What do firms do when dividend tax rates change? An examination of alternative payout responses

This paper investigates whether investor-level taxes affect corporate payout policy decisions. We predict and find a surge of special dividends in the final months of 2010 and 2012, immediately before individual-level dividend tax rates were expected to increase. We also find evidence that immediately before the expected tax increases, firms altered the timing of their regular dividend payments by shifting what would normally be January regular dividend payments into the preceding December. To our knowledge this is the first evidence in the literature about changes in the timing of regular dividend payments in response to tax law changes. For both actions (specials and shifting), we find that it was more likely for a firm to respond to individual-level tax rates if insiders owned a relatively large amount of the firm. Overall, our paper provides evidence that managers consider individual-level taxes in making corporate payout decisions.     

Can the academic literature contribute to the debate over mandatory audit firm rotation?

Recently, the Public Company Accounting Oversight Board (PCAOB) issued a concept release soliciting public recommendations to improve auditor independence and audit quality (PCAOB, 2011). The focus of the release is on mandatory audit firm rotation (MAFR) with a request for commentaries addressing the advantages and disadvantages of MAFR. In this paper, we briefly summarize the recent literature on mandatory audit firm rotation and suggest how it can be useful to regulators as they consider the implementation of mandatory rotation. We find that the conclusions reached about the possible effectiveness of MAFR appear to depend on the type of data used (voluntary vs. mandatory auditor changes), suggesting that regulators should exercise care when drawing inferences from past audit firm rotation research.     

Agency hazards and alliance portfolios

Prior research over several decades has catalogued many positive motives underlying firms' decisions to engage in joint ventures and other forms of alliances. In this empirical analysis, we investigate whether agency problems brought about by the separation of ownership and control also stimulate the development of firms' joint venture portfolios. By focusing on joint ventures, as opposed to diversification in general or acquisitions, we address the recent debate on agency theory's domain. Results from a sample of U.S. manufacturing firms' alliance portfolios offer supporting evidence, and comparable findings are obtained for international and domestic joint ventures. Agency hazards are also found to bring about extensions of firms' nonequity alliance portfolios in both the international and domestic settings. Copyright © 2005 John Wiley & Sons, Ltd.     

The Year in Review: Economics at the Antitrust Division, 2020–2021

Challenging anticompetitive acquisitions of nascent competitors is a top priority of the Antitrust Division of the U.S. Department of Justice. It is especially important that competition agencies remain vigilant of such acquisitions in platform markets, where indirect network effects and other market forces tend to preserve the status quo at the expense of smaller, more innovative rivals and potentially final consumers. This article discusses two such attempted acquisitions: (1) Visa’s acquisition of technology firm Plaid that threatened to disrupt Visa’s monopoly power in online debit; and (2) Sabre’s acquisition of Farelogix, which is a firm that allows airlines to connect directly to travel agencies and thereby disintermediates Sabre and other global distribution systems.

     

Global compliance with international accounting education guidelines

The International Accounting Education Guidelines (IAEG) of the International Federation of Accountants (IFAC) issued since 1982 specify the components for the Professional preparation to become a qualified accountant.

This paper presents the results of a survey of compliance conducted in fifty-four countries outside the USA with International Accounting Education Guidelines (IAEG), as issued by the International Federation of Accountants (IFAC). Its purpose is to provide a benchmark measure of compliance for current assessment of accounting education, and for reference in future studies. This study is the first attempt to examine compliance with IAEGs in all sectors of the world in which IFAC has members. The paper is divided into the following sections: international accounting education guidelines; survey questions; methodology; results; effectiveness of the guidelines, and summary and conclusions.     

The Impact of Energy Pricing Policy on Taiwan's Small Open Economy*

How a fast-growth country like Taiwan can develop its economy under restrictive energy constraints is an interesting and important research subject. This paper describes the impact of energy pricing policy, such as changes in the prices set by the state for oil or gas, on Taiwan's economy. In order to understand the interrelationships between the energy price shocks and the economy of Taiwan, a computable energy general equilibrium model (EGEM 1.1) is set up to study the problem. In this CGE model, the economy is divided into 13 industrial sectors, 2 primary input sectors, and 4 final demand sectors. There are 16 commodities of interest, 7 of which are major energy commodities. The results in this paper may be useful for providing important recommendations to the government of Taiwan and to other developing countries in Asia.     

The diversifiability of exchange risk

Discussions of the determinants of the spot or forward exchange rate frequently argue that holders of foreign assets that are subject to exchange risk must be compensated by a risk premium. This paper shows that much of exchange risk is diversifiable. If there are no outside assets and the value of the currency is uncorrelated with the value of other forms of wealth, then all exchange risk is diversifiable; there is no risk premium. More generally, there is a risk premium, but it need not be related to foreign indebtedness or to the variability of the exchange rate as commonly presumed.     

Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships

This paper examines long-term block ownership by corporations and performance changes in firms with corporate block owners. We also examine potential reasons for corporate ownership including benefits in product market relationships, alleviation of financing constraints, and board monitoring by corporate owners. We find the largest significant increases in targets' stock prices, investment, and operating profitability when ownership is combined with alliances, joint ventures, and other product market relationships between purchasing and target firms, especially in industries with high research and development. Our findings are consistent with the conclusion that block ownership by corporations has significant benefits in product market relationships.     

Fund Advisor Compensation in Closed-End Funds

This paper examines the relation between the premium on closed-end funds and organizational features of the funds and advisors, including the compensation scheme of the investment advisor. We find that the fund premium is larger when: (a) the advisor's compensation is more sensitive to fund performance; (b) the assets managed by the advisor are concentrated in the fund in question; (c) the advisor manages other funds with low compensation sensitivity to performance and with low concentration of assets managed by the advisor; and (d) the advisor's compensation contract evaluates performance relative to a benchmark.