We investigate whether physicians' financial incentives influence health care supply, technology diffusion, and resulting patient outcomes. In 1997, Medicare consolidated the geographic regions across which it adjusts physician payments, generating area-specific price shocks. Areas with higher payment shocks experience significant increases in health care supply. On average, a 2 percent increase in payment rates leads to a 3 percent increase in care provision. Elective procedures such as cataract surgery respond much more strongly than less discretionary services. Non-radiologists expand their provision of MRIs, suggesting effects on technology adoption. We estimate economically small health impacts, albeit with limited precision.

Seemingly self-serving attributions either attribute favorable performance to internal causes (enhancing attributions) or poor performance to external causes (defensive attributions). Managers presumably provide such attributions in earnings press releases to heighten (dampen) investors' perceptions of the persistence of good (bad) earnings news, thereby increasing (decreasing) the market reward (penalty) for good (bad) earnings news. Building on attribution theory and prior research on earnings commonality, this study investigates cross-sectional differences in investors' responses to quarterly earnings press releases that contain seemingly self-serving attributions. Using a random sample of press releases from 1999 to 2005, we find that firms that provide defensive attributions to explain earnings disappointments experience less severe market penalties when: (1) more of the their industry peers also release bad news, and (2) their earnings share higher commonality with industry- and market-level earnings. On the other hand, firms that provide enhancing attributions to explain good earnings news reap greater market rewards when: (1) more of their industry peers release bad news, and (2) their earnings share lower commonality with industry- and market-level earnings. Collectively, our results demonstrate that investors neither ignore seemingly self-serving attributions nor accept them at face value, but rely on industry- and firm-specific information to assess their plausibility. Data Availability: Data are publicly available from the sources identified in the text.

This paper investigates the effect of investments in internal investor relations (IR) departments on firm outcomes. We find that companies initiating internal professional IR experience increases in disclosure, analyst following, institutional investor ownership, liquidity, and market valuation relative to a matched sample of control firms. We also examine the differential impact the exogenous shock of Regulation Fair Disclosure (Reg FD) had on firms with an established professional IR department. We find these IR firms more than doubled their level of public disclosure post-Reg FD. Despite IR firms losing a potential communications channel following Reg FD adoption, we find they did not suffer adversely and instead show a post-Reg FD increase in analyst following, institutional investors, and liquidity relative to a control sample of similar non-IR firms. This implies that the effectiveness of professionalized internal IR increased post-Reg FD consistent with IR firms being relatively better positioned to navigate the more complicated regulatory environment. JEL Classifications: D82; M41; G11; G12; G14; G24 Data Availability: Data are publicly available from the sources identified in the paper with the exception of the membership data from the National Investor Relations Institute, which is a proprietary dataset.

We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the 12-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers, but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors’ trades.

We provide a cross-country and cross-bank analysis of the financial determinants of the Great Financial Crisis using data on 83 countries from the period 1998 to 2006. First, our cross-country results show that the probability of suffering the crisis in 2008 was larger for countries having higher levels of credit deposit ratio whereas it was lower for countries characterized by higher levels of: (i) net interest margin, (ii) concentration in the banking sector, (iii) restrictions to bank activities, (iv) private monitoring. The bank-level analysis reinforces these results and shows that the latter factors are also key determinants across banks, thus explaining the probability of bank crisis. Our findings contribute to extend the analytical toolkit available for macro and micro-prudential regulation.

To understand the thinking process in private information games, we use “Mousetracking” to record which payoffs subjects attend to. The games have three information states and vary in strategic complexity. Subjects consistently deviate from Nash equilibrium choices and often fail to look at payoffs which they need to in order to compute an equilibrium response. Choices and lookups are similar when stakes are higher. When cluster analysis is used to group subjects according to lookup patterns and choices, three clusters appear to correspond approximately to level-3, level-2, and level-1 thinking in level-k models, and a fourth cluster is consistent with inferential mistakes (as, for example, in QRE or Cursed Equilibrium theories). Deviations from Nash play are associated with failure to look at the necessary payoffs. The time durations of looking at key payoffs can predict choices, to some extent, at the individual level and at the trial-by-trial level.

Using a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks, we study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). Across the 15 countries in our sample, we find that the aggregate consumption response ranges between 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks, and (iii) when we consider households only use liquid assets (rather than net wealth) to smooth consumption.

Firm disclosures often reach only a portion of investors, which results in information asymmetry among investors and, therefore, lower market liquidity. This issue is particularly salient for firms that are not highly visible, as they tend not to receive broad news dissemination via traditional intermediaries, such as the press. This paper examines whether firms can reduce information asymmetry by more broadly disseminating their news. To isolate the impact of dissemination, we focus our analysis on firms' use of Twitter and exploit the 140-character message restriction. Specifically, using a sample of technology firms, we examine the impact of using Twitter to send market participants links to press releases that are provided via traditional disclosure methods. We find this additional dissemination of firm-initiated news via Twitter is associated with lower abnormal bid-ask spreads and greater abnormal depths, consistent with a reduction in information asymmetry. Moreover, this result holds mainly for firms that are not highly visible, consistent with them being in greater need of this additional dissemination channel. We also examine the impact of dissemination on a volume-based measure of liquidity, and find that dissemination is positively associated with liquidity. Data Availability: All data are publicly available from the sources indicated in the paper.

Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Facebook Twitter LinkedIn Email Tools Icon Tools Get Permissions Search Site Cite View This Citation Add to Citation Manager Citation Raffi J. Indjejikian, Michal Matějka, Jason D. Schloetzer; Target Ratcheting and Incentives: Theory, Evidence, and New Opportunities. The Accounting Review 1 July 2014; 89 (4): 1259–1267. https://doi.org/10.2308/accr-50745 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

This paper reconsiders the formal estimation of bank risk using the variability of the profit function. In our model, point estimates of the variability of profits are derived from a model where this variability is endogenous to other bank characteristics, such as capital and liquidity. We estimate the new model on the entire panel of US banks, spanning the period 1985q1–2012q4. The findings show that bank risk was fairly stable up to 2001 and accelerated quickly thereafter up to 2007. We also establish that the risk of the relatively large banks and banks that failed in the subprime crisis is higher than the industry’s average. Thus, we provide a new leading indicator, which is able to forecast future solvency problems of banks.