Higher order properties of the wild bootstrap under misspecification

We examine the higher order properties of the wild bootstrap (Wu, 1986) in a linear regression model with stochastic regressors. We find that the ability of the wild bootstrap to provide a higher order refinement is contingent upon whether the errors are mean independent of the regressors or merely uncorrelated with them. In the latter case, the wild bootstrap may fail to match some of the terms in an Edgeworth expansion of the full sample test statistic. Nonetheless, we show that the wild bootstrap still has a lower maximal asymptotic risk as an estimator of the true distribution than a normal approximation, in shrinking neighborhoods of properly specified models. To assess the practical implications of this result we conduct a Monte Carlo study contrasting the performance of the wild bootstrap with a normal approximation and the traditional nonparametric bootstrap.     

Managerial Compensation and the Market Reaction to Bank Loans

This article considers why a manager would choose to submithimself to the discipline of bank monitoring. This issue isanalyzed within the context of a model where the manager enjoysprivate benefits, which can be restricted by the monitor, andis optimally compensated by shareholders. Within this settingwe find that managers will submit to monitoring when they receivefavorable private information. This result is consistent withevent study evidence that suggests that the market has a favorableview of financing choices that increase monitoring.     

Wages,minimum wages,and income distribution in Brazil: Results from the construction industry

Critics of post-1964 economic policy in Brazil have argued that the decline of at least 25% in the real value of the government-determined minimum wage between 1964 and 1974 was an important factor accounting for increasing inequality in the size distribution of personal income observed during this period. This paper reports the results of a new test of this proposition, using cross-section and time series wage rate statistics for the Brazilian construction industry. The results suggest that the official minimum wage plays an important signalling role in wage-determination, acting as a standard of reference for the setting of the wage-rates of the least skilled manual workers in the Brazilian construction industry. The results, therefore, confirm the view that minimum wage policy in Brazil is influential in determining the size distribution of earned income.     

PAIRWISE DIFFERENCE ESTIMATION WITH NONPARAMETRIC CONTROL VARIABLES*

This article extends the pairwise difference estimators for various semilinear limited dependent variable models proposed by Honoré and Powell (Identification and Inference in Econometric Models. Essays in Honor of Thomas Rothenberg Cambridge: Cambridge University Press, 2005) to permit the regressor appearing in the nonparametric component to itself depend upon a conditional expectation that is nonparametrically estimated. This permits the estimation approach to be applied to nonlinear models with sample selectivity and/or endogeneity, in which a “control variable” for selectivity or endogeneity is nonparametrically estimated. We develop the relevant asymptotic theory for the proposed estimators and we illustrate the theory to derive the asymptotic distribution of the estimator for the partially linear logit model.     

Corporate governance in banking: The role of the board of directors

We use a sample of large international commercial banks to test hypotheses on the dual role of boards of directors. We use a suitable econometric model (two step system estimator) to solve the well-known endogeneity problem in corporate governance literature, and demonstrate the empirical and theoretical superiority of system estimator over OLS and within estimators. We find an inverted U-shaped relation between bank performance and board size, and between the proportion of non-executive directors and performance. Our results show that bank board composition and size are related to directors’ ability to monitor and advise management, and that larger and not excessively independent boards might prove more efficient in monitoring and advising functions, and create more value. All of these relations hold after we control for the measure of performance, the weight of the banking industry in each country, bank ownership, and regulatory and institutional differences.     

The influence of structural aspects of a leadership scenario on individual mental evaluation processes

There is little emphasis in leadership research on the relationship between structural aspects of a scenario and individual mental processes leading to certain leadership behavior. The authors present results from two empirical studies analyzing the influence of structural variables such as time pressure, danger, and formalization on internal mental processes evaluating the perceived impact of factors influencing leadership behavior. Results from both studies indicated that the effects of structural differences in a scenario (high or low time pressure, danger, and formalization) lead to systematically different evaluations of the perceived impact of important factors influencing leadership behavior. These findings underline the relevant influence of structural aspects of a leadership scenario on internal mental processes and shed light into the black box between the cause‐and‐effect relationship of structural aspects leaders are exposed to and their behavior.