Unintended consequences of the increased asset threshold for FDICIA internal controls: Evidence from U.S. private banks

We examine the unintended consequences of the 2005 increase from $500 million to $1 billion in the asset threshold for the Federal Deposit Insurance Corporation Improvement Act (FDICIA) internal control reporting requirements. We focus on a test sample of banks that increased their total assets from between $100 million and $500 million prior to the change in regulation to between $500 million and $1 billion within two years following the change. These “affected” banks are no longer subject to the internal control requirements but would have been had the regulation not been changed. We hypothesize that these affected banks are likely to make riskier loans, which will increase the likelihood of failure during the crisis period. We find evidence consistent with this hypothesis. Affected banks have higher likelihood of failure during the crisis period than banks from two different control samples. We also find that auditor reputation (i.e., whether the bank is audited by a Big 4 auditor or an industry specialist auditor) has a moderating effect on the likelihood of failure for these affected banks.     

The timing of pay

There exists large and persistent variation in not only how, but when employees are paid, a fact unexplained by existing theory. This paper develops a simple model of optimal pay timing for firms. When workers have self-control problems, they under-save and experience volatile consumption between paychecks. Thus, pay whose delivery matches the timing of workers' consumption needs will reduce wage costs. The model also explains why pay timing should be regulated (as it is in practice): although the worker benefits from a timing profile that smoothes her consumption, her lack of self-control induces her to attempt to undo the arrangement, either by renegotiating with her employer or by taking out payday loans. Regulation of pay timing and consumer borrowing is required to counter these efforts, helping the worker help herself.     

Identifying Neo-Schumpeterian Innovation in Service Firms: A Conceptual Essay with a Novel Classification

The identification of innovation in service firms is problematic since there is no consensus of opinion on its conceptualization. Recent papers suggest both distinctive features of innovation in services and distinctive types of service innovation. This article reviews and evaluates these findings from a Schumpeterian perspective. The evaluation justifies conceptualizing service innovation as a specific case of service development with a reference to Schumpeter, but not as strict as proposed by Drejer (2004) [Drejer, I. (2004) Identifying Innovation in Surveys of Services: A Schumpeterian Perspective. Research Policy, 33, 551–562]. Despite the simultaneity of production and consumption in services, this article claims that the distinction between product innovation and process innovation should be preferred to other ways of classifying innovation in service firms. Finally, changes in the denomination of services are advanced as a key to the identification of development and innovation in service firms.     

Optimal fiscal policy with robust control

This paper analyzes how consumer uncertainty affects optimal fiscal policy in the Lucas and Stokey (1983) framework. The consumers, lacking confidence in their knowledge of the stochastic environment, endogenously tilt their subjective probability model away from an approximating probability model. The government, though, is confident that the approximating probability model characterizes the stochastic environment. This confidence dichotomy reveals a range of possible objective functions for an altruistic government. I assume that the government maximizes the consumers' expected utility under the consumers' own subjective probability model. It is found that this government relies less heavily on labor taxes to absorb the fiscal shock than would be optimal if consumers were fully confident in their probability model. This policy helps mitigate the direct welfare cost associated with consumer uncertainty. I compare this policy to the one implemented by a government that maximizes the consumers' expected utility under the approximating probability model.     

Increase in Risk and its Effects on Welfare and Optimal Policies in a Dynamic Setting: The Case of Global Pollution

This paper studies the effects of an increase in risk on welfare and optimal policies in a stochastic dynamic model of global pollution. In a first step, we focus on the case of a single decision maker, and make use of an approach pioneered by Kimball (2014) for studying the impact of a marginal change in risk in optimal stochastic control models. Using a simple model with only one state variable and one control variable, we show how the optimal carbon tax responds to an increase in risk. It is found that the third derivative of the decay function of the stock of pollution may play a decisive role. In a second step, we investigate the extent to which Kimball’s approach may be extended to the case of stochastic dynamic games. We show how strategic interactions complicate the task of evaluating the effects of an increase in risk. Interestingly, in a dynamic model of the tragedy of the commons, we find that an increase in risk can increase welfare even though all agents are risk averse. The reason is that higher risk can cause agents to be more conservative, and this mitigates the tragedy of the commons.     

Stale in the pulpit? Leader tenure and the relationship between market growth strategy and church performance

• Taking a strategic choice perspective, the current study examines leader tenure and the growth implications of pursuing a market penetration versus market development strategy in a church setting. Using cross-sectional time series regression analyses of 1415 church organizations over a period of 6 years, study findings demonstrate the influence of leader tenure on both financial and non-financial church performance, but provide minimal evidence supporting the argument that the selected market strategy matters to organizational performance outcomes in churches.

Copyright © 2010 John Wiley & Sons, Ltd.     

Management Practices, Work--L ife Balance, and Productivity: A Review of Some Recent Evidence

Increasing product-market competition is believed to be a drivingforce behind higher productivity. However, even those criticsof globalization who accept this argument claim that there isa hard trade-off because tougher competition comes at the priceof reducing work—life balance (WLB). Optimists, by contrast,argue that competition can spur better WLB practices and thereforehigher productivity, so there is a ‘win—win’situation. To address this issue we use an innovative surveytool to collect the first international data on management practicesand WLB practices, surveying 732 medium-sized manufacturingfirms in the USA, France, Germany, and the UK. We find thatthe USA has the best management practices but the worst work—lifebalance. When we look within countries, however, we reject thepessimistic ‘trade-off’ model. First, WLB outcomesare significantly associated with better management, so thatwell-run firms are both more productive and offer better conditionsfor their employees. Second, tougher competition increases averagemanagement quality but does not negatively affect employees'working environment. As with many other studies, better WLBpractices are associated with significantly higher productivity.This relationship disappears, however, after controlling forthe overall quality of management. Footnotes ¹ E-mail addresses: nbloom{at}stanford.edu; j.vanreenen{at}lse.ac.uk     

How did women count? A note on gender‐specific age heaping differences in the sixteenth to nineteenth centuries1

The role of human capital in economic growth is now largely uncontested. One indicator of human capital frequently used for the pre-1900 period is age heaping, which has been increasingly used to measure gender-specific differences. In this note, we find that in some historical samples, married women heap significantly less than unmarried women. This is still true after correcting for possible selection effects. A possible explanation is that a percentage of women adapted their ages to that of their husbands, hence biasing the Whipple index. We find the same effect to a lesser extent for men. Since this bias differs over time and across countries, a consistent comparison of female age heaping should be made by focusing on unmarried women.     

An Application of Rating Conjoint Analysis to Study the Importance of Quality-, Access- and Price-attributes to Health Care Consumers

Outside the health care sector, consumer preferences have been effectively studied using rating and ranking conjoint techniques. In the health care sector this technique has received less attention than its choice-based variant. Applications of rating and ranking method to health care issues are few. This paper presents an application of rating conjoint analysis to study the importance of quality, access and price to the health care consumers in Bulgaria. The paper first describes the rating conjoint method and its distinctive features compared to the choice-based and the ranking approach. The method is illustrated by the rating conjoint design applied in the study. Next, the impact of different quality-, access- and price-levels on the rating of physician profiles is analysed and the differences between the socio-demographic groups are examined. The results suggest that similar to other countries, the quality of care is a highly valued characteristic in Bulgaria, whereas access is perceived as less important. The considerable importance of patient payments further implies that Bulgarians are responsive to prices in the health care sector, especially the elderly, the village dwellers and the lowest income groups. The relevance of the results with regards to health policy and planning, as well as with regards to the methodology of rating conjoint analysis is discussed at the end of the paper.