Integration of a Financial Literacy Curriculum in a High School Economics Class: Implications of Varying the Input Mix from an Experiment

We taught a mere seven‐period financial literacy curriculum to two 12th grade economics classes, where one treatment was Financial Fitness for Life^® (FFFL)‐intensive and the other was “stock market learning” (SML)‐intensive. Two control groups received no financial literacy treatment—an 11th grade group with no exposure to economics and a 12th grade economics class. The 12th grade economics classes, i.e., the two treatment groups and one control group, also worked on identical stock market portfolio assignments that their teachers required independently of our curriculum. In a test of overall financial knowledge, the FFFL‐intensive group outscored both control groups and the SML‐intensive groups, even on questions that were not taught in our curriculum. We conclude that an FFFL‐intensive input mix was beneficial in directly adding to financial knowledge and also in terms of leading to spillovers in such knowledge.     

Accounting, Intangible Assets, Stock Market Activity, and Measurement and Disclosure Policy—Views From the U.K.

This paper considers the impact of U.K. practices with respect to the measurement and disclosure of intangible assets, focusing on R&D activities. We first update prior U.K. work relating R&D activities to market prices. Second, given the clearly identified role of disclosure outside of the financial statements in helping market participants value R&D expenditures, we consider whether market forces are generally sufficient to ensure adequate disclosures with respect to intangibles by considering the cases of two biotechnology firms involved in the issuance of misleading disclosures. Within this context, we consider how disclosure regulation and enforcement mechanisms have evolved in recent years, and how this evolution has likely been affected by our 'scandal' cases. Our conclusions are that the case of the U.K. does not give rise to any wide-scale concerns about the economic ill-effects caused by the current state of recognition and disclosure with respect to expenditures on intangibles. Further, market forces are unlikely to be sufficient in ensuring honest and timely disclosures with respect to intangibles, but the combination of official regulation and voluntary self-regulation appears to have stemmed the tide of any such disclosure scandals in the U.K.     

HOW RELIABLE ARE CYCLICALLY ADJUSTED BUDGET BALANCES IN REAL TIME?

Cyclically adjusted budget balances (CABs) are often used to provide an indication of the structural state of public finances. This paper analyzes the reliability of these figures in real time. In a test of the ability to forecast the “final data,” we find that real‐time CABs are outperformed by a simpler methodology. Furthermore, we find that real‐time CABs have low power in detecting fiscal slippages and in correctly identifying fiscal improvements. Finally, we find that CABs are systematically less reliable under conditions of poor or deteriorating public finances, which means they are at their most unreliable precisely when they are needed most. (JEL H62, H87)     

Altering Perceptions Through Repositioning: An Exercise in Framing

This research was conducted to examine the efficacy of repositioning public parks and recreation services in the public mind. Respondents were recruited at various venues throughout a large Canadian city and randomly assigned to one of five groups. After reading hypothetical newspaper format articles, respondents completed questionnaires investigating their beliefs, attitudes, and behavioral intentions regarding a local recreation agency's efforts to reduce youth crime. Four treatment messages contained various combinations of real, psychological, and competitive repositioning messages, while a control group received no information. All types of repositioning messages were effective in improving beliefs and behavioral intentions, but not attitudes. There was no significant evidence that numerical treatment messages were more effective than non-numerical messages or that the cumulative effects of various repositioning messages were more effective than a single type of message. Discussion focuses on efficacy of various framing messages, on suggestions for future research related to repositioning, and on considerations related to social marketing efforts of this nature.     

Comparative Advantage and Heterogeneous Firms

This paper examines how country, industry, and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance, and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than in comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The improvements in aggregate productivity as countries liberalize dampen and can even reverse the real-wage losses of scarce factors.     

‘Lines of credit,debts of obligation’: migrant remittances to Britain,c.1875–19131

Britain of the nineteenth century was a net recipient of migrant remittances. Surprisingly little, however, is known about the flow of such funds to the UK. This article addresses this hiatus in several ways. First, it provides an account of the main mechanisms by which remittances were transferred in this period. Second, it presents new estimates of the volume of remittances flowing to Britain between 1875 and 1913, and, in doing so, offers a comparison of remittance patterns between different Anglophone societies. Third, it assesses the significance of remittances for their recipients in the UK. The article ends by considering the implications of all of the above for the way in which historians are currently trying to formulate the concept of a ‘British world’.     

The Use of Trade Association Disclosures by Investors and Analysts: Evidence from the Semiconductor Industry*

This paper investigates the relation between industry-wide information disclosures by the trade association for the semiconductor industry and both share prices and analyst forecasts. Such disclosures may have little impact on investors and analysts, since prior theoretical research suggests that trade associations may be unable to secure reliable data from firms in an industry. At the same time, such disclosures may be important, since prior empirical research suggests that share prices and analyst forecasts reflect industry-wide earnings effects earlier than firm-specific effects. We document significant stock price movements on release dates of industry Flash Reports by the Semiconductor Industry Association (SIA) each month that contain aggregate industry data on new orders and shipments. The magnitude of the price revisions on Flash Report disclosure dates is positively associated with changes in the numbers disclosed and varies across sample firms in a manner associated with identifiable characteristics of the firms. Further tests indicate that the Flash Report provides mainly forward-looking information on new orders that is linked to firm-specific sales changes and has explanatory power for quarterly stock prices beyond firm-specific earnings. This information is used by security analysts mainly in assessing the persistence of firm-specific quarterly sales changes. Our findings support the hypothesis that the SIA is able to obtain data from firms, compile it into reliable aggregate statistics, and then distribute these statistics in a timely fashion.     

Do Publicly Disclosed Tax Reserves Tell Us About Privately Disclosed Tax Shelter Activity?

We examine whether public disclosures of tax reserves recently made available through Financial Interpretation No. 48 (FIN 48) reflect corporate tax shelter activities. Understanding this relation is important to corporate stakeholders and researchers keen to infer the aggressive nature of a firm's tax positions from its tax reserve accrual. Our study links public disclosures of tax reserves with mandatory private disclosures of tax shelter participation as made to the Internal Revenue Service's Office of Tax Shelter Analysis. We find strong, robust evidence that the tax reserve is positively associated with tax shelters, while other commonly used measures of tax avoidance are not. Based on out‐of‐sample tests, we also show that the reserve is a suitable summary measure for predicting tax shelters. The tax benefits of tax shelters are economically significant, accounting for up to 48% of the aggregate FIN 48 tax reserves in our sample.     

Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans

Using a data set that records banks’ ongoing requests of information from small commercial borrowers, we examine when banks use financial statements to monitor borrowers after loan origination. We find that banks request financial statements for half the loans and this variation is related to borrower credit risk, relationship length, collateral, and the provision of business tax returns, but in complex ways. The relation between borrower risk and financial statement requests has an inverted U‐shape; and tax returns can be both substitutes and complements to financial statements, conditional on borrower characteristics and the degree of bank–borrower information asymmetry. Frequent financial reporting is used to monitor collateral, but only for non–real estate loans and only when the collateral is easily accessible to lenders. Collectively, our results provide novel evidence of a fundamental information demand for financial reporting in monitoring small commercial borrowers and a specific channel through which banks fulfill their role as delegated monitors.