Some public companies have groused that the Sarbanes-Oxley corporate-governance law has them thinking they ought to go private. Now some young companies say the same legislation is slowing their trip to stock market.At least it's given academics a whole new set of questions to examine (and write papers on).
Citing additional costs and requirements stemming from the 2002 law -- which, among other things, requires chief executives to sign off on financial statements -- some of these companies are taking private-equity money rather than opting for a fast initial public offering of stock. While they are still aiming for an eventual IPO, the companies are taking extra time to make sure their houses are in order.
Sarbanes-Oxley and the Law of Unintended Consequences (part 3,249)
Most legislators never learn about the Law of Unintended Consequences. As far as Sarbanes-Oxley goes, we've only just begun seeing the effects of this legislation on the capital markets. We already know that the increased costs associated with SOX have resulted in many companies choosing to go private. Now, it seems that these costs also affect the decision to go public (from the Wall Street Journal):
Insert Comment on "Winner's Curse" Here
From the Wall Street Journal Online:
Click here for the whole article (subscription required)
Qwest Communications International Inc. prepared to launch a revised bid for MCI Inc., which this week agreed for a second time to be bought by Verizon Communications Inc. after Verizon sweetened its offer to roughly $7.5 billion.
Small Groups And Cheating
I recently had to be out of town during an exam day, so I took the time-honored step of having a grad student proctor the exam. She caught three students cheating (they all got zeros on the exam, BTW). Then this comes out, from David Tufte at Voluntary Exchange):
Unfortunately, I haven't found this to be true in the classroom.
New Scientist reports that cooperation among members of small groups is strongly encouraged not just by punishing cheaters but also by punishing those who don't punish cheaters. Even better, the reward centers in our brains appear to be stimulated by both actions.
Via Mahalanobis.
Click here for the whole article.
Unfortunately, I haven't found this to be true in the classroom.
Needs a B In Class, But is Getting a D
Moebius Stripper at Tall Dark and Mysterious just got done with a half-hour conversation with a failing student. A must read. It begins:
At a school I previously taught at, the core finance class had the catalog number "FIN-330". We referred to some students (amongst ourselves) as "FIN-330 majors". One memorable student took it 4 or 5 times before eventually passing.
I used to tell students that one definition of insanity is "repeating an action that has always had the same result before, but expecting a different result this time". Unfortunately, a student who's failed the class once will typically be resistant to changing their approach. Hope is a wonderful thing, but it's a lousy way to manage grades.
Click here for the whole piece.Below, the fruits of half an hour of excruciating conversation during office hours. In the interest of fairness, I present two readings of my pupil’s abysmal performance in my class:
At a school I previously taught at, the core finance class had the catalog number "FIN-330". We referred to some students (amongst ourselves) as "FIN-330 majors". One memorable student took it 4 or 5 times before eventually passing.
I used to tell students that one definition of insanity is "repeating an action that has always had the same result before, but expecting a different result this time". Unfortunately, a student who's failed the class once will typically be resistant to changing their approach. Hope is a wonderful thing, but it's a lousy way to manage grades.
Betting Markets, Political Polls, and Economic Models
I've been using betting /predictions markets like the Iowa Electornic Markets and Tradesports for years in the classroom to demonstrate how prices reflect information. The last U.S. presidential election, they once again did a better job than the polls of predicting the outcome.
The New Economist discusses an article by Andrew Leigh and Justin Wolfers titled Competing approaches to forecasting elections, that compares the usefulness of polls, economic models, and prediction markets using Australian data. From the paper:
Click here for the whole article.
The New Economist discusses an article by Andrew Leigh and Justin Wolfers titled Competing approaches to forecasting elections, that compares the usefulness of polls, economic models, and prediction markets using Australian data. From the paper:
While the evidence for economic voting has historically been weak for Australia, the 2004 election suggests an increasingly important role for these models. The performance of polls was quite uneven, and predictions both across pollsters, and through time, vary too much to be particularly useful. Betting markets provide an interesting contrast, and a slew of data from various betting agencies suggests a more reasonable degree of volatility, and useful forecasting performance both throughout the election cycle and across individual electorates.N.E concludes with some thoughts on the extent of informed trading in these markets. I've often wondered about that too, since professional politicos have such an information advantage over the average (relatively uninformed) trader. My suspicion is that (to the extent that informed trading occurs trading), the preferred venue would be Tradesports.com rather than on the Iowa Electrnic Markets, since (to my recollection) the volume of trade was much higher on Tradesports. However, I'm primarily a corporate finance guy, so I'd welcome comments from any microstructure folks.
Click here for the whole article.
This Week's Carnival of The Capitalists
This weeek's Carnival of The Capitalists is up, hosted by The Mobile Technology Weblog. It's in two parts:
part 1
part 2
I highly recommend the Carnivals. They're a good opportunity to broaden the set of blogs you read.
part 1
part 2
I highly recommend the Carnivals. They're a good opportunity to broaden the set of blogs you read.
Maybe the Best Econoblog Yet (From Vox Baby)
Andrew Samwick at Vox Baby, discusses the latest Wall Street Journal Econoblog, a discussion between Nouriel Roubini and David Altig, titled " Does Overseas Appetite for Bonds Put the U.S. Economy at Risk?". He begins:
Overall, the arguments in the WSJ article are exceptional. They (and Andrew's discussion) center around the question of how hard a shift in overseas investor appetites for U.S. bonds would affect interest rates (i.e. whether there would be a "hard" or "soft" landing). WhileI haven't looked extensively at the issue, I'm in the "soft landing" camp - it would be difficult for overseas investors to unwind large portfolio positions rapidly.
Click here for the whole article.It's a funny question as a lead-in. Generally, when some other country has an "appetite" for something (like U.S. government bonds) that we make, we are not at risk but richer for it. There are some relative price shifts that have distributional consequences (like making U.S. exports relatively more expensive compared to foreign imports), but on the whole, the country is richer. For a variety of reasons, Asian central banks have been willing to not only hold U.S. debt but (via undervalued exchange rates) pay too much for it. At least initially, it's their problem, not ours.
So the real question, and the one that Nouriel and David seek to answer, is whether a potential loss in overseas appetites for U.S. government bonds will put the U.S. economy at risk.
Overall, the arguments in the WSJ article are exceptional. They (and Andrew's discussion) center around the question of how hard a shift in overseas investor appetites for U.S. bonds would affect interest rates (i.e. whether there would be a "hard" or "soft" landing). WhileI haven't looked extensively at the issue, I'm in the "soft landing" camp - it would be difficult for overseas investors to unwind large portfolio positions rapidly.
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