Unit Root Tests of Canadian Poverty Measures

This note examines the non-stationarity property of a most widely used Canadian poverty measure, low income cut-off, for Canada and for each of its ten provinces using various unit root tests which started gaining popularity since the early 1980s. Most test results indicate that the Canadian poverty rates for the period of 1980 to 2003 are non-stationary. Therefore it is quite reasonable and appropriate to model the Canadian poverty rates as an I(1) process in the empirical studies on poverty issues in Canada.

Convergence of Income Among Provinces in Canada – An Application of GMM Estimation

This paper tests for unconditional and conditional income convergence among provinces in Canada during the period 1981-2001. We apply the first-differenced GMM estimation technique to the dynamic Solow growth model and compare the results with the other panel data approaches such as fixed and random effects. The method used in this paper accounts for not only province-specific initial technology levels but also for the heterogeneity of the technological progress rate between the ‘richer’ and ‘not so richer’ provinces of Canada. One of the findings of the paper is that the Canadian provinces do not share a common technology progress rate and a homogeneous production function. The findings of the study suggest a convergence rate of around 6% to 6.5% p.a. whereas the previous studies using OLS and other techniques reported a convergence rate of around 1.05 % for per capita GDP and 2.89% p.a. for personal disposable income among Canadian provinces.Provincial convergence, Canada, Panel data, GMM

Price Index Convergence Among Provinces and Cities of Canada: 1978 - 2001

We study the convergence of price indices for Canadian provinces and cities for the period 1978-2001 for (a) ten provinces and nine commodity/price groups; and (b) fifteen cities a cross Canada and four commodity/price groups using panel unit root tests. The empirical results reject the unit root hypothesis for price data across provinces and cities. The estimated rate of convergence in Canada is comparatively faster than the rates for similar studies reported for U.S. c ities. The empirical results also reveal a relatively faster rate of convergence during the post-inflation targeting period (1991-2001), than earlier.Intra-national PPP, Panel unit root, Canada, CPI, Half-life

Share buybacks in India

We examine the market price and liquidity reaction to 239 share repurchase announcements in India. The average abnormal return on announcement day is 2.07 percent. Firms with larger promotor ownership stakes experience higher market reactions. Using the Amihud illiquidity measure and volume, we show that liquidity improves after the announcement. Open market repurchase programs increase market liquidity while tender offers do not. Liquidity improves more for high promotor ownership firms. Lastly, shorter duration repurchase programs improve liquidity more than longer duration programs. These results are consistent with our discussion of the pecking order of ownership structure in the low information transparency environment of India

Taxing share repurchases

The US Inflation Reduction Act of 2022 imposed a 1% excise tax on share repurchases. We can learn from corporate reaction to such a new policy in India. The Indian federal government recently levied a 20 percent tax, plus surcharge, on share repurchases. We show that companies did not slow down their share repurchase initiation. However, to offset the added taxes, they increased their capital investment. The combination of the share repurchase and capital investment decreased their free cash flow

Caste Primacy of Auditor Choice and Independence

We examine the caste affiliation of the auditor selected by the corporate boards of directors of Indian firms. The history of the caste system in India is one of discrimination and inequity. The constitutionally mandated quota system in the public sector has shown improvements, but has not trickled into private sector leadership. We find that nearly 96% of Indian corporate boards are dominated by a single caste. The auditing firms are also dominated by the forward castes. Lastly, we find that when boards are dominated by one caste, they select an auditing firm that is also affiliated with that same caste. We examine the board and auditor relationship because they both play an important monitoring role in corporate governance. However, auditor effectiveness can be undermined when there is a lack of independence between them and the firm. The existence of a strong shared social network like caste affiliation compromises that independence