Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.

Estimation and Inference in Econometrics

https://personal.lse.ac.uk/FERREIRD/gender.pdf

Women in the boardroom and their impact on governance and performance

We define higher audit quality as greater assurance of high financial reporting quality. Researchers use many proxies for audit quality, with little guidance on choosing among them. We provide a framework for systematically evaluating their unique strengths and weaknesses. Because it is inextricably intertwined with financial reporting quality, audit quality also depends on firms’ innate characteristics and financial reporting systems. Our review of the models commonly used to disentangle these constructs suggests the need for better conceptual guidance. Finally, we urge more research on the role of auditor and client competency in driving audit quality.

A Review of Archival Auditing Research

This study finds that highly leveraged firms lose substantial market share to their more conservatively financed competitors in industry downturns. Specifically, firms in the top leverage decile in industries that experience output contractions see their sales decline by 26 percent more than do firms in the bottom leverage decile. A similar decline takes place in the market value of equity. These findings are consistent with the view that the indirect costs of financial distress are significant and positive. Consistent with the theory that firms with specialized products are especially vulnerable to financial distress, we find that highly leveraged firms that engage in research and development suffer the most in economically distressed periods. We also find that the adverse consequences of leverage are more pronounced in concentrated industries. FINANCIAL ECONOMISTS HAVE NOT reached a consensus on how financial distress affects corporate performance. Traditionally, the financial economics literature has portrayed financial distress as a costly event whose possibility is important in determining firms' optimal capital structures. Financial distress is seen as costly because it creates a tendency for firms to do things that are harmful to debtholders and nonfinancial stakeholders (i.e., customers, suppliers, and employees), impairing access to credit and raising costs of stakeholder relationships.1 In addition, financial distress can be costly if a firm's weakened condition induces an aggressive response by competitors seizing the opportunity to gain market share.2 More recent articles have

https://www.jstor.org/stable/pdf/2329214.pdf

Financial Distress and Corporate Performance

http://hub.hku.hk/bitstream/10722/128993/1/Content.pdf

How does financial reporting quality relate to investment efficiency

We provide evidence that analyst coverage affects the pattern of security issuance. First, firms covered by fewer analysts are less likely to issue equity as opposed to debt. They issue equity less frequently, but when they do so, it is in larger amounts. Moreover, these firms depend more on favorable market conditions for their equity issuance decisions. Although all firms issue larger amounts of equity after favorable stock returns, this tendency is more pronounced for less covered firms. Finally, debt ratios of firms followed by fewer analysts are more affected by Baker and Wurgler's (2002) external finance-weighted average market-to-book ratio than those of firms followed by more analysts. These results are consistent with market timing behavior in the presence of information asymmetry, as well as behavior implied by dynamic adverse selection models of equity issuance.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID807967_code366287.pdf?abstractid=571065&mirid=1

Analyst Coverage and Financing Decisions

We provide evidence that analyst coverage affects security issuance. First, firms covered by fewer analysts are less likely to issue equity as opposed to debt. They issue equity less frequently, but when they do so, it is in larger amounts. Moreover, these firms depend more on favorable market conditions for their equity issuance decisions. Finally, debt ratios of less covered firms are more affected by Baker and Wurgler's (2002)“external finance-weighted” average market-to-book ratio. These results are consistent with market timing behavior associated with information asymmetry, as well as behavior implied by dynamic adverse selection models of equity issuance.

Firms in bilateral relationships are likely to produce or procure unique products—especially when they are in durable goods industries. Consistent with the arguments of Titman and Titman and Wessels, such firms are likely to maintain lower leverage. We compile a database of firms' principal customers (those that account for at least 10% of sales or are otherwise considered important for business) from the Business Information File of Compustat and find results consistent with the predictions of this theory.

Buyer–Supplier Relationships and the Stakeholder Theory of Capital Structure

The notion that firms have a debt ratio target that is a primary determinant of financing behavior is influential in finance. Yet, how definitive is the evidence? We address this issue by generating samples where financing is unrelated to a firm's current debt ratio or a target. We find that much of the available evidence in favor of target behavior based on leverage ratio changes can be reproduced for these samples. Taken together, our findings suggest that a number of existing tests of target behavior have no power to reject alternatives.

Target Behavior and Financing: How Conclusive is the Evidence?

This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less new information is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empirical support for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).

/pdf/transparency-price-informativeness-and-stock-return-1ro394313j.pdf

Sudipto Dasgupta

Papers

Analyst Coverage and Financing Decisions

Analyst Coverage and Financing Decisions

Buyer–Supplier Relationships and the Stakeholder Theory of Capital Structure

Target Behavior and Financing: How Conclusive is the Evidence?

Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence