Military deployments and job assignments provide an opportunity to estimate the impact of parental absences and household relocations on children’s academic achievement. Combining U.S. Army personnel data with children’s standardized test scores from Texas, I find that parental absences adversely affect children’s test scores by a tenth of a standard deviation. Likewise, household relocations have modest negative effects on children’s test scores. Both parental absences and household relocations have the greatest detrimental effect on test scores of children with single parents, children with mothers in the army, children with lower‐ability parents, and younger children.

This article develops a direct filtration-based maximum likelihood methodology for estimating the parameters and realizations of latent affine processes. Filtration is conducted in the transform space of characteristic functions, with a version of Bayes’ rule used for recursively updating the joint characteristic function of latent variables and the data conditional upon past data. An application to daily stock returns over 1953-96 reveals substantial divergences from EMM-based estimates; in particular, more substantial and time-varying jump risk. The implications for stock index options ’ prices are discussed.

This article develops a direct filtration-based maximum likelihood methodology for estimating the parameters and realizations of latent affine processes. Filtration is conducted in the transform space of characteristic functions, using a version of Bayes' rule for recursively updating the joint characteristic function of latent variables and the data conditional upon past data. An application to daily stock market returns over 1953-1996 reveals substantial divergences from estimates based on the Efficient Methods of Moments (EMM) methodology; in particular, more substantial and time-varying jump risk. The implications for pricing stock index options are examined.

This review essay examines whether too-big-to-fail is as serious a problem as Gary Stern and Ron Feldman contend. This essay argues that Stern and Feldman overstate the importance of the too-big-to-fail problem and do not give enough credit to the FDICIA legislation of 1991 for improving bank regulation and supervision. However, this criticism of the Stern and Feldman book does not detract from many of its messages. The policy recommendations in their book have merit even if the too-big-to-fail problem is currently not that serious because these policies make it less likely that a banking crisis will occur even if driven by other factors.

We examine three alternative explanations for excess endowments in not-for-profit firms: (1) growth opportunities, (2) monitoring, or (3) agency problems. Inconsistent with growth opportunities, we find that most excess endowments are persistent over time, and that firms with persistent excess endowments do not exhibit higher growth in program expenses or investments. Inconsistent with better monitoring, program expenditures toward the charitable good are lower for firms with excess endowments, and CEO pay and total officer and director pay are greater for firms with excess endowments. Overall, we find that excess endowments are associated with greater agency problems.

ABSTRACT This paper investigates the press's role as a monitor or “watchdog” for accounting fraud. I find that the press fulfills this role by rebroadcasting information from other information intermediaries (analysts, auditors, and lawsuits) and by undertaking original investigation and analysis. Articles based on original analysis provide new information to the markets while those that rebroadcast allegations from other intermediaries do not. Consistent with a dual role for the press, I find that business‐oriented press is more likely to undertake original analysis while nonbusiness periodicals focus primarily on rebroadcasting. I also investigate the determinates of press coverage, finding systematic biases in the types of firms and frauds for which articles are published. In general, the press covers firms and frauds that will be of interest to a broad set of readers and situations that are lower cost to identify and investigate.

Theory suggests that managers issue earnings forecasts to reduce information asymmetry. An earnings forecast is more effective in reducing information asymmetry if it contains earnings news that is relatively more informative about the firm's value. We hypothesize that a manager is more likely to issue an earnings forecast if investors perceive that earnings are more informative. We measure earnings informativeness by estimating the firm's earnings response coefficient (ERC) in quarters prior to the forecast issuance decision. Consistent with our hypothesis, we find that the firm's historic ERC is positively associated with management's issuance of earnings forecasts.

This article illustrates an incentive-aligning role of debt in the presence of optimal compensation contracts. Owing to information asymmetry, value-maximizing compensation contracts allow managerial rents following high investment outcomes. The manager has an incentive to increase these rents by choosing investments that generate greater information asymmetry. An aptly chosen debt level mitigates this incentive, because investments that generate greater information asymmetry have more volatile outcomes. The greater volatility would make the debt risky, causing the shareholders to focus on high outcomes and therefore compensation contracts that reduce managerial rents. At the optimum, the manager avoids opportunistic investments, and the shareholders offer value-maximizing compensation contracts. Empirically, the analysis predicts a negative relationship between leverage and market-to-book that is reversed at extreme market-to-book ratios, a negative relationship between leverage and profitability, a negative relationship between leverage and pay-for-performance, and a positive relationship between pay-for-performance and investment opportunities.

This article illustrates an incentive-aligning role of debt in the presence of optimal compensation contracts. Owing to information asymmetry, value-maximizing compensation contracts allow managerial rents following high investment outcomes. The manager has an incentive to increase these rents by choosing investments that generate greater information asymmetry. An aptly chosen debt level mitigates this incentive, because investments that generate greater information asymmetry have more volatile outcomes. The greater volatility would make the debt risky, causing the shareholders to focus on high outcomes and therefore compensation contracts that reduce managerial rents. At the optimum, the manager avoids opportunistic investments, and the shareholders offer value-maximizing compensation contracts. Empirically, the analysis predicts a negative relationship between leverage and market-to-book that is reversed at extreme market-to-book ratios, a negative relationship between leverage and profitability, a negative relationship between leverage and pay-for-performance, and a positive relationship between pay-for-performance and investment opportunities.