The relation of competition and cost accounting has been the subject of conflicting prescriptions, theories, and empirical evidence. Practitioner literature and textbooks argue that higher competition generally requires more accurate product costing. Theoretical economic analysis, in contrast, predicts that the optimal level of product‐costing accuracy is sometimes higher at lower levels of competition. Results of survey research are inconsistent, suggesting a need for further identification of conditions under which higher competition leads to more accurate product costing. This study shows experimentally that individuals' choices of the level of product‐costing accuracy depend not only on the current level of competition but also on the previous level of competition — that is, on an interaction between market structure (monopoly, duopoly, and four‐firm competition) and market history (increasing versus decreasing competition). In the experiment, subjects decide on the quantity of data to collect at a pre‐set price per datum to support more accurate product‐cost estimates. Subjects collect the most cost data (i.e., choose the most accurate product costing) in monopoly, collect the least in duopoly, and an intermediate amount in the four‐firm market, consistent with the pattern of optimal cost‐data collection in Hansen's 1998 model. The process of convergence to the optimum differs significantly across market types and market histories, however. Subjects who begin in four‐firm competition adapt more successfully to change than those who begin in monopoly. The lowest levels of decision performance occur when ex‐monopolists face their first competitor: they overreact to this first encounter with competition and overspend on cost data.

The last three decades have witnessed the rise of a pohtical gender gap in the United States wherein more women than men favor the Democratic party. We trace this development to the decline in marriage, which we posit has made men richer and women poorer. Data for the United States support this argument. First, there is a strong positive correlation between state divorce prevalence and the political gender gap—higher divorce prevalence reduces support for the Democrats among men but not women. Second, longitudinal data show that following marriage (divorce), women are less (more) likely to support the Democratic party.

Managers usually do not sell any of their own shares in an initial public offering but instead wait until the end of the lockup period. We develop a model in which managers strategically underprice IPOs to maximize personal wealth from selling shares at lockup expiration. First-day underpricing generates information momentum by attracting attention to the stock and thereby shifting the demand curve for the stock outwards. This allows managers to sell shares at the lockup expiration at prices higher than they would otherwise obtain. We test the model on a sample of IPOs in the 1990s. We find that higher ownership by managers is positively correlated with first-day underpricing, underpricing is positively correlated with research coverage, and research coverage is positively correlated with stock returns and insider selling at the lockup expiration. These results are consistent with the model.

We find no significant association between non–audit service fees and impaired auditor independence, where auditor independence is surrogated by auditors’ propensity to issue going concern audit opinions. We also find no association between going concern opinions and either total fees or audit fees. In addition, our findings are robust to controlling for unexpected fees, to controlling for endogeneity among our variables, and to several alternative research design specifications. Our results are consistent with market–based incentives, such as loss of reputation and litigation costs, dominating the expected benefits from compromising auditor independence.

The Q-theory of investment says that a firm's investment rate should rise with its Q. We argue here that this theory also explains why some firms buy other firms. We find that 1. A firm's merger and acquisition (M&A) investment responds to its Q more -- by a factor of 2.6 -- than its direct investment does, probably because M&A investment is a high fixed cost and a low marginal adjustment cost activity, 2. The typical firm wastes some cash on M&As, but not on internal investment, i.e., the 'Free-Cash Flow' story works, but explains a small fraction of mergers only, and 3. The merger waves of 1900 and the 1920's, `80s, and `90s were a response to profitable reallocation opportunities, but the `60s wave was probably caused by something else.

This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee “quality” are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees.

This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee “quality” are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees.

This paper uses data from the Census Bureau's Longitudinal Research Database to describe the dynamics of geographic concentration in U.S. manufacturing industries. Agglomeration results from a combination of the mean reversion and randomness in the growth of state-industry employment. Although industries' agglomeration levels have declined only slightly over the last quarter century, we find a great deal of movement for many geographically concentrated industries. We decompose aggregate concentration changes into portions attributable to plant births, expansions, contractions, and closures. We find that the location choices of new firms play a deagglomerating role, whereas plant closures have tended to reinforce agglomeration.

Regulatory changes that appear comprehensive will have little impact on the functioning of a developing market if they fail to lead to foreign portfolio inflows. We specify a reduced-form model for a number of financial time series and search for a common, endogenous break in the data generating process. We also estimate a confidence interval for the break. Our endogenous break dates are accurately estimated but do not always correspond closely to dates of official capital market reforms. Indeed, the endogenous dates are usually later than official dates, highlighting the important distinction between market liberalization and market integration.

This paper evaluates the importance of microeconomic irreversibilities for aggregate dynamics using a real-business-cycle (RBC) model characterized by investment irreversibilities at the establishment level. The main finding is that investment irreversibilities do not play a significant role in an otherwise standard real-business-cycle model: Even though investment irreversibilities are crucial for establishment-level dynamics, aggregate fluctuations are basically the same under fully flexible or completely irreversible investment.