...Research Study Capital-Market Effects of Corporate Disclosures and Disclosure Regulation Christian Leuz Peter Wysocki June 26, 2006 Commissioned by the Task Force to Modernize Securities Legislation in Canada Christian Leuz Christian Leuz is currently the Professor of Accounting at the University of Chicago, Graduate School of Business. He is also the David G. Booth Faculty Fellow. Prior to this position, Professor Leuz was the Harold Stott Term Assistant Professor in Accounting at the Wharton School of the University of Pennsylvania and Fellow at Wharton’s Financial Institution Center. His research interests include transparency and corporate governance, financial disclosure and securities regulation, and the links between the institutions of market economies. Professor Leuz earned his doctoral degree and “Habilitation” at the Goethe University Frankfurt in Germany. His most recent publications have appeared in the Journal of Financial Economics, the Journal of Accounting and Economics and the Journal of Accounting Research. He is an Associate Editor of the Journal of Accounting and Economics and serves currently on the Editorial Board of The Accounting Review, the Journal of Accounting Research, the Journal of Business, Finance and Accounting, and the International Journal of Accounting. He has received several grants and honors, of which the Geewax Terker Prize is the latest. Peter Wysocki Professor Peter Wysocki is an associate professor of management at...
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...School of Management, Rotterdam, The Netherlands a r t i c l e i n f o a b s t r a c t Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country’s legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly. Ó 2010 Elsevier B.V. All rights reserved. Article history: Received 4 July 2009 Accepted 6 January 2010 Available online 11 January 2010 JEL classification: G30 G32 G38 K22 Keywords: IPO Underpricing Legal framework Investor protection Multi-level modeling 1. Introduction When companies go public, a well-documented phenomenon is the underpricing of the initial public offering (IPO). On average, shares seem to be offered at a price lower than the market price. Underpricing is usually estimated as the percentage difference between the price at which the shares were sold to investors during the offering period and the price at which the shares trade afterwards in the secondary market....
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...be liable for cleanup costs amounts to deprivation of a significant property interest within meaning of the due process clause. Comprehensive Environmental Response, Compensation, and Liability Act of 1980, § 107(l ), as amended, 42 U.S.C.A. § 9607(l ); U.S.C.A. Const.Amend. 5. Absence of notice and hearing may be justified by exigent circumstances. U.S.C.A. Const.Amend. 5. 92k251.5 k. Procedural Due Process in General. Most Cited Cases Constitution allows the process due to be tailored to fit realities of the situation. U.S.C.A. Const.Amend. 5. *1510 Lynn Wright, with whom Robin F. Price and Edwards and Angell, New York City, were on supplemental brief, for plaintiffs, appellants. George W. Van Cleve, Deputy Asst. Atty. Gen., with whom Barry Hartman, Asst. Atty. Gen., Washington, D.C., Wayne A. Budd, U.S. Atty., George B. Henderson, II, Asst. U.S. Atty., Boston, Mass., Stephen L. Samuels, Steve C. Gold, Jacques B. Gelin, Attys., Dept. of Justice, Charles Openschowski, Office of Gen. Counsel, E.P.A. and Luis Rodriguez, Asst. Regional Counsel, E.P.A., Washington, D.C., were on supplemental brief, for defendants, appellees. OPINION EN BANC TORRUELLA, Circuit Judge. After removing hazardous substances from property belonging to the Reardons, EPA filed a notice of lien on the property for the amount spent. See 42 U.S.C. § 9607(l ). The Reardons sued to have the notice of lien removed, arguing that they were not liable for the cleanup costs, that the lien was overextensive...
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...Topics in Economic Analysis & Policy Volume 5, Issue 1 2005 Article 16 Price Discrimination and Smuggling of AIDS Drugs Richard A. Hornbeck∗ ∗ MIT, hornbeck@mit.edu Copyright c 2005 by the authors. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, bepress, which has been given certain exclusive rights by the author. Topics in Economic Analysis & Policy is one of The B.E. Journals in Economic Analysis & Policy, produced by The Berkeley Electronic Press (bepress). http://www.bepress.com/bejeap. Price Discrimination and Smuggling of AIDS Drugs∗ Richard A. Hornbeck Abstract Patent-holding pharmaceutical companies are shown to be imperfectly able to charge differential prices for AIDS drugs due to the potential for black market exchange. Thus, greater segmentation in the international market through additional barriers to smuggling would induce firms to charge lower prices for AIDS drugs in poorer countries. Without these additional barriers, widespread drug distribution through mandated lower prices or weakened patent protection in the developing world would result in smuggling, undercutting demand in developed markets and reducing firms’ research incentives. By contrast, further market segmentation would allow policy makers to go beyond the induced price cuts and remove...
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...The Consequences of Mandatory Corporate Sustainability Reporting Ioannis Ioannou London Business School George Serafeim Harvard Business School Abstract We examine the effect of mandatory sustainability reporting on several measures of socially responsible management practices. Using data for 58 countries, we show that after the adoption of mandatory sustainability reporting laws and regulations, the social responsibility of business leaders increases. We also document that both sustainable development and employee training become a higher priority for companies, and that corporate governance improves. Furthermore, we find that companies implement more ethical practices, reduce bribery and corruption, and that managerial credibility increases. These effects are larger for countries with stronger law enforcement and more widespread assurance of sustainability reports. We conclude with thoughts about mandatory sustainability and integrated reporting. Keywords: sustainability reporting, mandatory reporting, corporate social responsibility, integrated reporting Assistant Professor of Strategic and International Management, London Business School, Regent’s Park, NW1 4SA, London, United Kingdom. Email: iioannou@london.edu, Ph: +44 20 7000 8748, Fx: +44 20 7000 7001. Assistant Professor of Business Administration, Harvard Business School, Soldiers’ Field Road, Morgan Hall 381, 02163 Boston, MA, USA. Email:gserafeim@hbs.edu, Ph: +1 617 495 6548, Fx: +1 617 496 7387 (contact...
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...on the nature and consequences of the corporate governance problem, providing some guidance on the major points of consensus and dissent among researchers on this issue. Also analysed is the effectiveness of a set of external and internal disciplining mechanisms in providing a solution for the corporate governance problem. Apart from this, particular emphases are given to the special conflicts arising from the relationship between managers and shareholders in companies with large ownership diffusion, the issue of managerial entrenchment and the link between firm value and corporate governance. Keywords: agency theory, corporate governance, ownership structure JEL Classification: G300 1 1 Introduction Recent financial scandals associated to accounting and other frauds allegedly blamed to top company managers (e.g. Enron, Worldcom, Adelphia) have brought into public light the recurring question of whether companies are managed on the best interests of shareholders and other company stakeholders such as workers, creditors and the general community. A point that has been made frequently is that top managers may possess too much power inside their companies and that a general lack of accountability and control of their activities is...
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...Keywords: Complexity Institutional quality Human capital Division of labor Comparative advantage JEL classification: F10 a b s t r a c t This paper proposes a simple theory of international trade with endogenous productivity differences across countries. The core of our analysis lies in the determinants of the division of labor. We consider a world economy comprising two large countries, with a continuum of goods and one factor of production, labor. Each good is characterized by its complexity, defined as the number of tasks that must be performed to produce one unit. There are increasing returns to scale in the performance of each task, which creates gains from specialization, and uncertainty in the enforcement of each contract, which create transaction costs. The trade-off between these two forces pins down the size of productive teams across sectors in each country. Under free trade, the country where teams are larger specializes in the more complex goods. In our model, it is the country where the product of institutional quality and human per worker capital is larger. Hence, better institutions and more educated workers are complementary sources of comparative advantage in the more complex industries. © 2009 Elsevier B.V. All rights reserved. 1. Introduction “Ever since David Ricardo published his Principles of Political Economy, cross-country differences in technology have featured prominently...
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...ENVIRONMENTAL LAW PRIVATE REMEDIES Civil Law * written codes which rely on statutory material, traditions * Judges has small role Common Law * Based on customs of the areas, precedents * Judge made law – cases decided by judge US * Mostly statutory, but judges are important * Interpret statues * Judge decides if not codified * Criminal – against State * Civil – all other Environmental Law not very effective if using private remedies PRIVATE REMEDIES | GOOD | BAD | Develop theory and needs | After the fact | Push legislation | Disorganized | Day in court | Costly | Money damages | Only personal damages | Tort Law - wrongful acts vs. contract law 1. Negligence a. Duty owned b. Unreasonable act c. Personal Injury d. Ex: pesticides 2. Trespass e. Tied to property rights f. Property invasion g. Ex: dam building (H2O invasion) 3. Nuisance h. Tied to unreasonable use interfering with another’s use i. Property use damaged j. Loss of livability k. Can’t move TO a nuisance l. Standing question i. cannot sue unless suffer special damage ii. different in kind, not just degree m. Ex: smoke, sewage treatment, hog farm, airport CIVIL REMEDIES 1. Monetary damages – personal things $ can fix 2. Injunctive relief – environmental, $ can’t replace, make do something a. Negative – DON’T...
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...that both organizations and individual officers can implement to mitigate the negative effects of job-related stress. • Describe the ways that the police subculture and stress are related. • Identify and provide examples of the ways in which community policing can both increase and decrease stress levels among police officers. • Describe the characteristics associated with the phenomenon of police burnout. I n Chapter 4, we focus on organizational and administrative aspects of policing, on the formal structure and the impact of police leaders. While these formal considerations are crucial to an understanding of the police role, there are two other contributing factors that must be considered in our attempt to understand policing as an occupation: the police subculture and the pressures and stresses of police work. Police administrators and the law specify the broad parameters within which officers operate, 97 98 O INTRODUCTION TO POLICING O PHOTO 4.1 This patrol officer is attempting to explain to members of his department’s administrative committee on traffic safety why the traffic accident he was involved in was unavoidable. but the police subculture tells them how to go about their tasks, how hard to work, what kinds of relationships to have with their fellow officers and other categories of people with whom they interact, and how they should feel about police administrators, judges, laws, and...
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...the period 1984 to 1996. Random and fixed effects models are estimated to investigate the possibility of a causal relationship between unemployment and crime. Hypothesis tests show that two-way fixed effects models should be used. The main result of the paper is that there is some evidence of significant effects of unemployment on crime, both for total crime and for some subcategories of crime. We are grateful to Rachel Bambery, New Zealand Police National Headquarters, for her assistance in obtaining crime and population statistics. The staff of the University of Canterbury Library also gave invaluable help in unraveling the complexities of New Zealand unemployment and income data. The paper has benefited from useful comments by two anonymous referees, Simon Kemp, Jacques Poot and participants of the CEPR conference on “Metropolitan Economic Performance”, Lisbon, October 1998. *Corresponding author: IZA, P.O. Box 7240, 53072 Bonn, Germany; winkelmann@iza.org. “I know only of three ways of living in society: one must be a beggar, a thief, or a wage earner.” HONORÉ de MIRABEAU (1749-1791) 1. Introduction It is a common observation for many countries that unemployment rates and crime rates are positively associated. A more contentious issue is whether this association means that unemployment causes crime, crime causes unemployment or third factors cause both. Only the first of the three possibilities would imply that the effects of unemployment on crime deserve to be counted...
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...Captain of the Port, Sector Lake Michigan, telephoned the BPYC and confirmed the above understanding of the BPYC’s comment and its request. In light of the BPYC’s comment, the Coast Guard will not change the TFR published on April 13, 2012. Although the BPYC raised concerns about the economic impact of the Coast Guard’s security zones, the BPYC’s comment did not directly speak to the design, the establishment, or the enforcement of these security zones. The BPYC did not ask the Coast Guard to modify the security zones or to reconsider the manner in which they are enforced. Rather, the BPYC simply asked to meet with the Coast Guard to discuss compensation. While the Coast Guard takes seriously the economic impact that its rules might have on small entities, the Coast Guard is unable to provide compensation to small entities so impacted. Although the Coast Guard is unable to directly compensate small entities for the economic impacts of its rules, the BPYC is encouraged to contact CWO Jon Grob via the contact information provided above to discuss the Coast Guard’s enforcement of the security zones discussed herein and options for compliance. Dated: April 24, 2012. C.W. Tenney, Commander, U.S. Coast Guard Captain of the...
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...Trust, Repute, and the Role of Nonprofit Enterprise [The book version] by Andreas Ortmann* & Mark Schlesinger** Abstract In this chapter we examine the trust hypothesis: the proposition that information asymmetries between providers and consumers of services can explain the existence of nonprofit enterprise in certain markets. We argue that this hypothesis, in order to be viable, has to meet three challenges: (1) the de jure inability of nonprofits to distribute profits to shareholders and/or management must affect incentives within the nonprofit firm in ways that are compatible with trustworthiness (Aincentive compatibility challenge@), (2) nonprofit behavior must not be adulterated by individuals taking advantage of the perceived trustworthiness (Aadulteration challenge@), and (3) nonprofit status must be treated as a reliable predictor of organizational behavior by consumers, when the reputation of individual firms is not seen as reliable (Areputational ubiquity challenge@). We propose that the trust hypothesis stands on shaky ground. It can be sustained only under particular conditions that have been neither carefully described in theory nor subject to empirical assessment. The available evidence, patchy and inadequate as it is, seems to suggest that there are ownership-related differences in the organizational behavior of non-profits and for-profits. However, there is little evidence that these differences can be connected to trust per se or provide a rationale for the existence...
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...MICHAEL NEEL, University of Houston DECHUN WANG, Texas A&M University 1. Introduction We provide evidence on the preliminary effects of mandatory adoption of International Financial Reporting Standards (IFRS) on accounting quality for a relatively broad set of firms from 20 countries that adopted IFRS in 2005 relative to a benchmark group of firms from countries that did not adopt IFRS matched on the strength of legal enforcement, industry, size, book-to-market, and accounting performance. Understanding the effects of mandatory adoption on properties of accounting numbers is of potential interest to standard-setters and securities regulators in countries that are considering IFRS adoption as well as in countries that have already adopted IFRS. Furthermore, evidence on this question is of particular importance to the IASB because it can help the board evaluate whether its stated objective of improving accounting quality is being accomplished (see IASC 1989; Barth 2008). Finally, analysts, investors, and other users may also find it useful to understand the effects of IFRS adoption on accounting quality to potentially reassess how they use accounting numbers. The effects of mandatory IFRS adoption on accounting quality critically depend upon whether IFRS are of higher or lower quality than domestic GAAP and how they affect the efficacy of enforcement mechanisms. By a higher quality standard we mean a standard that either reduces managerial discretion over accounting choices...
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...Meulen Rodgers, Rutgers University April 2007 Abstract: As trade liberalization in India has unleashed a new wave of competitive forces in the economy since 1991, firms have faced growing pressure to cut costs in order to continue production. This study addresses the question of whether the increasing competitive forces from India’s trade liberalization affected the wages of male and female workers differently. Neoclassical theory implies that costly discrimination against female workers should diminish over time with increased competition (Becker 1971). We incorporate this idea into a theoretical model of competition and industry concentration in which the net impact of international trade on the gender wage gap could be positive or negative depending on the initial size of Becker’s discrimination coefficient. Our study tests the theoretical model using repeated cross sections of India’s NSSO household survey data merged with trade and production data from 1983 to 2004. We employ OLS and Fixed Effects techniques at the industry level to estimate the relationship between the male-female residual wage gap and measures of domestic concentration and international trade competition. Results indicate that increasing openness to trade is associated with a widening in the wage gap in India’s concentrated manufacturing industries. This result is consistent with female workers in India having weak bargaining power and a lower workplace status. They are thus less able...
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...ecti on Hi g h l i g h ts •• •• •• •• •• •• White-Collar Crime: An Evolving Concept Modern Conceptualizations of White-Collar Crime Extent of White-Collar Crime Consequences of White-Collar Crime Public Attitudes About White-Collar Crime Characteristics of White-Collar Offenders A 34 s noted in the introduction, Edwin Sutherland created the concept of white-collar crime more than 70 years ago to draw attention to the fact that crimes are committed by individuals in all social classes. As will be seen in this section, one of the largest difficulties in understanding white-collar crime has centered on an ongoing debate about how to define white-collar crime. After discussing various ways that white-collar crime can be defined, attention will be given to the extent of white-collar crime, the consequences of this illicit behavior, public attitudes about white-collar crime, and patterns describing the characteristics of white-collar offenders. Section II Understanding White-Collar Crime 35 As a backdrop to this discussion, consider the following recent white-collar crimes described in the media: •• A jury convicted [then-Baltimore mayor Sheila] Dixon . . . of embezzling about $500 worth of gift cards donated to the city for needy families. Dixon then pleaded guilty last month to lying about thousands of dollars in gifts from her former boyfriend, a prominent developer. (Nuckols, 2010) •• The money manager and technology investor convicted of stealing some...
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