Estimating liquidity premia in the Spanish government securities market

This paper investigates the presence of liquidity premia in the relative pricing of assets traded on the Spanish government securities market. First, a classification of bonds into four different categories based on their degree of liquidity is proposed. Second, liquidity premia are estimated introducing liquidity parameters in the estimation of the zero-coupon yield curve. Results suggest the existence of a liquidity premium for post-benchmark bonds (both strippable and non-strippable). The size of this premium is relatively small. In the case of pre-benchmark bonds, the lack of liquidity does not seem to be priced. It is also shown that these pricing discrepancies are robust to the impact of taxes on bonds.     

Why Press Coverage of a Client Influences the Audit Opinion

In this study I use an experiment to examine why auditors are more likely to issue going–concern opinions when the client has been the subject of negative press coverage prior to the date of the audit opinion. I find no evidence that negative press coverage increases auditors' perceptions of legal liability, as was suggested in the prior literature. I do find, however, that negative press coverage increases auditors' perception of a client's bankruptcy probability and this, in turn, leads auditors to modify the audit opinion. Because the press coverage presented in this study provides no new information, the results suggest that auditors react too strongly to redundant information. This over–reaction can result in inefficient allocation of audit resources and can have deleterious affects on clients. Accordingly, policy makers, auditors and their clients might be interested in how auditors' reliance on redundant information can be reduced.     

How networks reshape organizations--for results

Recently a new term-networks-has entered the vocabulary of corporate renewal. Yet there remains much confusion over just what networks are and how they operate. Ram Charan, a leading international consultant, has spent four years observing and participating in the creation of networks at ten companies in North America and Europe. These companies--which include Conrail, Dun & Bradstreet Europe, Du Pont, and Royal Bank of Canada-are clear about why they are creating networks, what networks are, and how they operate. A network is recognized group of managers (seldom more than 100, often fewer than 25) assembled by the CEO. Membership criteria are simple but subtle: What select group of managers, by virtue of its business skills, personal motivations and drive, and control of resources is uniquely positioned to shape and deliver on the strategy? Networks begin to matter when they change behavior-the frequency, intensity, and honesty of the dialogue among managers on priority tasks. The process of building a network starts at the top. Senior managers work as change agents to build a new "social architecture." Once the network is in place, they play three additional roles: 1. Define with clarity the business outputs they expect of the network and the time frame in which they expect it to deliver. 2. Guarantee the visibility and free flow of information to all members of the network who need it. 3. Develop new criteria for performance evaluation that emphasize horizontal collaboration and leadership.     

Redistribution and Insurance: Mandatory Annuitization With Mortality Heterogeneity

This article examines the distributional implications of mandatory longevity insurance when mortality heterogeneity exists in the population. Previous research has demonstrated the significant financial redistribution that occurs under alternative annuity programs in the presence of differential mortality across groups. This article embeds that analysis into a life‐cycle framework that allows for an examination of distributional effects on a utility‐adjusted basis. It finds that the degree of redistribution that occurs from the introduction of a mandatory annuity program is substantially lower on a utility‐adjusted basis than when evaluated on a purely financial basis. In a simple life‐cycle model with no bequests, complete annuitization is welfare enhancing even for those with higher‐than‐average expected mortality rates, so long as administrative costs are sufficiently low. These findings have implications for policy toward annuitization, particularly as part of a reformed Social Security system.