Tuesday, December 29, 2009

Fed Proposes Selling Term Deposits to Absorb Excess Reserves - BusinessWeek

In "open-market transactions" the Fed buys and sells assets to change the money supply. For instance, if they want to shrink the money supply they will sell something. (selling shrinks the money supply since the banks have to pay money to buy the asset. This in turn reduces the amount of money available to lend out.

Now the Fed is considering selling a different type of asset:

Fed Proposes Selling Term Deposits to Absorb Excess Reserves - BusinessWeek: "
The Federal Reserve proposed a program to sell term deposits to banks to absorb some of the banking system’s $1 trillion in excess reserves now threatening to accelerate inflation as the economy recovers."

Saturday, December 26, 2009

The Intelligent Investor: Golden Pay for CEOs Could Be Bad for Stocks - WSJ.com

The Intelligent Investor: Golden Pay for CEOs Could Be Bad for Stocks - WSJ.com:
"The first study, led by corporate-governance expert Lucian Bebchuk of Harvard Law School, looked at more than 2,000 companies to see what share of the total compensation earned by the top five executives went to the CEO. The researchers call this number—which averages about 35%—the 'CEO pay slice.'

It turns out that the bigger the CEO's slice of the pie, the lower the company's future profitability and market valuation...."

Friday, December 25, 2009

Keynes and Hayek rap from PBS

This is good. Not every day you can teach economics with rap music.

Thomas Acquinas for market prices from the Mises Institute

An interesting piece on price (which supports supply and demand as being the drivers of price) from Mises.org.

As a grocer by birth (I just happen to teach finance ;) ) I have often been puzzled at the idea of price "gouging" after disasters (big or small). A few summers ago we had a power outage. Hence people wanted ice and water. We arranged special deliveries (at an added cost) and sold them at the normal price (even though there were lines to buy them). So in this case supply was down, demand was up, but we sold at the same low price. Why? Because reputation matters. If we had raised prices, we would have angered customers who may not have come back. But the key thing is WE decided not to raise prices. It shows that market forces can keep prices in line.

On the other hand, if supply was so depressed (imagine after Katrina), why shouldn't prices rise? If prices had been allowed to rise, it may have prevented looting and sped the recovery.


The Philosopher-Theologian: St Thomas Aquinas - Murray N. Rothbard - Mises Institute

"Aquinas, in his great Summa, raised a question that had been discussed by Cicero. A merchant is carrying grain to a famine-stricken area. He knows that soon other merchants are following him with many more supplies of grain. Is the merchant obliged to tell the starving citizenry of the supplies coming soon and thereby suffer a lower price, or is it all right for him to keep silent and reap the rewards of a high price? To Cicero, the merchant was duty-bound to disclose his information and sell at a lower price. But St. Thomas argued differently. Since the arrival of the later merchants was a future event and therefore uncertain, Aquinas declared justice did not require him to tell his customers about the impending arrival of his competitors. He could sell his own grain at the prevailing market price for that area, even though it was extremely high."

Thursday, December 24, 2009

SSRN-Do Corporate Insiders Prefer Nasdaq? by Stanley Peterburgsky

Interesting take on Rule 144. The rule sets conditions when in the SEC's words there can be

Seal of the U.S.Image via Wikipedia

"...public resale of restricted and control securities if a number of conditions are met...."
included in these conditions is a volume condition:
"Trading Volume Formula. If you are an affiliate, the number of equity securities you may sell during any three-month period cannot exceed the greater of 1% of the outstanding shares of the same class being sold, or if the class is listed on a stock exchange or quoted on Nasdaq, the greater of 1% or the average reported weekly trading volume during the four weeks preceding the filing a notice of sale on Form 144."
Which brings us to the paper by Peterburgsky:

SSRN-Do Corporate Insiders Prefer Nasdaq? by Stanley Peterburgsky:
"I examine whether the double-counting of reported trading volume on Nasdaq plays a role in insiders’ decisions to move their firms. Specifically, since volume on Nasdaq is exaggerated and SEC Rule 144 ties the limit on insider selling to total volume, insiders of troubled firms may be able to use private information to take advantage of other shareholders by switching to Nasdaq and unloading more stock. Consistent with the hypothesis, I find that insiders engage in heavy selling of company stock in the months following the move. Post-announcement abnormal returns are strongly negative."
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Epoch Times - Insider Trading on the Rise

Epoch Times - Insider Trading on the Rise:
"“The Enron case illustrates one of the most pernicious effects of insider trading: It gives executives a reason to distort reports on corporate performance and find other ways to manipulate markets to their own benefit,” Strudler notes."

Wednesday, December 23, 2009

SSRN-The Microstructure of the TIPS Market by Michael Fleming, Neel Krishnan

A god article for class! Explains the TIPS market very well.

SSRN-The Microstructure of the TIPS Market by Michael Fleming, Neel Krishnan:
" We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the nominal Treasury securities market. We find little difference in bid-ask spreads or quoted depth between on-the-run and off-the-run securities, in contrast to the nominal market, but we do find a sharp difference in the incidence of posted quotes. Intraday activity differs strikingly from the nominal market, with activity peaking in the mid-to-late morning. Announcement effects also differ from the nominal market, with auction results and consumer price index announcements eliciting particularly sharp increases in trading activity"




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SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang

SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang:
"We find that voting with one’s feet is done largely by institutions that have less than 1% ownership in the firm while institutions that hold block levels of ownership at the time of the CEO turnover announcement significantly increase their ownership levels leading up to the turnover event. Moreover, we find evidence of activism in the financial press that is significantly related to CEO turnover. We conclude that voting with one’s feet is not a major mechanism by which institutions force corporate change."


I sit on a few investment boards of of groups that are very concerned about socially responsible investing and this "vote with your feet" or be active has come up regularly. In all cases we have sold the shares (always less than 1% of the firm).


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A Habit of Generosity - WSJ.com

A Habit of Generosity - WSJ.com:
"Paul Zak, a neuroeconomist and director of the Center for Neuroeconomics Studies at Claremont Graduate University in Claremont, Calif., has devoted his research to explaining this type of generosity. 'I investigate the biological basis for generosity, focusing on the neuroactive hormone oxytocin,' he says in his blog for Psychology Today. 'Our studies have shown that this hormone partially explains generous behavior because it makes us feel more connected to others.'"

Monday, December 21, 2009

In IPO Market, Issuers Court Long-Term Buyers - WSJ.com

The WSJ provides more evidence that investors are not the same.

In IPO Market, Issuers Court Long-Term Buyers - WSJ.com:
"Long-only buyers—those who tend to hold the stock rather than flip it on the first day—have always been critical participants in successful new issues. Mr. Fox added that issuers 'focus less on allocations when every deal is doing well than when they do in a more differentiating market period like we are in today.'"

Sunday, December 20, 2009

French plan to force gender equality on boardrooms | World news | The Guardian

French plan to force gender equality on boardrooms | World news | The Guardian:
"In a bill submitted to the French parliament this week, all companies listed on the Paris stock exchange would have to ensure female employees made up 50% of their board members by 2015. If passed, a gradual implementation of the law would see businesses obliged to have women in 20% of board seats within 18 months, and 40% within four years.

Currently 10.5% of CAC 40 board members are female.

Job growth predicted in financial regulation - washingtonpost.com

Note: if you are surprised even a little at this, shame on you.

Job growth predicted in financial regulation - washingtonpost.com:
"Financial examiners and compliance officers are expected to be two of the 30 fastest-growing U.S. occupations over the next 10 years, according to a Labor Department report released last week."

Thursday, December 17, 2009

Farnam Street: A Dirty Word or a Dirty World? Attribute Framing, Political Affiliation, and Query Theory

Need more proof that framing and how (and not just what) we say matters? Consider the following from Farnam Street:
Farnam Street: A Dirty Word or a Dirty World? Attribute Framing, Political Affiliation, and Query Theory: "The main distinction was between a surcharge described as a 'carbon tax' and an identical charge described as a 'carbon offset'.

The tax was unpopular - no real surprise. But when people were asked if they supported making the carbon offset mandatory - which is of course exactly equivalent - the response was highly favourable"

Wednesday, December 16, 2009

UPDATE 7-Cadbury points to rival interest as it rejects Kraft | Reuters

UPDATE 7-Cadbury points to rival interest as it rejects Kraft | Reuters
:
"Cadbury (CBRY.L) teased shareholders with the prospect of rival bids and promised bigger dividends and stronger growth as it again knocked back a 10 billion pound ($16.2 billion) offer from Kraft Foods (KFT.N)."

Tuesday, December 15, 2009

Bacteria provide new insights into human decision making

Have a hard time believe I am linking to an article on bacteria for Finance, but it is similar in ways to passive investing. If everyone is doing it, you have an incentive to not do it, but if no one is doing it, you have an incentive to do it.

Bacteria provide new insights into human decision making:
"'We have developed for the first time a system level model of a large gene network to decipher the underlying principles of the bacteria game theory and how an internal network of genes and proteins is used to calculate risks in this complicated situation,' he said.

This has applications to human society because many people encounter similar dilemmas during their own lives. For example, should people ignore side effects and vaccinate against a new potentially lethal virus or should they not vaccinate and take the risk of being infected with the possible consequences? If the majority of the population is going to get vaccinated, then it is better for each individual not to get vaccinated. However, if most people will not be vaccinated then it is better to be vaccinated."

To which I would add, it is also similar to passive investing.

Fondo Libre - Visualizing Bank Failures ( 2008-2009 )

Fondo Libre - Visualizing Bank Failures ( 2008-2009 ): "Visualizing Bank Failures ( 2008-2009 ) from Michael J Bommarito II on Vimeo."

Visualizing Bank Failures ( 2008-2009 ) from Michael J Bommarito II on Vimeo.

Monday, December 14, 2009

Paul Samuelson, Nobel-Winning Economist, Dies at 94 (Update1) - Bloomberg.com

Paul Samuelson, Nobel-Winning Economist, Dies at 94 (Update1) - Bloomberg.com:
"Paul Samuelson, Nobel Prize-winning economist and author of the best-selling economics textbook in history, died today at his home in Belmont, Massachusetts. He was 94."

Saturday, December 12, 2009

Hedge Fund Exchange: Women Hedge Fund Managers Outperform Men

Hedge Fund Exchange: Women Hedge Fund Managers Outperform Men:
"Women also, apparently, make better money managers according to another study by two professors at UC Davis [3]. That study found that overconfidence caused men to trade stocks 45 percent more often than women, thus lowering their net portfolio returns by 2.65 percent per year (compared with 1.72 percent lower returns for women traders). Moreover, several studies show a link between profit and gender. Companies with several high-ranking women at either officer or director levels tend to have higher earnings per share, return on equity and stock prices than competitors with few or no senior women."
The article mentions other studies as well and I know the evidence suggests strongly that there are differences between genders when it comes to risk financial risk taking.

But I am still not totally convinced. Why? Well there is some conflicting evidence. For instance, Olivares, Diaz, and Besser report that gender differences in risk aversion appear to be driven by wealth differences.

Moreover, even if there is a difference in performance (which I by no means doubt), is it based on gender?

An alternative explanation might be based on the relative numbers of male and female money managers (or board members). For instance, supposed that 80% of board members (or portfolio managers) are male. Further suppose that an equal proportion of males and females are "good at being money managers (or board members). If we assume that on average the more qualified managers get jobs first, then it would be the case that females would outperform. Which MAY be entirely different than the risk aversion explanation.

It does however lead to at least more questions as to the view that markets are efficient and that any money manager is as good as any other.

Friday, December 11, 2009

Bubble Decade: Technology, Housing, Real Estate, Money, Layoffs, Companies, Unemployment, Internet Pioneers, Business, Markets, Finance - CNBC.com

Bubble Decade: Technology, Housing, Real Estate, Money, Layoffs, Companies, Unemployment, Internet Pioneers, Business, Markets, Finance - CNBC.com:
"The sweeping story of the three economic bubbles that defined the decade begins with the tech bubble, its apex marked by AOL’s audacious takeover of Time Warner. The deal signified the heights and hope of the dot-com boom, a chapter that saw the creation of scores of high-flying internet companies, many of which would die an early death. The middle of the decade brought the housing boom and the formation of the real estate bubble. It was the age of easy money, with banks all too eager to fund new construction, and developers and homeowners all too eager to take on loans they couldn’t afford. The last bubble of the decade to burst was the credit bubble, exemplified by private equity firms awash in money and on the lookout for takeover targets. In some cases, these private equity deals and leveraged buyouts resulted in a lucky few making a fortune, with the targeted company loaded up with debt and ruined in the process."

Top 30 at Goldman Will Get Stock, Not Cash, as Bonus - NYTimes.com

Top 30 at Goldman Will Get Stock, Not Cash, as Bonus - NYTimes.com:
"Goldman Sachs announced on Thursday that its top executives would forgo cash bonuses this year and that it would give shareholders a say in determining compensation......While Goldman will give shareholders a say on pay, the bank would not be required to bow to its investors wishes. Still, a vote against Goldman would be deeply embarrassing for the bank."

Thursday, December 10, 2009

Paper Probes Fed Nightmare — Inflating Away U.S. Debt - Real Time Economics - WSJ

Paper Probes Fed Nightmare — Inflating Away U.S. Debt - Real Time Economics - WSJ: "
Some fear that inflating the nation’s debt away is the path of least resistance for political leaders who can’t make the hard choices on taxation and spending....

For those who detest inflation–and that’s most economists and policy makers–the bad news comes first. The paper says a review of the U.S. experience since World War II shows “eroding the debt through inflation is not farfetched.”"

New York Fed to hear new theory on financial meltdown Dec. 8

Anjan Thakor is a financeprofessor from Washington University in St. Louis.

New York Fed to hear new theory on financial meltdown
"Thakor says it is important to determine the root causes of the financial crisis in order to prevent it from happening again. 'We had this double fragility in the financial system from high borrower and bank leverage....

To get at root causes of the current crisis and prevent future meltdowns, Thakor offers these proposals:

- create an agency to gather information and monitor the interconnectedness of institutions, including the shadow banking system

- increase the minimum regulatory capital requirements for banks (a controversial, but necessary calibration according to Thakor)

- provide thoughtful research-based policy prescriptions that halt the tide of over-regulation

Blaming executive compensation or pumping more liquidity into the system is not going to fix the financial crisis, says Thakor."


Read the whole thing here

Wednesday, December 09, 2009

Two fast points on the 50% tax on British Bank bonuses

Two fast points on the 50% tax on British Bank bonuses:

City tells Darling: your super-tax is pushing us out of Britain | Business | The Guardian:
"City minister, Lord Myners, spent this afternoon calling the heads of all major banks in the City to try to reassure them about the tax, which is being introduced immediately, bankers reckoned there would be a race to circumvent the rules by raising basic salaries, deferring bonus payments or shifting bankers' contracts overseas."
and my favorite line:
"One lawyer said the one-off 50% tax on bonuses of more than £25,000 that will be paid by banks, rather than bankers, could become a job creation plan for Frankfurt, Paris and Zurich"

Mexico's oil hedge

Mexico Has Hedged Oil for 2010 at $57 a Barrel (Update2) - Bloomberg.com:
"Mexico spent $1.172 billion to buy oil hedges for 2010, covering a possible revenue shortfall if production falls for the sixth straight year and prices don’t recover from about a five-year low.

Mexico purchased put options that give it the option, not the obligation, to sell its oil for $57 a barrel next year, the Finance Ministry said in an e-mail statement today.

“We want this as an insurance policy...,"


I am sure this article will yield many interesting class discussions. Note the timing of the hedge but at least they had the right side and were buying options.

Steven Colbert on the Fed---FUNNY

Hilarious!


The Colbert ReportMon - Thurs 11:30pm / 10:30c
Fed's Dead
www.colbertnation.com
Colbert Report Full EpisodesPolitical HumorU.S. Speedskating



HT to Clusterstock.

Testosterone link to aggression may be all in the mind : Nature News

Testosterone link to aggression may be all in the mind : Nature News:
"Women who received testosterone made significantly higher offers than those who received placebo — an average of 3.9 money units compared with the placebo group's average offer of 3.4 money units.

'In the socially complex human environment, pro-social behaviour, not aggression, secures status,' says Michael Naef, an experimental economist at the Royal Holloway, University of London, who is a co-author on the paper."

U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says - Bloomberg.com

Wonder why the economy is slow? Consider these numbers from Zillow and Bloomberg:

U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says - Bloomberg.com:
"U.S. homeowners have lost about $5.9 trillion in value since the housing market peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com.

Almost half a billion dollars was wiped out this year through Nov. 30, as the market headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement."

Friday, December 04, 2009

Even Warren Buffett makes some investment mistakes

We all make mistakes, some investments don't work like we hope, even Warren Buffett does not bat 1000.

Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com:
"At NetJets, the returns have been disappointing — and lately the losses severe. Through his investment company, Berkshire Hathaway, he bought the private jet travel business, which caters to the affluent, for $725 million in 1998. Even though Berkshire does not provide detailed results for this small piece of its empire, insiders confirm that Mr. Buffett has yet to recover his investment.

With problems mounting at the unit — heavy losses and allegations of business improprieties — Mr. Buffett...."

The article goes on and introduce David Sokol as both the person that has been assigned to fix things and also a likely replacement to Buffett when the legendary investor eventually steps down.

Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com

We all make mistakes, even Warren Buffett:

Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com:
"At NetJets, the returns have been disappointing — and lately the losses severe. Through his investment company, Berkshire Hathaway, he bought the private jet travel business, which caters to the affluent, for $725 million in 1998. Even though Berkshire does not provide detailed results for this small piece of its empire, insiders confirm that Mr. Buffett has yet to recover his investment.

With problems mounting at the unit — heavy losses and allegations of business improprieties...."
It goes on to say that David Sokol (who many believe will eventually replace Buffett) has been assigned to straighten things out.

Wednesday, December 02, 2009

Free candy?

YouTube - The gift economy | Marketplace Dept. of Behavioral Economics:
"A generous candy stash raises a co-workers status, but sometimes the rules of exchange get confusing. Behavioral economist Dan Ariely uses his Predicably Irrational insights to help Marketplaces Eve Troeh understand social norms and social contracts"



Unbanked and underbanked

The FDIC issued a report today that shows that many Americans do not have access to banking or choose not to use the banking system.

First the results:

From FDIC.gov:

  • An estimated 7.7 percent of U.S. households, approximately 9 million, are unbanked. These households do not have a checking or a savings account....
  • In addition to the unbanked households, an estimated 17.9 percent of U.S. households, roughly 21 million, are underbanked. These households have a checking or savings account but rely on alternative financial services. Specifically, underbanked households have used non-bank money orders, non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years
  • From USATODAY:

    "Nearly 30 million households have no bank account or have one but also use alternate financial services at least occasionally, according to the FDIC report. The survey, the FDIC's first in-depth study of the issue, was conducted by the Census Bureau.

    The problem is most acute among minorities: 53% of African-American households and 43% of Hispanic households use check cashers or similar services instead of or in addition to banks.

    Buying money orders and cashing checks are the most frequent transactions, the survey shows. Those using check cashers and other services say they are faster, cheaper and more convenient than banks — even though they pay a fee to cash a check they could deposit in a bank account for free."

    And from the UPI:

    "Nine million households, including a fifth of households earning under $30,000 a year, have no bank account, the report to be released Wednesday says."

    Now we can argue some about the definitions (for instance are you underbanked if you use Money Orders twice a year? and what percentage are in transit (closed account at bank A, have yet to open one at bank B)? But regardless of those issues, the numbers are pretty big but as any student of banking should say, somewhat predictable. Why? As fees go up, small accounts pay a higher proportion. Thus it may be expected that some close their accounts. And indeed, nearly half of those who are "unbanked" did in fact close their accounts.

    Working with many of these "unbanked" through BonaResponds has given me a new appreciation of the importance of banking. Being "unbanked" definitely limits their access to capital (for instance this past year heard : "We will install insulation as soon as we can sell our tractor") and increases transaction costs. But it also prevents credit histories and thus makes future loans even more difficult.


    Report: Many minorities shun banks - USATODAY.com

    Report: Many minorities shun banks - USATODAY.com:
    "Nearly 30 million households have no bank account or have one but also use alternate financial services at least occasionally, according to the FDIC report. The survey, the FDIC's first in-depth study of the issue, was conducted by the Census Bureau.

    The problem is most acute among minorities: 53% of African-American households and 43% of Hispanic households use check cashers or similar services instead of or in addition to banks."


    Big numbers. I am surprised but would like to see the breakdown along monetary lines and not racial.

    Pirates float an equity issue

    Yes it is now possible (in some parts anyways) to buy stock in the Pirates! No, not the Pittsburgh Pirates. The Somali pirates of course. They have floated shares. (got to love the bad pirate humor!)

    From the Marginal Revolution

    Who says there's a credit crunch?

    Somali pirates are raising money through a local equity offering:

    In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate.

    Great as a teaching tool, but maybe, just maybe a tad illegal?

    Buy stock in the pirates. No Not the Pittsburgh Pirates, the Somali Pirates

    Marginal Revolution: Who says there's a credit crunch?:
    "Who says there's a credit crunch?

    Somali pirates are raising money through a local equity offering:

    In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate."

    Marginal Revolution: Who says there's a credit crunch?

    Marginal Revolution: Who says there's a credit crunch?:
    "Who says there's a credit crunch?

    Somali pirates are raising money through a local equity offering:

    In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate."


    A great teaching example, but come one, a tad illegal?

    Tuesday, December 01, 2009

    Hostile takeovers on from MarketPlace

    Hostile takeovers on Vimeo: "We all know what a takeover is. That’s when one company agrees to be bought by another. But what happens when companies don’t agree and the takeover goes hostile? Senior Editor Paddy Hirsch explains."

    Hostile takeovers from Marketplace on Vimeo.

    SSRN-Short Seller Trading in Companies with a Severe Accounting Irregularity by Jap Efendi, Edward Swanson

    So at least some people can identify accounting regularities! Will discuss in class.

    SSRN-Short Seller Trading in Companies with a Severe Accounting Irregularity by Jap Efendi, Edward Swanson:
    "We find that shorts establish significant positions more than a year before the average restatement announcement, those positions increase as the announcement month approaches, and the largest positions are held in companies that will announce an accounting irregularity that attracts class action litigation. Shorts are thereby well positioned to profit from the lengthy string of negative returns that precede the announcement of a severe accounting irregularity. Afterward, we find average short interest is sticky, and shorts retain positions in firms that experience a further price decline. In the six months after an announcement, positions in heavily shorted restating firms (i.e., short interest exceeding 2.5 percent before the announcement) earn an additional 24 percent (31 percent with class action litigation). We conclude that shorts have the skill to play an important private-sector role in identifying and disciplining companies with accounting irregularities."

    Update 12/1
    Miguel at Simoleonsense chips in the following article on the predictablity of restatements by Dechow Ge Larson and Sloan :

    "The results reveal that during misstatement years, accruals and cash and credit sales are unusually high, while return on assets and the number of employees are declining. In addition, misstating firms finance more of their assets through operating leases and have relatively less PP&E. We find that market pressures appear to affect incentives to misstate. Misstating firms are raising new financing, have higher market-to-book ratios, and strong prior stock price performance. We develop a model to predict accounting misstatements."

    SSRN-Social Capital and Community Economic Development in Los Angeles Koreatown: Faith-Based Organizations in Transitional Ethnic Community by Hyunsun Choi

    Maybe it does pay to pray. (and not just like you are thinking!)
    SSRN-Social Capital and Community Economic Development in Los Angeles Koreatown: Faith-Based Organizations in Transitional Ethnic Community by Hyunsun Choi:
    "Between October 2002 and October 2003, a spatial analysis of U.S. census records and the Korean Business Directory was performed to clarify the distribution of the Korean population and their institutions in the Los Angeles area.Sunday services and other meetings in four Korean congregations, and board meetings of Korean Churches for Community Development (KCCD) and the Korean American Museum (KAM), were observed.... Analysis of the data reveals that Korean congregations play a pivotal role in creating social capital for the Korean immigrant community in Los Angeles: many Koreans have built close social networks through the ethnic churches.In fact, Korean churches act as small business incubators in Koreatown, placing information and financial capital within the reach of immigrant entrepreneurs.Because these Koreans place more trust in those from the same religious group than in those from the same ethnic group, it appears that faith-based social capital can be more important than ethnic resources in the establishment of immigrant businesses. (SAA)"