Shareholder Value Maximization—Is There a Role for Corporate Social Responsibility?

Although often viewed as inconsistent with the corporate goal of value maximization, the corporate social responsibility (CSR) movement can add value by helping companies develop and maintain their reputations for fair dealing with each of their important non-investor stakeholder groups, including employees, suppliers, and local communities. Such "reputational capital" in turn helps reinforce the commitment of those stakeholders through what amount to informal or implicit contracts—contracts that are often critical to a company's long-run success.
Nevertheless, the importance and difficulty of balancing stakeholder interests against the overarching goal of efficiency and value maximization cannot be overstated. As with any corporate investment, each dollar of investment in a corporate stakeholder group should be justified by at least a dollar of expected return over a finite time horizon. By practicing this kind of "enlightened value maximization," to borrow Michael Jensen's phrase, management is likely to end up increasing not only its returns to shareholders, but the size of the corporate pie that is divided among all its stakeholders. Viewed in this light, CSR and value maximization have the potential to be complementary undertakings that result in a virtuous circle in which "doing good" helps companies do well, and doing well provides the wherewithal to do more good.     

SIX WAYS TO LEAVE UNEMPLOYMENT

This paper uses a unique Portuguese dataset to examine the effect of access to unemployment benefits (UBs) and their maximum potential duration on escape rates from unemployment. In examining the time profile of transitions out of unemployment, the principal contributions of the paper are twofold. First, it provides a detailed state space of potential outcomes: open-ended employment, fixed-term contracts, part-time work, government-provided jobs, self employment, and labour force withdrawal. Second, it is able to exploit major exogenous discontinuities in the maximum duration of unemployment benefits to identify disincentive effects. While confirming strong disincentive effects, it is shown that use of an aggregate hazard function regression model compounds very different and even contradictory effects of the determinants of unemployment.     

The value relevance and reliability of reported goodwill and identifiable intangible assets

We examine the value relevance and reliability of reported goodwill and identifiable intangible assets under Australian GAAP from 1994 to 2003; a period characterised by relatively restrictive accounting treatment for goodwill and relatively flexible accounting treatment for identifiable intangible assets. Our findings, using an adaptation of Feltham and Ohlson (1995), suggest that for the average Australian company the information presented with respect to both goodwill and identifiable intangible assets is value relevant but not reliable. In particular, goodwill tends to be reported conservatively while identifiable intangible assets are reported aggressively.     

The Persistence of Profits in the Long Run: A New Approach

We present a trend‐based alternative to the standard first‐order autoregression model in persistence of profits studies. This is motivated by reservations over the interpretation of the standard model, and rests on a different concept of dynamic competition. A nine‐category taxonomy of long‐run persistence stereotypes is developed. Structural time series estimates are presented for a sample of UK companies. We find the null of long run competitive equilibrium not rejected in nearly a third of cases, but non‐eroding persistence to be present in around 60%.     

Limits to forecasting in personalized medicine: An overview

Biomedical research is generating massive amounts of information about potential prognostic factors for health and disease. However, few prognostic factors or systems are robustly validated, and still fewer have made a convincing difference in health outcomes or in prolonging life expectancy. For most diseases and outcomes, a considerable component of the prognostic variance remains unknown, and may remain so for the foreseeable future. I discuss here some of the main problems in medical forecasting that pose obstacles to personalized medicine. Their recognition may help identify solutions to improve personalized prognosis, or at least understand and cope with the component of the future that we cannot predict. Much prognostic research is stuck at generating “publishable units”, without any interest in conclusively proving their worth, let alone moving them into real life applications. Information is reported selectively and reporting is deficient. The replication record of prognostic claims is poor. Even among replicated prognostic effects, few are convincingly shown to add much information besides what is already known through more simple, traditional measurements. There are few efforts to systematize prognostic knowledge. Most prognostic effects are subtle when traced to the molecular level, where most current research operates. Many researchers, clinicians, and the public are not appropriately educated to interpret prognostic information. We still have not even agreed on what the important health outcomes are that we want to predict and intervene for, and some subjectivity may be unavoidable. Finally, without concomitant effective, affordable, and non-harmful interventions, prognosis alone is of questionable value, and wrong prognosis or a wrong interpretation thereof can be harmful. The identification of these problems also suggests a roadmap on what could be done to amend them. Solutions include a systematic approach to the design, conduct, reporting, replication, and clinical translation of prognostic research; as well as the education of researchers, clinicians, and the general public. Finally, we need to recognize that perfect individualized health forecasting is not a realistic target in the foreseeable future, and we have to live with considerable residual uncertainty.     

On building better construct measures: Implications of a general hierarchical model

Four problems occur in the scale development process: (a) defining the construct, (b) drawing items from multiple domains, (c) identifying dimensions, and (d) showing nomological validity. In order to minimize these problems, the authors propose a general hierarchical model (GHM) that provides an organizational structure for placing many of the individual difference constructs used in marketing and consumer behavior. Three principles, which were derived from the GHM, add to the current scale development paradigm: (a) Define and test the construct within a hierarchical network that includes antecedents and consequences, (b) define and test the construct's dimensionality, and (c) match the construct's items to its level in the hierarchical system. By using these steps in scale development, researchers can build more precise measures possessing higher levels of validity and reliability. © 2008 Wiley Periodicals, Inc.     

Cooperative ventures in emerging economies

Foreign market entry strategy involves choices about which markets to enter and how to do it. Most of the literature on foreign direct investment reflects an interest in ownership structure decisions and the risks foreign investing firm may face. As recognized in many studies, one set of risks arises from public expropriation hazards, a function of the ability of the host country's institutional environment to credibly commit to a given policy or regulatory regime. Empirical research has shown this hazard to have an impact on ownership levels. This study is a theoretical model that describes how multinational firms face moral hazard risk from their local partners and political risk from the host country when they decide to go abroad in a joint-venture alliance. I found that the greater the level of hazard expropriation, the lower the participation of the multinational firm in the final cash flow, except for when the multinational firm has the negotiation power and there is a high level of local investment protectionism. In that case, the multinational firm increases its participation in the final cash flow.     

Sociology and applied leisure research

Hendee, John C., “Sociology and Applied Leisure Research,” ANNALS OF TOURISM RESEARCH, Volume II, No. 3, January/February, 1975, pp. 155–162 — The importance of leisure activity as a social problem is growing and sociological research is challenged to contribute more to leisure problem areas with public or industrial policy implications. Leisure researchers must adapt their product to the current goal-oriented, cost-effective, budgeting criteria to compete for public money. Thus, the future of leisure research may depend partly on riding the coattails of applied work which is more easily funded. Studies linking leisure activity to broader society and the mainstream of sociological research are encouraged and, for example, might focus on: identifying the social meaning of recreating, improved techniques for predicting future use of leisure time and demand for leisure facilities, patterns and benefits of leisure activity. Joint ventures combining sociology and professional schools with policy and applied interests could help alleviate the sociologist's often neglected task of developing policy implication. In short, an appeal is made for relevant leisure research so that growth in the field may be supported by the utility of results.