We study firms’investment in internal control to reduce accounting manipulation. We first show the peer pressure for manipulation: one manager manipulates more if he suspects that reports of peer firms are more likely to be manipulated. As a result, one firm’s investment in internal control has a positive externality on peer firms. It reduces its own manager’s manipulation, which, in turn, miti...

the effect of business regulations on economic growth (a selection of developed and developing countries) mohammad-hossein hosseinzade bahreini assistant professor of economics,ferdowsi university of mashhad mohammad ali falahi associate professor of economics,ferdowsi university of mashhad fatemeh erfany jahanshahi m.sc. in economics abstract in this research, the relationship between business...

This paper represents a new approach in the exchange rate determination by using microstructural and macroeconomic variables. We test combination of fundamentals microstructure variables cointegrated relationship USD/JPY USD/GBP currencies' pairs. The ‘twofold' model includes interest rate, money supply net foreign assets as fundamentals, spread high-low variable. Then we compare different mode...

in the recent economic literature, an important finding is the causal relationship between financial development and economic growth. before the 1970s, the most of economists believed that economic growth could be reached only by accumulation of physical capital. in the 1970s and after the pioneering works of mckinon (1973) and shaw (1973), this orthodox view was criticized by a vast amount of ...

The World Bank Group Entrepreneurship Survey measures entrepreneurial activity around the world. The database includes cross-country, time-series data on the number of total and newly registered businesses for 84 countries. This paper finds significant relationships between entrepreneurial activity and indicators of economic and financial development and growth, the quality of the legal and reg...

Existing microstructure literature cannot explain the empirical evidence that bid-ask spreads can decrease with information asymmetry and ignores either information asymmetry or inventory risks. We develop a market making model that highlights the asset pricing impact of market makers’ capability of making offsetting trades in markets where both information asymmetry and inventory risk are sign...

This paper examines the relation between annual report readability and firm performance and earnings persistence. I measure the readability of public company annual reports using the Fog index from the computational linguistics literature and the length of the document. I find that: (1) the annual reports of firms with lower earnings are harder to read (i.e., they have a higher Fog index and ar...

Market makers in over-the-counter markets often make offsetting trades and have significant market power. We develop a market making model that captures this market feature as well as other important characteristics such as information asymmetry and inventory risk. In contrast to the existing literature, a market maker in our model can optimally shift some trade with the informed to other discr...

We show how a high degree of commonality in investor liquidity shocks can diminish incentives for intermediaries to keep markets open and lead to market collapse, even without information asymmetry or news affecting fundamentals. We motivate our model using the perpetual floating-rate note market where two years of explosive growth – in which issues by high quality borrowers were placed with in...