Accounting guidance often contains examples which provide practitioners with a description of a hypothetical transaction and its appropriate accounting treatment. Despite this potential to influence accounting judgments, our understanding of how practitioners use such examples when making these judgments is limited. Relying on psychology theory, I propose that practitioners must first assess the level of similarity between the transaction and the example. I predict that when doing this, practitioners unknowingly use a biased cognitive process where they overweight shared aspects between the transactions. Using an experiment, I confirm this prediction and show that this bias causes practitioners to systematically assess similarity between a transaction and example as too high. Results also show that this causes practitioners to consistently overestimate the likelihood that their transaction also qualifies for the same treatment as any example they are given. My study provides insights on how and why examples can systematically affect accounting judgments and has implications for both standard setters and practitioners. / text

This dissertation contains three chapters in financial economics that theoretically and empirically examine how individuals' investment decisions explain aggregate behavior. The first chapter examines how reputational herding between fund managers depends on the fee structure, fund manager evaluation metric, market efficiency, and density of talented fund managers. Results show there are more equilibria involving herding between fund managers when net fund balance growth depends on reputation of talent rather than fund return. These inefficient equilibria are removed when the ratio of the performance fee rate to management fee rate is larger than calculated thresholds that depend on market efficiency and the density of talented fund managers. In the absence of performance fees, lower predictability of investment returns and a higher density of talented fund managers increase the desire for fund managers to deviate from efficient equilibria. The model also shows having fund managers compete against each other induces herding when net fund balance growth depends on fund returns, but removes herding equilibria when net fund balance growth depends on reputation of talent. The second chapter determines what herding networks exist between institutional investors and how herding depends on stock market volatility, degree of portfolio changes, and stock size. Using quarterly holding data from 2000-2010, I find stronger herding networks between similar types of institutions compared to institutions in the same metropolitan area. Furthermore, the herding network between similar types of institutions exists across metropolitan areas. Results show institutions herd more when making major portfolio changes than when making minor portfolio changes. The difference in herding between the two types of portfolio changes is greatest for small cap stocks which exhibit the highest levels of herding under both types of portfolio changes. The relationship between market volatility and herding by institutions is also examined and found not to have a strong correlation using quarterly holdings data. The third chapter answers the question, "Can reasonable wind energy plant cost reductions or efficiency improvements precipitate immediate investment in wind energy in the absence of renewable energy Production Tax Credits?" I analyze a single entity considering an irreversible investment under uncertainty in wind power energy. The investor's decision to invest is dependent on investment cost, energy production efficiency, government policy, current price of electricity, and beliefs on future electricity prices. The results show that even with substantial cost reductions and efficiency improvements, Production Tax Credits are still needed to encourage immediate investment. / text

My dissertation consists of empirical and theoretical essays on Microeconomic Theory and International Economics. The first chapter discusses the existence and characterization of a model that determines producer's optimal pricing and allocation rule as a preannounced markdown schedule. The mechanism focuses on pricing and operational implications of allotting scarce resources when customers are heterogeneous in their valuations and sensitivities towards availability of product. The proposed mechanism suggests that a carefully designed multistep markdown pricing could achieve optimal revenue when selling a single unit. However, to sell multiple units, monopolist should modify the implementation of markdown pricing by either hiding the number of available products or selling them via contingent contracts and upfront payments. In the second essay, we study the heterogeneity of finance and growth nexus across countries. Our paper contributes to the literature by investigating whether this impact differs across regions and types of economy. Using a rich dataset, cross-section and dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differing performance on financial access for a given level of depth. The third chapter analyzes contraction of exports in the aftermath of severe financial crises and tests for its heterogeneity across different industries and based on their credit conditions. It provides a theoretical framework to provide insight on why sectors are hit disproportionately during and in the aftermath of severe financial distresses, and confirms most of them with empirical estimations. The findings suggest that industries with greater reliance on outside financing and fewer shares of tangible assets experience greater contractions in export volumes in the years following a severe financial crisis. / text

The rise of Chinese economy has favoured the growth of several financial centres in China. This phenomenon has drawn much attention to several scholars who focus on the relationship between Hong Kong and Shanghai. With a few exceptions, the relationship among Beijing, Hong Kong, Shanghai and Shenzhen have not been satisfactorily revealed, while financial competition and cooperation among them are also far from clear. This thesis examines the financial systems of Hong Kong, Beijing, Shanghai and Shenzhen to show their strengths and weaknesses. Financial markets, such as the stock market, bond market, funds market, insurance market, futures and derivatives market as well as the foreign exchange market are all included in this study. In addition, other important players (banking industry and multinational corporations) in the financial system are covered. This study shows that Hong Kong’s strengths lie in its stock, fund, insurance, financial futures and options, foreign exchange and its related derivatives markets, banking industry as well as the attractions of multinational corporations; whereas it is weak in parts of the stock market, the GEM, bond, PE/VC funds and commodity futures markets. Beijing is an important player in the banking industry, stock, bond, private equity fund, VC fund and insurance markets. However, it is not so developed in regard to foreign currency bond, fund (excluding PE and VC funds), financial futures and options, foreign exchange and related derivatives markets, foreign banking and the attractions of multinational corporations. Shanghai is considered to be at a similar level of ranking as Beijing. It is the capital centre of China and has the no.1 fund market in the Mainland although weaker than that of Hong Kong. Shanghai is also strong in foreign banking industry and the attraction of multinational corporations. Whereas Shanghai is weak in its banking industry (excluding foreign banking), bond market, PE/VC funds, financial futures and options as well as foreign exchange markets. Shenzhen is the weakest financial centre, with its advantages in the SME board, ChiNext and VC funds. Another finding of this study reveals that, except for the previous studies on financial centre competition and cooperation in China, there are still some potential areas such as the financial cooperation between the HKEx and SSE, the GEM and ChiNext as well as the financial competition of the private equity fund industry between Hong Kong and Beijing for the financial competition and cooperation of Beijing, Shanghai, Shenzhen and Hong Kong. The research findings of this thesis have both theoretical and political implications. Theoretically, the study reflects the significance of an information hinterland as well as law and finance theory in the Chinese financial market and also proves the importance of Beijing as a financial centre in China. Empirically, this thesis offers some implications for policy marking to enhance the better development of these financial centres. Specifically, Mainland China should further promote its regulatory and legal quality in order to provide better regulation and supervision on the financial system. In addition, it should put more effort to promote the development of industries that perform well in Hong Kong, Beijing, Shanghai and Shenzhen. / published_or_final_version / Geography / Master / Master of Philosophy

Not available / text

Not available / text

The first chapter studies mass layoff decisions. Firms in the SP 500 often announce layoffs within days of one another, despite the fact that the average SP 500 constituent announces layoffs once every 5 years. By contrast, similar-sized privately-held firms do not behave in this way. This paper provides a theoretical model and empirical evidence illustrating that such clustering behavior is largely due to CEOs managing their reputation in financial markets. The model's predictions are tested using two novel datasets of layoff announcements and actual mass layoffs. I compare the layoff behavior of publicly-listed and privately-held firms to estimate the impact of reputation-based incentives on cyclicality of layoffs. I find that relative to private firms, public firms are twice as likely to conduct mass layoffs in a recession month. In addition, I find that the firms that cluster layoff announcements at high frequencies are also the ones that are more likely to engage in mass layoffs during recessions. My findings suggest that reputation management is an important driver of layoff policies both at daily frequencies and over the business cycle, and can have significant macroeconomic consequences. In the second chapter I present a theory of the safe assets market and make three central points. First, the quantity of safe assets has a strong influence on equilibrium risk premium and households’ willingness to hold risky assets. Second, the banking system and its regulation largely determine the quantity of safe assets (money-like claims) available to households. Lastly, by regulating banks’ safe asset creation, central bank policy influences risk premium even in a flexible-price world. I show that the optimal central banking policy involves managing risk in the economy, which sometimes calls for large interventions. The third chapter studies the asset allocation decisions of investors and central banks. This chapter identifies the fundamental drivers for these decisions and determines whether their influence has been altered by the global financial crisis and subsequent low interest rate environment in advanced economies. The fourth chapter analyzes the welfare losses of taxation in a simple dynamic moral hazard model under symmetric information. / Economics

The objective of this dissertation is to investigate the effect of the segmental disclosure required by Statement of Financial Accounting Standards No. 14 (SFAS 14) on the operating risk of multisegment firms. This investigation is accomplished in two phases. A theoretical model establishing the relationship between segmental disclosure and operating risk is developed in phase one. In the second phase, this model is employed in an empirical study that evaluates the effect of SFAS 14 on the operating risk of the affected firms. The findings of each of these phases are summarized below. A theoretical model for measuring operating risk is developed first. This model is developed by decomposing systematic risk into operating and financial risks. Then it is shown how the additional segmental disclosure provided by SFAS 14 can be used to assess the value of this measure of operating risk. First, the determinants of operating risk are identified. Then it is argued that if the additional disclosure provided by SFAS 14 had an effect on the assessment of operating risk, this effect would be associated with the disclosure of segmental assets. This argument provides the basis for conducting an empirical study that evaluates the effect of the segmental disclosure provided by SFAS 14 on operating risk. In this dissertation, the empirical study examines the effect of disclosure of segmental assets on the operating risk of firms that disclosed such information for the first time following the initiation of SFAS 14. A sample of these firms form the treatment group. The control group is composed of single-segment firms. The firms in the control group did not disclose segmental assets prior to or after SFAS 14 went into effect. A control group composed of multisegment firms is not used in this study because only two firms are available from the sample taken. Two hypotheses are tested. Hypothesis 1 simply tests whether SFAS 14 had an effect on the operating risk of the affected firms. Hypothesis 2 then tests if SFAS 14 had a favorable effect on operating risk. The effect on operating risk is evaluated by comparing changes in operating risk from pre-regulation period to post-regulation period for the treatment group with those of the control group. In both hypotheses, the null hypothesis that SFAS 14 did not affect operating risk is tested. The Mann-Whitney U test is employed to test Hypothesis 1. The Mann-Whitney U test, the Wilcoxon Matched-Pairs Signed-Ranks Test and multiple regression analysis are used to test Hypothesis 2. The empirical results indicate that neither of the null hypotheses could be rejected at any conventional level of significance. In short, the empirical results tend to suggest that the additional segmental disclosure provided by SFAS 14 did not have a favorable effect on the operating risk of the affected firms. However it is advised that caution should be exercised in drawing inferences based on these results because of the potential effects on operating risk by factors not controlled for in this study. Finally, an alternative future study is suggested. Pending the empirical findings of the future study it is suggested that the empirical results presented in this study should be considered preliminary.

No description available.

Portfolio design is one of the central topics in finance. The original attempt dates back to the mean-variance model developed for a single period portfolio selection. To have a more realistic approach, multi-period selections were developed in order to manage uncertainties associated with the financial markets. This thesis presents a multi-period financial model proposed on the basis of the network flow structure with many planning advantages. This approach comprises two main steps, dynamic portfolio selection, and dynamic portfolio monitoring and rebalancing throughout the investment horizon. To build a realistic yet practical model that can capture the real characteristics of a portfolio a set of proper constraints is designed including restrictions on the size of the portfolio as well as the number of transactions, and consequently the management costs. The model is solved for two-stage financial planning problems to demonstrate the main advantages as well as characteristics of the presented approach.