In defense of social responsibility

Recent journalistic criticism of the concept of corporate social responsibility rests on the assertion that social responsibility adds nothing to corporate profits. Hence, inclusion of the motion in the business vocabulary amounts to nothing more than “double talk.”The author of an influential 1953 book on the topic took another look at social responsibility twenty-five years later and found “few gains in the quality of business stewardship over that time.” The idea “remains peripheral to the mainstream of economic thought.”Corporate social responsibility involves more than simply being a law-abiding corporate citizen. It reaches into these decision-making areas where perfectly legal choices may have harmful social consequences. As evidence of social harm amounts, society has to define and defend the ground on which it requires an appropriate response from the business corporation. Society will get the response it demands.     

Market power and systematic risk

This paper examines the relationship between market power variables and the systematic risk, beta, of a firm. The study controls for the effects of dividend policy, liquidity, and earnings growth. Market power is measured by firm size (both sales and assets), proportion of industry sales, and the industry's four-firm concentration ratio. The study finds only a weak relationship between individual firm market power and firm risk, but there is evidence of a strong negative relationship between industry concentration and the market risk of the firms in an industry. This indicates that firms in concentrated industries experience lower capital costs than firms in less-concentrated industries. The existence of limit pricing is suggested as an explanation for this finding.     

Corporate governance: Assessing corporate performance by boardroom attributes

The corporate boardroom, once an inner sanctum where the secret ritual of top-level policymaking takes place, is slowly opening its doors and letting in a bit of sunshine. As the investing public begins to peer into the corporate “kiva,” it will want to know more about board structure and performance. In anticipation, this study provides an assessment model to correlate 15 boardroom attributes, or directorate dimensions, with company performance. As a major conclusion, the study finds that as yet there is no substitute for technical experience and internal managerial expertise. Neither is there an optimal formula. No two firms have identical boardroom dimensions. As the newer dimensions begin to make contributions, this diversity will be even greater. This accentuates the need for more precise measurement of board structure and effectiveness.     

Increases in energy prices,costs of production,and plant size

A translog cost function is estimated for U.S. manufacturing in order to investigate plant size differences in responses to increases in energy prices. Smaller plants were more intensive users of energy in the early 1970s but were also better able to substitute out of energy and into other inputs during the first round of energy price increases. As a result, by the mid-1970s larger plants had become more intensive energy users. Thus, later energy price increases probably had a greater adverse impact on the production costs of larger plants in manufacturing.     

Prices of deep discount bonds and the Revenue Act of 1978: An evaluation of market response

This article explores the market response of deep discount corporate bonds to the reduction in the capital gains tax rate incorporated into the Revenue Act of 1978. Such tax change should have increased the desirability of assets acquired for capital gains potential, such as deep discount bonds. Examining a time series of prices and returns for a sample of deep discount corporate bonds and a control group of comparable duration and credit risk corporate bonds selling at or near par did indeed provide evidence of a market price reaction. Moreover, the price changes for the deep discount bonds occurred well in advance of the implementation of the tax change.     

A comparison of job analytic and conventional economic variables as explanations of occupational earnings differentials

Occupational carnings are analyzed in order to determine the relative importance of micro-oriented job analytic variables vis-a-vis more conventional market variables as explanatory factors of earnings differentials. Earnings functions are constructed in order to determine the extent to which these variables can explain occupational earnings differentials. These functions are analyzed by means of both ordinary least squares and ridge regression techniques. Job analytic variables were obtained from the Position Analysis Questionnaire (PAQ), which measures job characteristics that are similar to many job evaluation systems. When these approaches are combined, a comprehensive model can be estimated that reflects the responsibilities, experience, training, skills, job environment, and work regularity characteristics of different occupations as well as conventional economic factors. Although the job analytic variables measure potentially important differences between jobs, the conventional economic variables have greater explanatory power.     

Bank structure and mortgage rates: Implications for interstate banking

Competition in financial markets has been the subject of many studies in the area of market structure and performance. This paper analyzes the differences in mortgage rates between unit banking and branch banking states to consider the likely outcome of interstate banking on competition. A model of interest rate determination is developed which suggests that, at least in the mortgage market, interstate banking will, ceteris paribus, decrease competition if it lowers the number of competing firms and increases deposit concentration levels. Support is provided for the argument that only those states under statewide branching laws may receive more competitive environments from the spread of interstate banking.     

The effects of mortgage laws on home mortgage rates

Mortgage rates differ between regions because of usury laws, not import of mortgage funds, loan-to-value ratios, and mortgage laws. This study focuses on the effects that state laws regarding foreclosure have on regional mortgage rates.     

A note on the association between systematic risk and common stock and bond rating classifications

Relative risk classifications for both common stock and bonds are provided by several financial services, based upon their analysis of the financial and operating data of the issuer. Systematic risk, on the other hand, is a quantitative measure of relative risk based upon market-generated data. Using several multivariable statistical techniques and a sample of 443 listed companies, this note provides empirical evidence of the association between 1) systematic risk and common stock rankings, 2) systematic risk and bond ratings, 3) two popular common stock ranking classification systems, and 4) common stock rankings and bond ratings.     

Heterogeneity in performance within the bank holding company sector: Evidence and implications

The performance of banks affiliated with the holding company sector has been heavily investigated. Empirical studies have sought to determine if the alleged efficiency of holding companies does in fact exist; and if such efficiency outweighs the anticompetitive effects introduced into the banking structure. Research methodologies, nevertheless, have tended to view the holding company sector as homogeneous in its performance characteristics as compared to independent banking. In this study, however, it is found that there is considerable heterogeneity in performance within the holding company sector. The findings have implications for the direction of future research as well as the formation of public policy in banking.     

The determinants of occupational mobility patterns among blue-collar jobs

Barriers to mobility are commonly believed to partition blue-collar jobs into skilled, semiskilled, and unskilled components. This paper develops a model based in large measure on the classical gravity model for purposes of ascertaining mobility pattern determinants and for testing for the presence and form of mobility barriers. The model is implemented on a 1965–1970 sample data of male mobility among 60 intermediate-detailed blue- collar occupations. The empirical results reveal that mobility patterns in the blue-collar component conform well with neoclassical theoretical expectations. Very little support is found for the view that the blue-collar labor market is highly structured or segmented in its operations through the mobility process.     

Polymorphism in competitive strategies: Trading stamps

This paper uses the example of trading stamps to examine a model of competitive nonprice marketing strategies. A concept borrowed from ethology, polymorphic equilibrium, is developed and used to explain salient features of trading stamp use by retail firms. The results contribute to an understanding of why virtually identical firms may optimally choose quite different competitive strategies. The paper also demonstrates the possibility of cyclical movements in the proportion of firms that adopt nonprice strategies such as the use of trading stamps.     

The error learning hypothesis: The evidence reexamined

This paper reexamines the error learning hypothesis, taking explicit account of both the measurement error in forward rates and the nonstationary of liquidity premiums. The evidence is consistent with the model, but with lower explanatory power than the previous results of Meiselman (1962) and Van Horne (1965).     

The entrepreneur: A capable executive and more

In the United States, entrepreneurs have been cussed and discussed, glorified and vilified, declared to be social misfits and bastions of the private enterprise system. Early in the life cycle of an entrepreneur, he or she may have been classified as being “unable to relate to family or peers,” later as “unwilling and unable to submit to or work with authority” to “jungle fighter” to “robber barron” to “philanthropist.” 5A common but incorrect assumption is that if one cannot adjust to the corporate environment, he or she should pursue an entrepreneurial career. Whether or not one can adjust does not preclude the necessity for the development of the skills and techniques required of a competent executive. The authors hypothesize that an entrepreneur must be a capable executive, and in addition, must possess a number of psychological characteristics to a greater or lesser degree than their corporate counterparts.This does not imply that all entrepreneurs are alike any more than all managers or executives are alike. Nor that the presence of a higher or lower level of a psychological trait or characteristic is itself sufficient for success. There are a number of sociological, psychological, demographic, and economic factors that appear to impact on the decision to enter entrepreneurial occupations. Although neither the absolute level of the impact of a psychological trait nor the interrelationship of the combined factors on the final decision-making process are known, research has indicated that significant differences in the intensity level of psychological traits or characteristics exist between entrepreneurs and managers or executives.This article discusses those traits that entrepreneurs exhibit at significantly different levels than do their corporate counterparts; how these factors may influence the decision to enter entrepreneurial occupations: and how these same traits have the propensity, if ignored, to have a negative influence on both the entrepreneur's organization and personal life-style.Entrepreneurs tend to be 1) tolerant of ambiguous situations, 2) prefer autonomy (autonomy may be described as self-reliance, dominance, and independence), 3) resist conformity, 4) be interpersonally aloof yet socially adroit, 5) enjoy risk-taking, 6) adapt readily to change, and 7) have a low need for support. These factors can lead to serious problems in delegation and communication, two factors of paramount importance to a growing concern. They may also cause intense stress or loneliness for the entrepreneur. Fortunately, the traits of willingness to accept change and ability to adapt to it will help the entrepreneur to accept and respond to problems that arise due to poor delegation or communication. Coping methods and a tolerance of ambiguity will assist the entrepreneur in dealing with stress and loneliness. The main problem is to alert the entrepreneur to the potentiality of these problems—which is what this article attempts to do.     

The impact of bank holding companies on local market rivalry and performance

The bank holding company movement in banking is, in many respects, the counterpart of the conglomerate movement in the industrial sector. Both are characterized by a substantial amount of merger activity and thus raise questions as to the affect of the acquiring firms on competition. This study uses Tobit analysis and OLS to examine the influence of bank holding companies on rivalry and performance in 154 banking markets (1970–1979). Test results indicate that in markets where bank holding companies are a significant factor rivalry is higher, but so are prices even though profits are not higher, than in markets where bank holding companies are less important. These seemingly conflicting findings may be explained by the finding that significant holding company presence in a market is associated with relatively high noninterest expenses.     

Competitive strategies and performance in technology-based industries

A model is proposed for relating a technology-based firm's investments in R&D and marketing to its level of performance. The model is based on a homothetic performance function form that is maintained to best represent unique differences among the competitive strategies of firms or groups of firms within an industry. It also permits explicit estimation of returns to scale with respect to investments in R&D and marketing for the industry as a whole. The empirical analysis strongly supports the existence of a heterogenous competitive structure in a technology-based industry with the returns-to-scale estimates varying among the industries studied. The model implies that desirable increases in competition occur through the interaction of individual firms and possibly strategic groups. It also implies the possibility of less than perfect substitution of resources across competitive strategies within an industry. Thus future models of competition should not be based entirely on size-related measures.     

Size and rank stability of the 100 largest commercial banks, 1925–1978

Although the importance and rank stability of the 100 or 200 largest industrial corporations has been the subject of several studies, no comparable studies have been conducted in banking. Questions about the position and role of the 100 largest banks are beginning to emerge as a result of the 1980 thrift institution legislation and the prospect of interstate banking in the not too distant future. Data constructed for this study reveal that 1) concentration of deposits in the 100 largest banks increased from 33.7 percent in 1925 to 51.4 percent in 1978, 2) the pattern of change and the absolute level of concentration are remarkably similar for the 100 largest industrials, 3) deposits have become increasingly concentrated within the top 100 banks, 4) mobility and turnover have been relatively stable since 1925, 5) merger activity is partly responsible for the increased concentration and observed mobility and turnover, and 6) there has been a notable increase in the geographical dispersion of banks among the top 100.