This paper suggests that earnings announcements provide information that allows certain traders to make judgements about a firm's performance that are superior to the judgements of other traders. As a result, there may be more information asymmetry at the time of an announcement than in nonannouncement periods. More information asymmetry implies that bid–ask spreads increase, suggesting that market liquidity decreases at the time of an earnings announcement. Furthermore, informed opinions resulting from public disclosure may lead to an increase in trading volume, despite the reduction in liquidity that accompanies announcements.

There are frequent expressions of concern in the accounting, economics, and legal literature about managers' conflicting duties and incentives in management buyouts. This study is motivated by a concern about the managerial incentive to reduce reported earnings prior to the announcement of the buyout proposal. Our analysis of a sample of 175 management buyouts during 1981-88 provides evidence of manipulation of discretionary accruals in the predicted direction in the year preceding the public announcement of management's intention to bid for control of the company.

We study the problem of financial contracting and renegotiation between a firm and outside investors when the firm cannot commit to future payouts, but assets can be contracted upon. We show that a capital structure with multiple investors specializing in short-term and long-term claims is superior to a structure with only one type of claim, because this hardens the incentives for the entrepreneur to renegotiate the contract ex post. Depending on the parameters, the optimal capital structure also differentiates between state-independent and state-dependent longterm claims, which can be interpreted as long-term debt and equity.

Exchange minimum price variation regulations create discrete bid-ask spreads. If the minimum quotable spread exceeds the spread that otherwise would be quoted, spreads will be wide and the number of shares offered at the bid and ask may be large. A cross-sectional discrete spread model is estimated by using intraday stock quotation spread frequencies. The results are used to project $1/16 spread usage frequencies given a $1/16 tick. Projected changes in quotation sizes and in trade volumes are obtained from regression models. For stocks priced under $10, the models predict spreads would decrease 38 percent, quotation sizes would decrease 16 percent, and daily volume would increase 34 percent. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

[Exchange minimum price variation regulations create discrete bid-ask spreads. If the minimum quotable spread exceeds the spread that otherwise would be quoted, spreads will be wide and the number of shares offered at the bid and ask may be large. A cross-sectional discrete spread model is estimated by using intraday stock quotation spread frequencies. The results are used to project 1/16 spread usage frequencies given a 1/16 tick. Projected changes in quotation sizes and in trade volumes are obtained from regression models. For stocks priced under $10, the models predict spreads would decrease 38 percent, quotation sizes would decrease 16 percent, and daily volume would increase 34 percent.]

Abstract. Experimental economics is an increasingly important tool in accounting research. This paper examines how the accounting experimentalists' expertise in design, institutional knowledge, and theory can be used to enlighten policy debate. Two recent economics‐based experiments examining tax policy and audit education are used to highlight these ideas and show where careful attention to theory would shift the direction of research, making it more applicable to contemporary policy issues. Résumé. L'économique expérimentale est un instrument de plus en plus important en recherche comptable. L'auteure examine comment les aptitudes des expérimentateurs comptables en ce qui a trait à la définition des problématiques, leur connaissance des institutions et leur bagage théorique peuvent servir à éclairer le débat politique. Deux expériences récentes qui s'appuient sur l'économique portent sur la politique fiscale et la formation des vérificateurs et son employées pour jeter un nouvel éclairage sur ces idées et pour illustrer comment l'intérêt pour la théorie devrait modifier le cours de la recherche, en la rendant davantage applicable aux problèmes politiques contemporains.

Willard F. Mueller and Frederick E. Geithman (1991) test the competing free-rider (efficiency) and market-power explanations of certain vertical restraints once used by the Sealy mattress company and declared illegal after 1980. They estimate that eliminating the restraints increased sales and argue that this supports only the market-power explanation. However, Mueller and Geithman overlook the rise in Sealy's profits that occurred after 1980, a fact which renders their test inconclusive. Copyright 1994 by MIT Press.