ABSTRACT This paper reports the results of controlled experiments designed to test the Harris‐Raviv generalization of the Vickrey theory of bidding in multiple unit discriminative auctions. The paper also discusses further development of the theory—in a way suggested by the experimental results—to include bidders with distinct risk preferences.

Richard W. Baker, Jr., Leon T. Kendall, Walter C. Nelson, J. Charles Partee, David Fritz, Harry S. Schwartz, Changing Character of the Real Estate Mortgage Markets: Discussion, The Journal of Finance, Vol. 19, No. 2, Part 1: Papers and Proceedings of the Twenty-Second Annual Meeting of the American Finance Association, Boston, Massachusetts, December 27-29, 1963 (May, 1964), pp. 321-333

ABSTRACT In this study, we examine how information foraging by auditors affects audit evidence collection in two distinct contexts, and show how a small change to audit methodology mitigates the potentially harmful effects of foraging. Information Foraging Theory explains how, while navigating an information environment, individuals learn to acquire information through personally experiencing the costs incurred and the values obtained from information. Consistent with the theory, we find that auditors react to the immediately felt costs of information collection (e.g., time and effort) at the expense of a more global consideration of information value (i.e., auditors collect lower-quality audit evidence). However, foraging behavior is moderated by removing the personal cost to the individual auditor (identifying audit evidence for another member of the audit team to collect), further demonstrating that these personally felt costs influence auditor choices in a way that reduces the quality of information collected. We contribute to the literature by demonstrating how information foraging can influence evidence quality and, thus, audit quality, and how a slight alteration of audit methodology can mitigate this behavior.

ABSTRACT This paper examines the impact of hedge fund activism on corporate tax avoidance. We find that relative to matched control firms, businesses targeted by hedge fund activists exhibit lower tax avoidance levels prior to hedge fund intervention, but experience increases in tax avoidance after the intervention. Moreover, findings suggest that the increase in tax avoidance is greater when activists have a successful track record of implementing tax changes and possess tax interest or knowledge as indicated by their Securities and Exchange Commission (SEC) 13D filings. We also find that these greater tax savings do not appear to result from an increased use of high-risk and potentially illegal tax strategies, such as sheltering. Taken together, the results suggest that shareholder monitoring of firms, in the form of hedge fund activism, improves tax efficiency. JEL Classifications: G32; G34; H26. Data Availability: Data are available from sources identified in the text.

ABSTRACT: This study reports the result of an experiment examining two aspects of the audit context that auditors likely do not suspect can influence audited account balances: the magnitude of an audit difference and the presence of a prior client concession. Negotiation theory shows that negotiators’ initial positions (e.g., clients’ unaudited balances) as well as feelings of reciprocity created by prior negotiations serve to create expectations for the current negotiation and, in turn, affect the outcomes of such negotiations. Our results show that the magnitude of an audit difference involving an estimate (i.e., difference between client’s account balance and the auditor’s independent estimate) as well as the presence of a prior client concession influence auditors’ negotiation expectations. Specifically, auditors proposed smaller adjustments when the magnitude of the audit difference was high and when the client conceded on an audit issue prior to resolving the difference in estimates. These manipulations similarly influence the negotiated outcome, and this influence is fully mediated by the auditor’s initial negotiation position.

The article presents devices and techniques developed by the member of accounting profession for the presentation of the knotty aspects of accounting. The first method presented focuses on the accounting problems related to business income and the cash basis. Money profits are basic to the management of a business. The cash basis, where properly applied, involves considerably more than receipts and disbursements. Accounting on the cash basis means that net income is determined by including income and gains actually or constructively received and deducting those expenses actually or constructively paid, losses sustained, and allowable depreciation or amortization for the period. Cash includes not only money but also commercial paper redeemable in money on demand such as money orders, bank drafts or checks. It does not include notes or similar promises to pay money at some future time. The general rule is that a bank check received constitutes an actual or conditional receipt, even though the holder refrains from depositing or cashing the check until a later date. Transactions near the end of the year call for decision as to the exact time receipt occurs.

Starting from an initial (baseline) budget line, income-compensated price changes always resulted in substitution effects consistent with the Slutsky-Hicks theory. This behavior cannot be explained by a simple random-behavior model. Similar changes in relative prices that did not originate from the initial (baseline) budget line resulted in "undersubstitution effects": The composition of consumption changed in the expected direction, but the magnitude of change was not large enough to be consistent with the initial commodity bundle chosen. These undersubstitution effects are not explainable by shifting preference patterns or anchoring effects found in inconsistent choice sequences with human subjects.

ABSTRACT After a natural experiment is first used, other researchers often reuse the setting, examining different outcome variables. We use simulations based on real data to illustrate the multiple hypothesis testing problem that arises when researchers reuse natural experiments. We then provide guidance for future inference based on popular empirical settings including difference‐in‐differences, instrumental variables, and regression discontinuity designs. When we apply our guidance to two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we find that many results that were statistically significant using single hypothesis testing do not survive corrections for multiple hypothesis testing.

ABSTRACT We examine the effects of physiology and spiritual sentiment on economic decision‐making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads.