Career concerns and mandated disclosure

This paper examines the effects of mandated disclosure on the design of contracts and induced behavior in the presence of career concerns. We analyze the impact of two key properties of a mandated performance measure that is publicly disclosed: its sensitivity to the agent’s effort and its informativeness about the agent’s ability. We show conditions under which the agent’s effort (and the firm’s output) and the pay-for-performance weight critically depend on these two properties. In particular, when the mandated measure is sufficiently noisy, the pay-for-performance weight always decreases relative to a setting with no mandated measure. But when the mandated measure’s noise is close to that of the existing performance measure, the effect of a mandated measure on the pay-for-performance weight depends on the effort-sensitivity and informativeness of the measure. We also characterize settings where a mandated disclosure would be desirable or not; variations arise because mandated disclosures can increase both effort and risk. Our results imply that mandating the public disclosure of performance measures, particularly measures that are relatively informative about ability but are difficult to influence through managerial effort, may have the unintended consequence of generating inefficiencies in firms’ employment contracts.     

Trade, turnover, and tithing

This paper examines the hypothesis that turnover affects trade preferences. High turnover industries are similar to the Stolper-Samuelson assumption of perfect factor mobility, so factor of production drives trade preferences. Among low turnover industries, as in the specific factors model, net export position determines trade preferences. We show that PAC contribution patterns are consistent with this hypothesis. In high turnover industries, capital groups give significantly larger shares of their campaign contributions to free trade supporters than labor groups do. Among low turnover industries, on the other hand, exporting and import-competing groups differ significantly in their financial support for free traders.     

Leverage and Taxes: Evidence from the Real Estate Industry

Finance theory has long viewed corporate income taxes as a potentially important determinant of corporate financing decisions and capital structures. But finance academics have been unable to provide convincing empirical evidence of a material effect of taxes on corporate leverage, in part because of difficulties in constructing an effective proxy for marginal corporate tax rates, and hence for the tax benefits of debt, for large samples of individual companies. The authors address this by analyzing leverage decisions in an industry whose publicly traded entities are organized either as taxable corporations, or as real estate investment trusts (REITs) that effectively avoid entity level taxation. This enables them to measure the relative tax benefits of debt with greater precision while controlling for important nontax characteristics that affect debt usage. The tax hypothesis predicts that for real estate firms with similar asset portfolios, taxable firms should have more debt than their nontaxable counterparts. Both the nontaxable and the taxable real estate firms in our sample routinely have more than twice the leverage of industrial firms, which suggests that factors other than taxes are contributing to their use of debt. But among real estate firms, tax status appears to play a much weaker role. Taxable firms have significantly more leverage only after 2000, when restrictions on REITs were removed through new regulations that made their operations much more like those of taxable real estate firms. Our findings also depend on real estate characteristics—most notably, only residential real estate firms demonstrated differences that are consistent with the tax hypothesis. Taken together, the authors’ findings suggest that although taxes do seem to matter, their role is clearly secondary relative to factors such as the nature of the firm’s assets. A generous interpretation of our evidence puts the effect of taxes between one‐third and one‐half of that implied by prior research.     

Managerial Incentives and Corporate Fraud: The Sources of Incentives Matter

Operating performance and stock return results imply that managerswho commit fraud anticipate large stock price declines if theywere to report truthfully, which would cause greater lossesfor managerial stockholdings than for options because of differencesin convexity. Fraud firms have significantly greater incentivesfrom unrestricted stockholdings than control firms do, and unrestrictedstockholdings are their largest incentive source. Our resultsemphasize the importance of the shape and vesting status ofincentive payoffs in providing incentives to commit fraud. Fraudfirms also have characteristics that suggest a lower likelihoodof fraud detection, which implies lower expected costs of fraud.     

Critical factors to consider in the development of an audit client engagement decision expert support system: a Delphi study of Big Six practicing auditors

The litigious audit environment is driving accounting firms to change their audit client engagement strategies in order to remain viable and successful in a very competitive environment. Firms are realizing the need to make better, more informed decisions regarding client acceptance/continuance decisions. Expert Support Systems are suggested as a useful tool for reengineering the audit client engagement decision. Towards this goal, this study uses the Delphi method with a panel of experts from the Big Six accounting firms to determine critical factors which may cause a firm to reject potential clients. © 1997 John Wiley & Sons, Ltd.     

The reference wars: Encyclopædia Britannica's decline and Encarta's emergence

Research summary: The experience of Encyclopædia Britannica provides the canonical example of the decline of an established firm at the outset of the digital age. Competition from Microsoft's Encarta in 1993 led to sharp declines in the sales of books, which led to the distressed sale of the firm in 1996. This article offers new source material about the actions at both Encarta and Britannica, and it offers a novel interpretation of events. Britannica's management did not misperceive the opportunities and threats, and Britannica did not lack technical prowess. This narrative stresses that Britannica's management faced organizational diseconomies of scope between supporting lines of business in the old and new markets, which generated internal conflicts. These conflicts hindered the commercialization of new technology and hastened its decline . Managerial summary: An established and leading firm, such as Encyclopædia Britannica, would seem to have enormous advantages over its competitors in a new market. Why would a successful firm come to have severe difficulties organizing for a new market? Of particular importance for explaining Britannica's decline are theories that stress its inherited capabilities, especially inherited technological (in)abilities and inherited (mis)perceptions about the potential for new market opportunities. This article argues that Britannica's management did not misperceive the opportunities and threats, and Britannica did not lack technical prowess. This narrative stresses that Britannica's management faced organizational diseconomies of scope between supporting lines of business in the old and new markets, which generated internal conflicts. The narrative directs attention at managing commercialization activity around new products using new technologies . Copyright © 2016 John Wiley & Sons, Ltd.     

Stability of acrylic monomers

Certain procedures and tests have been developed to ensure that monomer products are sufficiently stable for manufacturing and handling.     

Towards Strategic Intent: Perceptions of disability service provision amongst hotel accommodation managers

The tourism sector globally has become increasingly mindful of how an ageing population is reshaping service provision forms and offerings. This being particularly true of accommodation operations where there is a now a growing recognition of the commercial value for providing market groups with exceptional service. With this in mind, this study sought to ascertain the perceptions of managers in the accommodation sector towards disability service provision with a view to identifying any current service gaps or failings. An inductive, qualitative approach was used with the data collection phase incorporating a series of one on one interviews and a focus group. The in-depth interviews were conducted with 10 managers of hotels deemed to have accessible rooms that complied with the relevant building codes and standards. A focus group comprised 22 managers of hotels located in the Sydney central business district, Australia. Study findings revealed five key themes that had not been previously discussed in the literature. They were: inclusive attitudinal approach; safety; the responsibility of people with a disability to communicate their needs to the hotel; perceptions of accessible rooms by the general public; and operational processes. Related themes that emerged from the data analysis that had previously been aligned with the literature included: legislative responsibility, policy and building codes; disability as a market segment; staff awareness/training; and language, marketing, and promotion information. Implications with respect to management of accessible rooms in the accommodation sector are outlined and further areas of research are proposed.