Assesses how different regimes of auditor liability affect the demand for and supply of auditing services. Adoption of complex strategies by economic agents; Usefulness of the experimental approach in aiding the understanding of the functioning of auditing markets; Strict liability regime as an alternative by auditors.

[In this study we assess how different regimes of auditor liability affect the demand for and supply of auditing services. The assessment was made with 15 experimental markets, each of which involved two sellers of assets, two auditors (verifiers), and four buyers. The experimental markets paradigm allowed us to compare the negligence liability regime (six markets) that auditors currently face with two alternatives not currently in existence-a strict liability regime (six markets) and a no-liability regime (three markets). We focused on the extent to which the experimental results conformed to our predictions of (1) sellers' frequency of hiring verifiers and of selecting a costly investment that improved aggregate welfare, (2) verifiers' service fees and their frequency of testing the truthfulness of the sellers' disclosures, and (3) buyers' reliance on the sellers' disclosures and verifiers' reports when pricing the sellers' assets. The predictions varied across the liability regimes primarily because differences in the degree of the verifiers' liability changed their economic incentives to test the truthfulness of the sellers' disclosures. The results show that the no-liability and negligence markets operated in a manner consistent with the predictions, whereas the strict markets deviated from the predictions on several dimensions. Specifically, verifiers in the strict liability markets were hired less often than predicted because they submitted higher offers for their services than sellers were willing to pay. This in turn led to fewer than predicted costly investments by the sellers. Although our general conclusion recognizes that a legal system is an integral part of the auditing institutional infrastructure, we found no evidence of any systematic benefits from imposing a strict liability rule on the verification service. In fact, the results suggest that the negligence liability markets operated at a level of economic efficiency as high or higher than those in the other two regimes. This suggests that the current tendencies of courts and the auditing profession to expand the scope of auditors' liabilities may not achieve the net benefits expected from such expansions.]

This paper examines the properties of corporate disclosure and price discovery associated with NYSE temporary trading halts. We address the hypothesis that managers release highly informative disclosures outside of trading hours or seek a trading halt to allow investors greater opportunity to assess the implications of new information. We investigate whether: (a) disclosures associated with trading halts are highly price informative, and (b) the process of price discovery as reflected in specialist indications is more protracted and difficult for extreme and bad news halts. We find that halts arise from non‐routine highly informative disclosures for which price discovery is more uncertain and protracted. First, most disclosures associated with our sample of trading halts are ones whose arrival investors cannot predict but which have large valuation effects (e.g., corporate takeovers and leveraged buyouts). Second, halts associated with large price changes exhibit more uncertain and protracted price discovery during the halt. Specialist indications for extreme news halts have (1) bigger differences between high and low prices, (2) poorer predictive accuracy with respect to opening price, and (3) greater frequency. Finally, similar comparisons for bad and good news only weakly support the conjecture that bad news is associated with more certain and protracted price discovery. Résumé. Les auteurs examinent les propriétés des renseignements fournis par les sociétés et de la supputation des cours en période d'arrêt temporaire des opérations de la Bourse de New York. Ils se penchent sur l'hypothèse selon laquelle les gestionnaires publient des renseignements très informatifs en dehors des heures d'activite ou en période d'arrêt des opérations, de façon à donner aux investisseurs tout le loisir d'évaluer les conséquences de ces renseignements. Les auteurs se demandent 1) si l'information publiée en période d'arrêt des opérations est très éclairante sur les cours et b) si le processus de supputation du cours tel que l'illustrent les indications des spécialistes est plus long et plus difficile lorsque les arrêts sont associés à des renseignements qui entraînent des variations du cours d'une grande amplitude ou des variations du cours négatives. Selon les auteurs, il y a arrêt des opérations lorsque les renseignements publiés sortent de l'ordinaire et que leur contenu en information est élevé, si bien que le processus de supputation du cours est plus incertain et plus long. Premièrement, la plupart des déclarations associées à notre échantillon d'arrêts des opérations sont de nature telle qu'il était impossible pour les investisseurs d'en prédire l'occurrence, mais ont des conséquences majeures sur l'évaluation de l'entreprise (par exemple, les prises de contrôle et les prises de contrôle adossées). Deuxièmement, les arrêts des opérations correspondant à d'importantes variations du cours sont caractérisés par un processus de supputation du prix plus incertain et plus long. Les indications des spécialistes en ce qui a trait aux arrêts des opérations associés à des renseignements qui entraînent des variations du cours d'une grande amplitude présentent 1) un écart plus grand entre cours élevé et cours faible, 2) moins de précision dans les prédictions relatives au cours d'ouverture et 3) une fréquence supérieure. Enfin, des comparaisons analogues en ce qui a trait aux renseignements positifs et aux renseignements négatifs corroborent seulement faiblement l'hypothèse selon laquelle les renseignements négatifs rendent la processus de supputation du cours plus certain et plus long.

The ability of planners in Poland and the U.S.S.R. to recognize and act to eliminate market disequilibrium in the markets for grain and meat is tested by means of an econometric model of grain and meat production, consumption, and trade. Planners' perceptions of excess demand for grain, meat, and foreign exchange are shown to influence production and trade decisions in a way that tends to reduce excess demand or supply. Nevertheless, the markets for grain, meat, and foreign exchange are shown to be characterized by excess demand or supply for much of the sample period.