When does incentive compensation motivate managerial behaviors? An experimental investigation of the fit between incentive compensation,executive core self-evaluation,and firm performance

We develop and test an integrative model that examines the fit between compensation schemes, executives' characteristics, and situational factors. We propose that a fit among all three factors is crucial to motivate desirable managerial behaviors. Using a specially designed management simulation, our study demonstrates that the effectiveness of incentive compensation to motivate managerial behaviors depends on executives' core self-evaluation and firm performance. Our results show that, relative to fixed salary compensation, executives with higher core self-evaluation respond to incentive compensation with greater perseverance, competitive strategy focus, ethical behavior, and strategic risk taking during organizational decline. However, these interaction effects are not present during organizational growth. Our theory and empirical evidence provide significant insights into the complex relationships among compensation schemes, executives' characteristics, firm performance, and managerial behaviors. Copyright © 2012 John Wiley & Sons, Ltd.     

Resource‐led Development: An Illustrative Example from Nigeria

Abstract: Several strategies are open to an economy in its attempt to attain sustainable economic development, depending on its historical background and resource endowment. One such strategy is the resource‐led strategy. Nigeria is very rich in crude oil and has reaped billions of petrodollars. However, the country faces the problem of successfully translating this huge oil wealth into sustainable development. This paper employs the vector error correction technique in examining the long‐run impact of the huge oil wealth accruing to Nigeria on its economic development. Basic indicators such as growth, private consumption, infrastructure (electricity), agriculture and manufacturing output growth rates are examined. The empirical results suggest a significant positive long‐run impact of per capita oil revenue on per capita household consumption and electricity generation while a negative relationship is established for GDP, agriculture and manufacturing. Even for those with a negative relationship at current period, there exist positive relationships at subsequent lags. Thus, oil revenue, if properly managed and invested, could be effectively used to induce oil‐led development for Nigeria provided that the initial inhibitions of corruption, lack of transparency, accountability and fairness in its use and distribution are removed.     

The Mystery of the Missing Sovereign Debt Restructuring Mechanism

The absence of a formal international regulatory mechanism tofacilitate sovereign debt restructuring has long been recognizedas a most serious gap in the architecture of global finance.Why has it proven so difficult to create such a sovereign debtrestructuring mechanism (SDRM) at the international level? Politicaleconomists have devoted relatively little scholarly attentionto this question. This paper attempts to begin to fill thisgap in the literature by examining four failed initiatives tocreate a SDRM over the past century. In place of a realist orstructural Marxist account, the paper puts forward a more contingentexplanation for these failures that highlights three distinctpolitical problems that must be overcome in the constructionof a SDRM: (1) collective action problems on both the side ofsovereign debtors and that of private foreign creditors; (2)basic distributional conflicts embodied in any debt restructuringeffort; and (3) the uncertain behavior of the private creditors'home states.     

AN ARBITRAGE PRICING APPROACH TO EVALUATING MUTUAL FUND PERFORMANCE

A test procedure, derived from arbitrage pricing theory, that permits the measurement of the security selection performance of professional portfolio managers is developed and applied to a sample of mutual funds over the period of the 1970's. The evidence indicates that more than one factor was present in the market during that interval as a systematic influence on the profile of securities returns. Consistent with prior studies, the evidence also suggests that mutual fund portfolios did not outperform a passive buy-and-hold investment strategy. A comparative analysis of the same data, using performance measures based on the single-factor market model, produces similar but less powerful results, both in the aggregate and at the individual fund level.     

RESIDENTIAL MOBILITY AND HOUSING TAX REFORMS: Some Empirical Evidence*

The efficiency and equity implications of mortgage interest deductibility have been studied by a number of authors using models of housing demand that do not account for barriers to residential mobility. This paper examines how one's assessment of that proposed tax reform may differ based on models that do allow for such barriers, using data from Toronto, Canada. We find that earlier works tend to overstate the deadweight loss attributable to the introduction of mortgage interest deductibility, particularly in the short run.     

Valuing animal genetic resources: a choice modeling application to indigenous cattle in Kenya

In an effort to improve productivity and profits, many farmers have replaced traditional livestock breeds with higher yielding alternatives. While such changes may bring about short‐term economic gains, the loss of traditional livestock breeds could result in the loss of an important genetic resource as a variety of important genetic traits adapted to local conditions gradually become less common in the population. This is a particular problem in Africa, where livestock make a substantial contribution to human livelihoods. Using the example of cattle in Kenya's pastoral livestock markets this study uses a choice experiment approach to investigate buyers' preferences for indigenous breeds such as the Maasai Zebu. The analysis employs a latent class approach to characterize heterogeneity in valuations both within and across respondents buying cattle for breeding, slaughter, or resale. The results show that there are at least three classes of buyers with distinct preferences for cattle traits and that most buyers favor exotic rather than indigenous breeds. Such preferences have implications for the conservation of indigenous cattle in Kenya and in other developing countries and suggest that some form of intervention may be required to ensure the preservation of this important animal genetic resource.     

SLIPPAGE AND THE CHOICE OF MARKET OR LIMIT ORDERS IN FUTURES TRADING

Retail futures traders face uncertainty regarding the price they will obtain when trading. This price "surprise," known as slippage, can be substantial. Using unique data from an introducing brokerage for Chicago Board of Trade (CBOT) wheat, corn, and soybean futures contracts, we quantify time-to-clear and the magnitude of slippage. We then identify factors that affect these trade quality measures. Finally, we analyze individual trader choice between market and limit orders and find that the likelihood of placing limit orders, where regulations protect traders from slippage, is greater when order and market characteristic indicate that adverse slippage is likely.