This paper considers causal inference and sample selection bias in nonexperimental settings in which (i) few units in the nonexperimental comparison group are comparable to the treatment units, and (ii) selecting a subset of comparison units similar to the treatment units is difficult because units must be compared across a high-dimensional set of pre-treatment characteristics. We discuss the use of propensity score-matching methods, and implement them using data from the National Supported Work experiment. Following LaLonde (1986), we pair the experimental treated units with nonexperimental comparison units from the CPS and PSID, and compare the estimates of the treatment effect obtained using our methods to the benchmark results from the experiment. For both comparison groups, we show that the methods succeed in focusing attention on the small subset of the comparison units comparable to the treated units and, hence, in alleviating the bias due to systematic differences between the treated and comparison units.

This paper investigates nonlinear features of FX volatility dynamics using estimates of daily volatility based on the sum of intraday squared returns. Measurement errors associated with using realized volatility to estimate ex post latent volatility imply that standard time series models of the conditional variance become variants of an ARMAX model. We explore nonlinear departures from these linear specifications using a doubly stochastic process under duration-dependent mixing. This process can capture large abrupt changes in the level of volatility, time-varying persistence, and time-varying variance of volatility. The results have implications for forecast precision, hedging, and pricing of derivatives.

We use data from a sample of child care centers to estimate the relationships between cost and child care quality, and between revenue and quality. We use a measure of child care quality, designed by developmental psychologists, that is positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we estimate the objective functions of firms and compute the quality supply function. The results indicate that the supply of quality is moderately elastic with respect to price and the wages of child care center workers. Implications of the results for child care policy are discussed.

In simple economic models, it is relatively easy to describe how to impose a value-added tax at a uniform rate on all consumption goods, and to demonstrate that this tax is equivalent to a proportional labor-income tax, plus a tax on existing assets. The equivalence involves little more than the national income identity relating the sources and uses of income. Once one attempts to incorporate the costs of financial intermediation, however, tax analysis becomes more complicated. In attempting to determine how a VAT should treat financial transactions, various authors have attempted to apply results from simpler models. Unfortunately, these results can lead to conflicting, ambiguous, and misleading prescriptions. In this paper, we argue that one needs to rely more on the fundamental objectives of a VAT to decide how it should treat financial transactions. Adopting this approach, we find that, in principle, the VAT should apply to resources devoted to financial transactions in the same manner that it does in other sectors. However, as discussed below, there are real problems in implementing such a tax on the financial sector which we do not attempt to address in this paper.

Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Facebook Twitter LinkedIn MailTo Tools Icon Tools Get Permissions Search Site Cite View This Citation Add to Citation Manager Citation William H. Beaver; Perspectives on Recent Capital Market Research. The Accounting Review 1 April 2002; 77 (2): 453–474. https://doi.org/10.2308/accr.2002.77.2.453 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentThe Accounting Review Search Advanced Search

A hot growth stock in the 1980s, L.A. Gear's equity fell from $1 billion in market value in 1989 to zero in 1998. For over six years as revenues declined precipitously, management tried a series of radical strategy shifts while subsidizing the firm's large losses through working-capital liquidations. The L.A. Gear case illustrates that asset liquidity (broadly construed, not limited to excess cash) can give managers substantial operating discretion during financial distress. It also shows (1) that debt covenants can be stronger disciplinary mechanisms than requirements to meet cash interest payments, (2) why debt contracts typically constrain earnings instead of cash flow, (3) why cash balances are not equivalent to negative debt, and (4) why debt maturity matters. We find that many firms have highly liquid asset structures, thus their managers have the potential to subsidize losing operations should the need arise.

This paper uses recent advances in Bayesian estimation methods to exploit fully and efficiently the time‐series and cross‐sectional empirical restrictions of the Cox, Ingersoll, and Ross model of the term structure. We examine the extent to which the cross‐sectional data (five different instruments) provide information about the model. We find that the time‐series restrictions of the two‐factor model are generally consistent with the data. However, the model's cross‐sectional restrictions are not. We show that adding a third factor produces a significant statistical improvement, but causes the average time‐series fit to the yields themselves to deteriorate.

Trade has been considered a condition for growth and development, a view that might have merits in explaining the rise of the Western world. I use a new data set from archival sources of eighteenth-century China to revisit this question. This analysis suggests previous studies of market integration, which attribute much growth to a reduction in transport costs, have overestimated these effects. I find the overall level of market integration in China was higher than previously thought, and, intertemporal effects are important substitutes for trade. Both factors reduce the importance of trade as a unique explanation for subsequent growth.

We examine the effect of bargaining power and informational asymmetry on the design of international cooperative ventures in the presence of restrictions on equity participation and investment. When the bargaining advantage rests with the multinational, equity participation restrictions can increase the profits to domestic firms and encourage suboptimal investment policies. Overinvestment occurs when the multinational's bargaining advantage is reinforced by an informational advantage, while underinvestment occurs when the domestic firm possesses the informational advantage. In contrast, when the bargaining advantage rests with the domestic firm, equity participation restrictions do not affect investment levels.

This study shows that international firms listing their shares on the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE) experience a significant increase in visibility, as proxied by analyst coverage and print media attention (The Wall Street Journal or Financial Times). The increase in analyst following is also associated with a decrease in the cost of equity capital after the listing event in a way consistent with Merton's (1987) investor recognition hypothesis. Our results are stronger for NYSE listing firms than for LSE listing firms. This may partially compensate firms for the higher costs associated with NYSE listing (compared to LSE listing).