Executive Compensation and Short-Termist Behaviour in Speculative Markets

We present a multiperiod agency model of stock-based executive compensation in a speculative stock market, where investors have heterogeneous beliefs and stock prices may deviate from underlying fundamentals and include a speculative option component. This component arises from the option to sell the stock in the future to potentially overoptimistic investors. We show that optimal compensation contracts may emphasize short-term stock performance, at the expense of long-run fundamental value, as an incentive to induce managers to pursue actions which increase the speculative component in the stock price. Our model provides a different perspective on the recent corporate crisis than the "rent extraction view" of executive compensation.     

Presidential Address: Debt and Money: Financial Constraints and Sovereign Finance

Economic analyses of corporate finance, money, and sovereign debt are largely considered separately. I introduce a novel corporate finance framing of sovereign finance based on the analogy between fiat liabilities for sovereigns and equity for corporations. The analysis focuses on financial constraints at the country level, making explicit the trade‐offs involved in relying on domestic versus foreign‐currency debt to finance investments or government expenditures. This framing provides new insights into issues ranging from the costs and benefits of inflation, optimal foreign exchange reserves, and sovereign debt restructuring.     

Disappearing Call Delay and Dividend‐Protected Convertible Bonds

Firms do not historically call their convertible bonds as soon as conversion can be forced. A number of explanations for the delay rely on the size of the dividends that bondholders forgo so long as they do not convert. We investigate an important change in convertible security design, namely, dividend protection of convertible bond issues. Dividend protection means that the conversion value of the convertible bond is unaffected by dividend payments and thus dividend‐related rationales for call delay become moot. We document that call delay is near zero for dividend‐protected convertible bonds.     

RELATED AND UNRELATED DIVERSIFICATION AND THEIR EFFECT ON HUMAN RESOURCE MANAGEMENT CONTROLS

This paper examines the link between related and unrelated diversification and human resource management (HRM) controls. The paper presents a model proposing that the type of corporate (macro) controls used by related or unrelated firms implies a relative emphasis on either flexibility or fit among HRM practices in that related firms emphasize flexibility and unrelated firms emphasize fit. This emphasis on flexibility or fit, in turn, has implications for the use of HRM (micro) controls such as clan, behavior, and outcome controls such that related firms exhibit the use of all three types of HRM controls, while unrelated firms exhibit a relative emphasis on the use of outcome controls. © 1997 by John Wiley & Sons, Ltd.     

Rules and reality: quantifying the practice of apprenticeship in early modern England1

This article uses recently digitized samples of apprentices and masters in London and Bristol to quantify the practice of apprenticeship in the late seventeenth century. Apprenticeship appears much more fluid than is traditionally understood. Many apprentices did not complete their terms of indenture; late arrival and early departure from the master's household were widespread. Other apprentices appear to have been absent temporarily, returning to the master shortly before the end of their indenture. Regression analysis indicates that the patterns of presence and absence broadly reflect the resources and external opportunities available to apprentices.     

Scottish,Irish, and imperial connections: Parliament,the three kingdoms,and the mechanization of cotton spinning in eighteenth‐century Britain1

This paper offers a new perspective on the emergence of machinery in the cotton spinning trade during the third quarter of the eighteenth century. It does so by examining the interplay between economic, political, and national interests within the early Hanoverian state. Changes in trading relationships between textile producers across the three kingdoms of England/Wales, Ireland, and Scotland created escalating supply‐side problems, which, by the 1760s, would precipitate a quest for solutions based on new technologies.     

Gramsci,Polanyi and Impressions from Africa on the Social Forum Phenomenon

The rise of the Social Forum phenomenon has been heartily welcomed, partly so as to unite diverse discourses of anti‐neoliberal and anti‐imperialist resistance under a common banner. There are debates worth flagging, however, that draw our attention to political philosophies (typically binary statist versus anti‐statist disputes), visions of agency (typically networked movements versus parties), and potentials for revolutionary processes to emerge within ‘civil society’. In the spirit of Polanyi, many South Africans and other Africans are working on ‘decommodification’ strategies that range from particular sites of project‐level struggles to national, regional and international advocacy. But we must be conscious, as well, of warnings by Gramsci about the long march through a civil society often co‐opted to support state and neoliberal projects. The merits of African intellectual engagements with radical social movements have been shown in sites such as South African cities, but the African Social Forum awaits further opportunities to welcome allied researchers and academics. As the World Social Forum comes to Africa in 2007, Marcuse’s hope that the constituent movements begin to coalesce around a program is timely. However, this is likely to emanate more from intra‐sectoral networks rather than from multidisciplinary moments such as the WSF itself. La montée du phénomène des Forums sociaux a été accueillie chaleureusement, en partie comme manière d’unifier sous un même drapeau les multiples discours de la résistance anti‐néolibérale et anti‐impérialiste. Certains débats éminents attirent pourtant l’attention sur des philosophies politiques (généralement des oppositions binaires étatistes/anti‐étatistes), des visions de l’intermédiation (en général, mouvements interconnectés/partis) et des processus révolutionnaires susceptibles de naître au sein de ‘la société civile’. Dans l’esprit de Polanyi, nombre d’Africains, du Sud et d’ailleurs, s’emploient à des stratégies de ‘démarchandisation’ couvrant à la fois sites de conflit particuliers liés à un projet et plaidoyers aux niveaux national, régional et international. Toutefois, il ne faut pas oublier les avertissements de Gramsci pour qui la longue marche passant par la société civile risquait d’être cooptée afin de soutenir des projets gouvernementaux ou néolibéraux. Si les engagements d’intellectuels africains aux côtés de mouvement sociaux radiaux se sont révélés bénéfiques dans des cas tels que les villes d’Afrique du Sud, le Forum social africain espère d’autres occasions de rallier chercheurs et universitaires. Comme le Forum social mondial se tiendra en Afrique en 2007, l’espoir de Marcuse — de voir les mouvements constitutifs s’unir progressivement autour d’un programme — est d’actualité. Cependant, cette évolution viendra plus probablement de réseaux intra‐sectoriels que d’élans multidisciplinaires comme le FSM.     

Did the Reserve Requirement Increases of 1936–37 Reduce Bank Lending? Evidence from a Quasi‐Experiment

We analyze the impact of contractionary monetary policy through increases in reserve requirements on bank lending. We compare the lending behavior of banks that were subject to the requirement increases in 1936–37, Federal Reserve member banks, to a group of banks that were not subject to the reserve increase, Federal Reserve nonmember banks. After implementing the difference‐in‐difference estimators, we find that the increases in reserve requirements did not create financing constraints for member banks and lead them to reduce lending. Therefore, the actions of the Federal Reserve concerning the required reserve ratios cannot be blamed for instigating the economic downturn of 1937–38.