Although earnings quality has been an important part of literature in accounting and financial economics for some time, there are relatively few examples of empirical work designed to isolate the effects of variation in earnings quality on the returns to equity ownership in the marketplace. Building on the previous literature, we conduct a robust analysis of these effects by employing earnings restatements as a proxy for quality of earnings in a multi-factor return model. Our results indicate that material misstatements of earnings are priced risk factors that have persistent (long-run) impacts on equity returns. Applications to business practice are discussed in the light of these results.
Purpose
The purpose of this paper is to extend the literature on entrepreneurship and corruption by examining the link between productive and unproductive entrepreneurial activities as moderated by economic freedom. Specifically, the authors hypothesize that various aspects of economic freedom are contextual in their moderating effects, so that what matters in terms of economic freedom will depend on other factors such as levels of human capital.
Design/methodology/approach
The authors test these hypotheses by incorporating aggregated and disaggregated measures from the Economic Freedom of the World into a model of international entrepreneurial activity.
Findings
The results indicate that not only is economic freedom a major determinant of the level of entrepreneurial activity across countries, as previously verified, but that it also moderates the relationship between human capital, corruption, and productive entrepreneurship.
Originality/value
These findings resolve many of the ambiguities previously identified in the literature on the link between corruption, entrepreneurship, and growth.
Assuming that a legislator representing a moderate constituency (with respect to a variety of interests) may be expected to vote moderately in general, the authors suggest a measure of the``moderateness'' of a legislator's voting behavior and use it to determine whether a relationship exists between PAC contributions and the degree of moderateness. The results suggest that PACs exhibit a tendency to give more, at the margin, to legislators with moderate voting records.
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