The Effects of Uncertainty and Disclosure on Auditors' Fair Value Materiality Decisions

Financial accounting standards increasingly require fair value measurements. I experimentally examine how uncertainty affects auditors’ adjustment decisions when evaluating fair values. I manipulate two types of uncertainty, input subjectivity and outcome imprecision, and one reporting choice, supplemental disclosure. I find that auditors are most likely to require adjustments when fair values contain both more input subjectivity and more outcome imprecision, but that this likelihood diminishes when clients supplement recognized fair values with additional disclosure. Thus, consistent with moral licensing, I find that auditors tolerate greater potential misstatement in the financial statements when clients provide disclosure, suggesting that the SEC's preference for supplemental disclosure may have the unintended consequence of affecting fair values recognized in the body of the financial statements. I also provide evidence that auditors determine adjustment size by comparing recorded fair value to the nearest bound, rather than the midpoint, of the auditors’ own range estimate, consistent with strict application of auditing standards.     

In Defence of Neo-Classical Neo-Populism

This paper is a response to the discussion in the special issue of this Journal on Redistributive Land Reform Today (Vol. 4, Nos. 1 and 2). We begin by attempting to clarify the methodological debate, differentiating our approach, which our critics call neo-classical neo-populism, from mainstream neo-classical economics and historical materialism. We then distinguish between land tenure reforms and redistributive land reforms, and argue that it is the latter that really matter. Next, we address the issue of the inverse relationship between farm size and productivity. Fourth, we discuss cases in which systems of labour control are used to transform the peasantry into a landless rural proletariat and challenge the view that systems of labour control can usefully be reduced to a problem of transaction costs. We end with discussions of reform in the transition economies, China and Bangladesh, where we defend the view that it is the distribution of landownership rather than operational holdings that largely determines the extent of poverty.     

Common Stock Returns and Rating Changes: A Methodological Comparison

This paper examines the adjustments in a firm's common stock price during the eleven months before and during the month of announcement of a bond rating change. Based on several different measures of abnormal security return, the findings are consistent with the proposition that bond downgradings convey information to common stockholders. For bond upgradings, the price adjustments were statistically insignificant in the month of announcement, although in the eleven preceding months, upgraded firms exhibited positive abnormal returns. While the results do not fully support earlier research, we stress that the main contribution of this article lies in the scrutiny it gives to issues of methodology in assessing the possible price effects of bond reclassifications.     

Is Bitcoin Really Untethered?

This paper investigates whether Tether, a digital currency pegged to the U.S. dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.     

Who Drove and Burst the Tech Bubble?

From 1997 to March 2000, as technology stocks rose more than five‐fold, institutions bought more new technology supply than individuals. Among institutions, hedge funds were the most aggressive investors, but independent investment advisors and mutual funds (net of flows) actively invested the most capital in the technology sector. The technology stock reversal in March 2000 was accompanied by a broad sell‐off from institutional investors but accelerated buying by individuals, particularly discount brokerage clients. Overall, our evidence supports the bubble model of Abreu and Brunnermeier (2003), in which rational arbitrageurs fail to trade against bubbles until a coordinated selling effort occurs.     

Investigation of Products Liability Attitudes and Opinions: A Consumer Perspective

The area of product safety and products liability legislation has been the subject of a great deal of academic research. Policymakers and business executives have been surveyed to determine their attitudes toward liability and product safety concerns. In addition, a substantial amount of research has focused on the impact of products liability trial outcomes on business and public policy. However, there are relatively few studies reporting opinions, attitudes, and predispositions of consumers regarding relevant liability topics. This article explores the consumer perspective on several critical questions relating to products liability and product safety. The results indicate a wide divergence of opinion exists among consumers on key issues shaping current trends in the products liability legal environment. Implications for consumers, business, and public policy are discussed.