Auditor Lobbying for Accounting Standards: The Case of Banks and Savings and Loan Associations

This study examines auditor lobbying on seven proposed US accounting standards which affect banks and savings and loan associations. Evidence is provided in support of the Watts and Zimmerman (1982, 1986) theory on auditor lobbying. Watts and Zimmerman (WZ) hypothesise that auditor lobbying is a function of the client-manager position and a set of wealth effect variables. These variables may provide an incentive for auditors to disagree with their clients on proposed accounting issues. The WZ model is modified by including an audit risk variable. Results show that the model is statistically significant and that the identified wealth and audit risk effects are significant explanatory variables of auditor lobbying behaviour.     

An Interim Assessment of the US Trade Policy of ‘Competitive Liberalization’

Since 2001, the Administration of George W. Bush has pursued a trade policy known as Competitive Liberalization. This policy envisages a series of mutually‐reinforcing and sequential steps to open markets abroad to US companies, to strengthen market‐oriented laws and regulations overseas, and to place the United States at the centre of the world trading system. Foreign and security policy considerations have influenced US trade policy making, perhaps more so than in the 1990s. To date the principal outcome of this policy has been the negotiation by the United States of numerous free trade agreements, mainly with developing countries, individually or in sub‐regional groupings. In addition to characterising this policy in detail, the principal purpose of this paper is to assess the logic underlying this approach to trade policy making and whether Competitive Liberalization has begun to fulfil the promise spelled out for it at the beginning of this decade.     

Late-blooming societies can be stimulated by information technology

About 50 societies in the world have been unable to make significant progress toward development over the last several decades, despite various kinds of assistance. Information technology is a powerful new tool that has not yet been applied. It can strongly reinforce and redirect more familiar programs, and expedite others, such as education, micro-enterprise formation, community-oriented non-government organizations, family size limitation, social communications, financial management and stabilization of politics.Introducing much more information makes possible efficient consumption. A good, sustainable quality of life, with minimal consumption of natural resources, seems to be a superior goal for development. Here it is proposed that the target conditions should be ‘happiness’, ranging from serenity (achieving order, internal calm to delight) to spontaneous, infectious forms (well-being, fun and joy). Sociologists have developed quite robust measures over the last several decades. Happiness comes cheaply, because it need not involve massive infrastructure, fuel or other expensive inputs. Accelerated progress will require some new institutions using information appropriately.The outlook for funding from foundations created by the information technology billionaire entrepreneurs is promising after current risks of loss have diminished. The same technology would enable affluent people to adopt lives of voluntary simplicity.Consumption at a quarter of Euro–American levels requires only a little planning, and a tenth of those levels seems possible with careful organization and discipline. Then people would be able to move easily to late-blooming societies which accelerated progress through their choice of the happiness path to development. Simultaneously, some talented, energetic individuals who started poor could use the Internet to gain entry into the circle of world servers within a lifetime.     

Bayesian games with unawareness and unawareness perfection

Applying unawareness belief structures introduced in Heifetz et al. (Games Econ Behav 77:100–121, 2013a), we develop Bayesian games with unawareness, define equilibrium, and prove existence. We show how equilibria are extended naturally from lower to higher awareness levels and restricted from higher to lower awareness levels. We apply Bayesian games with unawareness to investigate the robustness of equilibria to uncertainty about opponents’ awareness of actions. We show that a Nash equilibrium of a strategic game is robust to unawareness of actions if and only if it is not weakly dominated. Finally, we discuss the relationship between standard Bayesian games and Bayesian games with unawareness.     

Investment and financing decisions of private and public firms

We examine differences in the allocation of cash flow between Western European private and public firms. Public firms have a higher investment‐cash flow sensitivity than comparable private firms. This difference is not attributable to more severe financing constraints of public firms. Instead, because differences in investment‐cash flow sensitivities are only observed for the unexpected portion of firms’ cash flow, the empirical evidence supports an agency‐based explanation. Similar patterns are observable for the expected and unexpected portion of firms’ shareholder distributions. Our results are driven by firms from countries with low ownership concentration and more liquid stock markets, where shareholders have lower incentives to monitor. The results are also more pronounced for public firms with low industry Tobin's q and high free cash flow, which are more prone to suffer from agency problems.