Defenders of market efficiency argue that anomalies involving long-term abnormal returns are not robust to alternative methodologies. We argue that because various methodologies use different weighting schemes, the magnitude of abnormal returns should differ, and in a predictable manner. Three problems are identified that cause low power in value-weighted three-factor time series regressions when abnormal returns following managerial actions are being estimated. We illustrate the sensitivities in the context of the new issues puzzle as well as with simulations. More generally, multifactor models as currently used do not, and cannot, test market efficiency.

This study focuses on electric utilities in the United States to consider two related issues. First, the study tests for asymmetric price reactions to positive and negative earnings surprises (ES). Second, the study associates policy differences across jurisdictions with variations in the cash flow effects of positive and negative ES and then uses the framework to consider variations in price responses across regulatory climates. In the same context, the study investigates the effects of a utility's abnormal profits on the asymmetry of price reactions to positve and negative ES. The empirical predictions are motivated by the disparity between the principles and practices that underlie cost recovery for the utilities and the uneven effects of the cost‐recovery practies on the cash flows associated with positve and negative ES. The results show that the sign of ES and the climate in which a utility operates are related to the size of price reactions to ES. Furthermore, a utility's abnormal profit status has significant effects on the size of price reactions to ES. Only a modest price response asymmetry is indicated for manufacturing firms.

In recent times there has been a renewed interest in relationships between redistribution, growth, and welfare. Land reforms in developing countries are often aimed at improving the poor's access to land, although their effectiveness has often been hindered by political constraints on implementation. In this paper we use panel data on the sixteen main Indian states from 1958 to 1992 to consider whether the large volume of legislated land reforms have had an appreciable impact on growth and poverty. We argue that such land reforms have been associated with poverty reduction.

Gerald T. Garvey, Todd T. Milbourn, EVA versus Earnings: Does It Matter Which Is More Highly Correlated with Stock Returns?, Journal of Accounting Research, Vol. 38, Supplement: Studies on Accounting Information and the Economics of the Firm (2000), pp. 209-245

This study provides evidence that highly leveraged owner‐managed properties liquidated assets during the commercial real estate decline of the late 1980s, and that this provided buying opportunities for better capitalized buyers. The analysis documents significant financial distress costs for highly leveraged firms during an industry‐wide downturn and shows that these costs are particularly large for owner‐managed firms.

This study seeks to establish the empirical importance of price dispersion due to costly consumer search by examining retail prices for prescription drugs. Posted prices in two geographically distinct markets are shown to vary considerably across pharmacies within the same market, even after one controls for variation due to pharmacy differences. Pharmacy heterogeneity accounts for at most one‐third of the observed price dispersion. The empirical analysis hinges on the observation that consumers’ incentives to price‐shop depend on characteristics of the drug therapy. Cross‐sectional patterns in price distributions across drugs are consistent with the predictions of a search model: prices for repeatedly purchased prescriptions (for which the expected benefits of search are highest) exhibit significant reductions in both dispersion and price‐cost margins.

The effect of insecure ownership on ordinary investment and natural resource use is examined. Insecure ownership is postulated to depend on the type of government regime in power and the prevalence of political violence or instability. The political determinants of economywide investment are estimated from cross-country data, and the results are used to form an index of ownership security. When introduced into empirical models of natural resource use, this index has a significant and quantitatively important effect on the use of forests and petroleum. Contrary to conventional wisdom, ownership risk slows resource use in some circumstances.

This paper examines the demand for on-board computers in trucking, distinguishing between their incentive- and resource-allocation-improving capabilities. I find that monitoring's incentive benefits are high when perquisitetaking is attractive to drivers, driver effort is important, and verifying drivers' actions to insurers is valuable. These results are consistent with agency theory and suggest that networking applications will raise the productivity and pay of difficult-toevaluate workers. I also find that monitoring's benefits are disproportionately resource-allocation-related when managerial decisions are least constrained. This suggests that networking applications' monitoring capabilities raise the returns to delegation when resource allocation decisions are routine and lower them when they are not