Corporate investment myopia: a horserace of the theories

This paper tests two theories of corporate investment myopia which predict a distortion in investment policy with respect to the standard net present value rule. The theories are confronted with the empirical evidence, allowing the theories to compete to explain investment behavior. Research and development expense is used to proxy for long-term investment in a pooled, cross-sectional time-series regression. I find that research and development expense is decreasing in the age of the Chief Executive Officer. Results are consistent with the hypothesis that agency costs are lower when the firm invests myopically, rather than follow a standard net present value rule.     

On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?

We examine the role of index futures trading in spot market volatility. We use the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) approach to measure volatility, analyze causality and feedback relations between volatilities in the spot and futures markets, and test various hypotheses in the context of a multivariate model that incorporates other macrostate variables. Our empirical results suggest index futures trading may not be blamed for the observed volatility in the spot market. Rather, we find stronger and more consistent support for the alternative posture that volatility in the futures market is an outgrowth of a turbulent cash market. We use the regret (cognitive dissonance) theory to explain our results.     

An Analysis of Occupational Outcomes for Indigenous and Asian Employees in Australia

This paper examines occupational performance in Australia across three racial groups in Australia: Indigenous Australians; Asian people, defined as all those whose language spoken at home was either Chinese, Vietnamese or other forms of a South-east or East Asian language; and white people, defined as the residual category. The paper has as its starting point, observed differences in occupational attainment among the three groups in Australia and sets out to account for these observed differences on the basis of both race and non-racial attributes such as, age, education and area of residence.     

Discrimination and Skill Differences in an Equilibrium Search Model*

We analyze an equilibrium search model with three sources for wage and unemployment differentials among workers with the same (observed) human capital but different appearance (race): unobserved productivity, search intensities, and discrimination due to an appearance‐based employer disutility factor. We show that the structural parameters are identified using labor market survey data. Estimation results for a black and white high school graduate sample imply: black productivity is 3.3% lower than white productivity; the employer's disutility factor is 31% of the white's productivity level; and 56% of firms have a disutility factor toward blacks.     

A note on measuring political participation in comparative research

This article presents an application of Prezeworski and Teune's so-called “identity-equivalence method” to a large set of indicators of political participation. By relaxing commonly held assumptions about necessary distinctions among types of participation, it is found that the distinction between “conventional” and “unconventional” modes of participation is unnecessary, while the distinction between “government” and “nongovernment” has some merit. The findings also lend further support to the claims of Prezeworski and Teune that the identity-equivalence method is preferable to the identical indicator method.     

Antecedents of private label attitude and national brand promotion attitude: similarities and differences

A model that addresses the similarities and differences in conceptual antecedents of attitudes toward private label grocery products and national brand promotions is proposed and tested. The proposed model is tested using a sample of 300 consumers who were recruited from grocery stores, provided behavioral data from sales receipts of their shopping trip, and responded to a survey that contained multi-item construct measures. We predict and find in the study that both price and nonprice related constructs impact both private label attitude and national brand promotion attitude, but the directionality and strength of several of these relationships differ. Implications of these findings for retailers and national manufacturers are discussed.     

The Information Content of Nonfinancial Performance Measures in the Airline Industry

This research extends the literature on nonfinancial performance measures (NFPMs) by assessing (1) the information content of a broader set of NFPMs and (2) whether NFPMs provide information not provided by financial performance measures (FPMs) from all previously identified FPM categories, rather than just earnings and book value. Specifically, exploratory and confirmatory factor analysis results presented in this paper demonstrate that nineteen NFPMs of major airlines capture seven underlying constructs not captured by eighteen common FPMs. Additionally, this research develops reliable composite measures of the identified performance measure constructs, which prior research argues are superior to individual performance measures.     

How Naïve Is the Market’s Use of Firm‐Specific Earnings Information?

Recent studies suggest the apparent delay in the stock-price response to earnings announcements (i.e., post-earnings announcement drift) is caused by investors who underestimate the autocorrelation of seasonally-differenced earnings (persistence). I present results that suggest: (1) a firm's future persistence is predictable on the basis of its past persistence; (2) the immediate stock-price response to earnings is positively related to historical persistence; (3) post-earnings-announcement drift is independent of historical persistence; and (4) consistent with (2) and (3), the difference between a firm's current observed persistence and that implied in stock prices is independent of its historical persistence. These results extend prior research by demonstrating that investors are aware not only that seasonally-differenced earnings are autocorrelated, but that investors recognize firm-specific differences in the magnitude of the autocorrelation.