Shareholder preferences concerning corporate ethical performance

This study surveyed investors to determine the extent to which they preferred ethical behavior to profits and their interest in having information about corporate ethical behavior reported in the corporate annual report. First, investors were asked to determine what penalties should be assessed against employees who engage in profitable, but unethical, behavior. Second, investors were asked about their interest in using the annual report to disclose the ethical performance of the corporation and company officials. Finally, investors were asked if they felt that ethics reports should be audited.The survey results indicate that many shareholders (42%) do not expect a high level of ethical behavior from corporate employees or officers. There is a significant amount of interest in disclosure of ethical issues (72%) and unwillingness to trust management to provide unbiased reports of ethical behavior. If such reports are included with the financial statements, 32 percent of the investors surveyed would prefer to have them audited to provide independent verification.Marc J. Epstein is currently a Visiting Professor at the Graduate School of Business Administration at Harvard University Ruth Ann McEwen, Associate Professor, and Roxanne M. Spindle, Assistant Professor, are members of the Accounting Department at Virginia Commonwealth University.     

Some Simple Economics of Open Source

There has been a recent surge of interest in open source software development, which involves developers at many different locations and organizations sharing code to develop and refine programs. To an economist, the behavior of individual programmers and commercial companies engaged in open source projects is initially startling. This paper makes a preliminary exploration of the economics of open source software. We highlight the extent to which labor economics, especially the literature on 'career concerns', and industrial organization theory can explain many of these projects' features. We conclude by listing interesting research questions related to open source software.     

Legislative Organization Under Separate Powers

Existing theories of legislative organization attribute thestrong committee system in the U.S. Congress to members' distributive,informational, or partisan needs. But legislators elsewhereshare these same motivations, yet not all have chosen to organizethemselves in a similar fashion. Therefore the strong committeesystem must derive to some extent from the larger constitutionalcontext, including plurality winner elections, bicameralism,and our focus, the system of separate powers. In particularwe argue that committees established in part to oversee executiveagencies will have preferences biased against those of the executive.Thus committees serve as contrary outliers, acting as a counterweightto executive branch policy making. We find support for thisprediction with data drawn from all standing committees fromthe 80th to 102nd Congresses. We also find that each of theseemingly incompatible theories of legislative organizationpredicts well patterns of committee composition in differentissue areas.     

Contests, NGOs, and Decentralizing Aid

International donors usually have particular goals they want to achieve with their foreign aid, e.g., poverty alleviation. In the international aid story lobbying by potential recipient groups attempting to capture the donor's support plays a potentially important role for non‐governmental organizations. We model this situation as a hierarchical contest and compare the implications of a centralized allocation process with a decentralized allocation process with non‐governmental organizations as intermediaries.     

The Core of Large Differentiable TU Games

For suitable non-atomic TU games ν, the core can be determined by computing appropriate derivatives of ν, yielding one of two stark conclusions: either core(ν) is empty or it consists of a single measure that can be expressed explicitly in terms of derivatives of ν. In this sense, core theory for a class of games may be reduced to calculus. Journal of Economic Literature Classification Number: C71.     

Endogenous Public Policy, Politicization and Welfare

In the two–stage political–economic game that we study public policy is the outcome of the interaction between interest groups and a two–tier government. Implementation of a policy proposed by a bureaucrat requires approval by an elected politician. The objective function of the bureaucrat hinges on the weight assigned to social welfare relative to the rent–seeking outlays of the interest groups. This weight represents the degree of politicization of the government. Our main result is that, in contrast to common belief, increased politicization need not adversely affect the public well–being.     

Cost-consequence analysis of two different active flowable hemostatic matrices in spine surgery patients

Objectives: A recently published retrospective analysis comparing two different active flowable hemostatic matrices (FLOSEAL and SURGIFLO Kit with Thrombin) showed significantly increased resource use and complications (surgery time, risk of blood product transfusion, and amount of matrix used) with SURGIFLO use compared to FLOSEAL in major spine surgery, and also significantly increased surgical time with SURGIFLO use in severe spine surgery. This analysis was developed as a follow-up to this prior analysis, to evaluate the cost-consequence of using FLOSEAL vs SURGIFLO in major and severe spine surgery.

Methods: A cost consequence model was constructed from a US hospital provider perspective. Model parameters combined clinical inputs from the published retrospective analysis with supplemental analyses on annual spine surgery volume using the 2012 National Inpatient Sample (NIS) database. Cost of hemostatic matrices, blood product transfusion, and operating room time were identified from published literature. Various one-way and probabilistic sensitivity analyses were performed.

Results: The base case for a medium volume hospital showed that, compared to SURGIFLO, patients receiving FLOSEAL required three fewer blood product transfusions and saved 27?h of OR time, resulting in annual savings of $151 per major and $574 per severe spine surgery. Additional scenarios for high and low volume hospitals supported cost savings in the base case. Probabilistic sensitivity analysis revealed FLOSEAL was cost-saving in 76% of simulations in major spine and 97% of iterations in severe spine surgery.

Conclusions: This economic analysis indicates that use of FLOSEAL instead of SURGIFLO hemostatic matrices to induce hemostasis in both major and severe spine surgery could potentially lead to sizable cost savings in US hospitals, regardless of spinal surgery case-mix.     

Can the Consumption Capital Asset Pricing Model Account for Traders' Expected Currency Returns?

This study uses survey data on traders' exchange rate forecasts to test whether their expected excess returns are related to the covariance between the exchange rate and consumption; as predicted by the consumption capital asset pricing model (CCAPM). The covariance is measured through the novel use of rolling windows of the realized covariance (both forward and backward looking) and testing is conducted with the cointegrated VAR. The model is able to account for expected returns with more plausible degrees of risk aversion, but only when using sufficiently long, backward‐looking measures of the covariance. This suggests that market participants assess risk, in part, based upon the pro‐cyclicality of returns, and infer it from experience in the recent past. There is also evidence that inclusion of the real exchange rate improves the plausibility of the estimates and the model fit.