Corporate Social Performance,Competitive Advantage,Earnings Persistence and Firm Value

In this paper, using a generalised valuation framework inspired by Ohlson, we show that corporate social performance (CSP) is value relevant and that, in particular, it appears to be associated with a higher coefficient on earnings. This could be attributable to either a lower cost of equity for these firms, or greater earnings persistence. We show that, once industry membership is controlled for, any cost of capital effect is minimal. Regression tests based on realised earnings confirm that the valuation effect is attributable mainly to greater earnings persistence in firms with higher levels of CSP. These outcomes are consistent with higher CSP conferring a competitive advantage on firms.     

Divisional Performance Measurement with Divisions as Lessees of Head Office Assets

The paper examines some of the methods suggested in the literature for the evaluation of divisional performance, and proposes an alternative approach to the problem whereby divisions are treated as lessees of fixed assets owned by head office. It is suggested that this method is compatible with the NPV decision rule, yet does not require the company to adopt asset valuation practices which depart from those normally used for financial reporting; furthermore, the method actively considers both the ‘abandonment’ decision and whether or not ‘life expired’ assets should be disposed of. It is also claimed that the method is less open to manipulation than some other proposed performance measures.     

Why Have Corporate Tax Revenues Declined? Another Look

The relative constancy of non-financial corporate tax revenuesas a share of US GDP masks offsetting trends in the ratio ofcorporate profits to GDP (declining) and the average tax rate(increasing). The average tax rate rose steadily between 1996and 2003, an increase largely attributable to the importanceof tax losses. This rise casts some doubt on the role of taxplanning activities in reducing corporate taxes. So, too, doesthe relative stability of the rate of profit (relative to netassets), which might be expected to have declined had the understatementof profits for tax purposes been increasing. (JEL code: H25,G32)     

Volunteering time decisions: a multi‐factor experimental study

Non‐profit organizations often seek volunteers to help staff a fundraising event. In the present research, an experimental study assessed volunteering time decisions for a fundraising event following manipulations of opportunity cost valence, opportunity cost avoidability and question order involving donating time and donating money. Opportunity costs represent foregone alternatives sacrificed (e.g. working) when engaging in an activity (e.g. volunteering), with valence of the opportunity cost indicating the appeal (positive or negative) of the foregone alternative and avoidability of the opportunity cost suggesting how easy it would be to forgo the alternative. Prospective donors are often asked to consider both volunteering time and contributing money, and these two questions posed to individuals can be varied in terms of order. The results of the experiment revealed that individuals intended to volunteer the most time when an opportunity cost was negative and avoidable. The lowest time donation intentions occurred when an opportunity cost was positive and less avoidable with individuals also being asked about donating money prior to being asked to donate time. The results highlighted the importance to non‐profit firms of considering opportunity costs potential volunteers face and suggested care in structuring the order of questions involving time and money posed to those individuals. Copyright © 2011 John Wiley & Sons, Ltd.     

Production risk,risk aversion and the determination of risk attitudes among Spanish rice producers

Agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk. Risk attitudes in turn may be affected by certain socioeconomic characteristics of producers. Using 2004 survey data from a cross‐section of 130 Spanish rice farms, we estimate risk‐aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes. Our results show that farmers exhibit risk‐averse behavior and that risk attitudes are related to a series of socioeconomic characteristics. In particular, the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion, while age is found to have nonlinear effects on risk aversion. Off‐farm income, especially from nonagricultural activities, is found to reduce risk aversion. Neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences. Regarding the production technology, we find that land, labor, and fitosanitary products are risk‐reducing inputs, whereas capital, seeds, and fertilizer all increase risk.     

Market Conditions and Housing Choices: A Comparison of Homeownership Across Three Decades

This article uses information on out‐of‐pocket housing cost and house price appreciation along with the geo‐coded version of the Panel Study of Income Dynamics to consider the differences in the impact of these and other variables on the tenure choices of sample households across three time periods, the 1970s, the 1980s and the 1990s. Specifically, an extended continuous time probability model is used to examine households' transitions from renting to owning and subsequent possible transitions either back to rental tenure or to another owned home during our three observation periods. Coefficient estimates show that financial variables such as house price appreciation and out‐of‐pocket housing cost play an important role in determining all the transitions. In addition, the analysis demonstrates the interesting result that the cumulative likelihoods of homeownership derived from the model are consistently lower than the probabilities of an initial transition to homeownership from rental tenure during the observation period. Finally, the magnitude and timing of the impact on homeownership of a policy experiment that eliminates the mortgage interest deduction are shown to differ substantially across the three decades.