Journal Article The Existence of Optimal Distributed Lags Get access Lance Taylor Lance Taylor Harvard University and ODEPLAN, Santiago, Chile Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 37, Issue 1, January 1970, Pages 95–106, https://doi.org/10.2307/2296500 Published: 01 January 1970 Article history Received: 01 January 1969 Accepted: 01 March 1969 Published: 01 January 1970

Observation error, Observation Bias, Accounting research

James B. Rebitzer, Lowell J. Taylor; A Model of Dual Labor Markets When Product Demand Is Uncertain*, The Quarterly Journal of Economics, Volume 106, Issue 4, 1

A model is developed to illustrate Hyman Minsky's financial crisis theories. A key assumption is that the level of wealth in the economy is determined mac-roeconomically, with the value of firms' assets responding to the state of confidence as reflected by discounted quasi rents on capital. The second assumption is that there is high substitutability between liabilities of firms and money in the public's portfolio. A downward shift in anticipated profits leads wealth to contract and the public to shift portfolio preferences toward money. Interest rates rise, leading to further dampening of expected profits, and a debt-deflation crisis can occur.

The development of both brand name reputation and industry specialization by Big 8 auditors is argued to be costly and therefore to increase audit fees. For a sample of 1484 Australian publicly listed companies we estimate audit fee premia for Big 8 auditors. On average, industry specialist Big 8 auditors earn a 34% premium over nonspecialist Big 8 auditors, and the Big 8 brand name premium over non-Big 8 auditors averages around 30%. These results support that industry expertise is a dimension of the demand for higher quality Big 8 audits and a basis for within Big 8 product differentiation.

We examine whether the provision of nonaudit services (NAS) by incumbent auditors is associated with a reduction in the extent to which earnings reflect bad news on a timely basis (that is, news‐based conservatism). Reduced conservatism is expected to occur if relatively high levels of NAS result in reduced auditor independence and, ultimately, lower‐quality auditing. Because client‐specific demand for NAS is expected to vary, our proxy for the auditor‐client economic bond is the extent to which NAS purchases (relative to audit fees) are greater or less than expected. Using several different methods for identifying news‐based conservatism, we consistently find that higher than expected levels of NAS are not associated with reduced conservatism. This result is robust to allowing for endogenous NAS demand, as well as several explicit factors that may be associated with differences in conservatism. Similar conclusions arise from tests that use alternative measures of the economic bond between auditors and their clients, as well as in tests confined to either the Big 6 or non‐Big 6 audit firms. Our results are consistent with factors such as market‐based incentives, the threat of litigation, and alternative governance mechanisms offsetting any expected benefits to the audit firm from reducing its independence. We therefore conclude that recent legislative intervention aimed at restricting the supply of NAS is unlikely to result in increased independence in fact, although independence in appearance may be improved.

Philip J. Lee, Stephen L. Taylor, Terry S. Walter, IPO Underpricing Explanations: Implications from Investor Application and Allocation Schedules, The Journal of Financial and Quantitative Analysis, Vol. 34, No. 4 (Dec., 1999), pp. 425-444

This paper attempts to reconcile the contradictory findings in the debate over school resources and school effectiveness by highlighting the role of aggregation in the presence of omitted variables bias. While data aggregation for well-specified linear models yields unbiased parameter estimates, aggregation alters the magnitude of any omitted variables bias. In general, the theoretical impact of aggregation is ambiguous. In a very relevant special case where omitted variables relate to state differences in school policy, however, aggregation implies clear upward bias of estimated school resource effects. Analysis of High School and Beyond data provides strong evidence that aggregation inflates the coefficients on school resources. Moreover, the pattern of results is not consistent with an errors-in-variables explanation, the alternative explanation for the larger estimated impact with aggregate estimates. Since studies using aggregate data are much more likely to find positive school resource effects on achievement, these results provide further support to the view that additional expenditures alone are unlikely to improve student outcomes.