The influence of corporate governance mechanisms on the quality of financial reporting and auditing: Perceptions of auditors and directors in Singapore

This study uses two hypothetical cases to examine the perceptions of auditors and directors in Singapore about corporate governance practices relating to the quality of financial reporting and auditing. In the first case, the strength of the audit committee, the existence of an internal audit function and the strength of a corporate code of conduct were manipulated. All three variables were perceived to have some influence on financial reporting and audit quality. However, some interesting differences were found between the perceptions of auditors and directors. Auditors place more weight on the internal audit function, possibly due to their familiarity with the role that internal audit can play in reducing audit risk and enhancing controls. Directors have more confidence in board enforcement of a strong code of conduct, possibly reflecting the view that this encourages staff to adhere to higher ethical standards. In the second case, audit partner rotation, outsourcing of internal audit services and whether the audit firm audited all companies within a group were manipulated. Auditors believed that their ability to resist management pressure was enhanced when they audited all companies within the group. No significant differences were found for the other variables, suggesting that neither group believes that these practices impair audit independence.     

Generalized habit formation in an Inverse Almost Ideal Demand System: An application to meat expenditures in the U.S.

The Inverse Almost Ideal Demand System (IAIDS) model of Moschini and Vissa (1992) and Eales and Unnevehr (1994) is extended to include: (1) general, nonlinear, nonadditive habit effects; and (2) a specification for habit stock terms that allows purchases from the distant past to influence current consumption (long memory). The resulting models are compared with a linear habit effects model and a static specification. The empirical estimation is on U.S. quarterly meat expenditures (1961–1993), with each model being subjected to a battery of misspecification tests. Results of these tests, along with tests of homogeneity and symmetry restrictions, indicate clearly that the most generalized dynamic specification-the one with nonlinear, nonadditive long-memory habit stock effects-is preferred. Furthermore, persistence effects are found to be qualitatively important in that flexibility, consumption scale, and habit flexibility estimates differ, in some instances substantially, between alternative specifications.     

Teaching Ecological and Feminist Economics in the Principles Course

It can be difficult to incorporate ecological and feminist concerns into introductory courses, when one is also obliged to teach neoclassical analysis. In this essay we briefly describe how one might extend existing “multi-paradigmatic” approaches to feminist and ecological concerns, and then present an new alternative approach that may be more suitable for some students. This “broader questions and bigger toolbox” approach can be applied in both microeconomics and macroeconomics introductory classrooms.     

Building new roads really does create extra traffic: a response to Prakash et al.

A recent article by Prakash et al. (Applied Economics, 33, 1579–85, 2001) asserted that induced travel effects do not occur. This paper is criticized on several grounds. It disregards much of the recent work in this area that has empirically estimated induced travel relationships. The models specified are inappropriate for properly addressing this question, both in their use of road expenditure data (based on a misunderstanding of how this may relate to traffic growth) and specification of a model that does not account for other variables that generally have a large effect on traffic growth (notably population and income growth). The evidence in the literature is summarized and an analysis of UK road expenditure data shows that expenditure is not a good measure of actual road capacity that is built.     

Revenue insurance purchase decisions of farmers

The objective of this study is to evaluate farm, household, and financial characteristics of cash grain farmers’ decisions of whether to purchase revenue insurance. Using farm-level data these characteristics were identified by estimating a logit model of revenue insurance purchase decisions by farm operators. Results indicate that farm operators with the ability to self-insure through accumulation of sufficient wealth reserves measured in terms of the ratio of debts-to-assets, operators with off-farm income, and participation in production and marketing contracts, are more likely to pursue these strategies as a substitute for federal revenue insurance programmes. Further, study finds that older and wealthy cash grain farmers are less likely to buy revenue insurance.     

Copula-based nonlinear modeling of the law of one price for lumber products

This paper proposes an alternative and potentially novel approach to analyzing the law of one price in a nonlinear fashion. Copula-based models that consider the joint distribution of prices separated by space are developed and applied to weekly prices for lumber products. The copulas capture nonlinearities that arise in the extremes of the joint distributions of price differentials and suggest faster equilibrating adjustments when deviations from parity are extreme.     

Robust Testing of the Utility‐based High‐technology Product Sales Forecasting Models Proposed by Decker and Gnibba‐Yukawa (2010)

Decker and Gnibba‐Yukawa (2010) propose an elegant utility‐based model for forecasting the sales of high‐technology products and suggest that the model yields forecasts that are highly accurate. However, this finding is based on forecasts for a total of only six holdout observations shared across three products. This number of observations is insufficient for reliable inferences to be drawn about the accuracy of a method and the use of such a small data set runs counter to an accepted principle of forecast evaluation. The authors’ proposed model was tested on more extensive data and sensitivity analysis applied to the results. No evidence was found that the utility‐based model could outperform a relatively simple extrapolative model despite the much greater effort involved in applying the proposed model. In addition, the utility‐based model is only applicable for forecasting sales during a narrow interval in a product's life cycle and requires several periods of historic sales data before it can be implemented. It also depends heavily on the accurate estimates of parameters that are determined outside the model (and which may depend on difficult judgments by managers) and assumes that consumers or households will only purchase the product once between the launch date and the forecast horizon. In light of this, it is argued that the utility‐based model is likely to have limited usefulness as a sales forecasting tool.