A Note on Agency Conflicts and the Small Firm Investment Decision*

This paper explains how agency conflicts—and potential agency conflicts—can influence the investment decisions of small firms, and provides evidence of these effects using data from a recent survey of small firm investment practices. The survey asks business owners to identify their most important investment concern—overinvestment or underinvestment. We find that underinvestment concerns are more prevalent in growing firms, and those with concentrated ownership and control structures. Overinvestment concerns increase as firms adopt less‐concentrated ownership and control structures. These results suggest that the management challenges facing small firms shift as the degree of separation between ownership and control becomes greater.     

Corporate Tax Consolidation and Enhanced Cooperation in the European Union*

We assess the economic impact of introducing consolidation with formula apportionment in the European Union and consider alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggregate welfare gain in Europe. However, not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which destroys the possibility of cooperation. We find that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a Europe‐wide reform.     

Swatch fever: An allegory for understanding the paradox of collecting

The rise of the phenomenon referred to as “Swatch Fever,” collectors' seemingly insatiable desire for Swatch watches during the late 1980s to early 1990s, can be considered an allegory for collecting behavior in general. Using the dynamic progression of Swatch Fever, this article explores what motivates consumers to engage in collecting behavior. Based on this analysis as well as the current literature on collecting, the authors examine the paradoxical nature of collecting in order to add to the understanding of collecting as a phenomenon that is both rational and irrational, deliberate and uncontrollable, cooperative and competitive, passive and aggressive, and tension producing and tension reducing. © 1997 John Wiley & Sons, Inc.     

Corporate governance performance ratings with machine learning

We use machine learning with a cross-sectional research design to predict governance controversies and to develop a measure of the governance component of the environmental, social, governance (ESG) metrics. Based on comprehensive governance data from 2,517 companies over a period of 10 years and investigating nine machine-learning algorithms, we find that governance controversies can be predicted with high predictive performance. Our proposed governance rating methodology has two unique advantages compared with traditional ESG ratings: it rates companies' compliance with governance responsibilities and it has predictive validity. Our study demonstrates a solution to what is likely the greatest challenge for the finance industry today: how to assess a company's sustainability with validity and accuracy. Prior to this study, the ESG rating industry and the literature have not provided evidence that widely adopted governance ratings are valid. This study describes the only methodology for developing governance performance ratings based on companies' compliance with governance responsibilities and for which there is evidence of predictive validity.     

Public infrastructure provision and ethnic favouritism: Evidence from South Africa

Does coethnicity with the President affect public infrastructure provision in South Africa? Using municipal-level data for 52 district municipalities from 1996 to 2016, we find that municipalities coethnic with the President are associated with higher water infrastructure provision relative to non-coethnic municipalities. Taking into account various political considerations, results show that ethnic favouritism occurs due to ethnic altruism. Our findings remain robust to different specifications of coethnicity thresholds and are applicable to electricity infrastructure provision. Results suggest that in order to minimise ethnic favouritism, politically independent institutions should oversee the allocation of funding and provision of infrastructure.     

BETWEEN DEPRESSION AND HOPE: Affective Mediations of Urban Restructuring in Leipzig,East Germany

In this article, which is based on an empirical analysis of neoliberal restructuring in Leipzig, East Germany, I describe how the study of affective atmospheres adds to our understanding of urban restructuring, showing how collective moods affect (de)mobilization, contestation and the regulation of urban political economy to shed light on the relation between institutional, political and social processes. I demonstrate the relevance of affect for power relations, political interactions beyond rationality, and the rhythms and temporalities of urban restructuring, as exemplified by two prominent atmospheres that characterize Leipzig—post shrinkage depression (PSD) and anticipatory hope (AH).