Political patronage and analysts’ forecast precision

We test whether the channel by which the government plays the role of political patron to selected firms influences analysts’ forecast precision in Malaysia. Correcting for analysts’ self-selection bias, we find a negative relation between analysts’ forecast errors and the social dimension of political patronage, as proxied by government-controlled institutional ownership. The reverse is found for the economic dimension of political patronage, as proxied by the percentage shareholding of government-linked corporations. We find no evidence that the personal dimension of political patronage influences analysts’ forecast precision.     

The Accuracy of Price-Earnings and Discounted Cash Flow Methods of IPO Equity Valuation

This paper compares estimates of value derived from conventional discounted cash flow and price earnings valuation methods to the market price. For a sample of 45 firms newly listed on the New Zealand Stock Exchange our results suggest that the best discounted cash flow method and the best price earnings comparable have similar accuracy. The median absolute pricing error is around 20% and the models explain around 70% of the cross-sectional variation in market price scaled by book value. The results serve to corroborate the findings of Kaplan and Ruback (1995).     

Skyscrapers and the Skyline: Manhattan, 1895–2004

This article investigates the market for skyscrapers in Manhattan from 1895 to 2004. Clark and Kingston (1930) have argued that extreme height is a result of profit maximization, while Helsley and Strange (2008) posit that skyscraper height can be caused, in part, by strategic interaction among builders. I provide a model for the market for building height and the number of completions, which are functions of the market fundamentals and the desire of builders to stand out in the skyline. I test this model using time series data. I find that skyscraper completions and average heights over the 20th century are consistent with profit maximization; the desire to add extra height to stand out does not appear to be a systematic determinant of building height.     

Historic Preservation: Preserving Value?

The creation of historic districts has become a common way to preserve historic buildings and neighborhoods. Advocates of historic districts assume that such districts augment, or at least, protect property values for homes within these districts. The existing economic literature supports this conclusion, but most studies seem to fall victim to an endogeneity bias since higher value homes are, all else equal, more likely to be included in districts. This study uses repeat-sales fixed effects (difference-in-differences) analysis to look at homes before and after the creation of districts in the Boston-Cambridge-Quincy MSA between 2000 and 2007, and thus control for this endogeneity bias. Secondarily, we re-examine the effects of a Massachusetts preservation policy, the Community Preservation Act (CPA) which, in part, supports historic preservation. We find evidence that the creation of a local historic district, on average, reduces home prices for homes in that district between 11.6 and 15.5%. This indicates that any restrictions implied by the creation of a district outweigh any benefits to homeowners within the district. If, instead, census block fixed effects are employed, the analysis shows a statistically insignificant impact, the sign and magnitude of which depends on the specification. Taken together with the repeat sales result, this confirms our intuition about the importance of controlling for omitted variables and endogeneity biases. Finally, we find evidence that the CPA also lowers property values, by less than 1%, and that being in a Historic District magnifies the negative effect of the CPA.     

Market Institutions,Fair Value,and Financial Analyst Forecast Accuracy

This study investigates the valuation usefulness of fair values and related information disclosure in China and examines how regional-level market institutions influence the valuation usefulness of fair value information. Based on a sample of Chinese listed companies during 2007 to 2016, the empirical results show a negative association between overall fair values and analyst forecast accuracy. Further analyses suggest that the negative association is likely driven by biases and/or errors in fair value estimates. Using a difference-in-difference research design, the study also documents that the implementation of ASBE 39 in 2014 has improved the valuation usefulness of fair values. There is evidence that different aspects of market institutions—including the extent of government intervention in the market and the legal environment—influence analysts’ use of fair value information. This study contributes to the literature by providing new and different evidence on the usefulness of fair values to financial analysts outside developed countries. Moreover, by taking advantage of the uneven institutional development across China, the study shows that different aspects of market institutions influence the valuation usefulness of fair value information.     

Buyer-Type Effects in Conservation and Preservation Property Values

Properties can be bought by government agencies, land trusts, or private entities for conservation and preservation purposes, such as farmland preservation, wildlife refuges, other conservation, and cultural and historical preservation. There is variation in the dollars paid per acre across properties and across buyer type. An option value model based on future potential land uses is used to explain much of this variation. The data used in our analysis is sales transactions data for conservation and preservation purposes from throughout the United States. We find that much of the value of conservation properties is derived from future potential land uses, including housing, timber, recreation, and conservation. We confirm that public versus private buyers value options differently, which makes sense from a public good point of view, if markets are thin.     

Optimal investment with fixed financing costs

Models with a premium on external finance produce counterfactual predictions about liquidity management. We address this shortcoming by introducing a fixed cost of increasing external finance into an otherwise standard investment/financing problem. This additional financial friction is well-motivated by case studies and our analysis shows that it generates more realistic predictions about liquidity management: firms hold external finance and idle cash simultaneously, and may invest an additional dollar of cash flow in liquidity rather than repaying external funds or investing in productive capital. In addition to better fitting the stylized facts about the time-series and cross-sectional pattern of liquidity holding, these results may help shed light on the fragility of estimates of investment–cash flow sensitivities.     

Daily mutual fund flows and redemption policies

We examine how redemption policies affect daily fund flows in open-end mutual funds. Since short-term trading of fund shares, as manifested in daily fund flows, can have an adverse impact on returns to the fund’s shareholders, mutual funds might find it desirable to discourage short-term trading through the use of redemption fees. However, if daily fund flows are due to fund shareholders’ legitimate liquidity demands, the redemption fee would have little effect on daily fund flows and possibly adversely affect fund shareholders by imposing a liquidity cost on them. We find that the likelihood of a fund charging a redemption fee is largely a function of its overall fee structure. We also use a sample of funds that imposed redemption fees to examine whether the distribution of daily fund flows changes after the initiation of the redemption fee. We find that the redemption fee is an effective tool in controlling the volatility of fund flows.     

管理会计在中国

我们研究了2004年中国上市公司的管理会计实务。自早先一些基于这个课题的研究以来,中国经济已经发生了许多重要的变化。我们通过调查这些实务是否因公司所在地、行业和规模而不同,从而为该项研究增加了新的视角 研究结果表明,自2001年以来,管理会计技术的采用有所增加,不同地区虽然经济发展程度各异,但对企业管理技术的使用影响甚微。然而我们发现,大型企业和制造类行业更倾向于实施管理会计方法。这表明公司实务至少部分地受到自身需求和资源可得性的影响 .[编者按]