A Cross‐national Comparison of R&D Expenditure Decisions: Tax Incentives and Financial Constraints*

We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. We contribute to extant research by comparing R&D expenditures in the United States and Canada, thereby exploiting the differences in the two countries' R&D tax credit mechanisms and generally accepted accounting principles. The two tax incentive mechanism designs are consistent with differing views of the degree of financial constraints faced by firms in these economies. Our sample also allows us to explore the effects of capitalizing R&D on Canadian firms. Employing a matched design, we document relations between tax credit incentives and R&D spending consistent with both Canadian and U.S. public companies responding as though they are not financially constrained. We estimate that the Canadian credit system induces, on average, $1.30 of additional R&D spending per dollar of taxes forgone while the U.S. system induces, on average, $2.96 of additional spending. We also find that firms that capitalize R&D costs in Canada spend, on average, 18 percent more on R&D. Collectively, this evidence is important to the ongoing debates in both countries concerning the appropriate design of incentives for R&D and is consistent with the assumptions found in the U.S. tax credit system, but not those found in the Canadian system.     

Liquidity, Labels and Medium-Term Notes

We suggest that the medium-term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter-intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995) , we find that labeling a security an MTN can have an impact on its yield. The label "note" also appears to matter for yield in some instances.     

Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability

This paper examines the long-run relationship between short-term and long-term interest rates (both nominal and real) in 19 countries, and explores the possibility that the relationship is statistically stable using Lc, MeanF, and SupF statistics suggested by Hansen [1992]. Empirical results obtained from various cointegration techniques (Johansen, Phillips and Hansen, Stock and Watson, and Park) and quarterly data (1973–1998) show considerable support for the expectations hypothesis in all countries (except the United Kingdom). In a majority of cases, it is also found that a stable relationship exists between the short-term and long-term interest rates.     

Extracting the information: espionage with double crossing

This paper addresses two very old issues in human society: espionage and double crossing. Our major conclusion points out that there will be a serious over rewarding problem in the direct mechanism due to double crossing in espionage, and a competitive mechanism with a relative performance regime can possibly mitigate the over rewarding problem and still extract the information.      

The teaching of ethics in management accounting: progress and prospects

Recent research has shown that, although still on a limited scale, the teaching of business ethics in UK higher education has been increasing in recent years. This paper reports on a postal questionnaire survey conducted to investigate the extent to which ethical issues are covered in the teaching of management accounting in higher education. The principal findings are that the majority of management accounting lecturers in the British Isles do not incorporate ethics. About a third of the respondents to the survey do address ethical issues, although about half of those say they do so only implicitly. Various factors underlying the findings and prospects for the future are discussed.     

Background Risk and the Performance of Insurance Markets under Adverse Selection

Background risk can influence the performance of insurance markets that must deal with adverse selection when applicants are risk vulnerable, since they are more averse to bearing the insurable risk as a result of their exposures to background risk. We show that background risk always results in a lower deductible for the incentive constrained contract, and that a broader range of markets attains the stable sequential equilibrium cross-subsidized pair of separating contracts. We conclude that background risk always improves the performance of markets for coverage against (insurable) foreground risks that must deal with adverse selection. We also find, however, that these improvements are never sufficient to offset the cost to insureds of bearing the background risk.     

Some Cracks in the Empire of Chance (Flaws in the Foundations of Reliability)

Making quantified statements about the uncertainty associated with the lifelength of an item is one of the most fundamental tasks of reliability assessment. Most practitioners routinely do this using one of the several available statistical techniques. The purpose of this paper is two-fold. The first is to give the user an overview of the key tenets of two of the most commonly used parametric approaches. The second is to point out that these commonly used approaches involve strategies that are either ad hoc, or are in violation of some of the underlying tenets. A method that is devoid of logical flaws can be proposed, but this method is difficult to implement. The user must therefore resign to using that technique against which the fewest objections can be hurled.     

Scaling up support for children in HIV-affected families by involving early childhood development workers: community views from KwaZulu-Natal,South Africa

The United Nations Programme on HIV/AIDS estimates that South Africa has 1.2 million orphans as a result of AIDS. This study investigated the views of communities in KwaZulu-Natal on the potential use of early childhood development (ECD) practitioners for helping children in vulnerable households. It reports on in-depth interviews and focus group discussions with community members and service providers in six different areas of KwaZulu-Natal. Despite the increase in the numbers of deaths, people in affected areas have yet to accept that HIV is the cause. Stigma, denial, myths and witchcraft beliefs were evident, particularly in the rural areas. There was general agreement by the respondents that ECD practitioners with additional training specific to HIV/AIDS could assist families if cost difficulties were overcome. As community members with basic training in childcare they could enhance community responses by linking with community health workers and other service providers to assist children and households in need.