The Fair Value of Cash Flow Hedges,Future Profitability,and Stock Returns

The SEC and FASB recently expressed concerns that investors do not fully assimilate all of the information provided by complex and incomplete derivatives and other comprehensive income (OCI) disclosures. My evidence supports these concerns. Specifically, I examine the information content of unrealized cash flow hedge gains/losses for future profitability and stock returns. An unrealized gain on a cash flow hedge suggests that the price of the underlying hedged item (i.e., commodity price, foreign currency exchange rate, or interest rate) moved in a direction that will impair the firm's profits after the hedge expires. Consequently, I find that unrealized cash flow hedge gains/losses are negatively associated with future gross profit after the firm's existing hedges have expired. This association only holds after the firm has reclassified its hedges into earnings, and is weaker for firms that can pass input price changes on to their customers. Finally, investors do not immediately price the cash flow hedge information. Instead, investors appear surprised by future realizations of gross margin, consistent with the view that complex and incomplete disclosures delay pricing. These results are relevant to policymakers involved in the current FASB and IASB project designed to simplify the accounting and disclosure for derivatives and, in particular, cash flow hedges.     

Estimating the Impact of Currency Unions on Trade: Solving the Glick and Rose Puzzle

Does leaving a currency union reduce international trade? This paper uses a historical approach to re‐examine the puzzling large apparent impact of currency unions on trade. I find that the early time series estimates were driven by the gradual decaying of colonial trade ties and other major geopolitical factors, including warfare, communist takeovers and ethnic cleansing episodes. My methodology, which carries lessons for other uses of gravity equations in policy analysis, yields point estimates of currency unions on trade that are not statistically distinct from zero.     

Adolescent injuries in relation to economic status: An international perspective

The primary objective of the study was to examine the relationship between patterns in car-to-car crashes involving young drivers and car and driver characteristics and the research design was a national register-based prospective cohort study. Individual records in a cohort born 1970 – 1972 are linked to road-traffic-crash data (1988 – 2000). Subjects' first police-registered two-car crash leading to severe or fatal injury (n = 4875) are identified. Typical crash patterns are highlighted and associations between pattern and both car and individual socio-demographic characteristics are tested. Four crash patterns are highlighted. Male drivers and those with lower educational attainment are over-represented in all patterns. Pattern-based risk levels vary considerably according to car safety level and driver's age at time of injury and socio-economic status. Crash patterns might be considered in young adult driver education systems, bearing in mind the consistent higher risks of male drivers and of drivers with lower educational attainment.     

The effect of legislation on corporate disclosure practices

This article investigates the effect of the Financial Reporting Act of 1993 (FRA) on mandatory disclosure practices of companies listed on the New Zealand Exchange Limited. The FRA gave statutory backing to financial reporting standards in New Zealand and made non-compliance illegal. Using both univariate and multivariate analyses, we examine the association between (a) the levels of compliance with mandatory disclosure by the companies in our sample, and (b) disclosure regulatory regimes that prevailed in New Zealand before and after the implementation of the FRA. We find that mean corporate disclosure compliance levels in the periods after the enactment of the FRA are significantly higher than those in the periods before the enactment of the legislation. After controlling for the effects of other mandatory disclosure-related variables documented in prior studies, we also find that the improvement in corporate disclosure compliance behaviour is the result of the implementation of the FRA. Alternative specifications of the primary regression model indicate that those findings are robust.     

Managing customer relationships. The challenge of deploying scarce managerial resources

In industrial markets many managers from marketing, technical service and production functions interact with customers. How should these managers be allocated to an evolving array of customers? This paper reports on the customer visits made by the managers of one packaging supplier. The visits of the marketing people seem related to the financial significance of the customer, whereas the technical visits are best understood by a ‘portfolio’ approach. At the same time many idiosyncratic and situational factors affect resource deployments.     

Non-Parametric Regression Models of Deviations from Othogonality in the Expectations Theory of the Term Structure

Regression tests of the expectations theory of the term structure typically reject the null hypothesis of orthogonality between implied forecast errors and the yield spreads. In the statistical literature on the term structure, these rejections are sometimes attributed to time-varying liquidity premia, and Engle et al . (1987) suggest that the ARCH-M model of time-variation in the liquidity premium may be sufficient to account for rejections of the expectations theory. We use non-parametric (kernel) regression to explore the regression test results on a number of data sets, and find some evidence of a persistent deviation from orthogonality for large absolute values of the spread. Incorporating ARCH-in-mean into models of the term premium indicates that this specification does explain significant time variation in liquidity premia, but the effect does not apepar to be sufficient to account for all of the deviations from orthogonality of forecast errors and spreads.     

Authentic Program Planning in Technology Education

This paper reports on the needs identified by three teachers during an investigation into their first experiences of implementing technology in their primary classrooms. One part of one teacher's case is presented in detail to illustrate that the meanings the teachers made of their experiences were related very closely to their beliefs about teaching and learning, to their understanding of technology as a phenomenon and to the place they saw technology having within the whole curriculum. One particular outcome of the investigation was that the teachers experienced a lack of knowledge of the scope and breadth of the technology learning area, and as a consequence, faced challenges in planning for the successful implementation of activities. In response to this particular need and to the many issues emanating from current research literature in technology education, the paper then presents two models for conceptualizing and planning units of work in technology in primary classrooms. The models form frameworks that may be useful to help structure thinking for authentic classroom planning and sequencing of lessons or learning experiences. This revised version was published online in July 2006 with corrections to the Cover Date.     

How 'modern' is the modern apprenticeship?

Despite the fact that some sectors of industry are facing major skills shortages, the Scottish labour market continues to be characterised by occupational segregation and a large disparity between the wages of women and men. The concentration of individuals in occupations and training based on their gender effectively restricts the pool of potential recruits to industry and is unlikely to make the best use of human capital. Moreover, it obstructs the pursuit of gender equality by reinforcing the gender pay gap and restricting individual career choices. This paper reports on the government's flagship training policy, the Modern Apprenticeship programme, from a gender perspective. It concludes that, ten years on from its introduction, the scheme represents something of a 'missed opportunity' to tackle occupational segregation and its deleterious effects in the wider economy and in society at large. It is recommended that the government and organisations involved in the development and delivery of Modern Apprenticeships adopt a more conscious and cohesive approach to promoting non-traditional choices at the vocational level.     

Guidelines for Agricultural Policy Over the Next Decade

This paper discusses the need for developing consistent public agricultural policies for Canada. Six "realities" of today are discussed and are proposed as guidelines for public involvement in Canadian agriculture. The guidelines are indicated to be applicable not only to public policy for agriculture, but also to other sectors, and are believed to be relevant well beyond a decade.
QUELQUES LIGNES DIRECTRICES CONCERNANT LA POLITIQUE AGR1COLE DES DIX PROCHAINES ANNÉES – L'article qui suit analyse pour le Canada la nécessité d'une véritable politique agricole. Dans cet ordre d'idées. six "schémas" qui pourraient constituer les lignes directrices d'une intervention des pouvoirs publics dans l'agriculture canadienne sont discutes et proposés. Ce cadre d'analyse pourrait être appliquée non seulement aux politiques agricoles mais aussi à d'autres secteurs et nous croyons qu'il serait valable bien au-delà d'une décade.