Fragmentation and complementarity: The case of EFPs

With the proliferation of alternative markets, concerns have arisen that they may induce lower liquidity on centralized exchanges. In futures markets, the use of an alternative trading mechanism known as exchange of futures for physicals (EFPs) has increased sharply in recent years. EFPs provide a means to obtain futures positions, coupled with offsetting cash positions, away from the centralized exchange. Traders use EFPs to ensure a desired price on complex packages of trades, thus avoiding the transactional risk (slippage) that is inherent in the centralized market. Theoretical analysis establishes that any detrimental effects of fragmenting the centralized market can be offset by traders' knowledge of another opportunity to trade without transactional risk. If EFPs attract more risk‐bearing capacity, there could even be a net benefit to the central market. An empirical analysis suggests that EFP trading is motivated by transactional risk because it represents a larger portion of total trading during periods of unusually high volatility when slippage is apt to be more of a problem. Consistent with the notion that alternative markets can be complementary to centralized exchanges, we find that EFP trading is not associated with reductions in market quality and may act as an outlet for extra volume when markets are under the most stress. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:697–727, 2002     

On the benefits of allowing CEOs to time their stock option exercises

This article examines the costs and benefits of permitting executives to use inside information to time their stock option exercises. Whereas prior research has focused on the negative effects of timing discretion, I show that such discretion can have beneficial incentive effects in that it leads to improved project abandonment decisions. This result follows because at‐the‐money options used to induce managerial effort tilt the CEO's preferences toward project continuation. When the CEO is free to unload stock options at will, he will do so exactly in those states where the continuation bias is most detrimental (i.e., in the event of bad news), making the CEO willing to abandon the project.     

Geschafft! – Bewertung der Pflege im DRG-System

Professionelle Erfassung und Dokumentation hochaufw?ndiger Pflege Mit Wirkung zum 1.1.2010 traten die pflegerelevanten OPS 2010 – die Weiterentwicklung der G-DRG um ein Instrument zur Ermittlung von hohem Pflegeaufwand – in Kraft. Der ermittelte OPS-Code führt zu einem h?heren Entgelt für die Krankenh?user. Zudem wurde eine neue Aufwandsstufe geschaffen. Damit ist es weltweit erstmals dem Deutschen Pflegerat gelungen, Pflege als Ertragsposition im Rahmen der DRG zu deklarieren.     

How do most low ETR firms avoid paying taxes?

Review of Accounting Studies - Evidence suggests a large proportion of profitable U.S. firms have low effective tax rates (i.e., an ETR between 0 and 10%). Despite widespread interest in how firms...