Post-change Period Research Articles

Economic consequences of firms’ depreciation method choice: Evidence from capital investments

This study identifies several interrelated reasons why firms’ depreciation method choice is likely to influence managers’ capital investment decisions. We find that firms that use accelerated depreciation make significantly larger capital investments than firms that use straight-line depreciation. Further, we find that there has been a migration away from accelerated depreciation to straight-line depreciation over the past two decades. Firms that make such accounting changes make smaller capital investments in the post-change periods than in the pre-change periods. These results suggest that a choice made for external financial reporting purposes influences managers’ capital investment decisions.

Evaluation of Clostridium difficile-associated diarrhea with a drug formulary change in preferred fluoroquinolones.

Recent publications report that gatifloxacin might be associated with a greater incidence of Clostridium difficile-associated diarrhea (C. difficile, CDAD) than are other fluoroquinolones. We performed a drug use evaluation to examine this issue after adding gatifloxacin to the formulary and changing from levofloxacin to gatifloxacin as the preferred oral fluoroquinolone in 10 Department of Veterans Affairs (VA) medical centers in the northeastern United States. To estimate (1) the overall incidence of CDAD before and after the change from levofloxacin to gatifloxacin as the preferred oral fluoroquinolone and (2) the incidence rates for ciprofloxacin, levofloxacin, and gatifloxacin separately. Using the VA's Pharmacy Benefits Management database, the total number of days of antibiotic therapy was determined for all inpatients and outpatients of the 10 medical centers who filled at least 1 antibiotic prescription between July 1, 2003, and June 30, 2004. This time frame was chosen because it included 6 months before and 6 months after the change in the preferred oral fluoroquinolone from levofloxacin to gatifloxacin for the VA health system on January 1, 2004. For the same study period and medical centers, the electronic medical records of all inpatients and outpatients with an entry for a positive C. difficile toxin were reviewed. Positive toxins that occurred within 6 weeks of a previous positive result in the same patient were excluded. Exact Poisson tests were used to compare the incidence rates of CDAD (number of CDAD cases per 1,000 days of antibiotic treatment) for antibiotics overall, the fluoroquinolones as a group, non-fluoroquinolone antibiotics, and the individual fluoroquinolones, com-paring the 6-month time periods before (pre-change) versus after (post-change) the addition of gatifloxacin as the preferred oral fluoroquinolone. Of 505 cases of CDAD in the 12-month study period, 413 (81.7%) were associated with antibiotic use in the previous 6 weeks. Among anti-biotic users, incidence rates of CDAD were 166 per 72,114 days of antibiotic therapy in the pre-change period (2.3 cases per 1,000 days of antibiotics) versus 247 per 72,354 days in the post-change period (3.4 cases per 1,000 days of antibiotics, P < 0.001). Fluoroquinolones accounted for 54.8% of the CDAD cases in the pre-change period and 67.2% in the post-change period, representing a 22.6% relative increase in the percentage of CDAD cases that were associated with fluoroquinolone use. The CDAD incidence rates per 1,000 days of fluoroquinolone therapy were 3.7 in the pre-change period versus 7.0 in the post-change period (P < 0.001). Among fluoroqui-nolone users, gatifloxacin accounted for none of the cases of CDAD in the pre-change period when it was nonformulary and 65.1% of the cases in the post-change period, for an incidence rate of 7.6 (108 per 14,239 days). The CDAD incidence rates per 1,000 antibiotic days for patients treated with ciprofloxacin were 4.6 (24 per 5,260 days) in the pre-change period and 7.4 (40 per 5,429 days) in the post-change period, a nonsignificant trend (P = 0.079). The incidence rate of CDAD for levofloxacin increased significantly from 3.9 (75 per 19,417 days) in the pre-change period to 10.7 (44 per 4,108 days) in the post-change period (P < 0.001). The incidence rates of CDAD in the post-change period did not differ significantly for ciprofloxacin, levofloxacin, and gatifloxacin (P = 0.119). There was an increase in the incidence of CDAD among all antibiotic users and fluoroquinolone users, but not among users of non-fluoroquinolone antibiotics, in the period following the formulary change from levofloxacin to gatifloxacin as the preferred fluoroquinolone. However, rates of CDAD among the 3 fluoroquinolone antibiotics in the post-change period were not significantly different, and levofloxacin was the only fluoroquinolone that was associated with a significant increase in the rate of CDAD between the pre-change and post-change periods. These findings suggest that the increase in the CDAD incidence rate was probably not attributable to the addition of gatifloxacin to the formulary.

Effect on drug utilization and expenditures of a cost-share change from copayment to coinsurance.

While increases in prescription drug spending have moderated in recent years, drug spending is still a concern among managed care organizations and health plan administrators. In order to minimize cost increases from year to year, many health care plans have shifted more of the cost of medications to the member-consumer. Coinsurance, a benefit design in which the patient pays a percentage of the cost of the medication, is garnering more attention as a type of cost-sharing that differs from the traditional copayment model. To estimate the impact on medication expenditures and utilization of a pharmacy benefit design change from 3-tier copayment to coinsurance. Drug expenditures and utilization of beneficiaries aged >or =18 years and continuously enrolled in 2 privately insured groups were compared before and after a benefit design change in 1 of the groups. For the 12 months before the benefit design change, both groups had a 3-tier, fixed-dollar copayment structure with identical cost-sharing per 30-day supply: $10 tier-1 copayment for generic drugs, $25 tier-2 copayment for preferred brand drugs, and $40 tier-3 copayment for non-preferred brand drugs. On September 1, 2005, a 4-tier coinsurance benefit design (25% for all tiers except tier-3 [non-preferred] drugs at 50%, with minimum and maximum patient out-of-pocket [OOP] cost applied to each tier) was implemented in the intervention group (N = 46,311). The 3-tier copayment design was maintained in the comparison group (N = 7,916). A difference-in-difference analysis was used to estimate the effect of the benefit design change on expenditures and utilization, overall (for all prescription drugs), and for 3 classes of essential medications: antihypertensives, antidepressants, and statins. Analyses measured changes in outcomes from 6 months pre-change (October 1, 2004, through March 31, 2005) through 6 months post-change (October 1, 2005, through March 31, 2006). In the overall (all drug) analyses, per member per month (PMPM) outcome measures were total pharmacy claims and cost, beneficiary (patient OOP) cost, and employer (plan sponsor) cost. Analyses of the 3 essential drug classes were limited to members with at least 1 claim in the drug class in both the pre-change and post-change periods (N = 11,917, intervention group; 1,792, comparison group), and assessed per patient per month (PPPM) days supply, beneficiary cost, employer cost, and total cost. Beneficiaries in the intervention group paid 31.8% of total pharmacy benefit cost at the point of care versus 31.5% in the comparison group in the post-change period. The increases in beneficiary cost from the pre-change period to the post-change period were not significantly different for the intervention (7.5%) and comparison (3.0%) groups (P = 0.983). From the pre-change period to the post-change period, total spending per member increased $4.57 PMPM (6.3%), from $72.29 to $76.87 in the intervention group versus a $5.87 PMPM increase (9.5%), from $61.54 to $67.41, in the comparison group, a relative difference of $1.30 PMPM (P = 0.013). The increases in utilization from the pre-change period to the post-change period were not significantly different in the intervention group (2.4%) versus the comparison group (4.6%, P = 0.189). Utilization per patient in the 3 essential drug classes increased 4.1% (1.59 days PPPM) in the intervention group versus 9.0% (3.23 days PPPM) in the comparison group (P = 0.004). Total expenditures in the 3 classes for the intervention and comparison groups increased 8.2% ($5.07 PPPM) and 13.3% ($7.80 PPPM), respectively, a difference of $2.73 PPPM (P = 0.003). Beneficiary cost for all 3 drug classes increased $2.20 PPPM (9.2%) in the intervention group versus $2.12 PPPM (9.1%) in the comparison group (P = 0.032). The increases in employer cost for the 3 essential drug classes in the intervention group (7.5%, $2.86 PPPM) and comparison group (16.1%, $5.67 PPPM) did not significantly differ (P = 0.057). A pharmacy benefit design change from tiered copayment to tiered coinsurance, without a significant increase in beneficiary OOP costs, was associated with a lower rate of increase in total pharmacy benefit cost and no significant reduction in utilization. For utilizers in 3 essential drug classes, drug utilization and total spending increased in the coinsurance group but at a lower rate of increase compared with the copayment group. The coinsurance design provides another approach for controlling prescription utilization and spending for certain medication classes.

Combining sediment source tracing techniques with traditional monitoring to assess the impact of improved land management on catchment sediment yields

Summary This paper aims to demonstrate the potential value of combining sediment source tracing techniques with traditional monitoring approaches, when documenting the impact of improved land management on catchment sediment yields. It reports the results of an investigation undertaken in a small (1.19 km 2 ) agricultural catchment in southern Brazil, which was monitored before and after the implementation of improved land management practices. Attention focussed on 50 storm events that occurred between May 2002 and March 2006 and which reflected the behaviour of the catchment during the pre-change, transition and post-change periods. Improved land management, involving minimum-till cultivation and the maintenance of good crop cover, was introduced in early 2003. The traditional monitoring provided a basis for evaluating the changes in storm runoff volume, storm hydrograph peak and storm-period sediment load and mean suspended sediment concentration. The results indicate that both storm runoff volumes and peak flows associated with a given amount of rainfall provided evidence of a significant decrease after the introduction of improved land management. Storm-period sediment loads showed a similar reduction, with a reduction by as much as 80% for low magnitude events and of ca. 40% for events of intermediate magnitude. However, there was no significant change in mean suspended sediment concentrations, indicating that the reductions in sediment load were primarily the result of the reduced storm runoff volume. Sediment source fingerprinting was used to explore the changes in the relative and absolute contributions to the storm sediment loads from the three key sources, namely the surface of the fields under crops, the unpaved roads and the stream channels. A comparison of the load-weighted mean contributions for the pre- and post-treatment periods indicated that the contribution from the field surfaces and unpaved roads decreased from 63% and 36% to 54% and 24%, respectively, whereas the contribution from the stream channels increased from ca. 2% to 22%. By relating the absolute amounts of sediment mobilised from each individual source group to variables representing the runoff and precipitation associated with the events, it was possible to identify changes in the response of the individual sediment sources to the changes in land management that occurred within the catchment. Sediment mobilisation from the stream channel during individual events increased substantially over the whole range of flows after the introduction of improved land management in the study catchment, whereas the amounts of sediment mobilised from the surfaces of the fields and the unpaved roads showed a significant decrease during events of low and intermediate magnitude. The short monitoring period associated with the study, coupled with inter-annual variations in rainfall, necessarily limit the scope and rigour of the study reported, but it is seen to provide a useful demonstration of how the coupling of sediment source tracing with more traditional monitoring techniques can provide an improved understanding of the impact of improved management practices on the sediment response of a catchment, as well as important information to inform the design and implementation of effective sediment management and control measures.

Effect of Changes in Financial Leverage on the Relation , Between Earnings and Stock Returns: Evidence from Korean Firms

This study examines whether a firm's default risk as measured by its financial leverage affects the relationship between accounting earnings and stock returns, viz., the earnings response coefficient (ERC). From analytical results, we hypothesize that the ERC is a negative function of the firm's default risk. We test this hypothesis by comparing the ERC’s between pre-change and post-change period, using a sample of Korean firms that experienced changes in their financial leverages through either the issue of new debt or the retirement of outstanding debt. The empirical results indicate that the ERC's have decreased for the issue of new debt, but increased for the retirement of outstanding debt from pre-change to post-change period. Furthermore, these shifts in the ERC's are statistically significant, even after controlling for the differences in the systematic risk and growth between pre-change and post-change period. Overall, our findings suggest that the default risk is an important factor affecting the ERC for the Korean firms.

Statistical Modeling of Extreme Rainfall in Southwest Western Australia

Abstract Rainfall over southwest Western Australia (SWWA; 32°S southward and 118°E westward) has been decreasing over the past decades, putting further constraints on water resources in an already dry area. In this study, daily rainfall over five geographically dispersed and homogenized weather stations within SWWA are analyzed. A peak over threshold method from the extreme value theory is used to model daily rainfall above a given threshold. The Mann–Whitney–Pittitt (change point) test was applied to detect changes in annual, winter (May–October), and summer (November–April) maximum daily rainfall. Change points for winter extreme daily rainfall were found around 1965, based on different individual stations, with the extreme daily rainfall reduced since then. To demonstrate the degree of change in the winter extreme daily rainfall, at 1965 the data were stratified, and generalized Pareto distributions were fitted to the tails of the distributions for daily rainfall in the prechange period of 1930–65 (including 1965) and the postchange period of 1966–2001. The fitted tail distributions also allow the estimation of probabilities and return periods of the daily rainfall extreme. Results show that return periods for the winter extreme daily rainfall have increased after 1965, implying that winter daily rainfall extremes in SWWA are lower after 1965 than they were before. There has been vigorous debate as to what forces the drying trend, that is, whether it is part of multidecadal variability or whether it is driven by secular forcings, such as increasing atmospheric CO2 concentration. In this paper, statistical modeling is also used to identify possible associated changes in atmospheric circulation. It is found that there is a change point near 1965 in a dominant atmospheric circulation mode of the Antarctic Oscillation (AAO). The result offers qualified support for the argument that the AAO may contribute to the drying trend.

Commuting Stress

This study took advantage of a major improvement to the infrastructure of a commuter rail line to conduct a field study examining the effects of that change on commuter stress. The study used a multimethod approach, employing self- and significant other–report data, behavioral measures, and physiological measures of stress. Cross-sectional and longitudinal data were collected with a pretest–posttest design including both within- and between-group comparisons. The results on psychophysiological, self-report, and job strain measures revealed that those commuters using improved transit service showed reduced stress in the postchange period and those staying with the previous service remained constant. Commuters who switched to the new train service also experienced a reduced level of job strain after the implementation of the line. A subgroup of rail passengers with elevated sensitivity to commuting conditions were also uncovered. On both a behavioral index of motivation and perceived job strain, women who had children at home especially benefited from the intervention. Multimethodological evidence from a natural experiment indicates that transit infrastructure improvements not only increase efficiency but also enhance passenger well-being by reducing commuting stress.

Commuting Stress: Psychophysiological Effects of a Trip and Spillover into the Workplace

This study took advantage of a major improvement to the infrastructure of a commuter rail line to conduct a field study examining the effects of that change on commuter stress. The study used a multimethod approach, employing self- and significant other—report data, behavioral measures, and physiological measures of stress. Cross-sectional and longitudinal data were collected with a pretest—posttest design including both within- and between-group comparisons. The results on psychophysiological, self-report, and job strain measures revealed that those commuters using improved transit service showed reduced stress in the postchange period and those staying with the previous service remained constant. Commuters who switched to the new train service also experienced a reduced level of job strain after the implementation of the line. A subgroup of rail passengers with elevated sensitivity to commuting conditions were also uncovered. On both a behavioral index of motivation and perceived job strain, women who h...

Do International Investors' Demand Curves for Stocks Slope Down Too?

Using changes in the MSCI Standard Country Indices for 29 countries between 1998 and 2001, we document that stock returns and volumes exhibit index in international markets similar to those detected by the studies of US stocks. The inclusion of a stock generally leads to higher returns immediately following the announcement followed by a further rise till the actual change with a partial reversion in the post change period. Deletions lead to significant negative returns that continue after the change date. Volumes traded increase significantly and remain at high levels after the change date for the added stocks. There are also considerable cross-country variations in these effects. The evidence is consistent with the downward sloping demand curve hypothesis though some price-pressure effects are also present. Tests using data on ADR availability and free float on stocks added to the indices fail to turn up any evidence in support of information effects.

The 'Index Effect' On Stock Prices and Trading Volumes: International Evidence

Using changes in the MSCI Standard Country Indices for 29 countries between 1998 and 2001, we document that stock returns and volumes exhibit index in international markets similar to those detected by the studies of US stocks. The inclusion of a stock generally leads to higher returns immediately following the announcement followed by a further rise till the actual change with a partial reversion in the post change period. Deletions lead to significant negative returns that continue after the change date. Volumes traded increase significantly and remain at high levels after the change date for the added stocks. There are also considerable cross-country variations in these effects. The evidence is consistent with the downward sloping demand curve hypothesis though some price-pressure effects are also present. Tests using data on ADR availability and free float on stocks added to the indices fail to turn up any evidence in support of information effects.

Dental visits to hospital emergency departments by adults receiving Medicaid: Assessing their use

Pain from toothaches represents a significant problem. People lacking access to private dental services may use hospital emergency departments, or EDs. In 1993, Maryland eliminated Medicaid reimbursement to dentists for adult emergency services. The authors used the change in Medicaid policy that eliminated dentist reimbursement to establish two study periods. Data tapes describing patients' use of EDs were obtained from the Maryland Medicaid Management Information System. A total of 3,639 people visited EDs for dental problems sometime during the four-year study period. After controlling for age, race and sex, the authors found that the rate of ED claims was 12 percent higher in the postchange period than in the prechange period. Comparisons between periods show significant rate increases during the postchange period for men, whites, African-Americans and patients aged 21 through 44 years and 45 through 64 years. The change in Medicaid policy that eliminated dentist reimbursement and participation in the program appears to have increased the use of EDs for the treatment of dental problems. Practice Implications. Many EDs lack dental services and are not capable of providing definitive treatment. When definitive treatment is not provided, this pattern of care may be repeated if patients are forced to return for treatment.

Tick size and quote revisions on the NYSE

In this paper, we analyze how tick size affects quote revisions on the NYSE and whether pre-decimalization tick sizes ($1/8 and $1/16) were binding constraints on specialists’ spread- and price-quote decisions. We find that the number of quote revisions that involve changes in the spread increased dramatically after the tick-size reduction in 1997. The number of spread-quote revisions is smaller for stocks with lower prices and larger volumes during both the pre and post tick-size change periods. We interpret this result as evidence that the minimum price variation is a binding constraint on absolute spreads even after the tick-size reduction, especially for low-price and/or large-volume stocks. The number of quote revisions that involve changes in the spread (depth) is largest (smallest) during the early hour of trading, suggesting that the minimum price variation is least likely to be the binding constraint on spreads during the early hour of trading. These results suggest that decimalization is likely to further reduce price rigidity and increase price competition. Consistent with this expectation, we find a significant increase in the frequency of spread- and price-quote revisions after decimalization.

Tick Size and Quote Revisions on the NYSE

In this paper, we analyze how tick size affects quote revisions on the NYSE and whether pre-decimalization tick sizes ($1/8 and $1/16) were binding constraints on specialists' spread- and price-quote decisions. We find that the number of quote revisions that involve changes in the spread increased dramatically after the tick-size reduction in 1997. The number of spread-quote revisions is smaller for stocks with lower prices and larger volumes during both the pre and post tick-size change periods. We interpret this result as evidence that the minimum price variation is a binding constraint on absolute spreads even after the tick-size reduction, especially for low-price and/or large-volume stocks. The number of quote revisions that involve changes in the spread (depth) is largest (smallest) during the early hour of trading, suggesting that the minimum price variation is least likely to be the binding constraint on spreads during the early hour of trading. These results suggest that decimalization is likely to further reduce price rigidity and increase price competition. Consistent with this expectation, we find a significant increase in the frequency of spread- and price-quote revisions after decimalization.

The Valuation Consequence of Accounting Changes: A Multi-Year Examination

We examine the valuation impact of changes in the accounting procedures and estimates underlying reported financial data in the year of the change as well as in the postchange years. Since most accounting changes have undisclosed effect on financial variables in subsequent years in addition to the earnings impact disclosed in the year of the change, an accounting change might be motivated by its long-term valuation effect, even if investors are cognizant of the initial earnings impact and fully account for it in the year of the change. This conjecture is empirically examined for the first time in this study. Our tests are based on a cross-sectional examination of the valuation impact of the earnings effect of accounting changes in the year of the change and a longitudinal examination of the behavior of returns in the postchange years. We also provide descriptive evidence indicating that earnings management is a managerial motive for changing accounting techniques. Cross-sectionally, for income-increasing accounting changes, our results show that investors' valuations seem to reflect a concern for the reduced quality of earnings, as reflected by smaller earnings response coefficients and R2s. However, the decline is not attributable specifically to the earnings effect of the accounting change. Similarly, the earnings effect of income-decreasing changes does not have valuation impact in the year of the accounting change. Although investors appear to largely ignore the accounting changes in the year they are made, our longitudinal test does show that firms undertaking accounting changes experience different long-term returns relative to other firms in the postchange period. However, income-increasing accounting changes are associated with negative valuation changes in the postchange period, rather than the positive impact expected from the conjecture stated above. Over the five years following the year of the accounting change, abnormal returns of income-decreasing firms exceed those of income-increasing firms substantially, with the latter firms experiencing large negative returns over the period. We demonstrate a trading rule that, ex post, exploits the information contained in the accounting changes to yield large abnormal stock returns. The results suggest that income-increasing accounting changes are perhaps the first visible sign indicating other hidden, fundamental problems that get revealed in subsequent years.

IMPACT ON RESIDENTIAL WATER CONSUMPTION OF AN INCREASING RATE STRUCTURE1

ABSTRACT: A two‐step procedure is used to estimate the impact of an increasing rate structure on residential water use. An error components regression procedure is used to estimate demand relationships for a period prior to the rate change. Water use is predicted for the post rate change period, assuming that the rate structure was not changed. Comparison of actual with predicted use indicate that water use declined as a result of the imposition of the increasing rate structure.