James R. Frederickson, Sean A. Peffer, Jamie Pratt, Performance Evaluation Judgments: Effects of Prior Experience Under Different Performance Evaluation Schemes and Feedback Frequencies, Journal of Accounting Research, Vol. 37, No. 1 (Spring, 1999), pp. 151-165

With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.

A simple construction that will be referred to as an error-duration model is shown to generate fractional integration and long memory. An error-duration representation also exists for many familiar ARMA models, making error duration an alternative to autoregression for explaining dynamic persistence in economic variables. The results lead to a straightforward procedure for simulating fractional integration and establish a connection between fractional integration and common notions of structural change. Two examples show how the error-duration model could account for fractional integration in aggregate employment and in asset price volatility.

Volvo's attempt to merge with Renault in 1993 temporarily destroyed SEK 8.6 billion (US$ 1.1 billion) in Volvo shareholder wealth. This study traces the destruction to hubris, managerialism, and the escalation of commitment – elements suggested in previous research. In addition, the case suggests path dependence as a source of wealth destruction in mergers. An elaborate structure of cross-shareholdings, joint committees, and a poison pill made it difficult for the strategic allies (Volvo and Renault) to follow any strategic path other than merger if they wanted to exploit economies more fully. Activism by institutional investors was instrumental in halting the destruction of shareholder wealth and redirecting the firm. This study reveals significant positive abnormal returns associated with the institutional activism. Consistent with Shleifer and Vishny (1986), institutional `jawboning' is valuable. An analysis of the voting premium between Volvo's `A' and `B' shares suggests that the value created by institutional voice derived from the strategic change in the firm's direction rather than the power of the coalition of institutional investors to expropriate wealth.

Deregulation provides a natural experiment for examining how governance adapts to structural changes in the business environment. We investigate the evolution of governance structure, characterized by ownership concentration, compensation policy, and board composition, in the U.S. airline industry during a 22-year period surrounding the Airline Deregulation Act of 1978. Consistent with theory, we find that after deregulation (i) equity ownership is more concentrated, (ii) CEO pay increases, (iii) stock option grants to CEOs increase, and (iv) board size decreases. Airlines’ governance structures gravitate toward the system of governance mechanisms used by unregulated firms. The adaptation process is gradual, however, suggesting that it is costly to alter organizational capital. We also present evidence on the relation between governance structure and firm survival.

Journal Article Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence Get access Robert Forsythe, Robert Forsythe University of Iowa Search for other works by this author on: Oxford Academic Google Scholar Russell Lundholm, Russell Lundholm University of Michigan Search for other works by this author on: Oxford Academic Google Scholar Thomas Rietz Thomas Rietz University of Iowa Address correspondence and reprints requests to Thomas Rietz, Department of Finance, College of Business Administration, University of Iowa, Iowa City, IA 52242, or e-mail: [email protected]. Search for other works by this author on: Oxford Academic Google Scholar The Review of Financial Studies, Volume 12, Issue 3, July 1999, Pages 481–518, https://doi.org/10.1093/revfin/12.3.0481 Published: 01 June 2015

The inferences a prospective home buyer can make about the quality of a house from the amount of time it spends on the market and the seller"s optimal strategy in light of these inferences are investigated. Depending upon the information structure, the seller may have an incentive to post an inordinately high initial price (in order to "dampen" the signal transmitted to future prospective buyers) or an inordinately low initial price (in order to make an early sale and avoid consumer "herding"). It is shown that the sellers of high-quality homes do best when inspection outcomes are publicly recorded and do worst when inspection outcomes are not public and the price history is not observable. Costly inspections create more adverse selection but deter consumer herding.

We examine the relationship between ownership structure and corporate crime. Our approach draws upon two lines of research: (1) the theory of the firm which poses ownership as a critical incentive mechanism and (2) the economic theory of corporate crime, which emphasizes the role played by top management in affecting crime in the corporation. We find that crime occurs less frequently among firms in which management has a larger ownership stake. Our results imply that penalizing `corporations' (shareholders) deters crime, and that corporate crime tends not to benefit shareholders, ex ante. Rather than being something shareholders have encouraged, corporate crime appears to reflect an agency cost limited but not optimally eliminated through the costly efforts of top management. The evidence is consistent with the notion that ownership structure plays an important role in aligning the hidden actions of top management with the shareholder interest.

This paper empirically analyzes a broad range of real exchange rate apprecia-tion episodes. The objective is twofold. First, the paper studies the dynamics of appreciations, using a sample that is not limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by which overvaluations are corrected. In particular, for various degrees of misalignment we calculate the proportion of the reversions that occur through nominal devaluations rather than through cumulative inflation differentials. The overall conclusion is that in most cases large and medium appreciations are reversed with nominal devaluations. What is the probability that a currency that has appreciated significantly in real terms will require a nominal devaluation? The relevance of this question is easier to understand in the context of recent failed attempts to manage nominal exchange rates. A large number of countries have used the exchange rate as an instru-ment to stabilize inflation and coordinate expectations around an easy focal point. However, with inflation higher at home than