Returns to scale and asset prices

The q‐theory of investment is proposed to explain firm growth effects, where previous papers identify a negative effect of firm growth, including asset growth, real investment and net share issuance, on future stock returns. This paper uses returns to scale from the production function to test the dynamic q‐theory, which predicts that the firm growth effect is theoretically weaker for firms with decreasing returns to scale (DRS) than for non‐DRS firms. Our empirical results generally support the prediction of dynamic q‐theory. However, we find that the dynamic q‐theory explains little of the value, momentum and ROE effects from the standpoint of returns to scale.     

Priors and Posterior Computation in Linear Endogenous Variable Models with Imperfect Instruments

In this paper we, like several studies in the recent literature, employ a Bayesian approach to estimation and inference in models with endogeneity concerns by imposing weaker prior assumptions than complete excludability. When allowing for instrument imperfection of this type, the model is only partially identified, and as a consequence standard estimates obtained from the Gibbs simulations can be unacceptably imprecise. We thus describe a substantially improved ‘semi‐analytic’ method for calculating parameter marginal posteriors of interest that only require use of the well‐mixing simulations associated with the identifiable model parameters and the form of the conditional prior. Our methods are also applied in an illustrative application involving the impact of body mass index on earnings. Copyright © 2014 John Wiley & Sons, Ltd.     

An analysis of environmental corporate social responsibility

This article investigates corporate social responsibility (CSR) practices while taking into account their product substitutability and environmental responsibility. CSR firms, integrating environmental and social concerns into its business operations, are introduced. The effects of the firms' social concerns, environmental responsibility, and product substitutability are all captured. First, firms' social concerns improve both outputs and CSR firms' objective function value, while reducing the profit maximization firm's profits. Second, environmental responsibility has the contrary effects. Both the outputs and the objective function values of both firms decrease with their product substitutability. Finally, social concern effects on CSR firms' performance are uncertain.     

Non‐performing loans and the harmonisation of extrajudicial collateral enforcement across Europe

The European Union plans on partially harmonising the extrajudicial enforcement of collateral in order to reduce the stocks of nonperforming loans. This article discusses the proposed regime and its background. After examining its impact on the national secured transactions law of Austria, Belgium, France, Germany and The Netherlands, the authors comment on the appropriateness of the proposed harmonisation.     

The SOX 404 control audit and the effectiveness of additional audit effort in lowering the risk of financial misstatements

Review of Quantitative Finance and Accounting - We examine the effectiveness of additional audit effort in lowering the risk of financial misstatements for companies with internal control material...     

Endogenous product substitutability strategy under duopoly

This article develops endogenous product substitutability theory. With game theory approach, the effects of endogenous product substitutability are characterized. First, equilibrium under endogenous product substitutability is achieved. Second, product substitutability strategy promotes price, total outputs, and social welfare. Outputs under high‐efficiency firm's product substitutability are compared with those under low‐efficiency firm's product substitutability. Third, compared with the other cases, joint product substitutability improves price difference. Finally, the outputs of all firms under endogenous product substitutability are shown to be lower than the social optimality level. The policy implication is to encourage firms investing product substitutability.     

A price index for Canada, 1688 to 1850

This paper presents the first price index for any region of Canada that spans from the colonial era to the mid‐19th century. I constructed it using prices from the account books of religious congregations with estates throughout modern‐day Quebec. It represents a substantial improvement over previous indexes thanks to the consistent price quotations in the source material, the high frequency of observations for many goods, the vast number of goods and the inclusion of numerous non‐agricultural and non‐food goods. Its price trends differ mildly from those of existing but less‐comprehensive price indexes. I link this new index with post‐1850 indexes to create a 328‐year price index for Canada.