THE ROLE OF EARNINGS PERSISTENCE IN VALUATION ACCURACY AND THE TIME HORIZON

ABSTRACT Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms' idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market.

Solidarity finance through community development banks as a strategy for reshaping local economies: lessons from Banco Palmas

The purpose of this paper is to reflect on the possibilities and challenges of Community Development Banks (CDBs) as an innovative method of socioeconomic management of microcredit for poor populations. To this end, we will discuss the case of Banco Palmas in Conjunto Palmeiras in the city of Fortaleza, in the northeastern state of Ceará, as an empirical case study. The analyses presented here are based on information obtained from Banco Palmas between late 2011 and early 2012. In addition, previous studies by other researchers on the bank and other studies on CDBs were important. The primary data collected at Banco Palmas came from documents made available by the bank, such as reports and mappings. The analyses describe some of the characteristics of the granting of microcredit and allow one to situate it in the universe of microfinance and solidarity finance. They also show the significant growth of local consumption, mostly through the use of the Palmas social currency. The Banco Palmas experience, aside from influencing national public policies of solidarity finance, initiated a CDBs network that encourages the replication of these experiences throughout the country.

Genesis of the sombric horizon in ultisols (red argisols) in southern Santa Catarina, Brazil

Dark subsurface horizons, with properties similar to the sombric horizon characterized by the USA Soil Taxonomy, are frequent in Southern Brazil. The genesis of this horizon is controversial and poorly understood. This study aimed to describe the occurrence of sombric-like horizons in Ultisols in the South of Santa Catarina State, at low altitudes, and suggest possible processes of humus transference, accumulation and persistence in these horizons. Physical, chemical and mineralogical properties of four Ultisols were evaluated; three were sampled in a toposequence, and another representative one in an isolated profile (RSP). The dark subsurface horizons coincide with the AB and BA transitional genetic horizons; they are acid, low in base saturation, and have a similar clay mineralogy in all horizons. Very high amounts of Fe and Al extracted by ammonium oxalate and sodium pyrophosphate solution as well as maximum Al extracted by CuCl2 solution were observed in these dark subsurface horizons, indicating a possible migration of these elements in the form of organometallic complexes. The contents of Al plus ½ Fe extracted from the RSP soil horizons with ammonium oxalate indicated spodic materials in the sombric-like horizon, although the soil morphology was not compatible with Spodosols. Maximum contents of fine clay were also found in the sombric-like horizon, suggesting Fe and Al migration as clay-humic substances. However, the hypothesis that sombric-like horizons in these soils are a relict feature of a grass paleovegetation, different from the current dense seasonal forest, should not be discarded but investigated in further studies.

Atrazine and picloram adsorption in organic horizon forest samples under laboratory conditions

Adsorption of two herbicides, atrazine and picloram, displaying different sorption characteristics, were evaluated for O (organic) horizon samples collected from SMZs (streamside management zones) in Piedmont (Ultisol) of Georgia, USA. Samples were randomly collected from within 5 SMZs selected for a study of surface flow in field trials. The five SMZs represented five different slope classes, 2, 5, 10, 15 and 20%. Results indicate that 0 horizons have the potential for sorbing atrazine from surface water moving through forested SMZs. Atrazine adsorption was nearly linear over a 24-hour period. Equilibrium adsorption, determined through 24-hour laboratory tests, resulted in a Freundlich coefficient of 67.5 for atrazine. For picloram, negative adsorption was observed in laboratory experiments. This seemed to be due to interference with ELISA analyses; however, this was not confirmed. The adsorption coefficient (Kd) obtained for atrazine in 0 horizons was greater than it would have been expected for mineral soil (from 1 to 4). Picloram was not sorbed in 0 horizons at any significant degree. Although there is a significant potential for the direct adsorption of soluble forms of herbicides in SMZs, the actual value of this adsorption for protecting water is likely to be limited even for relatively strongly sorbed chemicals, such as atrazine, due to relatively slow uptake kinetics.

The impact on advanced economies of north-south trade in manufacturing and services

Many types of production are being transferred from the rich economies of the North to the poorer economies of the South. Such changes began in manufacturing but are now spreading to services. This paper provides estimates of their past and future impact on employment in the North. About 5 million manufacturing jobs have been lost over the past decade because of trade with low-wage economies. A similar number of service jobs may be lost to low-wage economies over the next decade. Although small compared to total employment, such losses may seriously harm certain localities or types of worker.

External debt in developing economies: assessment and policy issues

More than one decade after the external debt restructuring (the Brady Plan), a great amount of literature has been published concerning the balance sheet factors in developing countries. The staff of international multilateral institutions joined with reputable academics in this great controversy. The external debt problem of the developing countries is back and once more reflections on its cause and on policy recommendations are analytically distinct. Our main task is to reflect on the recent external debt dynamics and assess how this debt has evolved. Our findings indicate that the susceptibility of some developing countries to default is associated with global imbalance, that is, the way they borrow.

Corruption, income, and rule of law: empirical evidence from developing and developed economies

This article presents an empirical analysis based on cross-country data concerned with two points regarding corruption: (i) its effects on income; and (ii) how to mitigate corruption. The findings can be highlighted in two points. Firstly the idea that corruption is intrinsically connected with income is confirmed. Secondly, the traditional argument that an increase in rule of law represents a good strategy in the fight against corruption is valid for developing countries. Furthermore, this study reveals that the search for increasing the human development index represents a rule of thumb for high levels of income and to control corruption.

Exchange rate pass-through inflation and wage differentials in late-industrializing economies: the Mexican case

This paper investigates exchange rate pass-through inflation, and the wage bargaining process, in a developing economy in which firms' market power is largely dependent on technical progress embodied in imported intermediates and capital goods. It develops a heterodox model of income distribution, based on theoretical contributions from Latin American structuralists, labor market segmentationists and post-Keynesian writers, and it presents supportive empirical evidence from the Mexican economy.