LTW (2008) examine firms withdrawing from the SEC reporting system but continuing to trade on Pink Sheets. The paper finds that Sarbanes-Oxley increased the propensity of firms to go dark but, counter to conventional wisdom, had no significant effect on the rate of going-private transactions. Agency costs, as well as poor growth opportunities, proximity to financial distress, and increased compliance costs arising from SOX increase the propensity to go dark. Suggestions to improve the empirical implementation and interpretation involve including additional control and more suitable explanatory variables, and more attention to causation issues and to the quantification of economic significance.

This paper re-evaluates evidence in Ayers and Freeman [Ayers, F., Freeman, R., 1997. Market assessment of industry and firm earnings information. Journal of Accounting and Economics 24, 205–218] suggesting that investors anticipate industry-wide components of earnings earlier than firm-specific components, and that post-earnings-announcement drift following annual earnings announcements is due primarily to firm-specific components of earnings. Our tests indicate that post-announcement drift is entirely attributable to coefficient bias due to measurement errors in the use of realized earnings changes as proxies for unexpected earnings. Also, coefficient differences in the market's anticipation of subsequent-year industry and firm-specific earnings become insignificant when we introduce suitable controls for non-linearity in the return/earnings relation.

This paper provides conditions for identification of functionals in nonparametric simultaneous equations models with nonadditive unobservable random terms. The conditions are derived from a characterization of observational equivalence between models. We show that, in the models considered, observational equivalence can be characterized by a restriction on the rank of a matrix. The use of the new results is exemplified by deriving previously known results about identification in parametric and nonparametric models as well as new results. A stylized method for analyzing identification, which is useful in some situations, is also presented.

We extend the literature regarding the importance of corporate governance and bank monitoring by examining the association between loan announcement wealth effects and the corporate governance characteristics of the borrowers. Using a sample of over 800 commercial loan announcements over a period of more than 20 years we find that loan announcements are more likely to have positive wealth effects for firms with weak internal corporate governance. However, we also find that this relation between perceived bank monitoring and board independence and incentive-based pay exists only for firms with weak external governance, specifically the market for corporate control.

Fama and French [2002. The equity premium. Journal of Finance 57, 637–659] estimate the equity premium using dividend growth rates to measure expected rates of capital gain. We apply their method to study the value premium. From 1945 to 2005, the expected value premium is on average 6.1% per annum, consisting of an expected dividend growth component of 4.4% and an expected dividend price ratio component of 1.7%. Unlike the equity premium, the value premium has been largely stable over the last half century.

This paper examines the impact that the introduction of a closing call auction had on market quality at the London Stock Exchange. Using estimates from the partial adjustment with noise model of Amihud and Mendelson [Amihud, Y., Mendelson, H., 1987. Trading mechanisms and stock returns: An empirical investigation. Journal of Finance 42, 533–553] we show that opening and closing market quality improved for participating stocks. When we stratify our sample securities into five groups based on trading activity we find that the least active securities experience the greatest improvements to market quality. A control sample of stocks are not characterized by discernable changes to market quality.

We model merger waves as reallocation waves, and argue that mergers spread new technology in a way that is similar to that of the entry and exit of firms. We focus on two periods: 1890–1930, during which electricity and the internal combustion engine spread through the U.S. economy, and 1970–2000—the Information Age. As the model implies, reallocation did rise during both epochs. The model also implies that exits should lead mergers during a transition, but this seems to have happened more emphatically in the electrification epoch.

This comment makes three observations about Donohue and Levitt's paper on abortion and crime (Quarterly Journal of Economics 119(1) (2001), 249–275). First, there is a coding mistake in the concluding regressions, which identify abortion's effect on crime by comparing the experiences of different age cohorts within the same state and year. Second, correcting this error and using a more appropriate per capita specification for the crime variable generates much weaker results. Third, earlier tests in the paper, which exploit cross-state rather than within-state variation, are not robust to allowing for differential state trends based on statewide crime rates that predate the period when abortion could have had a causal effect on crime.

This paper examines outside director compensation for a sample of 237 Fortune 500 firms over the 1998–2004 period. We document a trend towards fixed-value equity compensation and away from cash only and fixed-number equity compensation. Adjustments to director compensation are consistent with firms targeting a market level of compensation, and firms that deviate from their market wage symmetrically adjust compensation back toward the market level. We also document the relation between changes in compensation and changes in equity values, and find that upward adjustments begin sooner than downward adjustments. When equity values rise, we find virtually no immediate offset to director compensation. However, when equity values fall, fixed-number equity compensation is adjusted in the same period (by awarding more shares or options) to offset the loss of income by almost one-third. Thus, the magnitude of adjustments towards the market wage level is symmetric, but the timing is not.