Information Content of Internal Control Weaknesses: The Evidence from Japan

This paper investigates how capital markets in a code-law country, Japan, react to the disclosure of internal control weaknesses (ICW). The Japanese government attempted to implement a more concise, efficient, and, thus, less strict internal control reporting system than Section 404 of the US-SOX. In fact, for the first two years, the disclosure rate of ICW has been much lower in Japan than in the U.S. While market reactions to the disclosure of ICW are not significantly different from zero in our event study analysis, they become significantly negative after controlling for other information released around the disclosure date, audit quality, and other firm attributes. Our results are consistent with the notion that the disclosure of ICW is informative to the market because it is less frequent and exceptional in Japan.     

A Random Parameter Model with Onsite Sampling for Recreation Site Choice: An Application to Southern California Shoreline Sportfishing

Estimation of consistent parameter estimates for recreational demand models faces challenges arising from the choice-based nature of the data collected primarily for resource management purposes. As an alternative to randomized respondent-based sampling, choice-based onsite sampling can provide information on actual choices made by a subset of the population where participation has a low incidence. While the literature has shown that under specific restrictions the estimation of choice models from onsite sampling data yields unbiased fixed parameter estimates for the conditional logit model, this result does not carry over to estimation of the random parameter logit model. We propose an estimator for the unbiased estimation of the random parameter model using choice-based data; our estimator uses weights based on information about the level of sampling effort. An empirical application of the standard and weighted discrete choice RUM models to onsite sample data on recreational fishing illustrates the advantages of the proposed estimator. The estimation results indicate the compensating variation associated with an decrease, or increase, of 50 % in expected catch rates for a recreational shoreline sportfishing trip to a man-made structure in southern California is $$-{\$}2.80$$ or $${\$}3.54$$ per trip, respectively.     

Comparative analyses of fiscal sustainability of the budgetary policy rules

We construct a continuous-time overlapping generations model with an endogenous growth structure and consider fiscal sustainability under two fiscal rules: (i) the government fixes the budget deficit-to-GDP ratio and (ii) the government fixes the primary balance-to-GDP ratio. Under the constant budget deficit-to-GDP rule, fiscal sustainability is ensured when the initial public debt-to-GDP and budget deficit-to-GDP ratios are sufficiently small. Under the constant primary balance-to-GDP rule, it is difficult to ensure fiscal sustainability when the primary balance is in deficit or zero. However, fiscal sustainability is ensured when the primary balance is in surplus and the initial government debt-to-GDP ratio is sufficiently small.