A conceptualisation of poverty in rural India

This paper investigates the different aspects of poverty in rural India. Based largely on data from a region of Bihar, the various characteristics and sources of poverty are enumerated and discussed, including food intake, other consumption, health, security, education and status as characteristics; and occupation, employment, wages, assets, organization and demographic factors as sources. It is argued that poverty must be seen as a multivariate phenomenon; policy to affect any one aspect of poverty is likely to be rendered ineffective by negative feedback from other variables in the poverty complex. Only a simultaneous attack on all aspects of poverty can be successful.     

Hospital Cost Inflation and Physician Payment*

Abstract . The hypothesis that physicians use control over hospital resources to maximize their net revenue is examined to determine whether such behavior leads to more rapid growth of hospital costs. Theoretical and empirical studies are reviewed and hypotheses are developed regarding the relationship of cost increases to the method of physician payment. Exploratory comparisons of increases in hospital cost per patient day are made between Health Maintenance Organizations with salaried practice and Medical Foundations with fee-for-service. The association of international differences in the rate of increase of hospital cost per day with method of physician payment is explored in an Appendix in the microfiche supplement.     

Information content and recency effect of the audit report in loan rating decisions

We examined the significance of the audit report in loan rating decisions using the belief revision model. We designed a laboratory experiment where the sign of the audit report is mixed with other annual financial information in a series of sequential evidence. The results of an experimental design, using 106 loan officers from international financial institutions, support the hypothesis that the qualified audit report appears to be an independent and useful piece of evidence when it is contrary to favourable financial expectations. Our findings also support that the ‘recency effect’ might influence international commercial loan officers’ perception of the qualified audit report.     

Auditor independence in economies in transition: a study of Russia

The independence of auditors is regarded as key to their credibility as external verifiers of external financial statements. The requirement for external auditors to be independent of their clients when undertaking an audit is enshrined in the International Federation of Accountants' (IFAC) Code of Ethics and in the European Union's Eighth Directive. In the IFAC code this requirement is translated into various situations where observance of certain rules should ensure independence. As the countries of Central Europe and the former Soviet Union have drafted and implemented new laws on external audit, some of these auditor independence rules have been included in the new laws and codes of professional practice. Yet the rationale for the inclusion of these rules is not always clear, particularly given the different cultural and business contexts. In this paper, the authors have identified the auditor independence rule requirements that have been implemented into the laws and codes of practice in Russia. These requirements are then analysed against the economic, social and historic background in Russia, based to a large extent on interviews with auditors, enterprise management and users of financial statements, to generate questions about the efficacy of the auditor independence rules. This should provide relevant input to international and national bodies concerned with the drafting of rules relating to auditor independence in countries with different social and economic traditions.     

Networking among Russian farmers and their prospects for success

In most post-socialist economies, private farming has re-emerged after regime change, although even today this sector most often accounts for only a minor proportion of national production. Russian private farmers are reported to dislike formal cooperatives, so this study investigated whether their informal collaborative arrangements may affect their business results. A survey involving personal interviews with 158 randomly chosen private farmers in the Kurgan Region examined whether collaborating farmers are economically more successful and consider their financial situation to be better than that of neighbouring farmers. Ordinary least square and ordered probit regression analysis indicated that farmers with stronger networks are more successful in terms of farm wealth, and also relative to the financial situation of their immediate neighbours. This suggests that success among private farmers in a post-socialist setting is related to their networks.     

GENDER DIFFERENCES IN VOCATIONAL SCHOOL TRAINING AND EARNINGS PREMIUMS IN TAIWAN

Abstract

International capital mobility and economic restructuring have brought training and skills acquisition to the forefront of policy dialogues. Taiwan has gone beyond most countries in promoting vocational education and setting strict quotas for schooling. Although the education plans do not have separate targets for men and women, they have gendered outcomes. Estimates of earnings premiums using ordinary least squares and quantile regression techniques indicate that only men have gained consistently higher premiums from vocational school compared to general schooling. Women who were denied access to the university system have forgone college premiums that exceed those of men. Also, the commerce track, in which women cluster, yields an earnings penalty compared to general schooling, while the technical track, in which men predominate, yields an earnings premium. Policy reforms based on relaxing education quotas and enforcing equal opportunity legislation would provide women with more rewarding education and career options.     

Initial credit ratings and earnings management

Credit rating agencies assert that they rely on financial information provided by issuers and that they value rating stability as well as accuracy. In an environment where rating agencies depend on issuer-reported information and are reluctant to adjust ratings promptly, managers of issuing firms can utilize the discretion afforded by GAAP to obtain the most favorable credit ratings. Consistent with our expectations, we find that current accruals are unusually positive and high around initial credit ratings. The increase in abnormally high accruals leading up to the initial credit rating year is followed by a reversal in the subsequent years. Multivariate regression analyses suggest that accounting accruals, abnormal current accruals in particular, are significantly positively related to initial credit ratings after controlling for several issue- and issuer-related characteristics indicative of default risk. Our results are robust to additional tests that account for endogeneity between credit ratings and earnings management, adjust for performance, and account for firms issuing debt and equity simultaneously.