CEO compensation and the seasoned equity offering decision

Empirical research on seasoned equity offerings indicates that the decision to make an SEO typically engenders a decline in firm value, as investors interpret this decision as a signal of poor financial health or that the stock is overpriced. Here, we add to the literature by analyzing the short‐term market reaction to SEO announcements and the chief executive officer's link to firm performance (i.e. the proportion of CEO equity‐based compensation). Results support the hypothesis that investors are more likely to view the announcement of an SEO as a last resort source of capital when the proportion of CEO equity‐based compensation is high. In such cases of high equity‐based compensation, our findings indicate that the SEO announcement provides an incremental signal of financial distress above that provided by financial statements. We also find this relationship (last resort signal) to be stronger when large information asymmetries exist between management and investors. Thus, managers should consider the ramifications of executive compensation structure when considering whether to make an SEO. Copyright © 2006 John Wiley & Sons, Ltd.     

Teaching the Implicit Assumptions Underlying Firm Behavior in the Neoclassical Model

The neoclassical model imposes narrow assumptions on firm behavior and in the process hides implicit assumptions regarding the behavior of individuals. Although the firm is a complicated organization composed of many individuals, the neoclassical model simplifies its behavior to one objective—the maximization of profits. This assumption implicitly assumes that individuals within the firm subordinate their own self-interest for the firm’s benefit. A classroom activity is described which assists students in discerning whether the assumption of profit maximization fits reality.     

How people pay: Evidence from grocery store data

Empirical evidence based on grocery store transaction data shows that consumer payment behavior at the point of sale is important for understanding models of money demand. There are statistically significant effects of transaction costs, opportunity costs, and product characteristics on the choice of payment instrument, which then, in turn, affect money demand. These results emphasize the overlap between the work of empirical researchers in payment choice and theoretical modelers of monetary economics and should inform both literatures.     

An empirical study of a new method for forming group judgments: Qualitative Controlled Feedback

The Qualitative Controlled Feedback (QCF) method was developed by Press [1] to assist policy makers in forming judgments and making decisions that reflect the careful interactive reasoning and arguments of all of the members of a group or population. Since the QCF method involves controlled feedback, it tends to minimize the effects of face-to-face group interaction pressures. Since the feedback is “qualitative,” however, the procedure tends not to artificially induce a consensus on the group. This paper summarizes a feasibility study of the procedure. A sample of 111 faculty and staff members of the University of British Columbia participated in the testing of the method. The participants were asked to make a judgment on the importance of building an aquatic center on campus. A second (control) group of 89 faculty and staff members was surveyed on the same issue, but using the conventional survey method, that is, no feedback. It was observed that Qualitative Controlled Feedback created a good interaction (in the sense of exchanging arguments and reasons) among group members. Changes in judgments occurred as subjects went from one stage to another after having qualitative feedback of information. It was also found that the judgments given by the subjects in the qualitative controlled feedback group were distributed quite differently from those given by the control group. The method suggests a significantly new way of collecting and interpreting group judgments.     

SEN,ETHICS, AND DEMOCRACY

Amartya Sen's ethical theorizing helps feminists resolve the tensions between the claims of women's particular perspectives and moral objectivity. His concept of "positional objectivity" highlights the epistemological significance of value judgments made from particular social positions, while holding that certain values may become widely shared. He shows how acknowledging positionality is consistent with affirming the universal value of democracy. This article builds on Sen's work by proposing an analysis of democracy as a set of institutions that aims to intelligently utilize positional information for shared ends. This epistemological analysis of democracy offers a way to understand the rationale for reserving political offices for women. From a political point of view, gendered positions are better thought of as an epistemological resource than as a ground of identity politics v - v that is, of parochial identification and solidarity.     

Adoption rationales of new management practices

This study considers that multiple and diverse rationales, including rational, emotional and socially conditioned responses can influence the adoption of management practices. The study includes four case studies in order to subject the adoption rationales that Sturdy (2004) posits to empirical inquiry and to explore the impacts of these differing rationales on characteristics of the subsequent adoption. The findings show that five of the six rationales Sturdy proposes are empirically identifiable. The findings also suggest that, subject to the exploratory nature of the study, earlier adoption of management practices is associated with political and psychodynamic rationales, consistent with notions of being seen to adopt new ways of working. The findings also suggest that the political and dramaturgical rationales are associated with more rapid adoption due to influential individuals or groups acting as champions. Whilst Sturdy proposes his rationales as a simple list, the findings of this study suggest a more complex relationship between the rationales. The study contributes to the growing body of literature that addresses the important topic of management practices, particularly those that provide an expository consideration.