Combined Income Taxes and Tax-Benefit Systems

We extend the analysis of income tax progression to combined taxes, benefits, and the tax-benefit system. The overall redistributive impacts of constituent reforms are identified. Our findings point to the importance of interaction effects and demonstrate the dangers of isolated reforms.     

GRAZING ON PUBLIC RANGELANDS: AN EVOLVING PROBLEM OF PROPERTY RIGHTS

Competition for publicly owned natural resources may be intensified when property rights are incomplete. Incomplete delineation of these rights among claimants to the various resource attributes of the public rangelands of the western United States has resulted in high transaction costs for capturing and/or protecting unassigned rights. This paper addresses how changes in the values society places on the public land resources have resulted in changes in the relative positions of various interest groups with respect to resource allocation decisions. The paper concludes by discussing implications of the property right approach for land management policies and grazing fees.     

Closing the Loop: Review Process Factors Affecting Audit Staff Follow‐Through

The PCAOB recently expressed concern regarding the sufficiency and effectiveness of review and supervision of audit fieldwork. For the audit review process to succeed as a quality control mechanism, any issues or questions identified by a reviewer must be adequately resolved and documented in the workpapers. If audit review fails to correct for errors/biases in the work of reviewees, there can be serious detrimental effects on audit quality and, in turn, financial statement quality. Our study extends the literature by examining the phase of the review process in which reviewees respond to (or “close”) notes/comments provided by their reviewers. Utilizing an experiment, we find that certain contextual factors (review timeliness and review note frame) influence reviewee follow‐through during this critical phase. Specifically, we find that a delayed review elicits significantly lower effort levels than a timely review. Review note frame (i.e., how the reviewer phrases the rationale given for the underlying directive of a review note) significantly affects reviewee effort and performance when the review is timely. Through mediation analyses, we explore the mediating effect of effort on performance. In addition, we find that reviewer delay leads to greater over‐documentation.     

Accounting Information, Disclosure, and the Cost of Capital

In this paper we examine whether and how accounting information about a firm manifests in its cost of capital, despite the forces of diversification. We build a model that is consistent with the Capital Asset Pricing Model and explicitly allows for multiple securities whose cash flows are correlated. We demonstrate that the quality of accounting information can influence the cost of capital, both directly and indirectly. The direct effect occurs because higher quality disclosures affect the firm's assessed covariances with other firms' cash flows, which is nondiversifiable. The indirect effect occurs because higher quality disclosures affect a firm's real decisions, which likely changes the firm's ratio of the expected future cash flows to the covariance of these cash flows with the sum of all the cash flows in the market. We show that this effect can go in either direction, but also derive conditions under which an increase in information quality leads to an unambiguous decline in the cost of capital.     

Elderly Consumers' Knowledge Related to Medigap Protection Needs

Elderly consumers’ knowledge of Medicare coverage and the major factors they considered in purchasing supplementary health insurance were examined. Perceptions of the financial consequences of being hospitalized also were investigated. The findings based on a sample of Florida residents indicated that many older people may be ill-prepared to correctly assess their medigap protection needs and to choose wisely among alternative insurance policies if they decide to purchase supplementary coverage. Inadequate knowledge may result in unfulfilled expectations about protection when medical expenses are incurred, vulnerability to questionable insurance sales appeals and methods, and purchase of uneconomic duplicate coverage.