What Works at Work: Overview and Assessment

This article discusses why it is difficult to measure the effects of management practices on organizational performance. In spite of these difficulties, a collage of evidence suggests that innovative workplace practices can increase performance, primarily through the use of systems of related practices that enhance worker participation, make work design less rigid, and decentralize managerial tasks. A majority of U.S. businesses have adopted some innovative work practices. However, only a small percentage of businesses have adopted a full system of innovative practices. We outline several constraints on the diffusion of new work practices, and suggest directions for future research     

Cross-Quarter Differences in Stock Price Responses to Earnings Announcements: Fourth-Quarter and Seasonality Influences*

Abstract. This article examines the impact of one form of sales seasonality on the response of equity returns to earnings announcements in different quarters. We regress unexpected announcement period returns on unexpected earnings and compare the results for seasonal firms—those with sales consistently concentrated in the same quarter each year—to those of other firms. For seasonal firms, we find robust evidence of a greater regression intercept and some evidence of a greater earnings response coefficient in peak sales quarters than in nonpeak quarters. These results are consistent with a greater resolution of the uncertainty about seasonal firms' prospects in their peak sales quarters than in other quarters. Our evidence also shows that fourth-quarter earnings announcements have smaller stock price response coefficients than do interim announcements. Some prior has found smaller fourth-quarter earnings response coefficients for small but not large firms. We find some evidence that fourth-quarter earnings response coefficients are smaller than interim-quarter response coefficients for large firms as well as for small firms. This suggests that explanations for smaller fourth-quarter earnings response coefficients need to be applicable to both large and small firms. Résumé. Les auteurs examinent, pour différents trimestres, l'incidence d'une forme de caractère saisonnier des ventes sur la réaction du rendement des actions aux déclarations de bénéfices. Ils effectuent une analyse de régression des rendements imprévus des trimestres par rapport aux bénéfices imprévus et comparent les résultats obtenus dans le cas des entreprises dont les activités sont saisonnières—c'est-à-dire dont les ventes sont systématiquement concentrées dans le même trimestre chaque année—aux résultats obtenus dans le cas des autres entreprises. Dans le cas des entreprises dont les activités sont saisonnières, les résultats de l'analyse démontrent vigoureusement que l'intersection de la régression est supérieure et confirment avec moins de fermeté que le coefficient de réaction aux bénéfices déclarés est supérieur pour les trimestres où le volume des ventes culmine, par rapport aux autres trimestres. Ces résultats permettent de conclure à une plus grande résorption de l'incertitude relative aux perspectives des entreprises dont les activités ont un caractère saisonnier dans les trimestres où les ventes de ces entreprises culminent que dans les autres trimestres. Les résultats de l'analyse démontrent également que les déclarations de bénéfices au quatrième trimestre donnent lieu à des coefficients plus faibles de réaction du cours des actions que les déclarations des trimestres intermédiaires. Certains travaux antérieurs ont établi que les coefficients de réaction aux déclarations de bénéfices du quatrième trimestre étaient plus faibles pour les petites entreprises que pour les grandes. L'analyse des auteurs tend ici à démontrer que les coefficients de réaction aux déclarations de bénéfices du quatrième trimestre sont plus faibles que les coefficients de réaction des trimestres intermédiaires pour les grandes entreprises aussi bien que pour les petites entreprises. Ces constatations donnent à penser que les facteurs qui expliquent les coefficients de réaction plus faibles aux déclarations de bénéfices du quatrième trimestre devraient pouvoir s'appliquer tant aux grandes qu'aux petites entreprises.     

TAX REFORM

After brief individual presentations, panelists discuss among themselves and with the audience a broad spectrum of issues regarding various taxes and tax reform proposals. The discussion includes such issues as privatizing Social Security and Medicare, eliminating income tax withholding, and the merits and demerits of income taxes, consumption taxes, value added taxes, sales taxes, and taxes on resources that have an inelastic supply. One panelist relates his recent experiences using his tools as an economist to deal with tax and related issues as a current member of the Canadian Parliament. Another cites practical problems of implementing tax reform from his long experience advising governments, especially in Latin America. A major focus of the exchange of views is on public choice problems involved in passing and implementing a so-called flat tax. However, the discussion also deals with economic efficiency and equity considerations and with nearly all other types of taxes. The discussion includes not only the impact on the country within which tax reform occurs, but international implications, as well.     

THE PSYCHOPATHOLOGY OF MONETARY POLICY

This paper develops some implications of assigning the Federal Reserve the contradictory goals of keeping interest and unemployment rates from rising while at the same time expecting the Fed to control inflation. The resulting imbalance causes Fed officials to engage in the classical psychological defenses of denial, projection, and obfuscation. Prolonged defense of an unbalanced state may lead to protective postures with dysfunctional implications. Federal Reserve secrecy, self-censorship, illusions of unanimity, and perceptions of need for insulation from external threat all are protective postures that may cause the Fed to lose credibility and alienate its professional staff. This, in turn, may promote the cause of monetary reform. This paper distinguishes between radical and piecemeal monetary reform and indicates why the latter could succeed in garnering political support.     

Original Issue High Yield Bonds: Aging Analyses of Defaults,Exchanges, and Calls

This paper presents an aging analysis of 741 high yield bonds and finds default, exchange, and call percentages substantially higher than reported in earlier studies. By December 31, 1988, cumulative defaults are 34 percent for bonds issued in 1977 and 1978 and range from 19 to 27 percent for issue years 1979–1983 and from 3 to 9 percent for issue years 1984–1986. Exchanges are also a significant factor although they often are followed by default. Moreover, a significant percentage of high yield debt, 26–47 percent for 1977–1982, has been called. By December 31, 1988, approximately one third of the bonds issued in 1977–1982 has defaulted or been exchanged, and an additional one third had been called. On average, only 28 percent of these issues are still outstanding. There is no evidence that early results for more recent issue years differ markedly from issue years 1977 to 1982.     

Why Are Quit Rates Lower Among Defense Contractors?

This paper presents empirical evidence of lower quit rates at small manufacturers with defense contracts and examines whether this is associated with differences in their human resource policies and organizational practices and strategies. We take advantage of an original data set to compare labor quits, workforce skills, and occupational structure between defense‐contracting and noncontracting small manufacturers in eastern Pennsylvania. We find that the remarkably large defense contractor advantage in quit rates—7 percentage points—is almost totally explained by differences in skills, operational strategies, and workforce management and training practices, suggesting a mediation effect through these HR practices. Defense‐contracting status emerges as an important overlooked variable in HRM studies.     

AMERICAN SOCIETY FOR ENGINEERING EDUCATION

High technology investments are a rapidly growing segment of business capital expenditures. The questionnaire responses presented in this paper provide information on the capital investment decision processes currently being used for high technology projects. Respondents indicate that the capital evaluation techniques used to justify high technology investments are similar to those used for other types of capital projects and that high-tech projects must meet normal requirements for project acceptability. Respondents specified that a wide variety of factors, some quantified and some not quantified (such as quality control and reduced lead time), are included in their decision process. While there is general satisfaction with the procedures used for project justification, the relative newness of these investments suggests that there is a need to gather more detailed information about this type of capital decision.