Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly governed companies outperform weakly governed companies after announcing share repurchase programs. Our findings include positive associations between strong governance and both post-announcement adjusted operating performance and abnormal stock returns. The results are robust to sample selection bias, different sample criteria, governance measurement, and various control variables. In addition, governance strength is associated with larger post-announcement changes in CEO incentive compensation and merger and acquisition activity, both of which we argue are consistent with strongly governed companies using the financial flexibility derived from choosing share repurchases over cash dividends to drive better performance. Consistent with current literature on attenuation of former anomalies, the associations we find between governance and post-announcement performance tend to disappear in the latter half of our sample period.

Using a novel data set that covers individual debt claims against 136 bankrupt US companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm’s debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further, but this trading is not associated with subsequent improvements in bankruptcy outcomes and could, at the margin, increase the likelihood of liquidation.

Abstract Projects seeking to define, measure, and evaluate audit quality are on the agendas of auditing standards setters as well as audit firms. The Public Company Accounting Oversight Board ( PCAOB ) currently provides information regarding audit quality through the release of inspection reports, and the Board intends to establish and report audit quality indicators. To provide additional perspective on audit quality, we obtain auditors' and investors' views, definitions, and indicators of audit quality. We find that investors' definitions of audit quality focus more on inputs to the audit process than do auditors', and that investors view the number of PCAOB deficiencies as an indicator of overall firm quality. We find a consensus that auditor characteristics may be the most important determinants of audit quality, and that restatements may be the most readily available signal of low audit quality. We relate responses to a general audit quality framework, provide support for archival audit research, and identify additional disclosures that participants suggest could signal audit quality. Taken together, we provide evidence regarding the construct of audit quality in the post‐ SOX environment, evaluate many of the audit quality indicators proposed by the PCAOB , and suggest avenues for future research.

We show that short interest is arguably the strongest known predictor of aggregate stock returns. It outperforms a host of popular return predictors both in and out of sample, with annual R2 statistics of 12.89% and 13.24%, respectively. In addition, short interest can generate utility gains of over 300 basis points per annum for a mean-variance investor. A vector autoregression decomposition shows that the economic source of short interest’s predictive power stems predominantly from a cash flow channel. Overall, our evidence indicates that short sellers are informed traders who are able to anticipate future aggregate cash flows and associated market returns.

This paper develops a reinterpretation of the devaluation analysis in a popular model of international trade developed by Charles Bickerdike, Joan Robinson, and Lloyd Metzler. It has come to be known as the elasticity approach.1 That model, developed in terms of independent markets for imports and exports, has been criticized for its apparent lack of general equilibrium properties. The assumptions underlying the model have remained by and large implicit and vary across users, and the integration of this analysis with the and macroeconomics has never been demonstrated. All this is very much recognized and indeed application of the model is consistently accompanied by appropriate partial equilibrium, impact effect, or upper bound caveats. These shortcomings notwithstanding, the model continues to enjoy substantial popularity in policy discussions and interpretations of current events, in empirical work, and in recent textbooks in the field of international economics.' The BRM model is likely to remain the preferred tool in the analysis of trade balance issues along with the foreign trade multiplier model. It is therefore interesting and useful to enquire into its formal general equilibrium implications. This paper is concerned with one such interpretation involving a nontraded goods sector and a well-defined government policy that makes the analysis consistent with the absorption approach. While it may well be possible to generate alternative interpretations, the present analysis would seem to have the advantage of simplicity while at the same time pointing out the essential properties that would have to be satisfied by alternative treatments. In Section I a brief review of the BRM approach is offered. In Section II that approach is interpreted in terms of a simple model with nontraded goods and constant terms of trade. The implicit assumptions of the BRM model are brought to the f oreground by an explicit consideration of the market for home goods, the equilibrium conditions, and the role of the relative price of nontraded goods.3 Following that analysis, Section III considers the subsidiary issues that are raised by variable terms of trade. The notion of total elasticities is given an interpretation in Section IV where we return to the composite traded good model to explore alternative assumptions about absorption policies.

mendation for a country facing a balance of payments deficit, this advice is often resisted by country governments. Instead, direct trade controls such as tariffs, quotas, and subsidies are frequently used. In this paper I propose an economic explanation for the reluctance to devalue and the use of trade controls, namely, the flight that can be expected to occur if the devaluation is anticipated. In an effort to avoid or offset the effects of this currency flight, countries may use direct controls. I shall analyze the properties of using import tariffs and export subsidies, with or without an anticipated devaluation, to affect the balance of payments and obtain the social optimum.'

While US companies mainly list their board of directors alphabetically, this is not the case for Chinese companies, most of which list their independent directors last. We interpret the listing order of Chinese directors as board hierarchy, reflecting power allocation within the board. Based on extant evidence that independent directors contribute to firm value and that empowered individuals have more influence in group decision making, we expect independent-director rankings to be positively associated with firm value and find evidence consistent with this prediction. In our supplementary analyses we explore the mechanisms through which empowered independent directors enhance firm value. We find that independent directors who are ranked higher are more likely to vote against the management, especially on financial reporting issues. Further, higher independent-director rankings are associated with less earnings management. Our study suggests that empowering independent directors increases firm value.

Households that fail to refinance their mortgage when interest rates decline lose out on substantial savings. Using a random sample of outstanding US mortgages in December 2010, we estimate that approximately 20% of unconstrained households for whom refinancing was optimal had not done so. The median household would save $160/month over the remaining life of the loan, for a total present-discounted value of forgone savings of $11,500, a particularly large consumer financial mistake. To shed light on possible mechanisms, we also provide results from a mail campaign targeted at a sample of homeowners who could benefit from refinancing.