HEADS I WIN,TAILS YOU LOSE: INSTITUTIONAL MONITORING OF EXECUTIVE PAY RIGIDITY

Agency theory argues that pay for performance alleviates the conflict of interest between managers and shareholders. Furthermore, the literature finds that institutional monitoring tends to promote the performance–pay linkage, thus aligning the two parties’ incentives. We find that executive compensation rigidity is negatively and significantly associated with firm value. Moreover, ownership by long‐term institutional investors reduces the pay rigidity of top managers in underperforming firms, thus decreasing the value‐destroying effect of the rigidity. Overall, these results reaffirm the role of institutional monitoring in mitigating managerial rent extraction.     

Effects of Environmental Regulations on Trade Flow in Manufacturing Sectors: Comparison of Static and Dynamic Effects of Environmental Regulations

This study analyzes environmental regulations and trade performance in manufacturing sectors under static and dynamic conditions. We investigate environmental innovation induced by environmental regulations and the spillover effect on manufacturing sectors, determine whether the spillover effect offsets any negative effect found under static conditions and analyze environmental regulations on the import side. For this, we formulate a trade model that incorporates the environmental innovation equation. We analyze environmental tax, energy tax and the Emissions Trading System (ETS) using strong, balanced panel data from 19 OECD countries for 1996–2009. The results reveal that the static effect of energy tax on exports is negative, but the dynamic effect is positive; however, the positive effect does not offset the negative effect. In short, environmental tax and energy tax decrease the international competitiveness of the manufacturing sectors. Environmental tax and energy tax limit imports, especially in the high‐energy consumption group. The analyses of the ETS further complicate the overall picture. It shows that the further research on the effects of ETS on manufacturing firms' competitiveness over their foreign competitors in the global is required. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

An analysis of the effect of software intellectual property rights on the performance of software firms in South Korea

This paper explores the effect of software intellectual property rights (IPRs) on the performance of software firms in South Korea using the statistics of software copyright registrations and patent applications along with the financial statements of firms. According to our empirical results, R&D and software R&D input has a strong positive effect on the production of software copyrights and patents, and large firms exploit software IPRs better than small firms. We also found that there are quite different trends in the selection of the legal means of protection; firms in the software industry prefer to copyrighting, whereas firms in the manufacturing industry prefer to patenting. In addition, software copyrighting has a positive effect on software revenue and total revenue of firms, but software patenting fails to show a positive effect on software revenue. Consequently, in contrast to the prevailing consensus indicating a high preference for patenting, it is obvious in our analysis that software copyrighting is more beneficial for software firms.     

Predictability of Term Spread for Economic Activity with Liquidity Premium Theory

In this article, we explore the predictive content of the term spread based on the liquidity premium theory. We decompose the contribution of the spread into the effect of expected future changes in short rates and the effect of the term premium. We also examine whether the predictive power of the term spread for real economic activity can be enhanced by such a decomposition. The basic finding is that both the expectations effect and the term premium effect are relevant for predicting economic fluctuations. In particular, we find that the decomposition might lead to a better prediction for the business-cycle turning points than the usual term spread.     

CROSS‐COUNTRY TECHNOLOGY TRANSFER AND POLITICALLY DRIVEN INTERNATIONAL AGREEMENTS FOR ENVIRONMENTAL STANDARDS

Grossman and Helpman highlighted a political framework to internalize inefficiency incurred due to unilateral trade policy implementation by sovereign countries. This paper extensively adopts their framework to explore the effects of special interest politics on governments under negotiation to forge international environmental standards to control global emission. Particular attention is given to a case in which negotiation is driven by transferring the abatement technology. Within a specific factor model of international trade, improving the abatement efficiency through technology transfer can give the most mutually beneficial outcome, achieving the lowest level of global pollution compared to other political benchmarks.     

International Variation in Accounting Measurement Rules and Analysts' Earnings Forecast Errors

We theorize that accounting systems affect analysts' forecast accuracy through changes in earnings variability. We argue that the matching and historical cost principles reduce earnings variability, and hence, reduce analysts' earnings forecast errors. We also argue that restricting the choice of accounting methods can result in larger forecast errors. We argue that more informative disclosure environments should reduce forecast errors. We test whether variation in these factors across countries explain variation in analysts' earnings forecast bias and accuracy. Our results indicate that these characteristics of financial accounting systems are complements, and that they affect financial analysts' earnings forecast errors.     

Country-specific sentiment and security prices

I study the effect of country-specific sentiment on security prices. I provide evidence that a country’s popularity among Americans affects US investors’ demand for securities from that country and causes security prices to deviate from their fundamental values. Moreover, I find that country popularity is positively associated with the intensity of US cross-border mergers and acquisitions activity, suggesting that country popularity also affects firms’ investment decisions.     

The interaction of major resources and their influence on waiting times in a multi-stage restaurant

The purpose of this study was to examine the impact of major resources on multi-stage waiting times and their interactions on waiting times. The simulation study showed that each resource influenced waiting for different service stages and that interaction among the multi resources occurred. The results implied that the simultaneous increase in the levels of two resources had a synergistic effect on reducing waiting times for some stages. However, for some resources, the simultaneous increase in the resource levels did not help reduce waiting times when the increase in one resource type overwhelmed the other resource's function.     

Sunk Costs,Accommodation, and the Welfare Effects of Entry

Although economists usually support the unrestricted entry of firms into an industry, entry may lower social welfare if there are setup costs or if entrants have a cost disadvantage. We consider the welfare effects of entry within a standard Cournot model where some of an incumbent firm’s costs are sunk. We find that the range of parameter values over which entry can harm welfare declines monotonically in the fraction of cost that are sunk. Furthermore, the presence of even a small fraction of sunk costs often reverses an assessment that entry harms welfare.     

Microstructure and reverse stock splits

In this paper we show that, similar to NYSE/AMEX stocks, NASDAQ stocks exhibit significant ex date returns for reverse stock splits. Although the 10-day cumulative return after the ex date is close to –10%, this does not violate market efficiency, because the average bid-ask spread for the reverse split stock is at least double this return. We also document that these large negative returns are mostly due to a drop in the ask price while bid prices barely change at all. Furthermore, the ex date returns are negatively related to trading volume.These results suggest that there is abnormal selling and a significant buildup of market makers' inventories near the ex date. To reduce the inventory buildup, market makers lower ask prices to induce buying by investors, resulting in the observed negative returns. Lowering bid prices, an alternative strategy for reducing inventories, is not attractive to market makers due to competitive factors and the reduction of commissions associated with a smaller number of transactions. Notably, selling investors have no incentives to sell their stocks early to avoid the observed negative ex date return, since this return is largely an ask price phenomenon and does not represent realized returns to sellers.