This study reports a preliminary empirical investigation into the relation between the choice of investment accounting method used by colleges and universities and factors such as type of institution, endowment size and returns, and debt. Because these institutions use fund accounting, the effects of the choice of investment accounting method can reasonably be isolated from other accounting decisions. The results indicate that the selection of investment accounting method is influenced by type of institution, endowment size and returns, but not by debt covenants.

Résumé. Les vérificateurs, les responsables de la réglementation et les universitaires s'intéressent à la pratique du ≪ leurre‐prix ≫ et à sa relation avec l'objectivité du vérificateur. Cette question a même fait l'objet de plusieurs modèles analytiques. Ces théories n'ont cependant jamais été testées, principalement à cause de l'absence de données concrètes relatives à d'importantes variables contextuelles. Les auteurs de la présente étude élaborent un modèle à périodes multiples s'appliquant à la pratique du leurre‐prix et à l'objectivité du vérificateur et l'expérimentent dans des marchés de laboratoire en recourant à la méthodologie de l'économique expérimentale. Leur étude vient enrichir la documentation existante sous deux rapports. D'abord, il s'agit de l'une des premières études à produire une argumentation empirique et à expérimenter la théorie de la relation entre la pratique du leurre‐prix et l'objectivité. Ensuite, le modèle repose sur un raisonnement nouveau relatif à la pratique du leurre‐prix et à sa relation avec l'objectivité du vérificateur. La pratique du leurre‐prix et l'atteinte à l'objectivité, qui se manifestent indépendamment des coûts exogènes des opérations, sont le résultat de la prémisse d'une variation transversale dans les coûts et la qualité de la vérification et d'un avantage relatif à l'information qui échoit à un couple vérificateur attitré‐client en ce qui a trait à l'évolution de ces dimensions de la vérification. Les auteurs ont appliqué le modèle pendant un certain nombre de périodes à des marchés de laboratoire réunissant plusieurs acheteurs et plusieurs vendeurs. Ils ont observé seize de ces marchés dans le but de vérifier la valeur prédictive du modèle en ce qui a trait aux prix et à l'information communiquée. L'expérience est concluante quant à la pratique du leurre‐prix, mais elle n'est pas convaincante en ce qui a trait à la prévision exacte des prix. L'expérience confirme également la validité des prévisions relatives à l'information communiquée, les vendeurs ne s'éloignant de la vérité (et faisant une entorse à l'objectivité) que lorsque les profits supplémentaires qu'ils sont susceptibles d'en retirer sont supérieurs aux coûts supplémentaires que risque d'entraîner la communication d'information inexacte. L'on peut obtenir les données relatives aux marchés de laboratoire utilisées dans le présent document en en faisant la demande aux auteurs.

Abstract. Auditors, regulators, and academics are interested in the pricing practice of “lowballing” and its relationship to auditor independence. Several analytical models have examined these issues. However, these theories have gone untested primarily due to a lack of field data concerning important environmental variables. In this study, a multiperiod model of lowballing and independence is developed and tested in laboratory markets via the experimental economics methodology. The study contributes to the literature in two respects. First, it represents one of the first studies providing empirical evidence and theory testing of the relationship between lowballing and independence. Second, the model presents a new rationale for low‐ball pricing and its relationship to auditor independence. Lowballing and impairment of independence, occurring without exogenous transaction costs, are caused by positing cross‐sectional variation in audit cost and quality and an informational advantage that accrues to an incumbent auditor‐client pair regarding future variation in these audit dimensions. The model is operationalized in a multiperiod laboratory market consisting of multiple sellers and buyers. Sixteen markets are conducted to test price and reporting predictions of the model. The markets strongly exhibit lowballing behavior, but the exact price predictions are generally not supported. The markets also support reporting predictions, with sellers deviating from truthful reporting (impairing their independence) only when additional future profits are greater than the additional cost of misreporting. Data availability. The laboratory market data used in this paper are available from the authors upon request.

Multi-bank holding companies file detailed financial statements on their subsidiary banks. The availability of these data allows for an empirical examination of the relation between accounting-based performance and personnel decision for lower-level managers. For our sample of Texas banks, we find that turnover of subsidiary bank managers is negatively related to subsidiary performance, while promotions are positively related to performance. Holding own-bank performance constant, turnover increases with holding-company performance, which is consistent with the view that turnover decisions are based on performance relative to a firm-specification benchmark.

Auditing, Damage-Sharing liability, Auditor liability, Price protection

We propose a nonparametric method for automatically selecting the number of autocovariances to use in computing a heteroskedasticity and autocorrelation consistent covariance matrix. For a given kernel for weighting the autocovariances, we prove that our procedure is asymptotically equivalent to one that is optimal under a mean-squared error loss function. Monte Carlo simulations suggest that our procedure performs tolerably well, although it does result in size distortions.

Some argue that managers effectively control corporate voting: hence the process is meaningless. Others contend that shareholder voting motivates managers to maximize firm value. We provide evidence on this debate by analyzing the results from a large sample of management-sponsored anti-takeover amendments. Our results do not support the extreme form of either hypothesis. The evidence suggests that shareholder voting is important and indicates the circumstances where voting is most likely to constrain managers. Our results also have implications for the use of voting in political and other non-corporate contexts.

This paper establishes a correspondence in large samples between classical hypothesis tests and Bayesian posterior odds tests for models without trends. More specifically, tests of point null hypotheses and one- or two-sided alternatives are considered (where nuisance parameters may be present under both hypotheses). It is shown that, for certain priors, the Bayesian posterior odds test is equivalent in large samples to classical Wald, Lagrange multiplier, and likelihood ratio tests for some significance level and vice versa. The priors considered under the alternative hypothesis are taken to shrink to the null hypothesis at rate n[superscript -1/2] as the sample size n increases. Copyright 1994 by The Econometric Society.