Reduction In Earnings Research Articles

SENSITIVITY OF DIVIDENDS TO EARNINGS CHANGES

This paper deals with probabilities of dividend changes for a given change in earnings. This so-called sensitivity of dividends to earnings changes was analyzed on a sample of Advanced economies and Emerging and developing economies, according to International Monetary Fund classification. The main goal of the research is to empirically verify the assumption that companies are generally reluctant to cut or reduce dividends regardless of the stage of economic development of the country. In addition, the probabilities of dividend changes for a given change in earnings in characteristic groups of countries - Baltic countries and former Yugoslavia countries - have been analyzed. Research results show that earnings are significant dividend factor in all sample countries, that companies are generally reluctant to cut or decrease dividends and that dividends are less sensitive to earnings changes in Advanced economies, compared to Emerging and developing economies. Research has also shown that dividends are less responsive to earnings changes in former Yugoslavia countries compared to Baltic countries. These findings are in line with Lintner (1956) who has shown that reduction in earnings is not necessarily followed by reduction in dividends. Such behavior of dividends can be explained even by prospect theory created by Kahneman and Tversky (1979). They have shown that investors are more sensitive to negative events than to positive events and that investors do not make decisions in relation to the overall wealth but in relation to a particular reference point, which is usually the status quo. If this is the case, the previous dividends represent a specific reference point in relation to which investors make decisions. Having in mind asymmetric reaction of the investing public to dividend increases and dividend decreases (or dividend cuts), companies are reluctant to cut or decrease dividends because they are trying to avoid negative market reaction.

Interest and tax burden on corporations in the Czech industrial and banking sector after 2008

Abstract The present paper deals with the interest and tax burden of corporations in the Czech industrial and banking sector as well as with the identification of the differences between the two sectors, including the evaluation of their developmental trends in the period after the economic and financial crisis of 2008. The interest and tax burden on business entities is determined by negative cash flows that reduce the value of their assets and equity. The basis of the research is the analysis of both components of the financial burden on corporations in these sectors over the past eight years and the identification of factors influencing their capital structure and performance. According to DuPont's equation, the burden is expressed by interest and the tax reduction of corporation's earnings before interest and taxes. The amount of the financial burden depends on the macroeconomic environment where the corporations operate. Our analysis identified an asynchronous dependence between the real payments and changes in the interest and tax rates. The reduction of both rates has had a positive effect on the performance of Czech corporations and increased their capital resources. They became more attractive to foreign investors, and the return on invested capital improved. Based on the results of the analysis, we evaluated the differences in the performance of the average corporation in the banking and industrial sectors.

Modelling the Economics of Grassland Degradation in Banni, India, using System Dynamics

This is a study of the interactions between the ecology and economy of the Banni grassland, located in the district of Kutch, Gujarat, India. The study focuses on modelling the economic impact of grassland degradation in the Banni from 1992–2015 and simulates future scenarios up to 2030 using system dynamics. The specific sectors being modelled are the area spread of the invasive species Prosopis juliflora, palatable grass, the populations of livestock as well as the livestock and charcoal incomes of Banni. An economic valuation is done by discounting the future earnings of the pastoral (milk, livestock sale, dung manure) and charcoal economy under two scenarios 1) Base case (Business as Usual), i.e. keeping current policies constant and 2) P. juliflora removal policy (PRP) i.e. where a decision is implemented to remove P. juliflora from Banni. Under the BAU scenario, modelling results indicate that the Banni grassland is headed for severe fodder scarcity due to the shrinking area under grassland. Under the PRP scenario, Banni is able to revive its grasslands and increase the present value of future earnings (up till 2030) by 62 per cent. A delay of five years in the decision to remove P. juliflora results in a 28 per cent reduction in earnings indicating the policy’s time sensitivity. The model serves as a test bed for generating what-if scenarios of the Banni grassland.

Short-Term Impact of Concussion in the NHL: An Analysis of Player Longevity, Performance, and Financial Loss.

Many studies have focused on the long-term impact of concussions in professional sports, but few have investigated short-term effects. This study examines concussion effects on individual players in the National Hockey League (NHL) by assessing career length, performance, and salary. Contracts, transactions, injury reports, and performance statistics from 2008-17 were obtained from the official NHL online publication. Players who sustained a concussion were compared with the 2008-17 non-concussed player pool. Career length was analyzed using Kaplan-Meier survival curves and stratification of player age, experience, and longevity. Player performance and salary changes were evaluated between the years before versus after concussion. Performance and salary changes were compared against non-concussed NHL athletes before/after their career midpoints. Of the 2194 eligible NHL players in the 9-year period, 309 sustained 399 concussions resulting in injury protocol. The probability of playing a full NHL season post-concussion was significantly decreased compared with the non-concussed pool (p < 0.05), specifically 65.0% versus 81.2% at 1 year into a player's career, 49.8% versus 67.4% at 2 years, and 14.6% versus 43.7% at 5 years. Performance was reduced at all non-goalie positions post-concussion (p < 0.05). Players scored 2.5 points/year less following a concussion. The total annualized financial impact from salary reductions after 1 concussion was $57.0 million, with a decrease of $292,000 per year in contract value per athlete. This retrospective study demonstrates that NHL concussions resulting in injury protocol activation lead to shorter career lengths, earnings reductions, and decreased performance when compared with non-concussed controls.

The effects of health shocks on labor market outcomes: evidence from UK panel data

This study examines the link between health shocks and labor market outcomes in the United Kingdom. For sample periods of up to 9 years, I use longitudinal data from the British Household Panel Survey to test how sudden health shocks affect a number of labor market outcomes, such as labor and household income, employment status, and hours worked. Additionally, the study examines potential mechanisms underlying the link between health declines and labor market outcomes. By estimating propensity score matching difference-in-differences models, the study shows that sudden health declines lead to significant and persistent reductions in earnings. The effects are strongest for individuals experiencing severe health shocks, males, individuals with higher education and those working in managerial jobs. When examining potential channels, I provide evidence that increased health care expenditures and health care usage as well as reduced work productivity can explain the observed effects on labor market outcomes.

Trajectories of disposable income among people of working ages diagnosed with multiple sclerosis: a nationwide register-based cohort study in Sweden 7 years before to 4 years after diagnosis with a population-based reference group

ObjectivesTo describe how disposable income (DI) and three main components changed, and analyse whether DI development differed from working-aged people with multiple sclerosis (MS) to a reference group from 7...

Anti-corruption effects on the credit risk of local financing vehicles and the pricing of Chengtou bonds: Evidence from a quasi-natural experiment in China

We investigate the causal effects of anti-corruption on the credit risk of local financing vehicles (LFVs) and the pricing of Chengtou bonds (CBs) in China. Difference-in-differences estimates show that anti-corruption decreases LFVs’ earnings, thereby increasing LFVs’ credit risk. This corresponds to a reduction in LFVs’ nonoperating incomes, and the greatest reduction of earnings occurs among LFVs investing in public infrastructure. Finally, we find that credit risk mispricing occurs in the primary market.

Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs.

THE EFFECTS OF JOB RELOCATION ON SPOUSAL CAREERS: EVIDENCE FROM MILITARY CHANGE OF STATION MOVES

We investigate the impact of military job relocation on spousal earnings and employment by creating a unique longitudinal database that tracks over 900,000 military spouses over the period 2001–2012, based on data from two administrative sources—military records on personnel and their dependents, and Social Security earnings records. This database allows us to estimate the effects of military change of station moves controlling for some key observable characteristics of the service‐member and household and controlling for individual spouse fixed effects. We find that military moves cause a substantial decline in spousal earnings in the year of the move, on the order of $2,100, or 14% of average spousal earnings. Moves also increase the likelihood that the spouse has no earnings for the year. We find larger earnings reductions for moves that cross state lines, and for older spouses, male spouses, and those with young children. The career costs persist over time and spouses continue to experience significantly lower earnings 2 years after the move. This persistence, combined with the typical military member experiencing a change of station move every 2 or 3 years, may substantially limit the ability of military spouses to accumulate human capital over time. (JEL H56, R23, J45, J16, J64)

The Effects of Job Relocation on Spousal Careers: Evidence from Military Change of Station Moves

We investigate the impact of military job relocation on spousal earnings and employment by creating a unique longitudinal database that tracks over 900,000 military spouses over the period 2001-2012, based on data from two administrative sources – military records on personnel and their dependents, and Social Security earnings records. This database allows us to estimate the effects of military change of station moves controlling for some key observable characteristics of the service-member and household and controlling for individual spouse fixed effects. We find that military moves cause a substantial decline in spousal earnings in the year of the move, on the order of $2,100, or 14% of average spousal earnings. Moves also increase the likelihood that the spouse has no earnings for the year. We find larger earnings reductions for moves that cross state lines, and for older spouses, male spouses, and those with young children. The career costs persist over time and spouses continue to experience significantly lower earnings 2 years after the move. This persistence, combined with the typical military member experiencing a change of station move every two or three years, may substantially limit the ability of military spouses to accumulate human capital over time.

The Effects of Health Shocks on Labor Market Outcomes: Evidence from UK Panel Data

This study examines the link between health shocks and labor market outcomes in the United Kingdom. For sample periods of up to seven years, I use longitudinal data from the British Household Panel Survey (BHPS) to test how sudden declines in self-reported health as well as the onsets of health conditions affect a number of labor market outcomes, such as personal income, employment status, and hours worked. The study shows that sudden health declines lead to significant and persistent reductions in earnings, which are only partly driven by reductions in labor force participation. The results suggest that higher out-of-pocket expenditures for health care and reduced work productivity are potential mechanisms through which health shocks affect earnings. The observed income losses are substantially larger for males and for individuals with higher levels of education. Additionally, the study shows that health shocks significantly impact economic stress and uncertainty as well as general well-being.

Anti-Corruption Effects on the Credit Risk of Local Financing Vehicles and the Pricing of Chengtou Bonds: Evidence from a Quasi-Natural Experiment in China

We investigate the causal effects of anti-corruption on the credit risk of local financing vehicles (LFVs) and the pricing of Chengtou bonds (CBs) in China. Difference-in-differences estimates show that anti-corruption decreases LFVs’ earnings, thereby increasing LFVs’ credit risk. This corresponds to a reduction in LFVs’ nonoperating incomes, and the greatest reduction of earnings occurs among LFVs investing in public infrastructure. Finally, we find that credit risk mispricing occurs in the primary market.

Labor earnings reductions, happiness levels and needs hierarchy

One of the main economic outcomes of the recent Great Recession has been the decrease of labor earnings in many countries. The relevant literature indicates that earnings and other socioeconomic predictors can influence levels of happiness. This paper tests the effect of pay cuts on happiness levels based on the psychological model of hierarchical needs. The basic idea of hierarchy is that the most important needs must be satisfied first before the secondary needs come into the picture. In a happiness research framework, this implies that for higher income levels, the effect of pay cuts on reported happiness levels becomes much weaker, given that the satisfaction of non-basic needs becomes important. The data used in this paper was drawn from the 5th European Survey on Working Conditions, which focuses on European countries. Two different disaggregation methods were performed, based on absolute nominal income threshold and relative income threshold, respectively. The methods for analyzing the data are the ordinary least-squares (OLS) regression model, and the Wald chi-square test. The pay cuts are a stronger predictor of happiness for low/middle income individuals than for high income individuals when it comes to disaggregation based on absolute threshold. The regression coefficients of pay cuts for the low/middle income group were not significantly different from those for the high income group regarding disaggregation based on relative threshold. The results seem to depend on the disaggregation method, implying the need for further research and discussion.

Do earnings really decline for older workers?

PurposeCross-section data suggest that the relationship between age and hourly earnings is an inverted U shape. Evidence from panel data does not necessarily confirm this finding suggesting that older workers may not experience a reduction in earnings at the end of their working life. The paper aims to discuss this issue.Design/methodology/approachIn this paper the authors use panel data on males for Great Britain in order to examine why the two types of data provide conflicting conclusions. Concentrating on the over 50s, several hypotheses are examined: overlapping cohorts, job tenure, job-changing, labour supply behaviour, and selectivity bias.FindingsCohort and individual fixed effects partly explain the divergent conclusions. However, for fully, year-on-year employed individuals, there is no evidence of earnings decline at the end of working life. The authors find no role for selectivity due to retirement, although shorter working hours or partial retirement along with job-changing late in life does provide an explanation for why hourly earnings decline for certain older workers.Originality/valueThe authors find no evidence that the process of ageing itself leads to lower earnings as suggested by the cross-section profile.

Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence

Why do some countries industrialize much earlier than others? One widely-accepted answer is that markets need to be large enough for producers to find it profitable to bear the fixed cost of introducing modern technologies. This insight, however, has limited explanatory power, as illustrated by England having industrialized nearly two centuries before China. This paper argues that a market-size-only theory is insufficient because it ignores that many of the modern technologies associated with the Industrial Revolution were fiercely resisted by skilled craftsmen who expected a reduction in earnings. Once we take into account the incentives to resist by factor suppliers' organizations such as craft guilds, we theoretically show that industrialization no longer depends on market size, but on the degree of spatial competition between the guilds' jurisdictions. We substantiate the relevance of our theory for the timing of industrialization in England and China (i) by providing historical and empirical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing that a model of our theory calibrated to historical data on spatial competition correctly predicts the timing of industrialization in both countries. The theory can therefore account for both the Industrial Revolution and the Great Divergence.

The Changing Consequences of Unemployment for Household Finances

In this article we present new evidence that the capacity of households to cover earnings lost during spells of unemployment through a combination of drawing down of wealth and receipt of unemployment insurance and other transfer payments is very limited and has deteriorated since the 1980s. Since 2006, most households have not had nearly enough financial wealth to smooth their consumption over more than a very short spell of unemployment. Individuals experiencing involuntary job loss also tend to experience substantial earnings reductions upon reemployment, resulting in longer-term deterioration in household finances. Wealth inadequacy to cover lost earnings and the earnings reduction upon reemployment are both especially acute in long unemployment spells, such as those that were prevalent in the aftermath of the Great Recession.

The Lasting Legacy of Seasonal Influenza: In-Utero Exposure and Labor Market Outcomes

Pregnancy conditions have been shown to matter for later economic success, but many threats to fetal development that have been identified are difficult to prevent. In this paper I study seasonal influenza, a preventable illness that comes around every year and causes strong inflammatory responses in pregnant women. Using administrative data from Denmark, I identify the effects of maternal influenza on the exposed offspring via sibling comparison, exploiting both society-wide influenza spread and information on individual mothers who suffer strong infections during pregnancy. In the short term, maternal influenza leads to a doubling of prematurity and low birth weight, by triggering premature labor among women infected in the third trimester. Following exposed offspring into young adulthood, I observe a 9% earnings reduction and a 35% increase in welfare dependence. These long-term effects are strongest for influenza infections during the second trimester and they are partly explained by a decline in educational attainment, pointing to cognitive impairment. This effect pattern suggests that maternal influenza damages the fetus through multiple mechanisms, and much of the damage may not be visible at birth. Taken together, these results provide evidence that strong infections during pregnancy are an often overlooked prenatal threat with long-term consequences.

Added worker effect during the Great Recession: evidence from Italy

PurposeThe purpose of this paper is to check the existence of the added worker effect (AWE) in Italy during the Great Recession.Design/methodology/approachThe authors used the Bank of Italy Survey on Household Income and Wealth to study factors driving the change in female work status over the period 2006-2012. The probit model was used to identify the timing, significance and the magnitude of the AWE. The authors also performed panel estimates to understand how women, positioned at either extensive or intensive margins, respond to the reduction in male hours of work which appear to be crucial for the AWE to manifest.FindingsThe authors find that with the crisis progressing, Italian women respond ever less to the reduction in male earnings, at the same time they become more responsive to the job loss by male partner which is the worst outcome. This means that the AWE survives, even if only in cases of serious hardship. It also remains when the reduction in male incomes is coupled with the reduction in their hours of work, suggesting that the redistribution of household chores is an important prerequisite for women to get into work.Originality/valueThis paper provides evidence on the AWE in Italy during the Great Recession. The authors took into account the peculiarity of the Italian labour market whose performance was affected by the use of the Wage Supplementation Fund. It masks part of the AWE when the standard methodology is used. By looking at the reduction in male earnings with or without a change in their work hours, the authors were able to reveal additional channels through which the AWE operates in Italy.

A Study of Motivators of Tender Offer Repurchases in the Indian Environment

&lt;div&gt;&lt;p&gt;&lt;em&gt;Share buybacks are a 15 year old process in India. In developed countries share buyback is a well-accepted practice but in India the concept has yet to gain popularity. The article tries to look at the tender offer repurchases in Indian between the periods 2004 to September 2013. There were 51 public announcements for share buyback through tender offer route. The other popular method is open market repurchase. The paper tries to identify the main drivers in the tender offer repurchase through regression analysis. The more significant drivers are reduction of earnings per share through buyback, correction in capital structure and improvement in return ratios like return on net worth . The paper also looks at identifying the impact on promoter’s holding through tender offer buyback and identify if it is one of the drivers of share buyback.&lt;/em&gt;&lt;/p&gt;&lt;/div&gt;

Costs of IQ Loss from Leaded Aviation Gasoline Emissions.

In the United States, general aviation piston-driven aircraft are now the largest source of lead emitted to the atmosphere. Elevated lead concentrations impair children's IQ and can lead to lower earnings potentials. This study is the first assessment of the nationwide annual costs of IQ losses from aircraft lead emissions. We develop a general aviation emissions inventory for the continental United States and model its impact on atmospheric concentrations using the community multi-scale air quality model (CMAQ). We use these concentrations to quantify the impacts of annual aviation lead emissions on the U.S. population using two methods: through static estimates of cohort-wide IQ deficits and through dynamic economy-wide effects using a computational general equilibrium model. We also examine the sensitivity of these damage estimates to different background lead concentrations, showing the impact of lead controls and regulations on marginal costs. We find that aircraft-attributable lead contributes to $1.06 billion 2006 USD ($0.01-$11.6) in annual damages from lifetime earnings reductions, and that dynamic economy-wide methods result in damage estimates that are 54% larger. Because the marginal costs of lead are dependent on background concentration, the costs of piston-driven aircraft lead emissions are expected to increase over time as regulations on other emissions sources are tightened.