Neuromarketing and Consumer Free Will

This article examines the impact of discoveries and methods of neuroscience on marketing practices as they relate to the exercise of individual free will. Thus, our focus centers on ethical questions involving consumers’ awareness, consent, and understanding to what may be viewed as invasion of their privacy rights. After a brief introduction, the article turns to scientific literature on the brain, followed by discussion of marketing persuasion models. Ethical dilemmas within the free will paradigm and Rawlsian justice developed in moral philosophy are delineated next. The article closes with policy implications and a revised consideration of consumer privacy.     

The Effect of SOX Internal Control Deficiencies on Firm Risk and Cost of Equity

The Sarbanes-Oxley Act (SOX) mandates management evaluation and independent audits of internal control effectiveness. The mandate is costly to firms but may yield benefits through lower information risk that translates into lower cost of equity. We use unaudited pre–SOX 404 disclosures and SOX 404 audit opinions to assess how changes in internal control quality affect firm risk and cost of equity. After controlling for other risk factors, we find that firms with internal control deficiencies have significantly higher idiosyncratic risk, systematic risk, and cost of equity. Our change analyses document that auditor-confirmed changes in internal control effectiveness (including remediation of previously disclosed internal control deficiencies) are followed by significant changes in the cost of equity that range from 50 to 150 basis points. Overall, our cross-sectional and intertemporal change test results are consistent with internal control reports affecting investors' risk assessments and firms' cost of equity.     

INFORMATION, WILDLIFE VALUATION, CONSERVATION: EXPERIMENTS AND POLICY

The authors use experimental surveys to investigate the association between individuals' knowledge of particular wildlife species and their stated willingness to allocate funds to conserve each. The nature of variations in these allocations between species (e.g., their dispersion) as participants' knowledge increases is examined. Factors influencing these changes are suggested. Willingness-to-pay allocations are found not to measure the economic value of species, but are shown to be policy relevant. The results indicate that poorly known species, e.g., in remote areas, may obtain relatively less conservation support than they deserve. (JEL Q51 , Q57 , Q58 )     

Australian Business Investment: A New Look at the Neoclassical Approach*

This paper attempts to reconcile neoclassical theory with Australian investment data. We argue that, by focusing almost exclusively on the demand for capital services, neoclassical investment theory neglects two related decisions: the decision to own the existing capital stock, and the decision to produce new capital goods. We propose a simple model of investment behaviour that integrates production decisions with portfolio decisions. Careful consideration is given to the determination of the price of capital, the rental price of capital, and the return on capital. The model is estimated by FIML, and a number of simulation results are reported.     

The ‘Market’ for contingent protection

Anti‐dumping and countervailing duty law and policy has, for several decades, been one of the most contentious issues affecting trading relations between members of the World Trade Organization. A major concern among researchers and policy‐makers is that the decision‐making process of regulatory authorities responsible for the administration of anti‐dumping and countervailing duty (AD/CVD) laws is biased in favour of providing protectionist outcomes for national applicant firms and industries. In this paper a new, broader approach for testing empirically AD/CVD outcome decisions is advocated that analyses the provision of contingent protection as the outcome of a quasi‐market process involving supply and demand behaviour played out in a quasi‐market context susceptible to market failure. This approach provides, arguably, a fairer test of AD/CVD outcomes. Using data from Australia, historically a heavy user of AD/CVD laws and policy, the paper finds support for the hypothesis that regulatory process bias including administrative and statutory biases, are important explanators of AD/CVD outcomes. Moreover the findings of this paper suggest that failure to include variables capturing these effects in other studies that have modelled empirically AD/CVD outcomes may have led to missing variable bias and false conclusions.     

Dividend Policy and Market Valuation in British Industry

The objectives of the article are: firstly, to identify the principal factors which determine interfirm variation in dividend policy within the UK; and secondly, to examine the effect of dividend policy on company stock-market valuation. This cross-section empirical study is based on a random sample of 60 publiclyquoted British companies, and refers to the year 1970.
The Lintner (1956) model is rejected, in that capital requirements and earnings risk are seen to play an important part in determining dividend policy. The 'dividend neutrality' hypothesis is strongly rejected once risk and profitability-of-retained-earnings are taken into account.     

Municipal financial reporting and competition among underwriters for new issues of general obligation bonds*

Abstract. This study develops and tests the hypothesis that the quality and quantity of municipal financial information are positively associated with increased competition in the primary market for new issues of general obligation bonds. A measure of market competition, the number of underwriter bids tendered, is regressed on several market-related and issue-specific control variables and a group of financial reporting test variables. A sample of 224 new issues of municipal general obligation bonds sold by competitive bid between 1978 and 1983 is examined. The results generally support the hypothesis. Employment of an independent CPA firm auditor and more extensive disclosure increase competition, as expected. However, no support was found for the argument that holding a Government Finance Officers Association Certificate of Conformance increases the level of underwriter competition. Résumé. Les auteurs établissent et vérifient l'hypothèse selon laquelle la qualité et la quantité d'information financière municipale sont en relation positive avec l'augmentation de la concurrence sur le marché primaire pour les nouvelles émissions d'obligations générales. Une mesure de la concurrence sur le marché, soit le nombre d'offres de preneurs ferme, est soumise à une analyse de régression basée sur plusieurs variables de contrôle reliées au marché et particulières à l'émission et sur un groupe de variables-tests reliées à l'information financière. Les auteurs examinent un échantillon de 224 nouvelles émissions d'obligations municipales générales vendues par soumission concurrentielle entre 1978 et 1983. Les résultats obtenus corroborent de façon générale l'hypothèse posée. Le recours à un vérificateur d'un cabinet de CPA indépendant et la publication d'informations plus étendues accentuent la concurrence, comme prévu. Cependant, rien ne confirme l'hypothèse selon laquelle la détention d'un Government Finance Officers Association Certificate of Conformance intensifie le degré de concurrence chez les preneurs ferme.