Matching rules

Institutions often utilize matching rules to achieve cooperative outcomes. However, the equilibrium induced by a matching rule may not be socially optimal. After presenting the case in which matching rules yield privately and socially optimal levels of cooperation, this article identifies the conditions which generate inefficient cooperation. Matching rules undershoot (i.e. parties cooperate less than is socially optimal) in one group of cases. In a second, more puzzling case, matching rules overshoot (i.e. parties that interact under a matching constraint are induced to cooperate more than is socially optimal). This paper identifies the conditions for such occurrences. Copyright © 2008 John Wiley & Sons, Ltd.     

Conference Calls and Stock Price Volatility in the Post‐Reg FD Era

Past research has documented that the utilisation of conference calls is greater in the high tech sector than in other industries. Do high tech firms benefit from that? This study attempts to answer this question by examining the impact of ‘post‐Reg FD’ conference calls on the price volatility of high tech firms listed in the US market. We find evidence that more open conference calls results in lower idiosyncratic volatility.     

Investigating the consumer–environment interaction through image modelling technologies

Abstract

This study uses an innovative research tool to evaluate the hypothesis of a consumer–environment interaction. A new computer graphics methodology keeps track of the time spent and the number of purchases made during shopping, together with several other behavioural measures. A laboratory experiment uncovered an interaction effect in dwell time and number of purchases between the type of shopping trip (fill-in trip vs. major trip) and the consumers' layout preference. Shoppers taking major trips were more prone to shop in a free-form layout, whereas those taking fill-in trips tended to prefer a grid layout. The article discusses implications for research and practice, identifying areas for future research.     

Competition and commercial media bias

This paper reviews the empirical evidence on commercial media bias (i.e., advertisers influence over media accuracy) and then introduces a simple model to summarize the main elements of the theoretical literature. The analysis provides three main policy insights for media regulators: (i) Media regulators should target their monitoring efforts towards news contents upon which advertisers are likely to share similar preferences. (ii) In advertising industries characterized by high correlation in products' qualities, an increase in the degree of competition may translate into a lower accuracy of news reports. (iii) A sufficiently high degree of competition in the market for news drives out commercial media bias.     

UNPRODUCTIVE INVESTMENT AND RENT EXTRACTION

This paper proposes a simple case of moral hazard in the credit market. A potential firm–entrepreneur needs outside financing to start up one potentially productive project. This agent has some initial illiquid endowment and is assumed to choose the amount of collateral to secure the financial debt. The model shows that, in the case of a monopolistic moneylender, only the minimum part of the endowment is offered as collateral and so invested in the productive sector. This occurs despite the fact that the loan received and, as a consequence, the final product will be the lowest possible. With perfectly competitive banks, instead, it is shown that it is possible to reach the first‐best outcome.     

Endogenous skill cycles

This paper explores the ability of a class of one-sector models to generate endogenous skills cycles. Skills cycles are here defined as endogenous fluctuations of the composition of equilibrium allocation of labor services. We consider a one sector economy in which there exist one type of capital stock and a finite number of different labor services, which are assumed to be heterogeneous along the skill/productivity dimension. We apply the Hopf bifurcation theorem and provide necessary conditions on the model’s parameters for having a closed orbit as the economy’s stable set. We also develop a numerical example (based on the United States economy) showing how this closed orbit can appear under reasonable parameter values.     

Underinvestment vs. overinvestment: Evidence from price reactions to pension contributions

Mandatory contributions to defined benefit pension plans provide a unique identification strategy to estimate the market's assessment of the value of internal resources controlling for investment opportunities. The price decrease following a pension-induced drop in cash is magnified for firms that appear a priori more financially constrained, suggesting a negative effect of financing frictions on investment. In contrast, low control on managerial discretion attenuates the negative price reaction to contributions consistent with empire-building theories. While overinvestment seems to be the prevalent distortion in a panel of large firms, underinvestment appears to dominate in a sample that is more representative of the cross-section of listed companies.     

Controlling International Joint Ventures: An Investigation of Australian Parent Partners

International joint ventures (IJVs) are an important modern organisational form, with their complexity presenting significant management and control issues. Our research uses a cross-sectional survey of Australian parent partners of IJVs to provide insights into the characteristics of Australian companies and their IJVs, performance outcomes and choices of parent partners management control systems (MCS) design in terms of operational areas they seek to control (focus), the extent to which they exercise control (extent) and the mechanisms of control used (formal and informal). Australian parent partners of IJVs generally are, partnering in countries close to Australia in the Asia-Pacific, in activities similar to those they undertake in Australia, contributing a significant amount of resources, but overall have only limited IJV experience. Australian parent partners focus on a limited set of controls, often with tighter formalised control structures. Finally, overall they are satisfied with the performance of their IJVs, with higher satisfaction for organisational learning and product/customer dimensions than financial performance.