Journal Article Note on Inter-Commodity Relationships in Demand Get access E. E. Lewis E. E. Lewis Washington, DC Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 5, Issue 1, October 1937, Pages 53–59, https://doi.org/10.2307/2967579 Published: 01 October 1937

This paper examines the impact of the borrower–lender relationship on the explicit loan interest rate and collateral, as well as the correlation between loan interest rates and collateral. Using a simultaneous equation approach, we find that collateral has a statistically significant positive impact of 200 to 400 basis points on loan interest rates. We find this positive association to be stronger for personal (or outside) collateral than collateral provided by the firm's assets (or inside collateral). Finally, we find the economic impact of the borrower–lender relationship to be 21 basis points for one standard deviation increase in relationship length.

We provide estimates of the equity capital needed and the resulting tax costs incurred when supplying catastrophe insurance/reinsurance using a partial equilibrium model that incorporates a specific loss distribution for US catastrophe losses. After consideration of insurer investment in tax-exempt securities, tax loss carry-back/forward provisions, and personal taxes, our results imply that the tax costs of equity finance alone have a substantial effect on the cost of supplying catastrophe reinsurance. These results help explain a variety of industry developments that reduce tax costs. Also, when coupled with non-tax costs of capital, these results help explain the limited scope of catastrophe insurance/reinsurance.

Analyst forecasts, Analyst forecast errors, Correlated forecast errors, Private information

Income smoothing, Chemical industry, Real smoothing, Artificial smoothing

Healy and Palepu, J. Account. Econ. (2001), this issue, provide a broad review of the empirical disclosure literature. This discussion focuses on the empirical voluntary disclosure literature, and assumes firms’ disclosure policies are endogenously determined by the same forces that shape firms’ governance structures and management incentives. This provides not only a more focused view of the literature, but also alternative explanations for some of the results discussed in Review and specific suggestions for future research.

This study examines a commercial bank manager's incentives to reduce regulatory costs imposed when the bank's capital adequacy ratio falls below its regulatory minimum. It also tests the general political sensitivity hypothesis that a manager seeks to reduce political costs incurred when revenue is unusually large. Tests of adjustments to the loan loss provision, loan charge-offs, and securities gains and losses attempt to control for exogenous economic conditions and previous investing decisions. Results are consistent with hypotheses associating accounting adjustments with capital adequacy ratio guidelines, but fail to support the political sensitivity hypothesis.

Using the model of discretionary disclosure suggested in Verrecchia (1983), I show that an increase in the quality of private information received by a manager results in more disclosure on his part. I also discuss how this result influences a manager's choice over levels of quality.

In the preceding paper Darrough and Stoughton suggest that firm interdependence, modelled as an entry game among firms in a product market, can yield endogenous proprietary costs. This allows the costs associated with the dissemination of information about the firm to depend upon the information's content in some direct way. My comments focus on: first, the structure of the game, which emphasizes the potential for full disclosure; second, the extent to which the entry game exaggerates the usefulness of ‘bad news’; and third, their suggestion that more competition among firms implies more, and not less, disclosure, an observation seemingly contrary to Verrecchia (1983).