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Obesity has been evident in the human record for over 20 000 years and affected numerous aspects of human life and society (Bray, 2007a; Bray, 2007b). This introductory chapter describes the early history of human obesity, and then reviews how understanding has developed in the basic biology of obesity, its defi nitions and measurement, the complications of the disease, and fi nally its management. Some of the major scientifi c and medical milestones in the history of obesity are shown in Table 1.1.

Chemotherapy, or chemical therapy, is one form of treatment that involves giving patients anti-cancer drugs. Most of these drugs are known as cytotoxic drugs, which literally means cell (cyto) killing (toxic).

Wage differentials between different demographic groups are a prevalent phenomenon in most developed countries. In spite of powerful equal-pay legislation and other anti–discrimination measures, these gaps remain considerable, even after controlling for workers’ qualification and experience. While wage differentials at the job cell level (occupation–establishment) are small, occupational segregation and establishment segregation are important causes of the wage gaps, and there is only weak tendency of segregation to decline.

The essence of central banking lies in the pursuit of macroeconomic and financial stability. There are complete models of macroeconomic stability, and a reasonably broad consensus on how to achieve it. Not so for financial stability. There is no consensus how to achieve it, nor a widely accepted model.

Large U.S. banks have been heavily exposed to debt from emerging countries. As these countries have encountered serious financial problems, the value of emerging country debt has decreased, with a potential negative impact upon banks. This paper addresses the issue of whether the market, through the equity price of the banks, fully values these debt valuation changes. Crucial to the analysis is whether the information about individual country debt holdings of large U.S. banks is sufficiently transparent so that it can be recognized by investors.

Recently, an active academic debate has arisen over whether any economic variables predict future excess stock returns better than historical average excess returns. Goyal and Welch (2008) argue that many predictive variables used in the literature perform poorly both in sample and out-of-sample, especially over the last 30 years. In contrast, Campbell and Thompson (2008) show that many predictive regressions beat the historical average return, once weak restrictions are imposed on the signs of coeffcients and return forecasts.

The focus of credit risk analysis has been either on the valuation of risky corporate bonds and credit spreads, or on the valuation of vulnerable options, but never on both in the same context. Risky corporate bonds and credit spreads have been modelled by Black and Scholes (1973) and Merton (1974), and extended by Black and Cox (1976), Longstaff and Schwartz (1995), Briys and de Varenne (1997), and others. Studies of vulnerable options are pioneered by Johnson and Stulz (1987), and subsequently advanced by Hull andWhite (1995), and Jarrow and Turnbull (1995). The existing studies can be improved in several aspects.

Accruals, the difference between income from continuing operations and cash flows from operations, result from accounting rules and journal entries for the recognition of revenues and expenses. Following Healy (1985) who examined the use of discretionary accruals by managers to manage earnings used in bonus calculation, the management of accruals for earnings management has been the subject of several dozen accounting studies. Healy (1985) defined discretionary accruals as “adjustments to cash flows selected by the manager” in order to affect reported net income.

There is ongoing debate about the empirical performance of the pecking order theory of financing proposed by Myers (1984) and Myers and Majluf (1984). The theory is based on asymmetric information between the firm’s investors and its managers. Due to the valuation discount that less-informed investors apply to newly issued securities, firms resort to internal funds first, and then debt and equity last to satisfy their financing needs.

The idea that there are both costs and benefits to relying on bank debt is an integral part of the modern theory of corporate finance. As formulated by Rajan (1992), the pros and cons are as follows. Being relatively concentrated, bank debt has more incentive to monitor the borrower than does dispersed “arm’s length” debt. But then the private information which the bank gains through monitoring allows it to “hold up” the borrower if the borrower seeks to switch to a new funding source, it is pegged as a lemon regardless of its true financial condition.

Explaining the size and value premia as a tradeoff between risk and return is an important challenge for asset pricing theory. The failure of the CAPM to explain the high average returns of small stocks relative to large stocks and value stocks relative to growth stocks has been well documented (cf. Fama and French (1992)). Mankiw and Shapiro (1986) and Breeden, Gibbons, and Litzenberger (1989) find that the Consumption CAPM (CCAPM) does no better in explaining the cross section of average stock returns.

There is an ongoing debate as to whether the quality of accounting information influences firms’ cost of equity capital. Much of the debate centers around the existence of a priced risk factor related to the quality of accruals. In an influential set of papers, Francis, LaFond, Olsson, and Schipper (2004, 2005) (henceforth, FLOS) argue that accrual quality affects the cost of equity. FLOS base their conclusions in part on a significant positive correlation between the returns on AQ Factor (the accrual quality factor) and contemporaneous stock returns.

In this paper, we examine how the revised accounting for employee stock options affects the properties of reported cash flows. Although most investors are aware of the new option accounting required by FAS 123(R), relatively little attention has been given to the revised accounting for the tax benefit included in this standard. Yet, the tax benefit firms receive from employee stock options has been among the largest contributors to reported cash from operations since the rise in use of options plans. For example, during 2004, the tax benefit from employee stock options comprised over 25 percent of the operating cash flows for firms in our sample.

The last two decades have witnessed an enormous increase in stock and option-based executive compensation. The average stock option grant for top executives was a small fraction of CEOs’ total wages in the early 1980s, but has today become an important component of executive compensation (e.g., see Hall and Liebman (1998) and Murphy (1999)). Although traditionally it has been argued that stock-based compensation is necessary to align the interests of managers and shareholders, recent arguments, in light of the corporate scandals involving WorldCom, Enron, and others, have called into question the efficacy of stock-based compensation.

In 1986, the federal government placed a cap on the volume of tax-exempt municipal bonds that states can issue each year if the proceeds are used by private entities. The cap, in year 2000 dollars per capita, has ranged from just under $50 to over $400 depending primarily on a state's population. In most states and years, the cap appears to be binding, so state governments are allocating a scarce resource.