Targets' Tax Shelter Participation and Takeover Premiums

This paper examines the effect of targets' participation in tax shelters on takeover premiums in mergers and acquisitions. Using a novel data set in which targets disclose that they have not participated in tax shelters, we find that targets that make this statement in their merger filings are associated with 4.6 percent higher takeover premiums, on average. These findings suggest that acquirers are concerned about the potential future liabilities when targets have engaged in tax sheltering. Consistent with this interpretation, the results also indicate that the positive association between targets' nonsheltering disclosure and acquisition premiums is stronger for less tax‐aggressive acquirers. This paper demonstrates the importance of targets' aggressive tax positions in the determination of premiums offered to targets' shareholders.     

Security Concentration and Active Fund Management: Do Focused Funds Offer Superior Performance?

We examine gross fund returns based on the number of securities held and find no evidence that focused funds outperform diversified funds. After deducting expenses, focused funds significantly underperform. Controlling for various fund characteristics, fund performance is positively related to the fund's number of holdings both before and after expenses. We find evidence linking focused fund underperformance to agency and liquidity problems. Finally, the attrition rate of focused funds is higher than that of diversified funds. These results do not support the view that managers holding focused portfolios have superior stock‐picking skills or that focused funds provide value to investors.     

Using an economic experiment to estimate willingness‐to‐pay for a new maternal nutrient supplement in Ghana

Scaling up access to supplements designed to prevent undernutrition, such as new small‐quantity lipid‐based nutrient supplements (SQ‐LNS), may require distribution via both public channels and retail markets. The viability of SQ‐LNS retail markets will hinge on household‐level demand. We use an economic experiment to characterize initial willingness‐to‐pay (WTP) for a maternal SQ‐LNS product in Ghana. WTP is positive for most participants, though below the estimated cost of production for many. WTP varies depending on income, assets, and parity status. These findings have implications for the design of public health policy and hybrid public–private delivery mechanisms.     

Developing an integrated conceptual framework to understand biodiversity conflicts

Although biodiversity-related conflicts are generally embedded into an ecological, economic and social context, reported studies often focus on only one of these aspects. The practical facilitation of such conflicts typically adopts an equally restricted view. The developing field of biodiversity conflict management is thus fragmented and, due to its generally insular case study approach, lacks theoretical underpinning.     

THE AGRICULTURAL POTENTIALS OF CANADA'S RESOURCES AND TECHNOLOGY*

Canada's agricultural potential during the 1980's will be constrained by the availability and prices of productive agricultural land, water, energy, labour, and technology. Resources for further expansion of agricultural production are becoming increasingly scarce. Past expansions were made possible largely by the substitution of cheap fossil energy for expensive labour. Further expansion will necessitate new technology that is both energy saving and labour saving. A multifaceted program involving government, farmers, and other components of the food system is needed to achieve Canada's agricultural potentials. Agricultural expansions in the 1990's will depend first upon the success of the programs designed for the 1980's and second upon new scientific knowledge and technological adaptations. Without a massive and well coordinated effort to meet the needs of agriculture, Canada could become a food deficit nation before the end of this century. Le potentiel de ?Agriculture du Canada durant les 1980's va être contraint par la disponibilité et le pri.x de la terre, ?eau, ?energie, le travail et la technologie productive. Les ressources pour ?avancement de la production agricoie deviennent de plus en plus rare. Les expansions du passé ont été possible par la substitution de ?énergie fossile pour le travail dispendieux. Un autre anvancement va nécessiter une nouvelle technologie qui sauvera ?energie et le travail. Un programme qui comprend le gouvernement les fermiers et touts les autres constituents du système alimentaire est nécessaire si le Canada va achever son potential agricoie. Les expansions agricoles des 1990's vont depéndre premièrement du succès des programmes developpés pour les 1980's et deuxièment de nouvelles connaissances scientifique et de nouvelles adaptations technologigues. Sans un effort massif et sans un grand effort coordonné dans le domaine de ?agriculture, le Canada peut devenir un pays qui manque de la nourriture avant la fin du siècle.     

Why do bank holding companies purchase bank-owned life insurance?

Review of Quantitative Finance and Accounting - Bank-owned life insurance (BOLI) is life insurance purchased by bank holding companies (BHCs) for key employees, whose proceeds can be shared by the...     

Understanding survey-based inflation expectations

This paper examines the behavior of inflation expectations in the United States. After documenting deviations from rationality in survey-based inflation expectations, I apply a model selection algorithm, boosting, to the inflation expectations of households and professionals. The algorithm builds a regression-like model of expected inflation using a large panel of macroeconomic data as possible covariates. The algorithm achieves a very strong fit in-sample, and finds that the inflation expectations of households correlate with different macroeconomic variables from the expectations of professionals. However, it is difficult to exploit the predictability of inflation expectations in order to improve forecasts of the realized inflation.     

Assets and Liabilities: When Do They Exist?

In this paper, we investigate whether the current references to probability in standard setters' conceptual definitions of assets and liabilities cause individuals to believe that the probability of a future transfer of economic benefits must be above some meaningful threshold for an asset or a liability to exist—a belief that is contrary to standard setters' intent. Results of multiple experiments indicate that the majority of individuals do use a high probability threshold to determine asset existence, whereas for liabilities the majority use a very low threshold. Thus, even under ceteris paribus conditions, liabilities are more frequently judged to exist than assets—a phenomenon analogous to accounting conservatism, as has been discussed in terms of the performance statement. These findings are robust to variation in formal training and in type of liability, and cannot be explained by alternative approaches to judging existence. Consistent with standard setters' intentions, results also suggest that their proposed changes to the definitions of assets and liabilities—changes that attempt to clarify the intended role of probability—do cause a greater proportion of participants to indicate that the relevant financial statement element (asset or liability) exists, relative to participants with no definition. Our study provides important insights for standard setters as they continue work on their missions to update their Conceptual Frameworks and for researchers regarding the role of conservatism on the balance sheet.     

Corporate In‐house Tax Departments*

In‐house human capital tax investment is a significant input to a firm's tax decisions. Yet, due to the lack of data on corporate in‐house tax departments, there is little empirical evidence on how tax departments are associated with tax planning and compliance outcomes. We expect the size of tax departments to be positively associated with the effectiveness of tax planning and compliance. Using hand‐collected data on the number of corporate tax employees in S&P 1500 firms over the 2009–2014 period, we find that firms with larger tax departments are associated with lower and less volatile cash effective tax rates. Furthermore, using tax employees' specialization, we identify tax departments' relative focus on planning or compliance and document a trade‐off between tax avoidance and tax risk. Specifically, tax departments with more of a tax planning focus have incrementally greater tax avoidance but higher tax risk, whereas tax departments with more of a tax compliance focus have incrementally lower tax risk but higher tax rates. Overall, this paper contributes to the literature by looking inside the “black box” of corporate tax departments and shedding light on the importance of human capital tax investment for tax outcomes.