CHILD CARE COURSES IN THE CURRICULUM

This paper considers the relevance of child care courses for adolescents in the light of the recent debate on the curriculum and argues that despite indications to the contrary, such courses are more important than they ever were and have a fundamental role to play in the formation of future generations. Support for this can be found in recent research into the needs of the young child. The author questions the new emphasis and the non-family role of women in relation to the child's welfare and suggests that it is a misunderstanding both of women's position and the nature of child care courses.     

Inco Ltd.: Market Value, Fair Value, and Management Discretion

We examine management discretion to decide when and how much to write down an asset, in a unique case where a tracking stock provides an observable market value for the asset. We find that, despite market evidence that Inco Ltd.'s financial statements substantially overvalued the Voisey's Bay nickel mine throughout 1997 to 2000, management chose not to write down the mine until 2002. Inco management used an independent fairness opinion to justify its December 2000 redemption of the tracking stock at 25% of its initial value, indicating almost surely that Inco management was aware of the generally accepted accounting principles (GAAP) impairment. This case illustrates that GAAP's reliance on undiscounted cash flows for impairment decisions allows huge unrecorded disparities between book and market value. The management discretion exercised in this case provides a concrete example of the subjectivity inherent in fair valuation.     

AN ASSESSMENT OF FASHION AWARENESS OF FEMALES BASED ON SELECTED DEMOGRAPHIC FACTORS

A sample of 252 females was queried to determine the differences in fashion awareness. The study aimed to assess the fashion awareness of females as affected by the city of residence, by their reference to different selected fashion magazines, and the extent of fashion awareness existing among women based on the following variables: age, marital status, education, number of dependent children in the family, income, and courses taken relating to fashion. The study determined that fashion awareness of the participants was affected by fashion reading media, age, marital status, education, income, and courses taken relating to fashion. Fashion awareness was not affected by city size or number of dependent children in the family.     

Price-Earnings and Price-to-Book Anomalies: Tests of an Intrinsic Value Explanation*

Abstract. Price deviations from basic valuation models based on accounting earnings and book value of owners' equity are used to test the intrinsic value explanation of the price-earnings and price-book value anomalies. Relative price deviations from the implied benchmark prices are used to assign years into high and low deviation groups. Traditional zero investment hedge portfolios are formed in each year, and the returns are compared across high and low deviation years. The high deviation years show significantly larger size- and risk-adjusted returns over four holding periods, providing strong evidence in favor of an intrinsic value explanation of the anomalies. The findings also indicate that the test periods chosen for earlier studies can play a role in the results generated. Résumé. Les auteurs utilisent les écarts de prix dérivés des modèles d'évaluation de base fondés sur les bénéfices comptables et la valeur comptable des capitaux propres pour vérifier l'explication des anomalies relevées dans les rapports cours-bénéfice et cours-valeur comptable, qui repose sur la valeur intrinsèque. Les écarts relatifs des cours par rapport aux cours de référence implicites sont utilisés par les auteurs pour classer les années selon la nature élevée ou faible des écarts. Pour chaque année sont constitués des portefeuilles traditionnels dont les placements ne font l'objet d'aucune couverture, et les rendements sont soumis à une comparaison combinée des années présentant des écarts élevés et faibles. Les années présentant un écart élevé affichent des rendements supérieurs et ajustés pour tenir compte du risque au cours de quatre périodes de détention, ce qui milite clairement en faveur de l'explication des anomalies reposant sur la valeur intrinsèque. Les résultats indiquent également que les périodes de test choisies dans les études antérieures peuvent avoir influé sur les résultats obtenus.     

Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC*

Abstract. This study investigates firms subject to accounting enforcement actions by the Securities and Exchange Commission for alleged violations of Generally Accepted Accounting Principles. We investigate: (i) the extent to which the alleged earnings manipulations can be explained by extant earnings management hypotheses; (ii) the relation between earnings manipulations and weaknesses in firms' internal governance structures; and (iii) the capital market consequences experienced by firms when the alleged earnings manipulations are made public. We find that an important motivation for earnings manipulation is the desire to attract external financing at low cost. We show that this motivation remains significant after controlling for contracting motives proposed in the academic literature. We also find that firms manipulating earnings are: (i) more likely to have boards of directors dominated by management; (ii) more likely to have a Chief Executive Officer who simultaneously serves as Chairman of the Board; (iii) more likely to have a Chief Executive Officer who is also the firm's founder, (iv) less likely to have an audit committee; and (v) less likely to have an outside blockholder. Finally, we document that firms manipulating earnings experience significant increases in their costs of capital when the manipulations are made public. Résumé. Les auteurs analysent les entreprises assujetties aux mesures d'exécution prises par la Securities and Exchange Commission dans les cas de présomption de transgression des principes comptables généralement reconnus. Ils s'intéressent aux aspects suivants de la question: i) la mesure dans laquelle les présomptions de manipulations des bénéfices peuvent être expliquées par les hypothèses existantes de gestion des bénéfices; ii) la relation entre les manipulations de bénéfices et les faiblesses des structures de régie interne des entreprises; et iii) la réaction du marché financier à l'endroit des entreprises au sujet desquelles les présomptions de manipulation des bénéfices sont rendues publiques. Les auteurs constatent qu'un incitatif majeur à la manipulation des bénéfices est le désir d'obtenir du financement externe à moindre coût. Ils démontrent que cet incitatif demeure important même après le contrôle des motifs contractuels que mettent de l'avant les travaux théoriques. Ils constatent également que les entreprises qui manipulent les bénéfices sont: i) davantage susceptibles d'avoir des conseils d'administration dominés par la direction; ii) davantage susceptibles d'avoir un chef de la direction qui joue simultanément le rôle de président du conseil; iii) davantage susceptibles d'avoir un chef de la direction qui est également le fondateur de l'entreprise; iv) moins susceptibles d'avoir un comité de vérification; et v) moins susceptibles d'avoir un bloc de titres détenus par un actionnaire extérieur. Enfin, les auteurs établissent le fait que le coût du capital, pour les entreprises qui manipulent les bénéfices, enregistre des hausses appréciables lorsque ces manipulations sont rendues publiques.     

Analyst Impartiality and Investment Banking Relationships

This study examines whether investment banking ties influence the speed with which analysts convey unfavorable news. We hypothesize that affiliated analysts have incentives to respond promptly to good news but prefer not to issue bad news about client companies. Using duration models of the time between an equity issue and the first downgrade, we find affiliated analysts are slower to downgrade from Buy and Hold recommendations and significantly faster to upgrade from Hold recommendations, in both within‐analyst and within‐issuer tests. We also find affiliated analysts issue recommendations sooner and more frequently after an offering than unaffiliated analysts, and that unaffiliated analysts are more likely than affiliated analysts to drop coverage of sample firms. Our findings indicate that banking ties increase analysts' reluctance to reveal negative news, and that reform efforts must carefully consider the incentives of affiliated and unaffiliated analysts to initiate coverage and convey the results of their research.     

Small Claims Court: Factors Influencing a Successful Outcome for the Individual Plaintiff

The purpose of this study is to ascertain the extent of individual plaintiff success in the trial stage of the small claims process and the impact of selected factors upon these favorable outcomes. Results of this study provide a basis for litigants and potential litigants to predict the outcome of the small claims trial. Of particular interest is the finding that litigant use of legal advice and representation in court is not a major factor in the outcome of a small claims court case. The results of this examination of the small claims court as it functions in Boone County, Missouri, suggest that, with the possible exception of plaintiff's gender, “justice is blind.”