Reviews the books "Selected Papers on Accounting, Auditing and Professional Problems," by Edward Stamp and "Edward Stamp: Later Papers," edited by Michael J. Mumford.

[This study reports on two experiments examining the effects of alternative incentive pay schemes for controlling unit manager behavior in intrafirm resource allocation settings. Two control problems are addressed: unit managers' misrepresentation of private information to the central manager prior to allocation, and unit managers' consumption rather than investment of resources subsequent to allocation. The experimental setting was adapted from Groves and Loeb (1979). The firm consists of central management and two units. The role of the (mechanized) central manager is to maximize firm profit by acquiring a common resource and allocating it to the units. The central manager also executes a control mechanism consisting of a performance measure and pay function for the unit managers. The role of each unit manager is to send a message to the central manager before the resource is acquired and to generate profit by investing allocated resources in productive activities. Actual unit profit depends on the unit's profit function and invested resources, which are known only to the unit manager. The linear profit function was in the form of a productivity ratio, i.e., the ratio of outputs to inputs. The central manager learns each unit's actual profit when realized. In both experiments, students served as subjects. Experiment 1 focused on unit managers' misrepresentation, which was measured by the difference between projected and actual p-ratios, under three incentive schemes: (1) unit profit scheme-a unit manager's pay is linear in actual unit profit, (2) unit profit-plus-penalty scheme-a unit manager's pay is linear in actual unit profit except that there is a "large" penalty when an unfavorable profit variance occurs, and (3) Groves scheme-a unit manager's pay is linear in the sum of his or her unit's actual profit and the other unit's budgeted profit. As predicted, misrepresentation was higher under the unit profit scheme than under the other schemes. Contrary to prediction, misrepresentation was higher under the Groves scheme than under the unit profit-plus-penalty scheme. The latter result may have been due to either or both of two factors associated with the Groves scheme. First, some subjects may have tried to gain from tacit collusion. Second, some subjects may have failed to understand the scheme's incentives, given noncooperation. Experiment 2 focused on resource consumption, which was measured by inputs exchanged directly for cash rather than invested, under the Groves and unit profit-plus-penalty schemes. As predicted, resource consumption was higher under the Groves scheme than under the unit profit-plus-penalty scheme. This result was largely due to the latter scheme's penalty, which forces a unit manager to invest enough resources to achieve budgeted unit profit.]

[This article provides confirmatory evidence of the value-relevance of book values of oil and gas properties. Harris and Ohlson (1987) find that the book values correlate significantly with the inferred market values of oil and gas properties. Reserve recognition accounting requires the simultaneous publication of alternative measures that are often assumed to be more relevant values of the oil and gas properties. The question that logically follows is whether the significance of the book values results from their value-relevance, or whether investors are "functionally fixated" on these accounting values. To address this question, we evaluate zero-investment trading rules based on portfolios constructed from values of the imputed market value (per equivalent barrel of proved reserves). If the security market is informationally efficient, this trading rule should not yield systematic positive returns and the Harris and Ohlson (1987) results then clearly suggest that the book values are value-relevant. We find that the trading rule based on cross-sectional variation in the inferred market values yields significant positive returns that cannot be explained by portfolio risks. This suggests a market inefficiency that could occur because the market "incorrectly" uses book values (per equivalent barrel) to determine market values. That is, functional fixation on book values may be the cause of the successful initial trading strategy. To reject a hypothesis of functional fixation and, thus, the value-irrelevance of book value, it is necessary to try and exploit the book-value-induced cross-sectional variation in the inferred market values. To do this we construct an additional trading rule that controls for the book-value component of the inferred market value. This second trading rule provides even larger returns than the first, and so argues against a simple form of functional fixation. To finally conclude against functional fixation on book values, we consider trading rules that control for other information, in particular the present value of future cash flows. Although these trading rules also yield significant returns, they do not improve on the results from the trading rule that controls for book values. In combination, the results suggest that although a pricing anomaly exists for our sample, the anomaly cannot be ascribed to functional fixation on book values. If anything, investors appear to be paying too little attention to the book values.]

We study the behavior of a large trader with private information about the mean of an asset with a risky return. We argue that if the variability of the return is not too great, typically the trader will find it desirable to ensure that the market price does not reveal his information, that is, that a "pooling" equilibrium arises. Such an equilibrium has the advantage of avoiding the incentive constraints that arise in "separating" equilibria, where information can be inferred from prices. Thus the efficient market hypothesis may well fail if there is imperfect competition. Despite the uniformativeness of prices, the other (competitive) traders are also better off in the pooling equilibrium than in any separating equilibrium, again if one assumes limited variability.

We study the behavior of a large trader with private information about the mean of an asset with a risky return. We argue that if the variability of the return is not too great, typically the trader will find it desirable to ensure that the market price does not reveal his information, that is, that a "pooling" equilibrium arises. Such an equilibrium has the advantage of avoiding the incentive constraints that arise in "separating" equilibria, where information can be inferred from prices. Thus the efficient market hypothesis may well fail if there is imperfect competition. Despite the uniformativeness of prices, the other (competitive) traders are also better off in the pooling equilibrium than in any separating equilibrium, again if one assumes limited variability.

Using aggregated data for 12 countries, a cross section of microeconomic data, and a panel of households, we demonstrate that increases in time in the labor market reduce sleep. Our theory of the demand for sleep differs from standard models of time use by assuming that sleep affects wages by affecting labor market productivity. Estimates of a system of demand equations demonstrate that higher wage rates reduce sleep time among men but increase their waking nonmarket time by an equal amount. Among women the wage effect on sleep is negative but very small.

This paper demonstrates how the incentive of manager-equityholders to substitute toward riskier assets, commonly referred to as the “asset substitution problem,” is related to the level of observable risk in the firm. When observable and unobservable risks are sufficiently positively correlated, increases (decreases) in observable risk generate the incentive for manager-equityholders to increase (decrease) unobservable risk. Thus, credible commitments to hedge observable risk can benefit the firm's manager-equityholders by reducing the incentive to shift risk and the associated agency cost of debt. This provides a positive rationale for hedging diversifiable risk at the firm level.