Shareholder Income Taxes and the Relation between Earnings and Returns*

The purpose of this study is to investigate whether and how shareholder‐level taxes affect earnings response coefficients (ERCs). Our tests indicate that when the tax rate on dividends increases, ERCs decrease for firms with high levels of dividend yield and whose marginal investor is likely to be an individual. For firms with high levels of share repurchase yield and whose marginal investor is likely to be an individual, an increase in dividend tax rate has no discernible effect on ERCs. These results are consistent with the notion that the tax penalty on dividends, relative to capital gains, reduces the earnings‐return relation.     

On the Implications of Reporting Retail Food Prices over Extended Periods

This paper reports the results of economic experiments designed to determine the implications of a changed information flow to sellers in spatial markets. The experimental design used duopoly posted-price markets. Apparently, price and firm profit levels increase as a result of instituting a price reporting system when consumers are fully informed. In light of these findings, it appears that a retail food price reporting system may have adverse impacts on consumers, especially when instituted for longer time periods.     

Robustness of an Intermittent Program of Comparative Retail Food Price Information

This study compares the distribution of food-item market basket prices across stores and relative to a local newspaper retail food price report. Distributions of prices for market baskets comprised of national brands and cheapest alternative brands coincided closely with the intermittent retail food price report. This suggests that consumer organizations with limited resources can produce comparative food-store price reports that provide useful information to consumers.     

Is There a Link between Executive Equity Incentives and Accounting Fraud?

We compare executive equity incentives of firms accused of accounting fraud by the Securities and Exchange Commission (SEC) during the period 1996–2003 with two samples of firms not accused of fraud. We measure equity incentives in a variety of ways and employ a battery of empirical tests. We find no consistent evidence that executive equity incentives are associated with fraud. These results stand in contrast to assertions by policy makers that incentives from stock‐based compensation and the resulting equity holdings increase the likelihood of accounting fraud.