The Effects of Conservative Reporting on Investor Disagreement

We examine whether the level of a firm's conditional conservatism affects investor disagreement around earnings announcement dates. Investor disagreement is relevant for its repercussions on stock market efficiency. However, the literature related to the effect of firms’ reporting policies on disagreement is scant. Prior research suggests that conservatism, by requiring higher verifiability of profits, constrains earnings overstatements and encourages more complete revelations of losses, thus improving the information environment. In this paper, we further hypothesize that these effects of conservatism enhance news credibility and decrease information asymmetry, particularly for bad news announcements. This results in a lower disagreement and improved interpretation of earnings news. We consistently find that conservatism measures are negatively associated with proxies of announcement-time investor disagreement and that this effect is stronger when the firm is reporting bad news. Additional analyses indicate that the impact of conservatism is stronger when market surprise to the announcement is greater, while it is weaker in the presence of frequent and precise voluntary disclosure that preempts the earnings announcement. Finally, we show that a higher percentage of institutional investors’ ownership and a higher level of commitment to conservatism reinforce the impact of the latter.     

Spatial Price Discrimination in the Spokes Model

The spokes model allows to address nonlocalized spatial competition between firms. In a spatial context, firms can price discriminate using location‐contingent pricing. Nonlocalized competition implies that neighboring effects are not relevant to firms. This paper analyzes spatial price discrimination and location choices in the spokes model. Highly asymmetric location patterns are one outcome if the number of firms is sufficiently high: in that case, one firm supplies a generally appealing product whereas others focus on a specific niche. Moreover, multiple equilibria arise for intermediate values of the number of firms. In this case, the location patterns do not always globally minimize the sum of transport costs: asymmetric configurations distribute more efficiently the cost between firms.     

Implementation of EEC consumer protection directives in Italy

The paper gives an overview of the specific method used in Italy to implement Community legislation, including consumer protection directives. It analyses the implementing legislation on product liability, competition law, adertising, and financial services. As a result Italian law has greatly changed for the benefit of the consumer. The authors criticize the fact that Italian law has not yet enabled consumer associations to take action before courts of law in order to stop illegal or misleading marketing practices.

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Umsetzung der Verbraucherschutzrichtlinien der EG in Italien

Zusammenfassung Der Beitrag befa\t sich zunächst mit der besonderen italienischen Umsetzungsgesetzgebung von EG-Rechtsakten einschlie\lich der Richtlinien sum Verbraucherschutz. Er untersucht dann die italienischen Regelungen zur Produktsicherheit- und haftung, Haustürgeschäfte, Wettbewerbsrecht, Werbung und Finanzdienstleistungen. Im Ergebnis verbessert der italienische Gesetzgeber den Rechtsschutz des Verbrauchers, etwa durch Einführung eines Widerrufsrechts auch für im Fernabsatz geschlossene Verträge und durch generalle Regeln über die Transparenz von Banktransaktionen. Im Beneich Produkthaftung hat der Gesetzgeber dagegen keine der Optionen ausgeschöpft. Die Autoren kritisieren, da\ bislang in Italien keine Verbandsklage der Verbraucher gegen unlautere und irreführenden Praktiken von Anbietern besteht.

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Simonetta Cotterli has written the section on financial services, Paolo Martinello on product liability and competition law, and Carlo M. Verardi on advertising.     

Developing-Country Benefits from MFN Relative to Regional/Bilateral Trade Arrangements

Using a general‐equilibrium model of world trade, this paper evaluates the benefits of most‐favored‐nation (MFN) treatment to developing countries in multilateral relative to bilateral or regional trade agreements, from three sources. First, developing countries may be able to free‐ride on bilateral tariff concessions exchanged between larger countries in MFN‐based GATT/WTO rounds. Second, MFN benefits developing countries by restricting discriminatory retaliatory actions by other countries, evaluated here by a non‐ cooperative Nash tariff game. Finally, MFN changes threat points in bargaining and hence affects the bargaining solution of multilateral MFN‐based trade negotiation compared to a bilateral/regional arrangement. The authors find that the benefits to developing countries are small in the first case as the tariff rates are already low, and the benefits are small in the second case as the optimal tariffs under unconstrained retaliation are not very asymmetric. Benefits from the third case are large as large countries can extract large side‐payments if they bargain bilaterally.     

“How may I help you?” Politeness in computer-mediated and face-to-face library reference transactions

Drawing upon Wittgenstein’s theory of language games, we apply a pragmatic approach to organizational communication. The study extends current theories of computer-mediated communication, and explores how language actually gets used across media. We conduct a comparative study of face-to-face versus computer-mediated reference transactions in an academic library, and analyze people’s use of politeness strategies. The study observes that people use politeness strategies to play different language games across media, and that a dynamic interplay exists among the three constituents of language games: sense making, language use, and forms of life. In particular, we found that: First, people use significantly more negative politeness strategies and fewer positive politeness strategies online than face-to-face. Second, language use influences people’s understanding and precedes practical forms of life. Third, CMC is a different form of life than a face-to-face communication. The new online form of life shapes people’s sense making and the way they use language, resulting in emerging new grammars of CMC. Finally, our findings suggest the interplay among multiple forms of life. This study offers important theoretical and managerial implications for organizational communication and the production and delivery of services in the rapidly expanding digital economy.     

The globalisation of technology and its implications for developing countries: Windows of opportunity or further burden?

On the basis of a categorisation of ways in which the generated knowledge is transmitted, this paper explores the impact of the different forms of the globalisation of technology on developing countries. Through travelling, media, scientific and technical workshops, Internet and many other communication channels, globalisation allows the transmission of knowledge at a much greater pace than in the past. However, this does not automatically imply that developing countries succeed to benefit from technological advances. On the contrary, this will strongly rely on the nature of the technology and of the policies implemented in both advanced and developing countries.     

Environmental innovation policy and international competition

We consider one polluting industry in an open economy. The national government implements a policy of industrial pollution control, by inducing appropriate technological innovation to reduce toxic emissions. The emission-reducing innovations are developed through firm-specific costly investments. Under different hypotheses on market structure (perfect competition, Bertrand and Cournot oligopoly), international competition forces the national government to subsidize innovation. The appropriate subsidy scheme varies according to the information available to the government and according to market structure. If information is asymmetric, the subsidy must include the information premium necessary to separate different types of firms.     

Income Diversification and Bank Performance: Evidence from Italian Banks

Using annual data from Italian banks, we study the link between non-interest revenues and profitability. We find that income diversification increases risk-adjusted returns. Our results provide econometric evidence consistent with current studies on EU banks, but do not support findings on the U.S. experience. In our view, the differences depend primarily on the relative importance of local banks: we find that the relation is stronger at large banks. In addition, we find that there are limits to diversification gains as banks get larger. Small banks can make gains from increasing non-interest income, but only when they have very little non-interest income share to start with. The source of non-interest income is less important than its level.

MONEY CYCLES

Operating overheads are widespread and lead to concentrated bursts of activity. To transfer resources between active and idle spells, agents demand financial assets. Futures contracts and lotteries are unsuitable, as they have substantial overheads of their own. We show that money—under efficient monetary policy—is a liquid asset that leads to efficient allocations. Under all other policies, agents follow inefficient “money cycle” patterns of saving, activity, and inactivity. Agents spend their money too quickly—a hot‐potato effect of inflation. We show that inflation can stimulate inefficiently high aggregate output.