Exchange Rules and the Incentive Compatibility of Choice Experiments

The incentive properties of stated-preference surveys continue to be a central debate in the valuation of public goods. The majority of empirical studies have focused on incentive properties of contingent valuation questions in relation to situations where answers have monetary consequences. This research explores the incentive properties of repeated, attribute-based choice questions when subjects are provided with an explicit connection between choices and outcomes. Two market/provision-rules are investigated: a posted-price market and a plurality-rule vote. These two provision rules are contrasted to treatments in which no provision rule is discussed—subjects are simply asked to choose their preferred alternative. These three hypothetical choice treatments are compared with a binding choice treatment. While none of the public good treatments are theoretically incentive compatible, we include a comparison of hypothetical and binding choices for a private-good that is incentive compatible. The private good experiments indicate that marginal willingness to pay (WTP) estimates from the hypothetical treatment are larger, but not statistically different than corresponding estimates in the binding choice treatment. Results for the public good experiments indicate that marginal WTP estimates from the hypothetical treatments are much larger, and statistically different than corresponding estimates in the binding choice treatment. The bias is largest when no provision rule is discussed. The bias is reduced with the inclusion of a provision rule, but surprisingly, there was no difference across provision rule treatments. Overall, our results indicate that choice experiments involving a public good should include a provision rule to reduce bias, but the resulting marginal WTP estimates may still be more biased, on average, than those arising from contingent valuation survey formats.     

Organizing Corporate Social Responsibility in Small and Large Firms: Size Matters

Based on the findings of a qualitative empirical study of corporate social responsibility (CSR) in Swiss MNCs and SMEs, we suggest that smaller firms are not necessarily less advanced in organizing CSR than large firms. Results according to theoretically derived assessment frameworks illustrate the actual implementation status of CSR in organizational practices. We propose that small firms possess several organizational characteristics that are favorable for promoting the internal implementation of CSR-related practices in core business functions, but constrain external communication and reporting about CSR. In contrast, large firms possess several characteristics that are favorable for promoting external communication and reporting about CSR, but at the same time constrain internal implementation. We sketch a theoretical explanation of these differences in organizing CSR in MNCs and SMEs based on the relationship between firm size and relative organizational costs.     

Do corporate tax cuts increase investments?

This paper studies the effect of corporate taxes on investment. Since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms do, their effective tax rate and, consequently, their tax-induced costs to investment are lower. We therefore expect capital investment responses to a corporate tax cut to be heterogeneous across firms. Using firm-level data on German corporations, we exploit the 2008 tax reform, which substantially cut corporate taxes as an exogenous policy shock and expect domestically owned firms' investments to be more responsive to the reform. We show exactly this in a difference-in-differences setting. We find that the reduction in corporate tax payments led to a one-to-one increase in the real investments of domestic firms. The effect is stronger for domestic firms relying more on internal funds. Correspondingly, labor investment increased more for domestic firms, ensuring a constant mix of input factors. In addition, we show that domestic firms' sales grew faster after the tax cut than the sales of foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but that domestic firms benefit more than foreign-owned firms from a tax cut through higher investment responses resulting in greater sales growth.     

Do boards pay attention when institutional investor activists “just vote no”?

We examine “just vote no” campaigns, a recent innovation in low-cost shareholder activist tools whereby activists encourage their fellow shareholders to withhold votes toward a director's election to express dissatisfaction with management performance or the firm's corporate governance structure. Grundfest [1993. Just vote no: a minimalist strategy for dealing with barbarians inside the gates. Stanford Law Review 45, 857–937] argues that a substantial withheld vote motivates directors to take immediate action to avoid further embarrassment. We find a variety of supportive evidence, including operating performance improvements and abnormal disciplinary chief executive officer (CEO) turnover, indicating that such campaigns induce boards to take actions in shareholders’ interests. Furthermore, abnormal turnover is robust to controlling for concurrent events and firm- and CEO-specific controls.     

Governmentality in accounting and accountability: A case study of embedding sustainability in a supply chain

This paper examines how the introduction of sustainability accounting has been used by an organization as a means to seek to govern social, economic and environmental issues relating to suppliers. The concept of governmentality and four analytics of government are proposed as a means to examine systematic ways of exercising power and authority. This theoretical framework illuminates the specific rationales and practices of government that enable particular aspirations of reform – such as sustainability – to be constituted. The analysis is informed by the discussion of the implementation of sustainability-orientated regimes of practice in the context of a single supply chain within a major supermarket chain in the UK against the theoretical analytics of government. The paper provides novel empirical insights into how sustainability accounting shaped forms of power, rationales and practices in a supply chain. It explores the extent to which senior decision-takers frame and use sustainability accounting to foster disciplinary effects based ostensibly upon social and environmental goals. These are found in practice to be reformulated primarily according to an economic (rather than social or environmental) regime of practice.     

Alternatives to conventional crude oil: When, how quickly, and market driven?

We examine the effect of uncertainty concerning remaining supplies of conventional crude oil and its production path on: the date alternative fuels will be needed, the quantity of alternative fuels needed, and how this uncertainty affects firms' willingness to provide alternatives in a timely fashion. Despite large uncertainties about the quantity of oil that remains and its production path, the start date for replacements is likely to fall within a twenty-two year period that is narrower and earlier than previous estimates. The twenty-two year window represents considerable uncertainty about the date of the peak and this uncertainty creates an asymmetry in the strategy that maximizes the welfare of firms relative to total social welfare, which works against the market's ability to generate a smooth transition from oil to alternative fuels. The timeliness of this transition is critical—the production paths generated here suggest that 10 million barrels per day or more of alternative fuels will be needed within a decade of the peak in production of conventional crude oil.     

Post-privatisation ownership concentration: Determinants and influence on firm efficiency

With this study we aim to contribute to the empirical literature on privatisation processes by analysing the determinants of post-divestment private ownership concentration and its possible link to corporate efficiency. For Spanish firms, we find that the method of privatisation, the type of industry, the company’s size and its level of risk may help explain differences in private ownership concentration. We also find, after controlling for endogeneity, that ownership concentrated in the hands of private investors has a positive and significant effect on post-privatisation efficiency.