The Influence of Ownership and Compensation Practices on Charitable Activities

Recent accounting research provides evidence that similar profit‐based compensation incentives are used in for‐profit and nonprofit hospitals. Because charity care reduces profits, such incentives should lead for‐profit hospital managers to reduce charity care levels. Nonprofit hospital managers, however, may respond differently to the same incentives because they face a different set of institutional pressures and constraints. We compare the association between pay‐for‐performance incentives and charity care in for‐profit and nonprofit hospitals. We find a negative and significant association between charity care and our proxy for profit‐based incentives in for‐profit hospitals, and no significant association in nonprofit hospitals. These results suggest that linking manager pay to profitability does not appear to discourage charity care in nonprofit hospitals. Apparently, the nonprofit mission, institutional pressures, and ownership constraints moderate the potentially negative effects of profit‐based incentives. Because this evidence partially alleviates concerns over nonprofit compensation arrangements that mirror those used in for‐profit hospitals, it should be of interest to regulators and policymakers. In addition, this study provides insights into accounting researchers about institutional and organizational influences that affect managerial responses to financial incentives in compensation contracts.     

Selling and sales management

According to the Bureau of Labor Statistics (http://www.bls.gov/oes/current/oessrcst.htm), almost 14 million Americans are employed in sales or sales-related jobs. Many organizations derive their entire revenue stream from the efforts of salespeople. As part of the domain of marketing, the academic study of selling and sales management is relatively young. Consider that the Journal of Marketing has been published for 70 years, while the Journal of Marketing Research has been in publication for 43 years (www.marketingpower.com). For its part, the specialized journal in selling and sales management, The Journal of Personal Selling and Sales Management, has been published for just 26 years. Therefore, while there are a great many widely-used and studied models in the field, there is still much to be learned about this topic. As highlighted in this article, the research published in 2006 indicates the range of interesting and relevant work being conducted in the area.     

Explaining Mortality Dynamics

Abstract

Using data for six OECD countries over the period 1950–2006, this paper studies the impact of macroeconomic fluctuations and cause of death trends on mortality dynamics in the Lee-Carter mortality forecasting model. The key results of this study are the following: (1) Periods can be identified in which the Lee-Carter mortality index k_t correlates significantly with macroeconomic fluctuations. (2) A few causes of death such as diseases of the circulatory system, influenza and pneumonia, and diabetes mellitus account for a large fraction of the variations in the Lee-Carter mortality index k_t . (3) Most cause-specific mortality rates show pronounced trends over the last few decades. These trends change the composition of deaths and alter how total mortality reacts to external factors such as macroeconomic fluctuations.     

Backtesting Stochastic Mortality Models

Abstract

This study sets out a backtesting framework applicable to the multiperiod-ahead forecasts from stochastic mortality models and uses it to evaluate the forecasting performance of six different stochastic mortality models applied to English & Welsh male mortality data. The models considered are the following: Lee-Carter’s 1992 one-factor model; a version of Renshaw-Haberman’s 2006 extension of the Lee-Carter model to allow for a cohort effect; the age-period-cohort model, which is a simplified version of Renshaw-Haberman; Cairns, Blake, and Dowd’s 2006 two-factor model; and two generalized versions of the last named with an added cohort effect. For the data set used herein, the results from applying this methodology suggest that the models perform adequately by most backtests and that prediction intervals that incorporate parameter uncertainty are wider than those that do not. We also find little difference between the performances of five of the models, but the remaining model shows considerable forecast instability.     

Real Longevity Insurance with a Deductible: Introduction to Advanced-Life Delayed Annuities (ALDA)

Abstract

This paper explores the financial properties of a concept product called an advanced-life delayed annuity (ALDA). The ALDA is a variant of a pure deferred annuity contract that is acquired by installments, adjusted for consumer price inflation, and pays off toward the end of the human life cycle. The ALDA concept is aimed at the growing population of North Americans without access to a traditional defined benefit (DB) pension plan and the implicit longevity insurance that a DB plan contains. I show that under quite reasonable pricing assumptions, a consumer can invest or allocate $1 per month, while saving for retirement, and receive between $20 and $40 per month in benefits, assuming the deductible in this insurance policy is set high enough. The ALDA concept might go a long way in mitigating the psychological barrier to voluntary lump-sum annuitization.