Showing papers on "Earnings published in 1973"

The information content of dividends

Abstract: A. The Problem For years, the term "information content of dividends" has been frequently used in finance literature. The phrase refers to the hypothesis which states that dividends convey information about future earnings -information that enables market participants to predict future earnings more accurately. At present, the information hypothesis is widely recognized, if not accepted, in texts on financial management.' However, there has been little or no empirical testing of the hypothesis. Such testing is the objective of this study.

The economics of work and pay

Abstract: *Labour Force, Hours of Work and Hours of Effort *Supply of Skill *The Demand for Labour *Extensions of Labour Demand *Supply and Demand Together *Migration and Turnover *Vacancies *Effort, Wages and Job Structure *Job Amenities and Employee Benefits *Unions *Union Methods *Effects of Employment and Turnover *Effects of Race and Gender on Earnings *Inequality of Earnings and Income *The Labour Market over the Business Cycle

Stock Market Reaction to Estimates of Earnings per Share by Company Officials

Abstract: Recent papers have examined the stock market reaction to a variety of information generating events, e.g., stock splits [10], annual and quarterly earnings announcements [1, 3, 7, 8], and announcements of discount rate changes by the Federal Reserve Bank [20]. This paper examines the stock market reaction to another potential information generating event, i.e., estimates of annual earnings per share by company officials. These estimates are made after the end of the financial year, but before the release of audited earnings figures. Three kinds of annual report data may be produced following the end of a firm's fiscal year: (a) Estimates of annual EPS by company officials, (b) Preliminary earnings reports, and (c) Complete annual report data. Relatively few of the companies for which preliminary and complete annual report data are published, release estimates of annual EPS made by company officials. For this reason, the number of firms in our sample is much smaller than in past studies on the stock market reaction to preliminary earnings reports [1, 3].

The Definition and Impact of College Quality

Abstract: In this paper we are concerned with the characteristics of colleges which serve to increase subsequent monetary incomes of those who attend. Usually, lifetime earnings are explained by variables such as innate ability, experience in the labor force and years of education, although other socio-economic, demographic and occupational data can be inserted to increase the explanatory power of the model. This paper attempts to add a new dimension to the earnings function analysis by hypothesizing the features of colleges which might yield financial payoffs later in life, and then testing to see which of these traits actually do add most to the explanatory power of the traditional earnings function.

Regional Differences in the Structure of Earnings

Abstract: T HERE have been a number of attempts to estimate the relationship between schooling and earnings of individuals, but the most common feature of these studies has been severe data limitation which, in turn, has dictated how the analysis could proceed. Perhaps the most serious restriction imposed by the data has been the assumption that earnings relationships are the same across the nation or, at least, across very sizable aggregations of states. This paper examines the viability of such assumptions by looking at differences in earnings functions among smaller, more homogeneous labor markets. This res-earch reveals large differences across labor markets in the returns to human capital and indicates that much of the observed difference in regional and racial earnings results from structural differences in earnings functions.

Estimation of a labor supply curve for self-employed business proprietors*

Abstract: There have been many studies in the literature that have investigated empirically labor supply curves for individuals. The most common method has been to estimate a reduced form regression with hours worked as the dependent variable, and the wage rate, non-labor income and possibly some sociodemographic factors as the explanatory variables [2], [5], [6], [8], [9], [10], [14]. Another method has been to estimate a simple utility function with hours worked (or leisure) and income as the arguments [4], [11]. The latter method has been used primarily in studies of low income individuals in attempts to -determine the effects of income maintenance schemes. Finally some studies have relied on interviews with individuals, particularly in attempts to determine the effects of high taxes or the impact of income maintenance proposals on the work-leisure choice [1], [3], [12], [16]. Generally such studies have faced serious drawbacks-accurate data are not available, and the individuals studied often do not have much freedom in their work-leisure choice, thus leaving the observed variables somewhat spurious. Further since these studies generally rely on aggregated data, they have not treated satisfactorily the problems arising from the fact that the net wage facing an individual differs from the gross wage, and the former cannot be taken to be *exogenous. In this paper we attempt to overcome these difficulties by basing -our analysis on a sample of self-employed business proprietors, for whom the work-leisure choice is clearly not restricted by institutional rules.2 Information is available for these individuals on earnings, non-labor income, wife's earnings, weekly hours worked, weeks worked each year, and various sociodemographic characteristics such as age, marital status, and education. We use these data to estimate utility functions with after-tax income and leisure as arguments, attempting to take into account the endogenous nature of the net wage.3 We obtain the associated demand (supply) curves, and determine whether these individuals are on the upward sloping or backward bending seg-

The Definition and Impact of College Quality

Abstract: In this paper we are concerned with the characteristics of colleges which serve to increase subsequent monetary incomes of those who attend. Usually, lifetime earnings are explained by variables such as innate ability, experience in the labor force and years of education, although other socio-economic, demographic and occupational data can be inserted to increase the explanatory power of the model. This paper attempts to add a new dimension to the earnings function analysis by hypothesizing the features of colleges which might yield financial payoffs later in life, and then testing to see which of these traits actually do add most to the explanatory power of the traditional earnings function.

Fluctuations in Export Earnings and Economic Patterns of Asian Countries

Abstract: It has been commonly held that exports of less developed countries (LDC) fluctuate widely, adding to the complexities of economic planning and management and adversely affecting the process of economic development. The general characteristics of economic patterns and structure, especially of LDC export markets, have made this view plausible. But a number of economists have recently investigated the empirical validity and relevance of certain aspects of this traditional view, questioning how violently the export earnings of these countries have fluctuated and the extent to which the resulting effects have retarded development. Most findings surprisingly cast much doubt on its general applicability. MacBean, for example, found the yearly fluctuation of LDC export income only insignificantly larger than for developed countries (DC).' Further, impacts of the three alleged sources of instability, namely, (a) export specialization in primary products, (b) commodity, and (c) geographic concentration of exports, are found to be small or insignificant, offering little support to the instability of export earnings.2 Another significant finding of MacBean, which agrees with Coppock's, is that export instability has not generally led to such detrimental effects on the growth of economies as purported. These findings which question the validity of traditional claims have, in turn, been criticized. Sundrum's as well as Maizels's evaluations of MacBean's work point out weaknesses in statistical procedure and interpretation and even present evidence to support the traditional view, largely

Direct and Indirect Effects on Earnings of Schooling and Socio-Economic Background

Abstract: T HE effects of schooling (as measured both by years attained and by one or more dimensions of quality), and socio-economic background in determining individuals' earnings, have long been controversial issues. In the past decade, with the advent of large scale empirical studies, a number of widely held but not well documented hypotheses about these issues have failed to find broad support in the data. Namely (a) several recent studies, most notably that by Coleman and his associates (1966), have found only a most tenuous relationship between conventional measures of the quality of school inputs and various achievement test scores and (b) the notion that socio-economic background is important in determining an individual's income has been played down in the literature concurrent with the rise in popularity of the human capital explanation of earnings differences (for example, Mincer (1970)). The purpose of this paper is to re-examine the relationship among income, socio-economic background, years of schooling and quality of school inputs. Several models are postulated which permit the examination of both the direct and the indirect effects of the various factors, separately for blacks and for whites. The primary data source is the 1968 Urban Problems Survey conducted by the Survey Research Center. The principal conclusions of this paper are: (a) school quality has a small direct effect on the wage rates of blacks but no apparent effect at all on the wages of whites; (b) for both races school quality has strong indirect effects as it influences the number of years of schooling attained; (c) socio-economic background, as variously measured, appears to have significant direct effects on earnings and, like school quality, indirect effects as it also influences the number of years of education attained; and (d) years of schooling appears to exert a strong influence on earnings independent of other measured variables, especially for whites.

Real Returns to Medical Education

Abstract: Previous estimates of the profitability of investment in medical training contain an upward bias. These studies treat as the return to such investment the full difference in trained and untrained earnings, and thus they fail to account for expected labor/leisure substitutions associated with training investments. When this bias is eliminated, rents on medical training reported in these studies disappear. These findings fail to support the popular belief that the medical profession restrains entry by limiting medical school capacity. The paper suggests other ways in which the profession may be exploiting its monopoly power which go undetected in such profitability tests.

The Covariance Structure of Earnings and the on the Job Training Hypothesis

Abstract: The fine structure of earnings is defined by a theoretically meaningful decomposition of the covariance matrix of earnings (or log earnings) time series. A three-element variance components model is proposed for analyzing earnings of young workers. These components are interpreted as the effects of differential on-the-job training (OJT) and differential economic ability. Several properties of these components and relationships between them are deduced from the OJT model. Background noise generated by a nonstationary first-order autoregressive process, with heteroscedastic innovations and time-varying AR parameters is also assumed present in observed earnings. ML estimates are obtained for all parameters of the model for a sample of Swedish males. The results are consistent with the view that the OJT mechanism is an empirically significant phenomenon in determining individual earnings profiles.

The Effect of College Quality on Earnings: Results from the N B E R-Thorndike Data

Abstract: Using Gourman's academic rating of colleges, we attempt to determine the extent to which returns to higher education (for a sample of 5,000) are due to quality of institution, after standardizing for various sociodemographic, background, and mental ability characteristics. Earnings of individuals in the top fifth of the undergraduate school quality distribution and in the top two fifths of the graduate distribution are significantly and substantially higher than earnings of others. However, it is unclear to what extent the quality variable is reflecting educational quality as opposed to individual scholastic abilities (by measuring selection of entrance to college).

An empirical investigation of the adjustment of stock prices to new quarterly earnings information

Abstract: The use of residuals, both mean and mean absolute, was found to be useful in capturing the impact of new quarterly earnings information on share prices. Our results seem to indicate that the market evaluates third quarter and annual earnings reports differentially from the first and second reports. This can perhaps be explained in part because the annual report, which is audited, contains year-end accounting adjustments. Furthermore, the third quarter report may be viewed as a harbinger of the annual report. Our results also indicate that the share prices of high growth companies adjust to earnings information differently than do the shares of medium and low growth firms. In total our results seem to be consistent with the “loose” form of the efficient markets hypothesis. This is because of the difficulty in predicting the signs of the mean residuals. Or alternatively, while we could observe significant changes in the absolute means, it was considerably more difficult to predict the direction of these changes as seen in the mean residuals. While the difficulty of predicting the direction of the residuals and the loss of statistical significance between trading days when days −1 and 0 in the group tests over all reports indicate support of market efficiency, it should be reemphasized that the market appears to take very long to react to the annual report — that is, the reaction seems to start even before the third quarter report.

Determining the Optimal Investment Policy for the Tourism Sector of a Developing Country

Abstract: For developing countries trying to increase their “buying power” in the community of nations, the establishment of a tourism industry is an important strategy for the generation of foreign exchange earnings. This paper develops a decision structure whereby investment allocation decisions for touristic projects may be made. The decision structure consists of a procedure to quantify the concepts of touristic attractiveness, a mathematical model representing the allocation problem, and a procedure for the solution of the model.

The economic returns to investment in women's education

Abstract: The paper discusses the problems of measuring the rate of return to women's education, and evidence is presented for nine countries which shows that the returns to secondary and higher education are on average two percentage points lower for women than for men, but in some countries they are actually higher. Education increases the earning capacity of women, and also increases their propensity to remain in the labour market. But some allowance must be made for the value of women's non-market work, for indirect benefits of education, and for psychic income. Various methods are suggested for measuring the non-monetary benefits of education, such as the intergeneration effect of a mother's education on the future achievement of her children, or the non-pecuniary benefits of employment for women in the labour force. The effects of discrimination on women's earnings and job prospects are discussed, and it is shown that a large part of the observed differential between male and female earnings is due to the concentration of women in low-income occupations. The paper concludes that the difference between the returns to education for men and women is less than is often suggested, particularly if some attempt is made to measure nonmonetary benefits. But the returns to women's education would be increased if there were a change in traditional attitudes leading to a more equal occupational distribution and better utilisation of women in the labour force.

The 1973 Report of the President's Council of Economic Advisers: The Economic Role of Women

Abstract: The 1973 Economic Report of the President devotes an entire chapter (ch. 4) to the economic role of women in the United States. In this chapter, the Report recognizes that economic discrimination against women exists and, by the length and thoroughness of the analysis describing its dimensions and consequences, implies that such discrimination constitutes a serious economic (and social) problem. The Report does not attempt to minimize the extent to which job segregation, earnings differentials, higher unemployment rates exist, and the lack of improvement in each component over the last few decades. As economists, we are particularly pleased to have the official imprimatur of an Economic Report on the view that discrimination does indeed exist. Some economists have the tendency to minimize the importance of nonpecuniary forces in influencing decisions made within the firm, and have been reluctant to admit the possibility of discrimination unrelated to real or perceived productivity differences. We believe that a proper analysis of discrimination is yet to come; such an analysis will have to fuse elements of economics, sociology, psychology, and history. Employers do refuse to hire women for certain occupations. Instead they hire men exclusively and pay them more than they would have to pay women of equal ability. The court records are now full of such cases,' but such data will never be explained on the basis of a model which includes in the objective function of the employer only monetary profits. Nor can models which assume that employers' decisions about hiring are based on inborn, unchanging, unexplained "tastes" do justice to the social forces, both internal and external to the firm, which bear on such decisions. Specifically, it is well known that the average woman college graduate who works full time all year ends up with about the same income as the average male high school dropout. The gross earnings differential works out to be between 35 and 57 percent, depending on the data base used to make the calculation. The Report puts the differential due to discrimination at about 20 percent, but this seems low. In a recent article, Isabel Sawhill reviewed seven econometric studies of male-female earnings patterns. In six of them,2 the differences which could be attributed to discrimination were above 29 percent and ranged up to 43 percent. The seventh study3 estimated the difference which might be attributable to discrimination as 12 percent, but arrived at this figure by classifying as nondiscriminatory the differences in the distribution of men and women among detailed occupations. Since

Performance of conglomerate firms: comment

Abstract: A RECENT ARTICLE in this Journal by Weston and Mansinghka concludes by observing ". . . that an important economic function of conglomerate firms has been the raising of the profitability of firms with depressed earnings to the average for the industry generally."' Likewise, W-M conclude that their findings are ". . . contrary to the general impression that one of the reasons for the high growth in earnings per share of the conglomerate firms was that they were able to play the differential price/earnings ratio game."2 This comment contains empirical evidence that seriously challenges both of these conclusions.

Institutional Dualism in Central America's Agricultural Development *

Abstract: The five nations of the Central American Common Market (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) have all the characteristics generally associated with less developed countries—largely agrarian economies, great dependence on agricultural exports for foreign exchange earnings, rapid population growth, widespread illiteracy, and low per capita incomes.

The Effects on Income of Type of College Attended

Abstract: The effects of particular attributes of colleges on the subsequent earnings of individuals who attend are much discussed but rarely studied systematically. Here we seek to compare the earnings patterns of people attending different types of colleges. The classification of colleges used in this study is the scheme developed by the Carnegie Commission on Higher Education based on the sense of commitments to research, types of programs offered and selectivity of admission of students. We find that at the college level, differences in type of institution attended have highly significant effects on differences in lifetime earning patterns of students.

The Structure of Earnings in Japanese Manufacturing Industries: A Human-Capital Approach

Abstract: The aim of the paper is to explain the earnings structure in manufacturing industries in Japan mainly by differences in resources used to create and improve the skills and knowledge of the working force. The approach provides the opportunity of analyzing the effects on earnings of experience inside and outside of the firm, given educational level attained, and to inquire whether the behavior of the Japanese worker corresponds to returns to these different forms of experience. The results suggest that outside experience is quite important, and that it is substitutable, to a great extent, for inside experience. These results do raise questions about the true extent of the nenko wage system. A by-product of the paper is a calculation of the rate of return to a college education in Japan.

Rates of Return on Investment in Education: Recent Results for Britain.

Abstract: The paper utilizes the results of an earnings follow-up sample survey to the 1966 Census to calculate for the first time private and social rates of return to education in Britain, based on a national representative sample of educated males. The results are subjected to a number of sensitivity tests on the assumptons made. The generally high private rates of return suggest a considerable degree of private underinvestment in education. Excluding externality effects, the social rates of return estimates seem to indicate a relative overexpansion in the graduate part of the university sector and social underinvestment in part-time, higher level technician training.

Human Capital Life Cycle of Earnings Models: A Specific Solution and Estimation

Abstract: The purpose of this paper is to consider human capital models of earning behavior over an individual lifetime. A general class of life cycle models relating to individual earnings behavior is developed by considering alternative formulation of the basic Ben- Porath type model. An explicit solution to a specific formulation within this general class is considered in some detail. An empirical development of this explicit earnings function is estimated using data on a cohort of individuals surveyed at some point in their lifetime. The empirical estimates are discussed in detail. The estimated earnings function is then used to predict and individualâ€TMs discounted present value of lifetime earnings.

Earnings Trends and Investment Selection

Abstract: (1973). Earnings Trends and Investment Selection. Financial Analysts Journal: Vol. 29, No. 2, pp. 79-83.

Size of Firm, Worker Earnings, and Human Capital: The Case of Japan

Abstract: Appraises the effect of size of enterprise on wage differentials in Japanese manufacturing. Application of the multivariate technique; Results of multivariate analysis; Causes of wage differentials. (Abstract copyright EBSCO.)

Where Do They Go from Here?— Retired Military in America:

Abstract: As one heritage of an armed era, the United States will have for the foreseeable future a large—currently, almost one million—and growing population of retired military professionals. One resulting problem involves the sheer cost of military retired pay—$4.8 billion in 1973 and rising rapidly. These costs would be even higher save for the assumption that most retirees can sustain themselves largely by earnings from second-career jobs. In the long run, the cost could be reduced by limiting armed forces size; by having fewer persons serve until retirement; and by having even longer service from the few who do. Any major short-term—within ten to twenty years—cost curtailment requires remunerative second-career employment for those already at or close to retirement eligibility. The nature of such employment also poses problems for public policy: potential conflicts of interests, the infusion of militaristic outlooks into institutions and localities in which retirees concentrate, and some opposition to job-com...

The Quantity and Quality of Education and their Influence on Earnings: The Case of Chemical Engineers

Abstract: IN this paper is examined some of the determinants of earnings of males in a "high powered" occupation, chemical engineering. Models such as those developed here can be useful to researchers interested in earnings functions, the theory of occupational choice, economic growth and returns to investments in human capital. In addition, earnings models can be help'ful to individuals who must make promotion and salary decisions. The impact of education on earnings has received a great deal of attention in social, political and economic circles. Previous studies show that persons who obtain higher levels of education earn higher incomes. However, comparing average incomes of individuals who differ only in levels of educational attainment may overstate the influence of education since schooling and non-schooling factors other than the amount of formal schooling cause differences in individual incomes. Such factors include socio-economic background, demographic characteristics, innate ability and the quality of formal education. Emphasis in this study is on the quality of education and student ability. The author was able to find only two attempts at simultaneously estimating the impact of student ability and school quality on the earnings of persons in professional occupations.' This paper is viewed as an exploratory effort in this direction. The basic earnings functions to be estimated are described in section I. The data sources, key proxy variables in the regression analysis and the regression findings are discussed in section II. Section III is a summary of the main findings.

Schooling, Ability, Non Pecuniary Rewards, Socioeconomic Background and the Lifetime Distribution of Earnings

Abstract: Inequality in income or earnings is the most indisputable fact about the distribution of income. Inequality in income distribution occurs in most political and economic models and has from ancient times to the modern era. Society and government have expressed a desire to establish a minimum floor for members of society -- though the level of the floor and the means of achieving it are matters of debate. Besides a direct interest in the questions of the sources of inequality, how to achieve income redistribution, and the efficacy of various policy tools, economists are also concerned with establishing how various labor markets operate, how rational individuals are, and how important are individual effort , chance, and predestination. Economists have constructed various theories that purport to explain income distribution. Some aspects of these theories have been tested against empirical observations. This study will extend the range of such tests. In addition, we will generate some new facts that a complete theory should be able to explain.

Deposit costs and bank portfolio policy

Abstract: DURING the ten-year period 1961 through 1970, commercial banks actively competed for time and savings deposits which became an increasing share of total bank deposits. Time deposit growth was facilitated by a number of upward adjustments in interest ceilings. Interest paid on time deposits became an increasing share of bank costs, and the interest cost per dollar of total bank deposits grew appreciably. During the same period, banks raised their gross earnings on assets, and during the first half of this period the increase occurred while market interest rates were relatively stable; that is, portfolio adjustments tended to raise the ratio of gross earnings to bank assets. Most observers would agree that there is a close relationship between deposit costs and gross earnings on bank assets. However, there appears to be somewhat less agreement on the precise nature of this relationship during periods when interest ceilings' on deposits are imposed or changed.' In an environment where banks are not restricted in their interest payments on deposits, we would expect gross yields on assets to be correlated positively with interest payments on deposits. Presumably both variables would be affected by changes in the level of interest rates. In the case of deposit payments, we would expect what banks are willing to pay to be affected by what they expect to earn on assets and by the cost of alternative sources of funds. During some of the period examined in this paper, banks operated under interest ceilings that significantly restricted their behavior. Relaxation of some of these restrictions led to upward adjustments in rates paid on deposits by banks during several periods when market interest rates remained unchanged. There appears to be considerable evidence that banks adjusted their loan and investment portfolios toward higher yielding assets and reduced their capital ratios to offset some of the impact of increased deposit costs. They were willing to take additional risk in order to maintain or to limit a decline in profits stemming from increased deposit costs. This view appears to be supported by both aggregate and individual bank data. In this paper we will attempt to develop a general framework for linking changes in bank deposit costs to portfolio policies and risk-taking (Sections II, III, and IV). In Section V aggregate bank experience in the 1960s will be related to this framework, and in Section VI we will look at individual bank data.