When does incentive compensation motivate managerial behaviors? An experimental investigation of the fit between incentive compensation,executive core self-evaluation,and firm performance

We develop and test an integrative model that examines the fit between compensation schemes, executives' characteristics, and situational factors. We propose that a fit among all three factors is crucial to motivate desirable managerial behaviors. Using a specially designed management simulation, our study demonstrates that the effectiveness of incentive compensation to motivate managerial behaviors depends on executives' core self-evaluation and firm performance. Our results show that, relative to fixed salary compensation, executives with higher core self-evaluation respond to incentive compensation with greater perseverance, competitive strategy focus, ethical behavior, and strategic risk taking during organizational decline. However, these interaction effects are not present during organizational growth. Our theory and empirical evidence provide significant insights into the complex relationships among compensation schemes, executives' characteristics, firm performance, and managerial behaviors. Copyright © 2012 John Wiley & Sons, Ltd.     

Homeownership and Child Welfare

Recent studies have concluded that homeownership is beneficial to children. This result is important because it is used to justify large government subsidies that encourage homeownership. We reexamine the results of two of the most prominent of these studies using the Panel Study of Income Dynamics, Public Use Microsample, and National Longitudinal Survey of Youth data. We extend this research by controlling for residential mobility, wealth, dwelling type and vehicle ownership, as well as by using a "differences in differences" methodology to deal with possible treatment effects bias. We find that the beneficial effects of homeownership previously measured are substantially reduced or eliminated by controlling for these factors. We confirm these results using data from the Early Childhood Longitudinal Study.     

AN ARBITRAGE PRICING APPROACH TO EVALUATING MUTUAL FUND PERFORMANCE

A test procedure, derived from arbitrage pricing theory, that permits the measurement of the security selection performance of professional portfolio managers is developed and applied to a sample of mutual funds over the period of the 1970's. The evidence indicates that more than one factor was present in the market during that interval as a systematic influence on the profile of securities returns. Consistent with prior studies, the evidence also suggests that mutual fund portfolios did not outperform a passive buy-and-hold investment strategy. A comparative analysis of the same data, using performance measures based on the single-factor market model, produces similar but less powerful results, both in the aggregate and at the individual fund level.     

The Mystery of the Missing Sovereign Debt Restructuring Mechanism

The absence of a formal international regulatory mechanism tofacilitate sovereign debt restructuring has long been recognizedas a most serious gap in the architecture of global finance.Why has it proven so difficult to create such a sovereign debtrestructuring mechanism (SDRM) at the international level? Politicaleconomists have devoted relatively little scholarly attentionto this question. This paper attempts to begin to fill thisgap in the literature by examining four failed initiatives tocreate a SDRM over the past century. In place of a realist orstructural Marxist account, the paper puts forward a more contingentexplanation for these failures that highlights three distinctpolitical problems that must be overcome in the constructionof a SDRM: (1) collective action problems on both the side ofsovereign debtors and that of private foreign creditors; (2)basic distributional conflicts embodied in any debt restructuringeffort; and (3) the uncertain behavior of the private creditors'home states.     

RESIDENTIAL MOBILITY AND HOUSING TAX REFORMS: Some Empirical Evidence*

The efficiency and equity implications of mortgage interest deductibility have been studied by a number of authors using models of housing demand that do not account for barriers to residential mobility. This paper examines how one's assessment of that proposed tax reform may differ based on models that do allow for such barriers, using data from Toronto, Canada. We find that earlier works tend to overstate the deadweight loss attributable to the introduction of mortgage interest deductibility, particularly in the short run.     

Cooperative ventures in emerging economies

Foreign market entry strategy involves choices about which markets to enter and how to do it. Most of the literature on foreign direct investment reflects an interest in ownership structure decisions and the risks foreign investing firm may face. As recognized in many studies, one set of risks arises from public expropriation hazards, a function of the ability of the host country's institutional environment to credibly commit to a given policy or regulatory regime. Empirical research has shown this hazard to have an impact on ownership levels. This study is a theoretical model that describes how multinational firms face moral hazard risk from their local partners and political risk from the host country when they decide to go abroad in a joint-venture alliance. I found that the greater the level of hazard expropriation, the lower the participation of the multinational firm in the final cash flow, except for when the multinational firm has the negotiation power and there is a high level of local investment protectionism. In that case, the multinational firm increases its participation in the final cash flow.     

A review of empirical studies of aggregate marketing costs and productivity in the United States

This article reviews empirical studies of aggregate marketing cost and aggregate marketing productivity in the United States. A methodological comparison is made of five cost studies for 1929 and seven productivity studies covering a period from 1869 to 1968. The cost studies do not clarify—one way or the other—if marketing costs too much or too little. The productivity studies, on the other hand, despite a variety of methodologies, reveal a rising secular trend over the past century. Thus, it may be concluded that irrespective of changes in cost, marketing is becoming more productive.