Foreign Institutional Ownership and the Global Convergence of Financial Reporting Practices

This paper investigates whether foreign institutional investors affect the global convergence of financial reporting practices. Using several measures of reporting convergence, we show that U.S. institutional ownership is positively associated with subsequent changes in emerging market firms’ accounting comparability to their U.S. industry peers. We identify this association using an instrumental variable approach that exploits exogenous variation in U.S. institutional investment generated by the JGTRRA Act of 2003. Further, we provide evidence of a specific mechanism—the switch to a Big Four audit firm—through which U.S. institutional investors affect reporting convergence. Finally, we show that, for emerging market firms, an increase in comparability to U.S. firms is associated with an improvement in the properties of foreign analysts’ forecasts.     

The usage of media across product classes: the influence of demographics and psychographics

The purpose of this study was to investigate the differences in the types of media used for four product classes, and to examine the effect of respondent's demographics and psychographics on the types of media. Eight hundred and four respondents were randomly selected from the population (8040) of five residential sections of Lubbock, Texas, by using systematic sampling. Different merchandise names representing the classes of product were listed in the questionnaire. The respondents were asked to rate each type of merchandise according to the order of media usage when they purchased the merchandise. One hundred and fifty-two questionnaires were analysed by factor analysis, multivariate analysis of variance, and Friedman two-way analysis of variance by ranks. Eight psychographic factors extracted by factor analysis were Traditional, Self-confident, Satisfied with Finances, Satisfied with Friends, Living Optimist, Self-conscious, Community Minded, and Homebody. Self-conscious was the only factor to affect the consumers' usage of newspapers, television, radio, magazines and direct mail. In addition, the usage of television was affected by the Satisfied with Finances factor. The demographic variables of marital status, age, education, ethnic group, political outlook, occupation and social level influenced the usage of newspapers, magazines, radio, television and direct mail. The usage of television was affected by one's political affiliation. Income did not influence media usage. The findings indicated that the individual's usage of the newspapers, television, radio, magazines and direct mail was affected by the classes of products: convenience, preference, shopping and speciality goods.     

Foreign Entry into Underwriting Services: Evidence from Japan's “Big Bang” Deregulation

We examined the effect of foreign entry into bond market underwriting activity using issue‐level data from the Japanese “Samurai” and euro–yen bond markets. We found that the fees charged by Japanese underwriters were higher on average than those of foreign underwriters, but the difference could be explained by conditioning on issue characteristics. Our results also suggest that bond issuers sorted properly across underwriters, as switching across underwriter nationalities would be expected to result in higher fees. However, the savings enjoyed by firms issuing with foreign underwriters were modest and statistically insignificant, while those of firms issuing with Japanese underwriters were substantial and statistically significant. This result suggests that Japanese underwriters priced their services aggressively over the sample period, perhaps in an effort to retain or gain market share. This conjecture is supported by a matching exercise that examined the liberalization of foreign underwriter access to the Samurai bond market, using euro–yen bond issues as a control. Foreign entry led to a statistically and economically significant decrease of 16 basis points on average in underwriting fees in the Samurai bond market. Overall, our results suggest that the international market for Japanese bond underwriting services was partially segmented by nationality as issuers appear to have preferred habitats, but that liberalization increased overall market competition.     

THE IMPACT OF HIV EDUCATION ON BEHAVIOR AMONG YOUTHS: A PROPENSITY SCORE MATCHING APPROACH

There has been a long‐standing debate as to whether sex or human immunodeficiency virus (HIV) education actually influences the way young people behave. To the extent these programs work, they represent a potential mechanism policy‐makers might use to reduce risky behavior among youths. This paper uses data from the 2009 Youth Risk Behavior Survey to examine if students who have received school‐based HIV instruction behave differently than those who have not. To address potentially endogenous exposure to HIV education, this paper considers a propensity score matching approach. Findings from the propensity score analysis suggest that standard ordinary least squares results are biased. Despite this, there remains some evidence that exposure to HIV education decreases risky sexual activity. Among male students, HIV education is also negatively related to the rate of using needles to inject illegal drugs into the body. The needle use results are robust to a sensitivity analysis, while the results for sexual behaviors are not. (JEL H75, I18, I28, K32)     

Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock?*

We examine corporate disclosure activity around seasoned equity offerings and its relationship to stock prices. Beginning six months before the offering, our sample issuing firms dramatically increase their disclosure activity, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and tends to be largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward‐looking statements prior to the equity offering, something that is expressly discouraged by the securities law. Firms that maintain a consistent level of disclosure experience price increases prior to the offering, and only minor price declines at the offering announcement relative to the control firms, suggesting that disclosure may have reduced the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months before the offering also experience price increases prior to the offering relative to the control firms, but suffer much larger price declines at the announcement of their intent to issue equity, suggesting that the disclosure increase may have been used to “hype the stock” and the market may have partially corrected for the earlier price increase. Firms that maintain a consistent disclosure level have no unusual return behavior relative to the control firms subsequent to the announcement, while the firms that “hyped” their stock continue to suffer negative returns, providing further evidence that the increased disclosure activity may have been hype, and suggesting that the hype may have been successful in lowering the firms' cost of equity capital.     

The effect of customer dress on attitudes towards selling service by sales associates

Eliminating the criticism levelled towards customer service in retail firms is a current consumer/marketing issue. Customer satisfaction encompasses factors such as sales service and first impression. Research focusing on variables pertaining to emotional labour has the potential of increasing sales productivity and consumer satisfaction. This study represents an exploratory attempt to determine if relationships exists between customer appearance and first impressions and sales service. Results of the study suggest that the potential exists for apparel to influence sales associate customer evaluations as a positive association was found between sales service and first impression.     

DOES IMPROVING SCHOOL QUALITY REDUCE THE PROBABILITY OF UNEMPLOYMENT?

The authors investigate the relationship between high school quality and the probability of extended unemployment among noncollege-bound men during three periods: the first two years, two to four years, and seven to nine years after high school. They find that larger high schools and schools with lower pupil–teacher ratios tend to decrease the probability of being unemployed for noncollege-bound men in the period shortly after high school graduation. However, no effect is found of high school quality on unemployment probabilities approximately a decade after high school completion. (JEL I21 , J64 )     

Motivating Truthful Subordinate Reporting: An Experimental Investigation in a Two-Subordinate Context*

Abstract. This experimental study tests the predicted effects of three performance-contingent pay schemes on subordinate misrepresentations: profit sharing, a single-subordinate truth-inducing scheme, and the Groves scheme. A contribution not found in prior experimental research is the introduction of the distinction between direct and indirect misrepresentations. The results show that, as predicted, the three schemes have different abilities to deter the two types of misrepresentations. The fewest direct and indirect misrepresentations occur under the Groves scheme and the most under the linear profit-sharing scheme. There is no significant difference between the single-subordinate truth-inducing scheme and the Groves scheme in the incidence of direct misrepresentations, but indirect misrepresentations are significantly more frequent under the former. Résumé. La présente étude expérimentale vise à tester certaines hypothèses relatives aux résultats de l'application de trois structures salariales liées au rendement sur les déclarations trompeuses des subordonnés: la participation linéaire aux bénéfices, une structure salariale individuelle favorisant la franchise et la structure Groves. Cette étude se démarque des etudes expérimentales antérieures en ce qu'elle introduit une distinction entre l'information trompeuse directe et indirecte. Les résultats révèlent que, conformément aux hypothèses, les trois structures salariales présentent des capacités différentes de décourager les deux formes de déclarations trompeuses. La structure Groves est celle qui occasionne le plus petit nombre de déclarations trompeuses directes et indirectes, tandis que la participation linéaire aux bénéfices est celle qui en occasionne le plus. Il n'existe pas de différence significative entre la structure salariale individuelle favorisant la franchise et la structure Groves en ce qui a trait à l'occurrence des déclarations trompeuses directes, mais les déclarations trompeuses indirectes sont beaucoup plus fréquentes dans le cas de la structure salariale individuelle.