Earnings management using estimates and the timing of adoption of accounting standards: An empirical examination of pensions

This study investigates the relationship between adoption timing of Statement of Financial Accounting Standards 87 and earnings management after adoption. Earnings management, defined consistent with Schipper (1989), is tested through hypotheses using (1) a portfolio approach and (2) pension rates. One Hypothesis uses a Modified Jones (1991) Model as a proxy for discretionary accruals and the other uses pension rate estimates.^ Statistically significant relationships are found between adoption timing and (1) discretionary accruals and (2) estimated rate-of-return (ROR) on pension plan assets. Early adopting firms tend to have lower discretionary accruals after adoption than on-time adopters. They also tend to use higher ROR estimates which are not supported by higher actual returns. Thus, while early adopters may be using ROR to manage income, this tends to not result in higher discretionary accruals. ^

Education, earnings, and rates of return: The case of Taiwan

Educational planners and economists have long recognized the importance of education as a form of productive investment in both advanced countries and developing countries. In the case of Taiwan, along with impressive economic growth, there was an even faster rate of growth of the government's investment in education. This leads some to question whether education has any role in economic development. ^ The purpose of this study is to provide a broad overview of the role of education, in terms of private rates of return to education, in Taiwan. In the process, a variety of hypotheses about human capital theory are examined and an empirical study of Taiwan's earnings functions are tested to show that education can be an important instrument to increase private rate of return, even under conditions of scarcity of natural and physical resources. Data was collected using the Manpower Survey and Manpower Utilization Survey, conducted by the government. Research questions were analyzed using descriptive statistics, frequencies, and regression analysis. ^ Results indicated that the Manpower Development Plans have been the decisive influence in allowing Taiwan to develop its human resources and achieve success in meeting the needs of Taiwan's economy. The structure of age-earnings profiles showed a strong relationship between earnings and education, and the profiles that successively shift upward are associated with higher levels of education. In the cross-sectional results of the rate of return in 1997, each additional year of schooling leads to a 6.2% increase in income. As to the private rates of return to different levels of education, the results found that the private rates of return are 2.88%, 4.85% and 10.05% for primary, secondary and higher education respectively. In an intertemporal comparison for 1980, 1985, 1990 and 1997, the results showed no significant trend except the private rates of return for primary education have been falling from 3.9% to 2.88%. ^ On the basis of this study, for individual student or family in Taiwan, there is likely to be a strong demand for education, particularly at the higher level. Therefore, a well-developed higher educational level becomes essential and the content of curriculum in higher education becomes another crucial question facing planners in Taiwan if they are going to use education as a means to foster economic development. ^

The political economy of inequality and growth: Essays on sovereign debt, democracy and saving

This dissertation addresses three issues in the political economy of growth literature. The first study empirically tests the hypothesis that income inequality influences the size of a country's sovereign debt for a sample of developing countries for the period 1970–1990. The argument examined is that governments tend to yield to popular pressures to engage in redistributive policies, partially financed by foreign borrowing. Facing increased risk of default, international creditors limit the credit they extend, with the result that borrowing countries invest less and grow at a slower pace. The findings do not seem to support the negative relationship between inequality and sovereign debt, as there is evidence of increases in multilateral, countercyclical flows until the mid 1980s in Latin America. The hypothesis would hold for the period 1983–1990. Debt flows and levels seem to be positively correlated with growth as expected. ^ The second study empirically investigates the hypothesis that pronounced levels of inequality lead to unconsolidated democracies. We test the existence of a nonmonotonic relationship between inequality and democracy for a sample of Latin American countries for the period 1970–2000, where democracy appears to consolidate at some intermediate level of inequality. We find that the nonmonotonic relationship holds using instrumental variables methods. Bolivia seems to be a case of unconsolidated democracy. The positive relationship between per capita income and democracy disappears once fixed effects are introduced. ^ The third study explores the nonlinear relationship between per capita income and private saving levels in Latin America. Several estimation methods are presented; however, only the estimation of a dynamic specification through a state-of-the-art general method of moments estimator yields consistent estimates with increased efficiency. Results support the hypothesis that income positively affects private saving, while system GMM reveals nonlinear effects at income levels that exceed the ones included in this sample for the period 1960–1994. We also find that growth, government dissaving, and tightening of credit constraints have a highly significant and positive effect on private saving. ^

Economic Inequality and the Conditions of Freedom- Views from the American Founding

Professor Clement Fatovic, Director of Graduate Studies for Politic Sciences, lectures on the subject of the American Founding. Lecture held at the Green Library, Modesto Maidique Campus, Florida International University, on April 10, 2013.

Three essays on the economics of defense contracting, output and income inequality

This dissertation analyzes both the economics of the defense contracting process and the impact of total dollar obligations on the economies of U.S. states. Using various econometric techniques, I will estimate relationships across individual contracts, state level output, and income inequality. I will achieve this primarily through the use of a dataset on individual contract obligations. ^ The first essay will catalog the distribution of contracts and isolate aspects of the process that contribute to contract dollar obligations. Accordingly, this study describes several characteristics about individual defense contracts, from 1966-2006: (i) the distribution of contract dollar obligations is extremely rightward skewed, (ii) contracts are unevenly distributed in a geographic sense across the United States, (iii) increased duration of a contract by 10 percent is associated with an increase in costs by 4 percent, (iv) competition does not seem to affect dollar obligations in a substantial way, (v) contract pre-payment financing increases the obligation of contracts from anywhere from 62 to 380 percent over non-financed contracts. ^ The second essay will turn to an aggregate focus, and look the impact of defense spending on state economic output. The analysis in chapter two attempts to estimate the state level fiscal multiplier, deploying Difference-in-Differences estimation as an attempt to filter out potential endogeneity bias. Interstate variation in procurement spending facilitates utilization of a natural experiment scenario, focusing on the spike in relative spending in 1982. The state level relative multiplier estimate here is 1.19, and captures the short run, impact effect of the 1982 spending spike. ^ Finally I will look at the relationship between defense contracting and income inequality. Military spending has typically been observed to have a negative relationship with income inequality. The third chapter examines the existence of this relationship, combining data on defense procurement with data on income inequality at the state level, in a longitudinal analysis across the United States. While the estimates do not suggest a significant relationship exists for the income share of the top ten percent of households, there is a significant positive relationship for the income share of top one percent households for an increase in defense procurement.^

Three Essays on the Economics of Defense Contracting, Output and Income Inequality

This dissertation analyzes both the economics of the defense contracting process and the impact of total dollar obligations on the economies of U.S. states. Using various econometric techniques, I will estimate relationships across individual contracts, state level output, and income inequality. I will achieve this primarily through the use of a dataset on individual contract obligations. The first essay will catalog the distribution of contracts and isolate aspects of the process that contribute to contract dollar obligations. Accordingly, this study describes several characteristics about individual defense contracts, from 1966-2006: (i) the distribution of contract dollar obligations is extremely rightward skewed, (ii) contracts are unevenly distributed in a geographic sense across the United States, (iii) increased duration of a contract by 10 percent is associated with an increase in costs by 4 percent, (iv) competition does not seem to affect dollar obligations in a substantial way, (v) contract pre-payment financing increases the obligation of contracts from anywhere from 62 to 380 percent over non-financed contracts. The second essay will turn to an aggregate focus, and look the impact of defense spending on state economic output. The analysis in chapter two attempts to estimate the state level fiscal multiplier, deploying Difference-in-Differences estimation as an attempt to filter out potential endogeneity bias. Interstate variation in procurement spending facilitates utilization of a natural experiment scenario, focusing on the spike in relative spending in 1982. The state level relative multiplier estimate here is 1.19, and captures the short run, impact effect of the 1982 spending spike. Finally I will look at the relationship between defense contracting and income inequality. Military spending has typically been observed to have a negative relationship with income inequality. The third chapter examines the existence of this relationship, combining data on defense procurement with data on income inequality at the state level, in a longitudinal analysis across the United States. While the estimates do not suggest a significant relationship exists for the income share of the top ten percent of households, there is a significant positive relationship for the income share of top one percent households for an increase in defense procurement.