Surya N. Janakiraman, Richard A. Lambert, David F. Larcker, An Empirical Investigation of the Relative Performance Evaluation Hypothesis, Journal of Accounting Research, Vol. 30, No. 1 (Spring, 1992), pp. 53-69
Steve Matsunaga, Terry Shevlin, D. Shores, Disqualifying Dispositions of Incentive Stock Options: Tax Benefits versus Financial Reporting Costs, Journal of Accounting Research, Vol. 30, Studies on Accounting and Taxation (1992), pp. 37-68
Journal of Accounting Research199230(1), 1open access
The article presents information on the effect of auditor changes on security prices in both a mechanical decision rule and in the possibility that an adverse audit opinion may lead to dismissal. The analysis implies that the stock price response to the announcement of an auditor change depends on the preswitch audit opinion. The author contends that his research proves auditor switches can be good for investors and that even when they are costless, and there is no collusion between auditor and firm, market reaction can be negative.
*University of Southern California; tUniversity of Colorado at Boulder. We would like to thank Gilbert Bloom of KPMG Peat Marwick, Bob Rosen of Ernst & Young, Wayne Gazur, Robert Jamison, Sally Jones, Stewart Karlinsky, and David Mason for their assistance in validating the instruments; Eugene Willis and the AICPA for allowing us to collect data at the National Tax Education Program; Stephen Conrad of Arthur Andersen, John Lanning of KPMG Peat Marwick, Jerry Marrs of Ernst & Young, and Randy Stein of Coopers & Lybrand for allowing us to collect data at their respective firms; Minou Bohlin, Linda Levy, David Mason, and Paul Walker for their research assistance; and Vairum Arunachalam for his assistance in collecting data. The authors also gratefully acknowledge the helpful comments of three anonymous referees, Alison Ashton, Robert Ashton, C. Brian Cloyd, David Frederick, Joan Luft, Robert Libby, Laureen Maines, Mark Nelson, Michael Roberts, Frank Selto, D. Shores, Ira Solomon, Rick Tubbs, S. Mark Young, and workshop participants at Arizona State University, Cornell University, Duke University, Indiana University, the University of Illinois Tax Symposium, the Journal of Accounting Research Conference, University of Texas at Arlington, University of Utah, and University of Wisconsin. Finally, the financial support of the KPMG Peat Marwick Foundation and the University of Colorado is gratefully acknowledged. 1 We infer expertise in this study from the level of performance in a specific task, here issue identification in tax planning. This inference is consistent with much of the literature on expertise in accounting and other disciplines (e.g., Bonner and Lewis [1990],
This paper studies the class of denumerable-armed (i.e. finite- or countably infinitearmed) bandit problems with independent arms and geometric discounting over an infinite horizon, in which each arm generates rewards according to one of a finite number of distributions, or "types." The number of types in the support of an arm, as also the types themselves, are allowed to vary across the arms. We derive certain continuity and curvature properties of the dynamic allocation (or Gittins) index of Gittins and Jones (1974), and provide necessary and sufficient conditions under which the Gittins-Jones result identifying all optimal strategies for finite-armed bandits may be extended to infinite-armed bandits. We then establish our central result: at each point in time, the arm selected by an optimal strategy will, with strictly positive probability, remain an optimal selection forever. More specifically, for every such arm, there exists (at least) one type of that arm such that, when conditioned on that type being the arm's "true" type, the arm will survive forever and continuously with nonzero probability. When the reward distributions of an arm satisfy the monotone likelihood ratio property (MLRP), the survival prospects of an arm improve when conditioned on types generating higher expected rewards; however, we show how this need not be the case in the absence of MLRP. Implications of these results are derived for the theories of job search and matching, as well as other applications of the bandit paradigm.
Much macroeconometric discussion has recently emphasized the economic significance of the size of the permanent component in GNP.Consequently, a large literature has developed that tries to estimate this magnitude-measured, essentially, as the spectral density of increments in GNP at frequency zero.This paper shows that unless the permanent component is a random walk this attention has been misplaced: in general, that quantity does not identify the magnitude of the permanent component.Further, by developing bounds on reasonable measures of this magnitude, the paper shows that a random walk specification is biased towards establishing the permanent component as important.