Development and the mystification of ‘cultural factors’: One destiny: Our common future in Africa,by A S van Niekerk

In One destiny: Our common future in Africa the author relates, in popular fashion, a series of incidents which convinced him that the basic difference between black and white in South Africa is cultural deep‐seated and the cause of underdevelopment and conflict He develops a circular argument in which world‐view is taken as the root of perceptions, values and activities. The effects of experience and economic and political factors are given secondary importance. This argument cannot accommodate social change and differentiation, and the author tends to concentrate on perceptions and events which he finds morally unacceptable. He gives an unbalanced assessment and an ethnocentric interpretation of African life. Possible reasons for this type of argument are explored and an alternative which takes its departure from the interaction between experience and perception is offered     

CAN INEFFICIENT TRADERS CREATE VALUE?

I examine the aggregate expected profit generated by informed traders of diverse ability in a competitive market. I assume that efficient traders get perfect information on asset values whereas inefficient traders get noisy information. In the presence of order size restrictions, I show that the aggregate expected profit generated by efficient and inefficient traders together can be higher than that generated by efficient traders alone. Thus, inefficient traders can create value in a constrained trading environment.     

Syndicated Loan Announcements and Borrower Value

Announcements of syndication loans increase borrowers' shareholder wealth if they are revolving credit agreements but not if they are term loans. Share price responses to revolving credit announcements are positive and significant, whereas the wealth effect for term loans is negative and significant. The results show that announcements from both the financial press and commercial information providers can affect borrower share price reaction. Overall, single syndication announcements appear to be more newsworthy than multiple announcements reported in the financial press, and we find evidence of information leakage, post‐announcement drift, or both.     

Political scrutiny and earnings management in the oil refining industry

The fortunes of the oil refining industry have historically been tied to the political process. In periods of high gasoline prices public outcry increases pressure on the political process to increase regulation, taxation, and other costs on the industry. This study explores the relationship of gasoline prices and oil firm earning with accounting earnings management of oil firms. Findings indicate that firms make accounting changes and discretionary accruals to decrease (increase) earnings in periods when gasoline prices and oil firm earnings are rising (falling).     

Cointegration Vector Estimation by Panel DOLS and Long‐run Money Demand*

We study the panel dynamic ordinary least square (DOLS) estimator of a homogeneous cointegration vector for a balanced panel of N individuals observed over T time periods. Allowable heterogeneity across individuals include individual‐specific time trends, individual‐specific fixed effects and time‐specific effects. The estimator is fully parametric, computationally convenient, and more precise than the single equation estimator. For fixed N as T→∞, the estimator converges to a function of Brownian motions and the Wald statistic for testing a set of s linear constraints has a limiting χ²(s) distribution. The estimator also has a Gaussian sequential limit distribution that is obtained first by letting T→∞ and then letting N→∞. In a series of Monte‐Carlo experiments, we find that the asymptotic distribution theory provides a reasonably close approximation to the exact finite sample distribution. We use panel DOLS to estimate coefficients of the long‐run money demand function from a panel of 19 countries with annual observations that span from 1957 to 1996. The estimated income elasticity is 1.08 (asymptotic s.e. = 0.26) and the estimated interest rate semi‐elasticity is ?0.02 (asymptotic s.e. = 0.01).     

Initial Public Offerings: CFO Perceptions

We examine four issues pertaining to initial public offerings (IPOs) using a survey of 438 chief financial officers (CFOs). First, why do firms go public? Second, is CFO sentiment stationary across bear and bull markets? Third, what concerns CFOs about going public? Fourth, do CFO perceptions correlate with returns? Results support funding for growth and liquidity as the primary reasons for IPOs. CFO sentiment is generally stationary in pre‐ and post‐bubble years. Managers are concerned with the direct costs of going public, such as underwriting fees, as well as indirect costs. We find a negative relation between a focus on immediate growth and long‐term abnormal returns.