Determinants of Managerial Earnings Guidance Prior to Regulation Fair Disclosure and Bias in Analysts' Earnings Forecasts*

Prior to Regulation Fair Disclosure (“Reg FD”), some management privately guided analyst earnings estimates, often through detailed reviews of analysts' earnings models. In this paper I use proprietary survey data from the National Investor Relations Institute to identify firms that reviewed analysts' earnings models prior to Reg FD and those that did not. Under the maintained assumption that firms conducting reviews guided analysts' earnings forecasts, I document firm characteristics associated with the decision to provide private earnings guidance. Then I document the characteristics of “guided” versus “unguided” analyst earnings forecasts. Findings demonstrate an association between several firm characteristics and guidance practices: managers are more likely to review analyst earnings models when the firm's stock is highly followed by analysts and largely held by institutions, when the firm's market‐to‐book ratio is high, and its earnings are important to valuation but hard to predict because its business is complex. A comparison of guided and unguided quarterly forecasts indicates that guided analyst estimates are more accurate, but also more frequently pessimistic. An examination of analysts' annual earnings forecasts over the fiscal year does not distinguish between guidance and no‐guidance firms; both experience a “walk‐down” in annual estimates. To distinguish between guidance and no‐guidance firms, one must examine quarterly earnings news: unguided analysts walk down their annual estimates when the majority of the quarterly earnings news is negative; guided analysts walk down their annual estimates even though the majority of the quarterly earnings news is positive.     

Changing wage structure and education in Vietnam, 1992–98

This paper examines the changes in relative earnings of workers with different education levels in Vietnam. Using a simple demand‐and‐supply framework developed by Katz and Murphy (1992 ), it was found that an increase in the relative demand for better‐educated male workers in particular appears to play an important role in explaining the earnings differentials between workers of different education groups. Education reform to better suit the needs of the post‐reform emerging market, on‐the‐job training for workers and equal access to education are some policy options that hold the key to reducing wage inequality between different education groups.     

Identifying,Enabling and Managing Dynamic Capabilities in the Public Sector*

abstract In this paper, we examine how a public sector organization developed a new strategic approach based on the identification and use of an internal dynamic capability (learning through experimenting). In response to the need for continual performance improvement in spite of reduced financial resources, this organization engaged in three overlapping phases as they shifted to this strategic approach. First, managers identified appropriate latent dynamic capabilities. Next, they used their leadership skills and built on established levels of trust to enable the use of these dynamic capabilities. Finally, they managed the tension between unrestricted development of local initiatives and organizational needs for guidance and control.     

The Role of Supplementary Statements with Management Earnings Forecasts

We investigate managers' decisions to supplement their firms' management earnings forecasts. We classify these supplementary disclosures as qualitative “soft talk” disclosures or verifiable forward‐looking statements. We find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward‐looking statements. We examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward‐looking statements, supporting our argument that these statements bolster the credibility of good news forecasts.     

BOC manufacture of telecommunications equipment: An assessment of benefits and competitive risks

Allowing BOCs to manufacture telecommunications equipment should benefit consumers of telecommunications services because it is likely to result in new and improved products and more efficient production of equipment and services. The sources of these benefits are the technical know-how, knowledge of customer needs, and financial resources the BOCs would bring to the design, development and production of telecommunications equipment. The risks of anticompetitive or inefficient behavior by BOCs, further diminished by various forms of incentive regulation adopted since 1984, are insufficient to offset the likely benefits of removing the manufacturing ban.     

An Empirical Exploration of Decision-making Under Agency Controls and Stewardship Structure

abstract Two theories have emerged in the managerial control literature as to the best way for organizations to ensure that managers are acting in the firm's best interest: agency theory, which stresses controlling decision‐makers through monitoring and incentives aligned with organizational goals, and stewardship theory, which stresses that decision‐makers will act in the organization's best interest even in the absence of controls. Much of the research investigating the utility of these two positions is based on archival data where actual decision‐making can only be inferred. In this study, we utilize a laboratory methodology in order to determine if decision‐makers actually make different decisions when under the types of control (or lack thereof) suggested in these two theories. The results of this study show that individuals under agency controls invest more in alternatives that maximize profits of an organization than individuals under stewardship controls.     

Estimation of income elasticities from Lorenz concentration curves: application to Canadian micro‐data

This study uses a method of estimating income elasticities of major Canadian expenditure groups. The technique is based on the implicit Engel functions derived from the Lorenz curve of permanent income and concentration curves of group‐specific expenditures. The methodology is applied to The 1996 Canadian Family Expenditure Survey. Results indicate that income elasticities for the majority of the broad expenditure categories considered in the study are inelastic and they increase monotonically with income.     

The double dividend, second-best worlds, and real-world environmental policy

The recent series of papers by Bovemberg, Goulder, Parry and others argue that the double dividend is unlikely to exist because of second-best problems. They argue that the imposition of environmental tax in an economy already distorted by income taxes will further distort the economy by reducing incentives to supply labor. Our paper argues that this is not likely to be the case because of the restrictive assumptions made by these models, and because of the role of the environment as a factor of production.     

Pretrial Bargaining with Asymmetric Information: Unilateral versus Bilateral Payoff Relevance

Asymmetric information is a leading explanation for settlement failure that results in a costly trial. Typically, the information in question is assumed to have bilateral payoff relevance, meaning it affects the expected payoffs of both the plaintiff and defendant. When there is bilateral payoff relevance, trials may be predicted, regardless of whether it is the informed or uninformed party who makes the offer. However, there may be important cases in which information has unilateral payoff relevance. For example, if the plaintiff's risk preferences are private information, this information will affect the plaintiff's expected payoff at trial, but will have no effect on the expected payoff of the defendant. When there is unilateral payoff relevance, inefficient trials never occur when the informed party makes the offer. Trials can occur when the uninformed party makes the offer assuming that the private information affects the payoff of the individual holding the private information.