Regional earnings inequality in Great Britain: Evidence from fixed-effects regressions

Earnings inequality in Great Britain has increased substantially over the last two decades at both the national and regional levels. This paper examines the determinants of regional hourly earnings over the period 1976 to 1995 by estimating regional fixed-effects earnings equations. Using panel dataset from the New Earnings Survey, individual-specific heterogeneity is controlled for, and superior estimates of the factors affecting regional earnings are obtained. Increasing returns to skill, increasing industrial differentials, and increasing premiums for older workers are found to have contributed to increasing regional earnings inequality, and consequently rising earnings inequality at the national level

The Persistence of Earnings and Corporate Governance in IPO Firms

In this study, we investigate the earnings persistence in IPO firms by examining the two components of earnings: accruals and cash flows. We also analyze the impact of corporate governance on earnings and the two earnings components. In our comparison of the top and bottom quartiles based on the firms\u27 earnings at the IPO year, we find that although the top quartile firms have a significantly positive accrual component in the IPO year, they eventually have the same negative accrual component of earnings as the bottom quartile firms in the second year after the IPO. In contrast, we find that the significant difference in the cash flow component between the top and bottom quartiles persists during the two years after the IPO. This finding supports the existing literature that the cash flow component contributes to the persistence of earnings while the accrual component does not. We also find that the corporate governance structure has a significant impact on earnings and the components of earnings for the top quartile firms, but not for the bottom quartile firms. This is particularly evident since the top quartile firms have the opportunity to manage their earnings, while firms in the lowest quartile are unable to manage their earnings

Earnings Management and Long-Run Stock Underperformance of Private Placements

The study investigates whether private placement issuers manipulate their earnings around the time of issuance and the effect of earnings management on the long-run stock performance. We find that managers of U.S. private placement issuers tend to engage in income-increasing earnings management in the year prior to the issuance of private placements. We further speculate that earnings management serves as a likely source of investor over-optimism at the time of private placements. To support this speculation, we find evidence suggesting that the income-increasing accounting accruals made at the time of private placements predict the post-issue long-term stock underperformance. The study contributes to the large body of literature on earnings manipulation around the time of securities issuance

What happens around earning announcements? An investigation of information asymmetry and trading activity in the Saudi market

This paper examines stock returns and trading activities around earnings announcements for listed companies in the Saudi stock market (SSM). Specifically, we examine the levels of stock liquidity, trading activity, volatility, bid-ask spread, asymmetric information and investor trading behaviour around earnings announcements for all firms in the market for the period 2002-2009. Abnormal price and volume reactions around earnings announcements suggest that these announcements produce highly informative contents. The magnitude of the cumulative abnormal returns around earnings announcement is induced by trading activity in the two weeks before the release date. We also show evidence of an increased adverse selection cost around earnings announcement, which is then gradually reduced in the post-announcement period, indicating that earnings announcements reduce uncertainty in the market. We also examine trading behaviour among small and large investors in the market through constructing order imbalance measures. In general, large investors are more sophisticated and show higher informed trading before earnings announcements whereas smaller investors show stronger reaction to news. Moreover, small investors show a buying pattern which is consistent with times-series based earnings surprise. They are net-buyers for good news and net-sellers for bad news portfolios

Who Pays if We Raise the Social Security Payroll Tax Cap?

Most Americans know that their earnings are subject to the Social Security payroll tax. Not as many are aware that the amount of earnings subject to the tax, while subject to change, is capped at the same level for everyone, regardless of total earnings. This year, the maximum wage earnings subject to the payroll tax is $127,200. The cap on the Social Security payroll tax means that those with the highest earnings pay a lower rate.Using Census Bureau data from the latest American Community Survey (ACS), this issue brief updates previous CEPR research to determine how many people would be affected if the payroll tax cap were raised or eliminated

Education, Gender and Earnings in France and Germany: Level and Dispersion Effects

This paper analyses the relationship between education, gender and earnings in France and Germany. The model chosen here enables to estimate the impact of education not only on the expected earnings level but also on their dispersion, taking gender-specific sample selectivity into account. The results indicate that the completion of a minimum level of general instruction yields an earnings premium that cannot compensated by a vocational degree. Moreover, education affects the uncertainty of earnings. General qualifications are found to increase the earnings risk, vocational one to reduce it. More education, especially tertiary education, yields a high earnings premium but is associated with the highest earnings uncertainty. Women enjoy a higher earnings premium for education than men and though they face overall a higher earnings uncertainty, they can - more than men - reduce this risk by investing in their education. --education,earnings,heteroscedasticity

Does volatility improve UK earnings forecasts?

We investigate the relation between UK accounting earnings volatility and the level of future earnings using a unique sample comprising some 10,480 firm-year observations for 1,481 non-financial firms over the 1985-2003 period. The findings confirm the in-sample result of an inverse volatility-earnings relation only for the 1998-2003 sub-period and for the most profitable firms. The out-of-sample forecast accuracy for the top earnings quintile when volatility is added as a regressor is superior to the model including only lagged earnings. The findings are consistent with the over-investment hypothesis and the view that the earnings of the most volatile firms tend to mean-revert more rapidly

How Informative Are Fraud and Non-Fraud Firms\u27 Earnings?

This study evaluates how informative the earnings of fraud firms are compared to peer non-fraud firms by assessing informativeness in the context of persistence, analysts’ forecast errors, and stock returns. There are differences in how informative the earnings of fraud firms are to analysts’ forecasts and returns in the pre-fraud period, but not in the fraud period. In the post- fraud period, there is no difference in how informative fraud firms’ earnings are to analysts’ earnings forecasts. Furthermore, fraud firm’s earnings are not differentially associated with excess returns post-fraud. When earnings are decomposed into accruals and cash flows, fraud firms’ accruals are more persistent pre-fraud and less so post- fraud while cash flows are not differentially persistent conditional on fraud. The study presents insights that can help practitioners, auditors, regulators, and researchers identify fraud candidates

Public and Private Sector Earnings in Alaska

We compare earnings in the Alaska public and private sector labor markets from 2001 -2016. Public sector laborers are older and more likely to be female, suggesting that taking these differences into consideration will be important in our comparisons. We also focus on the public-private sector earnings gaps for men and women separately, as the magnitude and even direction of the gap depends on this distinction. We go about this in three ways: unconditional comparisons, conditional earnings gaps, and comparing the earnings and growth of individuals who remain with the same employer. Below are the main findings: • The unconditional average public-private earnings gaps for men and women are of opposing signs (see Table 1). – Men in the public sector earn about $2,129 less in quarterly wages than men in the private sector, on average. – Women in the public sector earn about$498 more in quarterly wages than women in the private sector, on average. • On average, across all occupations, men and women have higher initial earnings in the private sector at the beginning of a job spell. – For men, the difference is $3113 in quarterly earnings. – For women, the difference is$760 in quarterly earnings. • Among workers who remain with the same employer, earnings growth is 1% and 2% higher in the public sector for men and women, respectively. • For men, despite the faster growth, they don’t catch up to the earnings of private sector employees within 10 years of tenure in most occupations (See Tables 9 and 11, and Figure 12). 1 • Women in the public sector earn more than their private sector counterparts within a few years of tenure, on average. • There is substantial heterogeneity in the earnings gap across occupations (See Tables 10 and 12, and Figure 13).Alaska Department of Administratio

Immigrant Economic Assimilation: Evidence from UK Longitudinal Data between 1978 and 2006

We exploit a large and long longitudinal dataset to estimate the immigrant-native earnings gap at entry and over time for the UK between 1978 and 2006. That is, we attempt to separately estimate cohort and assimilation effects. We also estimate the associated immigrant earnings growth rate and immigrant-native earnings convergence rate. Our estimates suggest that immigrants from more recent cohorts fare better than earlier ones at entry. Furthermore, the earnings of immigrants from more recent cohorts catch up faster with natives' earnings. While the convergence took over 30 years for those entering in the post-war, it only took half as long for those entering in the early 2000s. This earnings growth is fastest in the first 10 years, and it considerably slows down after 30 years.Immigration; assimilation; wages; earnings; earnings-gap; UK.