Unions and Firm Profits

This study examines the effect of unionization on manufacturing firm profits, extending earlier research by combining industry-level and firm-level measures of unionization. Using several profit measures, we find that quasi-rents from firm investments in intangible assets are a relatively greater source of union profit effects than product market concentration and that union profit effects occur largely in the first 10 percent of firm coverage, suggesting spillover effects on nonunion employees.     

The Effect of Competitive Bidding on Engagement Planning and Pricing*

This paper investigates how clients' choices regarding whether or not to engage in competitive bidding affect a bidding firm's decisions about planned engagement effort and pricing. Specifically, we investigate whether competitive bidding is associated with higher planned engagement effort and lower fees relative to noncompetitive bidding, and whether competitive bidding is associated with increased sensitivity of effort and fees to cost drivers and the components of service production. There is little available evidence regarding the effects of competitive versus noncompetitive bidding in the current market, and none that focuses on both quality and pricing effects associated with competitive bidding across a broad array of clients. We address these issues using data from a sample of one firm's evaluations of prospective clients, made during 1997‐98. During that period, about half of the firm's bids were competitive and half were noncompetitive, providing a unique opportunity to study how the bidding environment affects engagement planning and pricing. Our findings reveal that competitive bidding is associated with higher planned engagement effort and lower fees. In addition, we find that in competitive bidding situations there are stronger associations between cost drivers and planned engagement effort, and between the components of service production and fees.     

The Use of Unsigned Earnings Quality Measures in Tests of Earnings Management

This paper examines the implications of using the absolute value of discretionary accruals when testing for earnings management. First, we analytically develop the mean and variance of the distribution of absolute discretionary accruals, and show that the expected value is an increasing function of the variance in the underlying error term from the first‐stage discretionary accrual estimation model. Second, we highlight several firm characteristics that are related to the error variance in discretionary accrual estimation models. Using simulations, we show that correlation between the earnings management partitioning variable and these firm characteristics leads to an overrejection of the null hypothesis of no earnings management. Third, we provide research design suggestions to help researchers mitigate the potential bias arising from the use of unsigned measures of earnings management. Using these suggestions, we replicate a recent study, and demonstrate that the inferences change after controlling for operating volatility.     

Effects of Consumption Frequency on Believability and Attitudes Toward Alcohol Warning Labels

Alcohol consumption frequency and alcohol warning label type are examined for their influence on label believability, attitude toward the label, and attitude confidence. Findings from a convenience sample of students indicate a differential impact among five warning labels on label believability and label attitudes. As expected, frequent alcohol users find the labels to be significantly less believable and less favorable than occasional/nonusers of alcohol. However, occasional/nonusers of alcohol hold more confident attitudes toward the labels than frequent alcohol users.     

The Use of Vivid Stimuli to Enhance Comprehension of the Content of Product Warning Messages

Thousands of consumers are injured annually using consumer products. It is intuitively plausible that vivid product warnings may improve communication of the hazards associated with product use, yet vividness effects have been difficult to demonstrate empirically. Vivid product warnings are shown to increase accurate memory of the hazards associated with product use by enhancing cognitive elaboration on the content of a product warning message. Moreover, vivid product warnings may not, in and of themselves, generate negative elaborations regarding the safety of the product in question.     

Age,Product Nutrition,and Label Format Effects on Consumer Perceptions and Product Evaluations

Nutrition label format effects across different levels of product nutrition value and groups of younger (under 58 years; average 46 years) and older consumers (58 years or more; average 70 years) are examined using a 3 × 2 × 2 experimental design. Age interacts with nutrition level in affecting nutrition evaluation measures with older consumers displaying smaller differences in nutrition attitude and purchase likelihood for a low versus a high nutrition value product. Older consumers also perceive all labels as more difficult to understand. Consumer performance on judgment tasks vary across label formats and nutrition value manipulations. Implications for consumer welfare and future research are offered.     

Cross-Cultural Generalizability of a Scale for Profiling Consumers' Decision-Making Styles

Most studies that have developed and validated models and instruments in consumer affairs research have used U.S. samples. As a result, their cross-cultural generalizability remains unknown. This study reports a cross-cultural examination of a scale for profiling consumers' decision-making styles using a New Zealand sample. Examination of the scale's psychometric properties (i.e., dimensionality and reliability) offers general support for the scale's applicability to a different culture. Some differences were detected, however. The paper concludes with a discussion of these differences and the implications of the findings.     

Real Earnings Management in Sales

We surveyed 1,638 sales executives across 40 countries regarding their companies’ likelihood of asking sales to perform real earnings management (REM) actions when earnings pressure exists. Using this information, which we refer to as companies’ REM propensities, we study how company characteristics and environmental conditions relate to the responses received. The use of cash‐flow incentives for sales personnel and the distribution of interfunctional power in favor of finance rather than sales are both associated with companies’ REM propensities. In addition, we show that sales executives preemptively change their behaviors in anticipation of top management's REM requests. Sales executives working for public companies and companies in the United States reported higher levels of REM propensity. The data also support an association between REM propensity and finance–sales conflict. These findings and others are compared and contrasted with existing empirical and survey‐based research on REM throughout the paper.     

SIZE MATTERS: THE ECONOMIC VALUE OF BEACH EROSION AND NOURISHMENT IN SOUTHERN CALIFORNIA

Despite the widespread use of nourishment in California, few studies estimate the welfare benefits of increased beach width. This paper relies on panel data funded by National Oceanic and Atmospheric Administration and other agencies. Beach choices of respondents were combined with beach attribute data to reveal how changes in width affect choice and the economic value of beach visits. We use a random‐utility approach to show that the value of beach width varies for different types of beach uses: water contact, sand‐, and pavement‐based activities. We also find that the marginal value of beach width depends on initial beach width. (JEL Q50)