Integrated sampling procedures have been suggested in recent accounting literature. Yuji Ijiri and Robert Kaplan have proposed a nonlinear model which, when solved, yields a sampling procedure which satisfies several auditing goals. This paper presents a solution procedure for the proposed model. The solution procedure takes advantage of lagrange multipliers to create a problem which is linear in the constraints and convex in the objective function. A search technique then is used in conjunction with the convex simplex method to solve the problem. The procedure is used to test the model results in an actual auditing environment. The results of this study indicate the feasibility of using this approach for generating sampling designs.

We identify the labor market returns to university grade point average (GPA) by leveraging a nationwide change in the scaling of grades in Danish universities. Our results show that a reform-induced increase in GPA that is unrelated to ability causes higher earnings immediately after graduation, but the effect fades in subsequent years. The effect at labor market entry is largest for individuals with fewer alternative signals. Although employers initially screen candidates on the basis of skill signals, our findings are consistent with a model in which employers rapidly learn about worker productivity.

Expected discounting in seasoned equity offers is a cost of uncertainty about firm value, marketing new shares, and acquiring information that raises the offer price. Stockholders incorporate predictable discounting in stock prices when equity offers are first announced. The surprise component of discounting, reflecting the lead bank's final adjustment to the offer price, releases information that often causes economically large price swings on the offer day. Disparities between the issuer's closing price and the price suggested in the lead bank's final order book are a primary source of information. The discount surprise appears to be used by lead banks to update capital suppliers with that eleventh-hour information before they commit their funds.

We study how decision-makers' concerns about robustness affect prices and quantities in a stochastic growth model. In the model economy, growth rates in technology are altered by infrequent large shocks and continuous small shocks. An investor observes movements in the technology level but cannot perfectly distinguish their sources. Instead the investor solves a signal extraction problem. We depart from most of the macro-economics and finance literature by presuming that the investor treats the specification of technology evolution as an approximation. To promote a decision rule that is robust to model misspecification, an investor acts as if a malevolent player threatens to perturb the actual data-generating process relative to his approximating model. We study how a concern about robustness alters asset prices. We show that the dynamic evolution of the risk-return trade-off is dominated by movements in the growth-state probabilities and that the evolution of the dividend-price ratio is driven primarily by the capital-technology ratio.

Journal Article Are There Economies of Scale in Underwriting Fees? Evidence of Rising External Financing Costs Get access Oya Altınkılıç, Oya Altınkılıç Virginia Tech Search for other works by this author on: Oxford Academic Google Scholar Robert S. Hansen Robert S. Hansen Virginia Tech Address correspondence to Robert S. Hansen, Department of Finance, Pamplin College of Business, Virginia Tech, Blacksburg, VA 24061, or e-mail: [email protected]. Search for other works by this author on: Oxford Academic Google Scholar The Review of Financial Studies, Volume 13, Issue 1, January 2000, Pages 191–218, https://doi.org/10.1093/rfs/13.1.191 Published: 15 June 2015

[In this article we provide econometric tools for the evaluation of intertemporal asset pricing models using specification-error and volatility bounds. We formulate analog estimators of these bounds, give conditions for consistency, and derive the limiting distribution of these estimators. The analysis incorporates market frictions such as short-sale constraints and proportional transactions costs. Among several applications we show how to use the methods to assess specific asset pricing models and to provide nonparametric characterizations of asset pricing anomalies.]

Corporate debt sales have been regarded as “no news” events because there is no significant price reaction on average to their announcement. We explore the hypothesis that this lack of average price reaction to debt sale announcements is explained by the partial anticipation of debt offers. Theory suggests that the demand for debt capital is fundamentally related to changes in the sources and uses of funds, and we find evidence that earnings are significantly lower, investment growth is significantly higher, and, for some issuers, debt refunding requirements are significantly greater in the period immediately prior to issue than in periods well before and after the issue. We find that this preissue information conditions investors’ expectations of issue, thereby affecting the cross-sectional announcement date price reaction to debt sales in two ways. First, announcement date price reactions are negative, on average, for unanticipated offers or for those offers where prior information suggests that an issue is unlikely. Second, holding the probability of issue constant, announcement date price reactions are significantly more negative for offers that raise more capital than investors expected. These results are consistent with cash flow signaling and asymmetric information models of corporate financings.

I test the effect of harsher punishments and sanctions on driving under the influence (DUI). In this setting, punishments are determined by strict rules on blood alcohol content (BAC) and previous offenses. Regression discontinuity derived estimates suggest that having a BAC above the DUI threshold reduces recidivism by up to 2 percentage points (17 percent). Likewise having a BAC over the aggravated DUI threshold reduces recidivism by an additional percentage point (9 percent). The results suggest that the additional sanctions experienced by drunk drivers at BAC thresholds are effective in reducing repeat drunk driving.

A unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies. Our theory also explains the industrial revolution, which is the transition from an era when per capita incomes are stagnant to one with sustained growth. This transition is inevitable given positive rates of total factor productivity growth. We use a standard growth model with one good and two available technologies. The first, denoted the capital as inputs. The second, denoted the does not require land. We show that in the early stages of development, only the Malthus technology is used and, due to population growth, living standards are stagnant despite technological progress. Eventually, technological progress causes the Solow technology to become profitable and both technologies are employed. At this point, living standards improve since population growth has less influence on per capita income growth. In the limit, the economy behaves like a standard Solow growth model.

Worldwide many governments rely on personal income taxation as one of their major sources of tax revenue. Casual empirical evidence suggests that, although most developed countries levy substantial taxes, particularly on higher incomes, there also exist a few countries that are characterized by no or very low income taxation. A distinguishing feature of the countries in the latter group is that they are geographically very small, as can be seen from Table 1, which presents international income tax policies and geographical dimensions of some selected countries. In the present paper, we investigate whether the geography of a country is related to its pattern of taxation. Central to our argument is the ongoing international integration in the last decades. In some cases (e.g., in the European Union) the process has advanced to the point at which all formal constraints to mobility have been abandoned. This development has also greatly improved the mobility of households across states or national borders. In contrast to the mobility of production factors, however, the effects of household mobility (migration) are not confined to budgetary consequences as taxpayers immigrate or emigrate: the inand outflow of citizens also alters policy objectives by changing the composition of the electorate in a jurisdiction. At the same time migration decisions, especially those of wealthy individuals, are based on local tax policies. Consequently, the migration of households determines fiscal policies through the interplay of two basic effects: (1) residential choices determine tax rates through a process in which a jurisdiction's inhabitants select their local policies, and (2) tax and welfare policies in each jurisdiction influence residential decisions. As we argue in this paper, this interdependency of residential and political decisions may provide an explanation for the stylized facts illustrated in Table 1. We consider a simple framework in which households differ in incomes and national tax policies are democratically determined. As a natural implication of their earning characteristics, high-income households ceteris paribus prefer to live in countries with low taxation. For ease of exposition, we refer to those countries as tax h(e)avens, in a slight perturbation of popular nomenclature. Low-income households, in contrast, are more interested in generous public spending than in low income tax rates. Ceteris paribus, they prefer to reside in countries with large welfare programs financed by substantial taxation, which we call tax hells for obvious reasons. Thus, individual preferences imply a self-selection process, which leads to the segregation of households across countries according to income classes.1 If this segregation is, in turn, supported by a national vote for low taxes in countries where high-income earners live and high taxes in countries where lower-income earners live, an equilibrium with tax heavens, populated by wealthy residents, and tax hells, populated by the less affluent, evolves. Yet, the geographical size of countries plays a crucial role in this development: first, it affects the number of a country's inhabitants (the population size). Because households sort *Hansen: Apax Partners & Company, Possartstr. 11, 81679 Miinchen, Germany; Kessler: Department of Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany ([email protected]). We thank two anonymous referees, Marcus Berliant, Dennis Epple, Christian Ewerhart, Gerhard Glomm, David Pines, Urs Schweizer, and participants in presentations at the University of Munich, the 1997 SITE meeting (Stanford), the 1997 American Econometric Society Summer Meeting (Pasadena), and the 1996 IIPF Congress (Tel Aviv) for helpful suggestions and discussions. Both authors gratefully acknowledge financial support by the Deutsche Forschungsgemeinschaft, SFB 303 at the University of Bonn. Remaining errors are our own. The views expressed in this paper should not be attributed to Apax Partners & Company. 1 The sorting of individuals by preferences across jurisdictions goes back to the famous contribution of Charles M. Tiebout (1956) on migration as a means to reveal preferences over public goods.