Financial competence,overconfidence, and trusting investments: Results from an experiment

Financial transactions sometimes occur in an environment where third-party enforcement is lacking. Behavioral explanations typically allude to the social preferences, where an individual’s utility is directly affected by another’s outcome, as the driver of the trusting investments and reciprocal returns. We hypothesize that, in part, these decisions are determined by an individual’s financial literacy and overconfidence in one’s knowledge. Experimental evidence is coupled with an innovative financial literacy assessment, which measures general competence, numeracy skills, and overconfidence in one’s knowledge. Results indicate that overconfidence is a significant determinant of behavior. Specifically, overconfident individuals make larger contributions in the investment game. We also document that there is an escalated effect in overconfident individuals who are also exhibit risk loving preferences.     

Are supply chain management theories culturally constrained? An empirical assessment

Culture plays an increasingly important role in supply chain management as many manufacturing firms have linkages to suppliers and customers from various countries. In this paper we propose treating culture as an explanatory variable to test the assumption that existing theories are universally applicable. The primary research question was: Do purchasing theories built on samples from mainly North American companies with Anglo-Saxon cultures apply in other cultural contexts? We developed and tested a model where top management??s view of the purchasing function affects purchasing practices and manufacturing performance. The statistical results provide evidence that the engagement and efficacy of purchasing practices is highly dependent on culture. This finding has significant implications from the perspective of decision making in international supply chain management. Specifically, top managers across multiple cultures could decide to structure and evaluate the purchasing function similarly, but these decisions could lead to different practices and different outcomes depending on the culture.     

Investigating regional house price convergence in the United States: Evidence from a pair-wise approach

In this paper we examine long-run house price convergence across US states using a novel econometric approach advocated by Pesaran (2007) and Pesaran et al. (2009). Our empirical modelling strategy employs a probabilistic test statistic for convergence based on the percentage of unit root rejections among all state house price differentials. Using a sieve bootstrap procedure, we construct confidence intervals and find evidence in favour of convergence. We also conclude that speed of adjustment towards long-run equilibrium is inversely related to distance.     

Perceived Organizational Motives and Consumer Responses to Proactive and Reactive CSR

Corporate social responsibility (CSR) has emerged as an effective way for firms to create favorable attitudes among consumers. Although prior research has addressed the direct influence of proactive and reactive CSR on consumer responses, this research hypothesized that consumers’ perceived organizational motives (i.e., attributions) will mediate this relationship. It was also hypothesized that the source of information and location of CSR initiative will affect the motives consumers assign to a firms’ engagement in the initiative. Two experiments were conducted to test these hypotheses. The results of Study 1 indicate that the nature of a CSR initiative influences consumer attribution effects and that these attributions act as mediators in helping to explain consumers’ responses to CSR. Study 2 suggests that the source of the CSR message moderates the effect of CSR on consumer attributions. The mediating influence of the attributions as well as the importance of information source suggests that proper communication of CSR can be a viable way to inculcate positive corporate associations and purchase intentions.     

Gender differences in executive compensation: Variation with board gender composition and time

This paper uses EXECUCOMP, COMPUSTAT and Investor's Responsibility Resource Center data to examine gender differences in executive salaries and total compensation from 1996 to 2004. We find that the salaries of female executives are about 5 percent lower than those of male executives, controlling for executive, firm, and board characteristics, and that the gap exists primarily in the lower officer ranks, where women are relatively highly concentrated. The gender difference in salary is larger in firms with more male-dominated boards; perhaps not coincidentally, such firms are also found to have fewer female executives in top managerial positions as well as lower probabilities of having any top female executives at all. The results of Oaxaca wage decompositions suggest that, although the magnitude of the gender difference decreases slightly over the sample period, the share of the gender difference that is due to unobserved factors remains basically steady or even increases. Thus, although women have become better represented in top executive jobs in recent decades, their relative salaries remain below those of men, possibly due in part to governance structures that remain male-dominated.     

New business formation in a rapidly growing economy: the Irish experience

The extraordinary growth of the Irish economy since the mid-1990s—the ‘Celtic Tiger’—has attracted a great deal of interest, commentary and research. Indeed, many countries look to Ireland as an economic development role model, and it has been suggested that Ireland might provide key lessons for other EU members as they seek to achieve the objectives set out in the Lisbon Agenda. Much of the discussion of Ireland’s growth has focused on its possible triggers: the long-term consequences of the late 1980s fiscal stabilisation, EU structural funds, education, wage moderation and devaluation of the Irish punt. The industrial policy perspective has highlighted the importance of inflows of foreign direct investment, but a notable absence from the discourse on the ‘Celtic Tiger’ has been any mention of the role of new business venture creation and entrepreneurship. In this paper we use unpublished Irish VAT data for the years 1988–2004 to provide the first detailed look at national trends in business birth and death rates in Ireland over the ‘take-off’ period. We also use sub-national VAT data to shed light on spatial trends in new venture creation. Our overall conclusions are that new business formation made no detectable contribution to the acceleration of Ireland’s growth in the late 1990s, although we do find evidence of spatial convergence in per capita business stocks.     

Frequent issuers’ influence on long-run post-issuance returns

Prior studies conclude that firms’ equity underperforms following many individual sorts of external financing. These conclusions naturally raise significant questions about market efficiency and/or about the techniques used to measure long-run “abnormal returns.” Rather than concentrating on a single security type or issuance, we examine long-run performance following any and all sorts of security issuances. Initial financing events do not associate with underperformance; however, subsequent financings do. Our results suggest that negative post-issuance returns have nothing to do with the specific type of security issued, and everything to do with the number of types of securities issued.     

Competition among stock exchanges for equity

We consider cross-border competition by stock exchanges for listings from firms that have controlling shareholders who have private benefits. We examine exchanges’ choices of their listing standards and firms’ choices of the exchanges where they cross-list their shares. We show that the share price compensates controlling shareholders for giving up some private benefits and enables firms with growth opportunities to obtain listings on exchanges with different listing standards. In particular, firms with high-growth opportunities tend to obtain listings on stock exchanges with high listing standards. We empirically examine these predictions and find that they are consistent with evidence.