Modeling dividends,earnings, and book value equity: An empirical investigation of the ohlson valuation dynamics

This study empirically investigates the information dynamics of the Ohlson valuation framework. Single-period lagged linear autoregressive relationships among dividends, earnings, and book values of equity are estimated for a sample of stochastically stationary firms and are found not to support the valuation framework. This study further extends the empirical analysis to a multilagged vector autoregressive linear information system. Consistent with the Ohlson valuation framework,the past time series of all three variables are generally found to be relevant for firm valuation. This study brings into question empirical research utilizing the Ohlson framework that presupposes a single-period lagged information dynamic.     

Occupational job creation: patterns and implications

This paper empirically investigates the matching process ofjob seekers and job vacancies, on different occupational labormarkets, and reveals the relative importance of supply and demandfactors, and frictions in the job creation process. Using datafrom German administrative records, we estimate matching functionsboth on the aggregate level, and for different occupationaland educational groups. The data allow to avoid some of theusual problems in empirical matching studies; extensive robustnessand stationarity tests are carried out. The results indicatesubstantial heterogeneity in the matching processes at disaggregatelevels. This information can be useful for policymakers, sincepolicy interventions that are effective in creating employmenton some occupational labor markets might lead to unsatisfactoryresults for other occupations.     

Demand for the truth in principal–agent relationships

Consider the following puzzle: If earnings management is harmful to shareholders, why don’t they design contracts that induce managers to reveal the truth? To answer this question, we model the shareholders–manager relationship as a principal–agent game in which the agent (the manager) alone observes the economic outcome. We show that the limited liability (LL) of the agent, defined as the agent’s feasible minimum payment, might explain the demand for earnings management by the principal. Specifically, when the LL level is high (low), a contract that induces earnings management may be less (more) costly than a truth-revealing contract. This finding offers a new explanation of the demand for earnings management.     

The Eyes Have It: How a Car's Face Influences Consumer Categorization and Evaluation of Product Line Extensions

This research focuses on a previously unexamined risk associated with the widely used new product development strategy of line extensions. Specifically, it explores consumer reactions when line extensions become too visually similar and examines both short‐term and longer term strategies for solving the problem. Examined in the context of consumer durables, specifically, automobiles, the results show that consumers who make categorization mistakes when trying to distinguish between two visually similar product lines have more negative attitudes not only toward the product but also toward the parent brand. The results of Study 1 confirm that providing a design vocabulary that articulates the car's design features is effective in reducing consumer's categorization mistakes. In addition, results of Study 2 indicate that changes to the car's “eyes” (headlights) are more effective than changes to the car's “mouth” (grille) in helping consumers to differentiate among cars in the line.     

Sterilization, Monetary Policy, and Global Financial Integration

This paper investigates the changing pattern and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net balance of payments inflows, across countries, and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that sterilization depends on the composition of balance of payments inflows.     

Assessing the Effect of Bilateral Collaborations on Learning Outcomes

Despite recent interest in the effects of student-driven collaborations on learning outcomes, little or no empirical investigations examine the potential benefits from collaboration between instructors of separate, but related, courses. This study proposes a learning intervention that explicitly accounts for interdependencies across courses and extends the traditional definition of collaborative learning to include the synthesis of teaching and learning in four courses through bilateral, group activities between instructors and among students. A student-performance measure assesses the intervention. Statistical results suggest that the collaborative learning intervention improved student-writing performance.     

Reconciling sustainability, systems theory and discounting

Most definitions of sustainability imply that a system is to be maintained at a certain level, held within certain limits, into the indefinite future. Sustainability denies run-away growth, but it also avoids any decline or destruction. This sustainability path is hard to reconcile with the renewal cycle that can be observed in many natural systems developing according to their intrinsic mechanisms and in social systems responding to internal and external pressures. Systems are parts of hierarchies where systems of higher levels are made up of subsystems from lower levels. Renewal in components is an important factor of adaptation and evolution. If a system is sustained for too long, it borrows from the sustainability of a supersystem and rests upon lack of sustainability in subsystems. Therefore by sustaining certain systems beyond their renewal cycle, we decrease the sustainability of larger, higher-level systems. For example, Schumpeter's theory of creative destruction posits that in a capitalist economy, the collapse and renewal of firms and industries is necessary to sustain the vitality of the larger economic system. However, if the capitalist economic system relies on endless growth, then sustaining it for too long will inevitably borrow from the sustainability of the global ecosystem. This could prove catastrophic for humans and other species. To reconcile sustainability with hierarchy theory, we must decide which hierarchical level in a system we want to sustain indefinitely, and accept that lower level subsystems must have shorter life spans. In economic analysis, inter-temporal discount rates essentially tell us how long we should care about sustaining any given system. Economists distinguish between discount rates for individuals based on personal time preference, lower discount rates for firms based on the opportunity cost of capital, and even lower discount rates for society. For issues affecting even higher-level systems, such as global climate change, many economists question the suitability of discounting future values at all. We argue that to reconcile sustainability with inter-temporal discounting, discount rates should be determined by the hierarchical level of the system being analyzed.     

THE ARTICLES OF CONFEDERATION SHOW THE NEED FOR DIRECT TAXATION? IT JUST AIN'T SO!

Historians and economists often refer to the United States experience under the Articles of Confederation as evidence against decentralised government finance. While it is true that the US government had difficulty raising money from the states during this period, we argue that these facts are a benefit of the system, not a flaw. A 'bottom-up' system of finance, such as the one that existed under the Articles of Confederation, is an important check on Leviathan and has implications for United Nations fund-raising efforts and development economics.