Publication date: December 2023
Source: Advances in Accounting, Volume 63
Author(s): Govind S. Iyer
Publication date: December 2023
Source: Advances in Accounting, Volume 63
Author(s): Govind S. Iyer
This article studies the economic effects of regulations that restrict farm practices used to produce products sold within a regulating jurisdiction, regardless of where the product was produced. We apply this analysis to the impact of California's law on sow housing and the North American hog/pork supply chain. California's Proposition 12 requires that specified pork products sold in California come from hogs whose mothers were housed according to California requirements. Such regulations, whether imposed by national or subnational authorities, have unique impacts on production, demand, prices, and economic welfare both within and outside the regulating jurisdiction. Our model identifies these effects and quantifies their impacts within a calibrated equilibrium framework. Results show that California consumers will buy less pork under Proposition 12 because retail prices of regulated cuts of pork will rise by about 7%. Compliant hog producers will, on average, earn greater profits, while impacts on prices and quantities of products sold outside of California are minimal. Regulations like Proposition 12 are especially costly ways to affect farm animal treatment because they impose costs throughout the supply chain. We consider a simple alternative policy that would achieve far more change in animal housing at lower cost.
We examine whether CEOs' voluntary acceptance of a $1 salary is a credible signal of sacrifice. We find that firms with $1 salary CEOs are: (i) more likely to be associated with income-increasing accrual-based earnings management; (ii) less likely to use real earnings management; and (iii) more likely to engage in corporate tax avoidance. Our results indicate that this performance enhancement is driven by the motivation to restore salaries to their original levels. Our results suggest that extreme salary sacrifice could indicate an empty promise to improve firm performance and should be considered cautiously by investors and regulators.
Agricultural productivity is hindered in smallholder farming systems due to several factors, including farmers’ inability to meet crop-specific soil requirements. This article focuses on soil suitability for maize production and creates multidimensional soil suitability profiles of smallholder maize plots in Uganda while quantifying forgone production due to cultivation on less-than-suitable land and identifying groups of farmers that are disproportionately impacted. The analysis leverages the unique socioeconomic data from a subnational survey conducted in Eastern Uganda, inclusive of plot-level, objective measures of maize yields and soil attributes. Stochastic frontier models of maize yields are estimated within each soil suitability class to understand differences in returns to inputs, technical efficiency, and potential yield. Farmers cultivating highly suitable soil have the potential to increase their observed yields by as much as 86%, while those at the opposite end of the suitability distribution (i.e., with marginally suitable land) operate closer to the production frontier and can only increase yields by up to 59%, given the current technology set. There is heterogeneity in potential gains across the wealth distribution, with poorer households facing more heavily constrained potential.
We find that, compared to non-connected analysts, analysts with professional connections to a coverage firm (i.e., connected analysts) are more likely to continue covering the firm after it issues a restatement. Furthermore, connected analysts are more likely to issue pessimistic earnings forecasts and to downgrade stock recommendations for the firm after its financial restatement. Our results also reveal the costs and benefits associated with connected analysts' pessimism – a reduced market reaction to the analysts' pessimistic research on the restating firm, and a positive effect on the market's perception of the quality of the analysts' research on non-restating firms.
We reconsider the role of a sovereign wealth fund in commodity-exporting economies facing recent volatile fluctuations of commodity prices due to the COVID-19 shock. We examine the welfare-improving effect of a sovereign wealth fund from the new perspective of the link between commodity prices and interest rate spreads, which is unique to emerging economies. We show that a sovereign wealth fund becomes more effective in improving welfare for commodity-exporting economies with a stronger link between their commodity prices and interest rate spreads.
This study estimates the effects of the rapid expansion of digital infrastructure on rural employment and income. We use a triple-difference framework and exploit the geographic variation of the recent universal telecommunication service in China. Empirical results reveal increased broadband adoption after the implementation of the program with governmental subsidy. The universal telecommunication service led to an increase in rural residents’ income and their employment in the non-agricultural sector, especially salaried work. The findings suggest that digital infrastructure promotes the transformation of the rural economy in emerging markets.
We demonstrate the benefit of spatial smoothing for crop trend estimation with a deterministic spatio-temporal trend model. The proposed model is semiparametric, where the parametric temporal trend is modeled with a two-knot spline function for forecasting robustness, and the nonparametric spatially-varying coefficients are modeled by the radial basis function method for flexibility. To select the smoothing parameter of our trend model, we propose a forward validation criterion tailored to meet the forecasting nature of rating crop insurance. This criterion is based on a rolling regression approach that adds one year of data at a time for validation. We also propose a new criterion for model comparison using relative mean squared error in forecasting insurance payouts. Our empirical results show that the proposed trend model is more efficient and capable of identifying profitable insurance policies than two competing models in most state-crop combinations.