The importance of relative performance feedback information: Evidence from a natural experiment using high school students

We study the effect of providing relative performance feedback information on performance, when individuals are rewarded according to their absolute performance. A natural experiment that took place in a high school offers an unusual opportunity to test this effect in a real-effort setting. For one year only, students received information that allowed them to know whether they were performing above (below) the class average as well as the distance from this average. We exploit a rich panel dataset and find that the provision of this information led to an increase of 5% in students' grades. Moreover, the effect was significant for the whole distribution. However, once the information was removed, the effect disappeared. To rule out the concern that the effect may be artificially driven by teachers within the school, we verify our results using national level exams (externally graded) for the same students, and the effect remains.     

The Exploitation of Inside Information at the Wall Street Journal: A Test of Strong Form Efficiency

The study examines if tradings on stocks based on the inside information about the “Heard on the Street” column of the Wall Street Journal could generate abnormal returns. We found significant abnormal returns on days t =?1 and t= 0 (publication date) for the stocks related to insider trading. For a comparable control group of noninsider traded stocks, the abnormal returns were not significant on day t=?1 but were significant on day t= 0. The abnormal returns for the insider trade group on days t=?1 and t= 0 were greater than the returns for the control group. The results indicate that the inside information was the cause for the differences.     

Targeting fertility and female participation through the income tax

We evaluate the effect of a 2003 reform in the Spanish income tax on fertility and the employment of mothers with small children. The reform introduced a tax credit for working mothers with children under the age of three, while also increasing child deductions for all households with children. Theoretically, given the interplay of these two components, the expected effect of the reform is ambiguous on both outcomes. We find that the combined reforms significantly increased both fertility (by almost 5%) and the employment rate of mothers with children under three (by 2%). These effects were more pronounced among less-educated women. In addition, to disentangle the impact of the two reform components, we use an earlier reform that increased child deductions in 1999. We find that the child deductions affect mothers' employment negatively, which implies that the 2003 tax credit would have increased employment even more (up to 5%) in the absence of the change in child deductions.     

The Provision of Relative Performance Feedback: An Analysis of Performance and Satisfaction

This paper studies the effect of providing relative performance feedback on individuals’ performance, under two incentive schemes. In a laboratory setup, agents perform a real‐effort task. We show that relative performance feedback increases performance when performance is related to pay (piece‐rate) but has no effect on performance when pay is independent of performance (flat‐rate). These effects are independent of the agent's relative position. Subjects are also asked to rate their satisfaction during the experiment. We find that under flat‐rate, feedback has no effect on agents’ satisfaction, while under piece‐rate, feedback about relative position affects satisfaction.     

Contract Enforcement and Trade

The main objective of this paper is to investigate the effect of contract enforcement on trade in a large sample of developing economies. The effects of three separate measures capturing contract enforcement (the time required to enforce a contract; the costs to enforce a contract; and the number of procedures required to enforce a contract) on trade were tested using the panel corrected standard errors method of estimation. The results show that the three measures of contract enforcement are negatively and statistically significantly correlated with trade. The findings lead to the conclusion that the ease of contract enforcement is crucial in order to facilitate the speed of trade in the developing group of countries.     

Consumer well‐being and social responsibility of subsistence entrepreneurs in subsistence marketplace

Business malpractices, such as the sale of overpriced, underweight and adulterated foodstuffs and essential commodities, can pose serious threats to subsistence consumers' wellbeing, given they are more vulnerable than their affluent counterparts. Drawing on 40 interviews with subsistence entrepreneurs in Bangladesh and Sri Lanka, our findings provide insights into the interplay between religiosity and social responsibility of entrepreneurs. We further explore how socio‐economic conditions and local embeddedness—two important characteristics of individuals in subsistence marketplaces—moderate the relationship between religiosity and social responsibility of entrepreneurs, providing implications for consumer welfare at the macro‐level. Our research makes a distinctive contribution to three streams of literature relating to social responsibility, subsistence marketplaces, and consumer affairs, with specific policy implications.     

Ethical Foundations of the Islamic Financial Industry

Journal of Business Ethics - This paper examines the ethical foundations of the Islamic financial industry which is strongly criticized for its similarity with conventional finance. In this paper,...     

ISLAMIC BANKING,COSTLY RELIGIOSITY,AND COMPETITION

In this article we explain how Islamic banks (IBs) maximize profitability in the presence of costly religiosity. Because of strong competition between IBs and conventional banks (CBs), a unique equilibrium emerges that affects the IB pricing structure. We propose a new model that identifies the optimal rate on the asset and liability sides of IBs. It shows that the financial products offered by IBs are not an exogenous function of religiosity; instead, they are endogenously determined by the nature of market forces in which IBs are operating. We show that in the presence of costly religiosity and competition, the rates of both converge. Moreover, the competitive pricing mechanism induces IBs to structure their asset- and liability-side financial products (particularly Murabaha) with a risk profile similar to that of the CB loan system. This article empirically supports the theoretical propositions by using data from 17 Muslim majority countries where both IBs and CBs coexist from 2000 to 2015. We find that, holding other factors of bank returns constant, competition significantly affects IB asset- and liability-side returns. The analysis also reveals that because of increasing competition between IBs and CBs, the market power of IBs has significantly declined over time.     

THE IMPACT OF THE INSIDER TRADING SCANDAL ON THE INFORMATION CONTENT OF THE WALL STREET JOURNAL'S “HEARD ON THE STREET” COLUMN

We examine the impact of a scandal on the information content in the “Heard on the Street” column of the Wall Street Journal. Following the scandal in 1984, the column is found to have a reduced impact on stock prices for both buy and sell recommendations. However, the stock price response to information later published in the column before the publication day is smaller for the post-scandal period. This result suggests that after the scandal, editors and authors may have become more cautious in guarding against information leaks in the column. The scandal does not appear to have changed the impact of the column on trading volume.     

Some Aspects of Trade between Australia and Pacific Island Countries

Australia and Pacific Island countries (PICs) have maintained an ongoing trade and economic relationship for several years. The determinants of trade between Australia and PICs are examined using a gravity model by utilising time‐series cross‐country data for the period 1981 to 2005. The empirical findings indicate that imports by PIC from Australia are significantly determined by PICs’ population and their per capita GDP. The results also suggest that PICs’ exports are significantly determined by PICs and Australia's population, PICs’ infrastructure (telecommunications) and the distance to Australia. Consistent with the findings of other studies using the gravity model, distance is found to be a friction to PICs’ exports to Australia. While this study identifies factors influencing PICs’ trade with Australia, a more substantial issue for the governments and trade policy makers in PICs is to look into the generally disappointing long‐term trade performance. From a policy perspective, PICs would need to seriously look at increasing their export potential.