WHAT DO AUDITORS DO? OBVIOUSLY THEY DO NOT SCRUTINISE THE ACCOUNTING AND REPORTING

Auditors and auditing firms are important actors in the process of institutionalising accounting standards. However, the formal and institutional requirements to de facto ensure professionalism and independence in the Swedish municipal sector have been strongly questioned. The aim of this paper is to investigate and explain how deviations from accounting standards are treated and reported by auditors. The results indicate deficiency in both competence and independence among the auditors. The institutional arrangements in Sweden do not seem to ensure that auditors facilitate and support the implementation of accounting standards.     

Editorial Environmental regulations in the Swedish forest industry. What is the real problem?

The Swedish forest industry faces many regulations. In many cases they are used to eliminate, or diminish, negative external effects on the environment. The aims of most regulations are well accepted among decisions makers in the industry and in society. However, in many cases the implementation can present problems, the reason being bureaucracy.The Ortviken paper mill is located just north of Sundsvall, which is a middle-sized town in the northern part of Sweden. SCA, one of the world's largest forest companies, owns and operates the mill. In the beginning of the 1990s, Ortviken planned for an expansion, which was considered necessary for the company's strategy and potentially profitable. But in order to build a larger plant, SCA first needed a licence from the local authorities which showed that conditions laid down in the Law of Planning and Building were met. After that, the project needed approval by the environmental authorities according to their specific laws and requirements.SCA finally succeeded in getting all the permissions needed. But the whole process took more than 10 years, despite the fact that it was carried out in close co-operation with the local authorities.While waiting for the final approvals, SCA applied for permission to expand production without changing the present emission levels. The existing permit also included a ceiling on production since emissions usually are proportional to production. However, in this case SCA wanted to increase production by only 5 %, and emissions would not exceed allowed levels. But the application was refused. The company was not allowed to increase production above the existing ceiling without a completely new application to the environmental board. The processing time for such an application would cover about two years and cost an unknown amount of money.Recently, the same company decided to analyse the possibilities of expanding production at the Tunadal sawmill, which is located in the same area. One of the alternatives was to build a completely new mill with new technology at a new and suitable site. However, a pilot study showed that the handling time just for the local planning process would be seven years and cost around 10-15 million SEK (approximately 1.5 million Euro).In addition, two years would be required for the environmental approval, so that the whole process from planning to actual start of the investment would require about 10 years.These long handling periods are of course an effective obstacle to investment. No board of directors dares to decide on an investment costing hundreds of millions of Euro if the time span of uncertainty from decision to actual start of the factory is 10-15 years.Not only has the time span necessary to fulfil the new requirements caused problems. An enormous amount of detail is needed to fulfil the requirements of an environmental impact assessment for an investment. For instance, a temporary pile of soil requires a separate analysis of the consequences for the environment, and companies are required to specify the kind of fuel used in trucks that (an unspecified number of years ahead) will drive the garbage from the building site. All these problems are particular troublesome for heavy industries like the forest industry and other industries (e. g. the steel industry and the chemical industry) that deal with material processing.What this Swedish example shows is that it is perhaps not environmental regulation per se that can make an obstacle to industrial expansion. There is no problem for the Swedish forest industry in fulfilling the technical conditions on emission levels. The crucial factor is time. The example also shows that it is not the core content of environmental regulations that is troublesome, but how these regulations are handled and formulated. It is not the environment that is the enemy, but the bureaucracy around it.Sören WibeSLUDepartment of Forest EconomicsSE-90183 UmeåOla CarlénSLUDepartment of Forest EconomicsSE-90183 Umeå     

Can sickness absence be affected by information meetings? Evidence from a social experiment

During the last decade several empirical studies have stressed the importance of norms and social interactions for explaining sickness-absence behavior. In this context, public discussions about the intentions of the insurance, and of the rights and duties of the receivers, may be important for reducing the sickness absence. In this article, we study whether information meetings about the Swedish sickness insurance affect the length of sickness-absence spells. The study is based on experimental data on individuals with weak labor market attachments. The displacement of when the call to the meeting was sent out was randomized. Comparing the survival functions of those called immediately with those whose calls were delayed (by about 30 days) makes it possible to study whether the length of sickness absence is affected by receiving the call earlier. The result suggests that the length is reduced by, on average, 20%. In the long term (12 months later), there is no effect of the information meeting. This suggests that attendance to the information meeting does not change individuals’ long-term behavior.     

The Manure Hits the Land: Economic and Environmental Implications When Land Application of Nutrients Is Constrained

The discharge of manure nutrients into area waters from confined animal feeding operations is considered a leading contributor to U.S. water quality impairments. An option to mitigate these impairments is to constrain land application of manure. When these constraints are particularly binding, due to minimal acceptance of manure as a substitute for commercial fertilizer, potentially large and unanticipated changes in returns to agricultural production and water quality may occur. Moreover, some of the cost of meeting the constraints is passed on to consumers through higher prices and to a portion of rural economies through lower production rates and labor expenditures.     

Management and Risk Characteristics of Part-Time and Full-Time Farmers in Norway

The objective of this exploratory study was to provide empirical insight into how different categories of farmers perceive and manage risk. The data originate from a questionnaire of dairy and crop farmers in Norway. The associations between part-time and full-time farming and farm and farmer characteristics, farmers' goals and future plans, risk perceptions, and risk management responses were examined with simple t - and chi-square tests, as well as with logistic regression. The results indicate that full-time and part-time farmers' goals, risk perceptions, and management strategies differ significantly. Policy makers and advisers should consider these differences when developing policies and recommendations for the different types of farmers.     

Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice

Key features of U.S. agri-environmental programs are reviewed and analyzed using literature review and program data. We focus, in particular, on several key questions: Has benefit-cost targeting increased the environmental benefit obtained from program budgets? Has competitive bidding reduced program costs? To what extent have these program designs resulted in additional gain (that would not have otherwise been obtained)? Previous research illustrates how benefit-cost targeting using environmental indices (such as the Environmental Benefits Index in the Conservation Reserve Program) can increase environmental cost-effectiveness. Previous research and data from two U.S. programs suggests that bidding has reduced costs, but that the full potential of bidding may not have been realized. Finally, most U.S. programs are intended to yield environmental gains that would not have otherwise been obtained, but sometimes fall short of this goal.     

Diversification preferences in the theory of choice

Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von Neumann–Morgenstern expected utility model, but the equivalence fails to hold in other models. This paper analyzes axiomatizations of the concept of diversification and their relationship to the related notions of risk aversion and convex preferences within different choice theoretic models. Implications of these notions on portfolio choice are discussed. We cover model-independent diversification preferences, preferences within models of choice under risk, including expected utility theory and the more general rank-dependent expected utility theory, as well as models of choice under uncertainty axiomatized via Choquet expected utility theory. Remarks on interpretations of diversification preferences within models of behavioral choice are given in the conclusion.     

Sealed bid auctions versus ascending bid auctions: an experimental study

This paper considers two multi-item auction formats (ascending and sealed bid) which both identify the minimum Walrasian equilibrium prices and where truthful preference revelation constitutes an equilibrium. Even though these auction formats share many theoretical properties, there are behavioral aspects that are not easily captured. To explore this issue in more detail, this paper experimentally investigates what role the design of the auction format has for its outcome. The results suggest that the sealed bid mechanism performs weakly better in all of the investigated measures (consistent reporting, efficiency etc.). In addition, we find that the performance of the ascending auction is increasing over time, whereas the sealed bid auction shows no such tendency.     

An analysis of dynamic risk in the Greater China equity markets

This study looks at the time-varying nature of systematic risk in the Greater China equity markets. The Shanghai and Shenzhen markets both have a low average systematic risk when measured against the world market. The short outbursts in systematic risk for these two markets seem to be directly related to policy shifts. The Hong Kong and Taiwan markets are more integrated with world markets and they show signs of large variations in systematic risk over time. Furthermore, conditional betas in the Shanghai and Shenzhen markets are stationary, while the Hong Kong and Taiwan betas are integrated of order one. In addition, long memory tests show that all four markets exhibit a long-run dependence in their conditional betas. While the two mainland China market betas are covariance stationary, the Hong Kong and Taiwan betas are not.