Robert W. Holthausen, Robert E. Verrecchia, The Effect of Sequential Information Releases on the Variance of Price Changes in an Intertemporal Multi-Asset Market, Journal of Accounting Research, Vol. 26, No. 1 (Spring, 1988), pp. 82-106

Robert A. Haugen, Lemma W. Senbet, Bankruptcy and Agency Costs: Their Significance to the Theory of Optimal Capital Structure, The Journal of Financial and Quantitative Analysis, Vol. 23, No. 1 (Mar., 1988), pp. 27-38

This paper extends the Pearson chi-square testing method to nondynam ic parametric econometric models, in particular, to models with covar iates. The paper establishes the asymptotic distribution of the test statistic when the test statistic is based on data-dependent random cells of a general form and on an arbitrary asymptotically normal estimator. These results a re attained by extending recent probabilistic results for the weak convergence of empirical processes indexed by sets. The chi-square test that is introduced can be used to test goodness-of-fit of a parametric model, as well as to test particular aspects of the parametric model that are of interest. Copyright 1988 by The Econometric Society.

Abstract. The pricing of audit services is a complex function of many variables. Prior research in this area has proposed various approaches and models to identify some of these factors. This paper includes a description of one such model. Studies based on this model, or modifications of it, have been performed in the U.S., Australia, New Zealand, and the U.K. This paper reports the findings of a similar study conducted in Canada. The analysis indicates that an approximately linear relationship exists between audit fee and a company's total assets or sales. In addition, the number of subsidiaries and the level of inventory are statistically significant determinants of audit fee in the Canadian setting. The extent of foreign assets was also a significant determinant of audit fee for large companies, while the amount of receivables was found to be a significant determinant of audit fee for small companies. The findings are compared with those reported previously for different countries and the result of a test for price competition in the Canadian audit market is also discussed. Résumé. L'établissement du prix des services de vérification est une fonction complexe faisant intervenir de nombreuses variables. Les travaux de recherche précédents dans ce domaine ont débouché sur diverses méthodes et divers modèles destinés à cerner certains de ces facteurs. Les auteurs s'en tiennent à l'un de ces modèles qu'ils prennent soin de décrire. Des études fondées sur ce modèle, ou sur une version adaptée du modèle, ont été effectuées aux États‐Unis, en Australie, en Nouvelle‐Zélande et au Royaume‐Uni. Les auteurs font état des résultats d'une étude semblable menée au Canada. L'analyse révèle qu'une relation à peu près linéaire existe entre les honoraires de vérification et l'actif total ou le chiffre d'affaires d'une société. De plus, le nombre de filiales et le niveau des stocks sont des déterminants statistiquement significatifs des honoraires de vérification dans le contexte canadien. L'importance de l'actif à l'étranger est également un déterminant significatif des honoraires de vérification pour les grandes entreprises, tandis que le montant des comptes clients est un déterminant significatif des hororaires de vérification pour les petites entreprises. Les auteurs comparent ces résultats aux résultats précédemment obtenus pour différents pays et traitent du résultat d'un contrôle relatif à la concurrence sur les prix dans le marché canadien de la vérification.

We examine the cost differences between public sales and private placements of debt for a sample of public utility issues. The lowest cost method depends on a firm's transaction costs which comprise flotation costs, agency costs, and the costs of searching the market. Our findings suggest that firms minimize the cost of issuing securities by selecting the market providing the lowest transaction costs.

Theories of corporate payout policy do not explain the observed form of distributions to shareholders. Although open-market repurchases appear to have tax advantages, cash dividends are overwhelmingly chosen. We argue that there are costs associated with open-market-repurchase programs, since they provide managers with opportunities to use inside information to benefit themselves at stockholders' expense. We offer evidence suggesting that bid-ask spreads widen around repurchase announcements, as predicted by our analysis. Since these costs of repurchases do not arise with cash dividends, our analysis implies that repurchases do not dominate cash dividends for making distributions to shareholders.