The Contribution of Fisher to Enterprise Income Theory: A Comment

Income is indeed a will-o'-the-wisp. One of its modem founding fathers was Irving Fisher, who emphasized the psychic experience of consumption. This paper discusses some aspects of Fisher's contribution to the continuipg debate on the elusive concept of income.
Le revenu est un vrai feu follet. Un de ses fondateurs actuels fut Irving Fisher qui fit valoir l'aspect psychique de la consommation. Ce papier examine certains aspects de l'intervention de Fisher dans les débats incessants dirigés sur I'insaisissable concept du revenu.
Das Ertragskonzept ist allerdings ein Irrlicht. Einer seiner modernen Stamniväter war Irving Fisher, der die pschische Erfahrung yon Verbrauch zum Ausdruck brachte. Diese Abhandlung besprict einige Aspekte des Fisher-Beitrages zur fortdauernden Debatte uber das schwer erfassbare Ertragskonzept.     

Inferring Trade Direction from Intraday Data

This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote-based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications.     

Nonaudit Services and Earnings Management: UK Evidence*

Using a sample of UK firms for the period 1996‐98, we provide empirical evidence on the relation between nonaudit services (NAS) purchase and three proxies for earnings management: (1) the likelihood that client firm accounting practices during the sample period were publicly criticized or subject to regulatory investigation; (2) the likelihood that client firms were required to restate prior financial statements or adjust current year results upon adoption of Financial Reporting Standard (FRS) No. 12, which was intended to curb opportunistic use of provisions; and (3) the mean absolute value of client discretionary working capital accruals over the sample period. The level of NAS purchase is measured, alternatively, as (1) the ratio of nonaudit to total auditor fees, (2) the natural log of NAS fees, and (3) the decile rank of a particular client's NAS fees given all NAS fees received by the audit firm practice office. With one exception, we find that all three measures of earnings management are positively and significantly associated with the three measures of NAS purchase.     

Fixed‐Rate Mortgages,Labor Markets,and Efficiency

The paper studies the effects of mortgage choices between fixed‐rate mortgages (FRMs) and adjustable‐rate mortgages (ARMs) on labor market efficiency. FRMs provide insurance for risk‐averse borrowers in the sense that they pay the same rate over time and are not subject to uncertain spot market rates. FRMs, however, discourage borrowers from moving to other regions despite better employment opportunities, as they terminate the FRM contracts in order to move and their new loan interests may be higher. As FRM‐borrowers do not move to other regions due to the interest lock‐ins, entrepreneurs in other regions lose the potential surpluses from productive matches that would have occurred between borrowers‐workers and entrepreneurs. Borrowers ignore this negative externality they impose on the entrepreneurs when choosing their mortgages, and too many borrowers choose FRMs relative to the efficient level. If FRMs are eliminated and ARM‐insurance (that protects ARM‐borrowers against uncertain adjustable interest rates) is created, it will improve efficiency. The paper also assesses quantitatively the welfare effects of eliminating FRMs and providing ARM‐insurance.     

Corridor System and Interest Rates: Volatility and Asymmetry

The corridor system in its current form is believed to reduce the volatility of overnight interest rates and to eliminate any chance of persistent upward or downward bias. The model presented here serves to highlight two main findings: one is that a central bank can further reduce the volatility of overnight interest rates by allowing banks some flexibility to meet their reserve targets within a small range, as observed in the UK data. The second is that a seemingly symmetric corridor may be asymmetric in practice due to several distortions, as the UK and euro area data suggest.