informed about dividend changes is mixed. We contribute to this debate by examining institutional trade...     

Competition and market power in option demand markets

We call markets in which intermediaries sell networks of suppliers to consumers who are uncertain about their needs "option demand markets." In these markets, suppliers may grant the intermediaries discounts in order to be admitted to their networks. We derive a measure of each supplier's market power within the network; the measure is based on the additional ex ante expected utility consumers obtain from the supplier's inclusion. We empirically validate the WTP measure by considering managed care purchases of hospital services in the San Diego market. Finally, we present three applications, including an analysis of hospital mergers in San Diego.     

True and Fair — An Imaginary View

The recent collapses of major Australian corporations and the human and economic consequences have emphasised the need for a new approach to auditing in Australia to fix the culture of complacency. The challenge is to continue to persuade directors, auditors and ASIC to better understand what the law requires, and to pressure government to create the conditions to ensure that ASIC undertakes appropriate enforcement.