This study's purpose was to construct a performance criterion for New York Stock Exchange specialists which relates to their ability to affect price variability. It was emphasized that the price-setting behavior of the specialists, at times when trading imbalances prevail in the market, is the most important aspect of their performance. Their performance in this dimension may or may not be associated with their willingness to supply immediacy services to small orders. While the bid-ask spread is the correct variable to measure when the latter is considered, price variability or, more precisely, the functional relationship between price changes and trading imbalances is the variable to be measured when the price-setting behavior is of interest. While the experiment to evaluate the price-setting behavior of NYSE specialists using publicly available data may be considered a pioneer study, other studies have estimated the determinants of the bid-ask spread. The contributions of this study to the analysis of the spread can be summarized as follows: (a) observing an independent “specialist effect” on the size of the spread, (b) estimating the spread-volume relationships using a simultaneous system, and (c) estimating the association between the specialists' performance on both spread and price dimensions of their activity. The finding of this study is that there is a positive correlation between the quality measure of performance on both dimensions.

In his famous 1964 article, Paul A. Samuelson [1] presents what he calls “the only sensible definition of depreciation, ” namely, the period change in the present value of future cash flows expected to be generated by an asset.

The agency costs of debt are introduced in this paper to explain the existence of complex financial instruments. Two areas of complexities are discussed in detail: the call provision and the maturity structure of debt. Their existence is rationalized as a means of resolving agency problems associated with informational asymmetry, managerial (stockholder) risk incentives, and foregone growth opportunities. It is also demonstrated that both features of corporate debt serve identical purposes in solving agency problems. Complex financial instruments are required because markets fail to provide complete and costless solutions to the agency problems discussed in the paper.

The agency costs of debt are introduced in this paper to explain the existence of complex financial instruments. Two areas of complexities are discussed in detail: the call provision and the maturity structure of debt. Their existence is rationalized as a means of resolving agency problems associated with informational asymmetry, managerial (stockholder) risk incentives, and foregone growth opportunities. It is also demonstrated that both features of corporate debt serve identical purposes in solving agency problems. Complex financial instruments are required because markets fail to provide complete and costless solutions to the agency problems discussed in the paper.

The article discusses implications of a study conducted on the idea of classificatory smoothing of income statement statistics other than net income. The study was investigated on a hypothesis using correlational analysis without data on managements' intentions, it sought only to establish that managements behaved as if smoothing were intended. A central issue is the set of hypotheses to be tested in empirical research on income smoothing. Researchers of the study do not address the primary question of whether income smoothing exists. Instead, they attempt to determine if correlation patterns suggest one sort of smoothing rather than another. However, just the possibility of classificatory smoothing makes apparent some fundamental problems in income smoothing research and in the study of as-if smoothing hypothesis. Those problems, which include correlation and data problems and the issue of management intention, are the subject of this article. Suggestions for improvements in income smoothing research also are made.

The article deals with comments related to two major issues. Firstly, whatever results are obtained, they are consistent with the hypothesis and secondly, the rarity of the phenomenon under investigation. This might suggest insufficient data on which conclusions can be significantly based or that the subject matter is of a minor importance that it does not warrant a study. The first issue suggests that correlation analysis is not appropriate for tests of smoothing behavior if managements' intentions to smooth are not established independently. The commentor suggests that in the case of extraordinary items, any established correlation, whether positive or negative, of such items with either ordinary or net income statistics would point to a possible smoothing behavior, but of different types. Regarding the second issue, authors point out that extraordinary items incorporate three different variables namely nonrecurring expense adjusted for average tax rate, nonrecurring expense net of taxes and nonoperating expense adjusted for the average tax rate derived from basic data items.