Guest Editorial

The Journal of Real Estate Finance and Economics -     

Minimum wage and restaurant hygiene violations: Evidence from Seattle

We study the association between the minimum wage and food establishment hygiene violations between Seattle (the treated city) and Bellevue (the control city), both cities located in King County and sharing the same health inspection department. An increase in the real minimum wage of $0.25 is associated with an increase of at least 8% in total and less severe (blue) hygiene violation scores for food establishments in Seattle. We find mixed support for the increase in more severe (red) violations. A decline in employment with an increase in minimum wage could be driving the increases in hygiene violations.     

Pay dispersion among the top management team and outside directors: Its impact on firm risk and firm performance

Two key groups central to improving firm performance are the top management team (TMT) and the board of directors. Executives undertake strategic actions, whereas board members fulfill their resource provision and monitoring roles. Drawing on tournament theory and equity theory, we propose that high pay dispersion among outside directors and the TMT is positively associated with strategic risk, whereas high (low) TMT pay dispersion and low (high) outside director pay dispersion are positively associated with firm performance. Our predictor is the unexplained component of horizontal pay dispersion, or the residual of pay dispersion resulting from regressing pay on observable firm, industry, period, and individual characteristics. Our results highlight the importance of unexplained pay dispersion for TMTs, but not for boards of directors, in improving firm performance.     

The impact of B Corp certification on financial stability: Evidence from a multi-country sample

B Corps are firms certified by the non-profit B Lab for pursuing both economic and non-economic goals. Whether B Corps realize a higher financial performance has met mixed evidence. Drawing on the stability-change framework, we ask whether B Corp certification is associated with the level and volatility of financial performance. Also, expecting a greater focus on non-economic activities after certification, equity ratio may decline as shareholders may question the increased non-economic focus. Using nearest neighbor propensity score matched pair method, we draw on a multi-country sample of 355 B Corps and 623 non-B Corps. Our findings are not encouraging. B Corp certification does not provide financial gains nor financial stability, and equity ratio declines and becomes more volatile following certification. Our findings paint a gloomy picture of limited economic benefits and declining participation of equity holders following B Corp certification.     

The economic burden of tuberous sclerosis complex in UK patients with renal manifestations: a retrospective cohort study in the clinical practice research datalink (CPRD)

Background: Tuberous sclerosis complex (TSC) is a multi-system genetic disorder in which renal manifestations occur in ～50% of children and 80% of adults. Since these often present alongside other manifestations, renal TSC is likely to incur significant costs. This study aims to quantify healthcare resource use (HCRU) and costs for renal TSC patients in the UK.

Methods: TSC patients in the Clinical Practice Research Datalink (CPRD) linked to Hospital Episodes Statistics were identified from January 1987–June 2013. Clinical data were extracted over the entire history and costs were reported over the most recent 3-year period. HCRU was compared with a matched comparator cohort. Incremental costs were reported and the key cost drivers by primary manifestation category were identified by regression modeling.

Results: A total of 79 renal TSC patients were identified with manifestations including chronic kidney disease stage 3–5 (with prevalence increasing with age) and renal angiomyolipoma. Renal TSC patients consistently reported greater HCRU than the comparator. Inpatient hospitalizations were more frequent for renal TSC patients (3.2 vs 1.6), but length of stay was comparable; however, 70.9% of renal TSC patients recorded no kidney-related procedures ever and averaged <1 test per year in the 3-year period. Average costs for renal TSC patients were nearly 3-fold greater than the comparator (£15,162 vs £5672). Costs increased with additional manifestation categories (£3600: only renal; £27,531: renal with ≥4 additional manifestation categories [25% of patients]). Additional nervous system and dermatology/psychiatric manifestations significantly (p?Conclusions: Renal TSC patients have greater HCRU than the general CPRD population, likely to result from progression of renal disease and additional manifestations; however, surveillance for disease progression appears to be deficient. Inadequate monitoring may contribute to a lack of co-ordinated care and increased healthcare-associated costs. Efforts should be made to follow the TSC guidelines to effectively monitor and treat patients.     

How broad-based is broad-based black economic empowerment?

Common perceptions about broad-based black economic empowerment (BBBEE) have been that it is nothing more than a tool for the already affluent to access further wealth and has limited potential to address the economic exclusion of the most marginalised. An analysis was conducted of data on black economic empowerment (BEE) deals between 2004 and 2009. The findings demonstrate that although the elite continue to benefit from deals, broad-based beneficiaries, particularly employees and women, are also beginning to benefit to some extent. This suggests that empowerment policies have some potential to promote private sector involvement in addressing the state's social transformation agenda. However, a closer analysis of the BEE transactions shows that the BEE landscape is far more complex and nuanced than commonly thought. Further research is necessary to understand the real impacts of BEE on the ground.     

The impact of all-star analyst job changes on their coverage choices and investment banking deal flow

Using a sample of all-star analysts who switch investment banks, we examine (1) whether analyst behavior is influenced by banking relationships and (2) whether analyst behavior affects investment banking deal flow. Although the stock coverage decision depends on the relationship with the client firms, we find no evidence that analysts change their optimism or recommendation levels when joining a new firm. Investment banking deal flow is related to analyst reputation only for equity transactions. For debt and M&A transactions, analyst reputation does not matter. There is no evidence that issuing optimistic earnings forecasts or recommendations affects investment banking deal flow.     

Mean-Reversion in REITs Discount to NAV &; Risk Premium

REITs discount to NAV is a puzzling regularity. The sharp increase in volatility of REITs prices over the past few years has spurred a relatively new concern amongst academics, managers and investors about the consequences of, and causes of, property risk premium on discount to NAV. The two interrelated questions arising from the recent increase in volatility of REITs prices are: Is the increased volatility responsible for the observed widening in discount to NAV? What does the observed private and public risk premium tell us about discount to NAV? We attempt to address these questions by analysing risk premiums in private and public real estate markets. The analysis is conducted in the most recent years of high stock price volatility. Our analysis reveals two major results: a tendency for discount to NAV to revert to the long term mean value of 20% and, more significantly, a lower risk premium in equivalent yields in private market than in public market. These results suggest that investors in public market have a different conception of property risk and complexity of lease options than what is conveyed by private property valuation.