Uniform versus discriminatory tariffs

We analyze the non-cooperative interaction between two exporting countries producing differentiated products and one importing country when governments use optimal policies to maximize welfare. The analysis includes product differentiation, asymmetric costs, and Bertrand competition. For identical exporting countries we demonstrate that the importing country always prefers a uniform tariff regime while both exporting countries prefer a discriminatory tariff regime for any degree of product differentiation. If countries are asymmetric in terms of production cost then the higher-cost exporter always prefers the discriminatory regime but the lower-cost exporter prefers the uniform regime if there is a significant cost differential. With cost asymmetry the announcement of a uniform tariff regime by the importer is not a credible strategy since there is an incentive to deviate to discrimination. This implies an international body can play a role in ensuring that tariff agreements are respected.

The zero, the centre and the empty utopia: from Rossellini to Walter Salles

This article examines utopian gestures and inaugural desires in two films which became symbolic of the Brazilian Film Revival in the late 1990s: Central Station (1998) and Midnight (1999). Both evolve around the idea of an overcrowded or empty centre in a country trapped between past and future, in which the motif of the zero stands for both the announcement and the negation of utopia. The analysis draws parallels between them and new wave films which also elaborate on the idea of the zero, with examples picked from Italian neo-realism, the Brazilian Cinema Novo and the New German Cinema. In Central Station, the ‘point zero’, or the core of the homeland, is retrieved in the archaic backlands, where political issues are resolved in the private sphere and the social drama turns into family melodrama. Midnight, in its turn, recycles Glauber Rocha’s utopian prophecies in the new millennium’s hour zero, when the earthly paradise represented by the sea is re-encountered by the middle-class character, but not by the poor migrant. In both cases, public injustice is compensated by the heroes’ personal achievements, but those do not refer to the real nation, its history or society. Their utopian breadth, based on nostalgia, citation and genre techniques, is of a virtual kind, attune to cinema only.

Does managerial turnover affect football club share prices?

This paper analyses the 53 managerial sackings and resignations from 16 stock exchange listed English football clubs during the nine seasons between 2000/01 and 2008/09. The results demonstrate that, on average, a managerial sacking results in a post-announcement day market-adjusted share price rise of 0.3%, whilst a resignation leads to a drop in share price of 1% that continues for a trading month thereafter, cumulating in a negative abnormal return of over 8% from a trading day before the event. These findings are intuitive, and suggest that sacking a poorly performing manager may be welcomed by the markets as a possible route to better future match performance, while losing a capable manager through resignation, who typically progresses to a superior job, will result in a drop in a club’s share price. The paper also reveals that while the impact of managerial departures on stock price volatilities is less clear-cut, speculation in the newspapers is rife in the build-up to such an event.

Are investors guided by the news disclosed by companies or by journalists?

Most previous studies demonstrating the influential role of the textual information released by the media on stock market performance have concentrated on earnings-related disclosures. By contrast, this paper focuses on disposal announcements, so that the impacts of listed companies’ announcements and journalists’ stories can be compared concerning the same events. Consistent with previous findings, negative words, rather than those expressing other types of sentiment, statistically significantly affect adjusted returns and detrended trading volumes. However, extending previous studies, the results of this paper indicate that shareholders’ decisions are mainly guided by the negative sentiment in listed companies’ announcements rather than that in journalists’ stories. Furthermore, this effect is restricted to the announcement day. The average market reaction–measured by adjusted returns–is inversely related only when the announcements are ignored by the media, but the dispersion of market reaction–measured by detrended trading volume–is positively affected only when announcements are followed up by journalists.

Predicting early data revisions to US GDP and the effects of releases on equity markets

The effects of data uncertainty on real-time decision-making can be reduced by predicting early revisions to US GDP growth. We show that survey forecasts efficiently anticipate the first-revised estimate of GDP, but that forecasting models incorporating monthly economic indicators and daily equity returns provide superior forecasts of the second-revised estimate. We consider the implications of these findings for analyses of the impact of surprises in GDP revision announcements on equity markets, and for analyses of the impact of anticipated future revisions on announcement-day returns.

Earnings management in firms seeking to be acquired

Empirical evidence regarding accrual-based earnings management around mergers and acquisitions has been setting-specific as far as target firms are concerned. This might be due to the fact that target firms cannot always anticipate an acquisition proposal, and thus lack the motive and the time necessary to manage their earnings in order to facilitate or impede the deal. In this paper, we provide clear evidence of downward earnings management by a sample of target firms that have both time and motive to engage in such actions. These are firms that publicly announce their intention to be acquired. Publicly ‘seeking a buyer’ represents a rather unusual corporate event, and we find that these firms engage in downward earnings management in the years surrounding the ‘announcement year’. To some extent, this result is explained by overrepresentation of low performance and growth among these firms, and it can be interpreted under alternative explanations. Furthermore, we show that such downward earnings management negatively affects the probability for a ‘seeking buyer’ firm to secure an acquisition within a reasonable amount of time, a possible indication of efficient diligence by prospective buyers having a preference for firms ‘seeking buyer’ with no informationally obscure earnings.

Accounting quality, information risk and implied volatility around earnings announcements

We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996–2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase in IV before announcements, and is found to relate to a larger resolution in IV after the announcement has taken place. We interpret our findings as indicative of information risk having a significant impact on implied volatility behavior around earnings announcements.