The employment to population rate of high school–aged youth has fallen by about 20 percentage points since the late 1980s. One potential explanation is increased competition from substitutable labor, such as immigrants. I demonstrate that the increase in the population of less educated immigrants has had a considerably more negative effect on employment outcomes for native youth than for native adults. At least two factors are at work: there is greater overlap between the jobs that youth and less educated adult immigrants traditionally do, and youth labor supply appears more responsive to immigration-induced wage changes.

A probabilistic discovery model modified after Kaufman's earlier model is simplified to reduce computational demands and to reduce the sensitivity of the resulting estimates. The model is applied to the North Sea to estimate remaining oil reserves and forecast future discoveries. The simplification jeopardizes some informational detail, but the errors and approximations inherent in historical data sometimes overvalue the available information. A broader categorization scheme helps to control errors in this case. The model uses a stochastic production function based on a timing relationship between exploratory efforts and reservoir discovery and on a dynamic relationship of productivity and resource depletion. 21 references, 4 tables. (DCK)

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Using country-level data, we study the relation between institutionalization of capital and various measures of reliance on public equity markets. For developed and developing countries, assets under institutional management (mutual funds, pension funds, and insurance companies) are negatively related to the number of listed companies, market capitalization, and trading volume. The negative relationships are estimated on the margin, as other factors such as GDP have countervailing positive partial effects and are generally stronger for more highly developed countries. Results indicate that as direct ownership of equity by retail investors is displaced by investing through institutions, financial systems become less public-market-centric.

We study the role of banking relationships in IPO underwriting. When a firm in Japan goes public, it can engage an investment bank that is related through a common main bank, or can select an alternative investment bank. The main bank relationship can be an efficient way for the investment bank to acquire information generated by the main bank, but may give rise to conflicts of interest. We find that main bank relationships give small issuers increased access to equity capital markets, but that issuers of large IPOs often switch to non-related investment banks that are capable of managing large offerings. While investment banks seek to exploit bargaining power with related issuers, issuers respond to expected high issue cost by switching to non-related investment banks. The net result is that total issue costs through related and non-related investment banks are similar. With respect to aftermarket performance and use of proceeds, we find no evidence of conflict of interest or self-dealing for either the main bank or the investment bank.

Trade credit is created whenever a supplier offers terms that allow the buyer to delay payment. In this paper we document the rich variation in interfirm credit terms and credit policies across industries. We examine empirically the firm's basic credit policy choices: whether to extend credit or to require cash payment; and, if credit is extended, whether to adopt simple net terms or terms with discounts for prompt payment. We also examine determinants of variations in two‐part terms. Results are supportive primarily of theories that explain credit terms as contractual solutions to information problems concerning product quality and buyer creditworthiness.

ABSTRACT: Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.