Editorial

This July 2012 edition of Public Money &; Management publishes a range of articles debating matters of interest to academics and practitioners working in the provision of public services. The efficient use of public resources is a recurrent theme in our journal and this is reflected in different ways in this edition.     

Trust and development

In this paper we examine linkages between social trust and economic development using, for the first time, a panel of data. We confirm earlier cross-sectional studies finding that trust is a significant factor in development and also show for the first time that trust significantly interacts with both investment in physical and human capital. We provide a robustness analysis of our results via a set of jackknife experiments on our main equations, and the trust coefficients and interactions are very tightly distributed, indicating that the results are not highly sample dependent. We also consider whether trust directly influences investment and find that in a panel framework it does not unless we allow for a trust–education interaction in the investment equation.     

The Effect of Data Breaches on Shareholder Wealth

Many companies face the risk of a data breach exposing stored personal information of customers and employees. The frequency of such incidents has been increasing over time and can result in significant costs for the affected firm. This article examines the stock market's assessment of the cost of data breaches at publicly traded companies in which personal information such as customer and/or employee data are exposed. Using event study methodology on a sample of 77 events between the beginning of 2004 and the end of 2006, we find that the overall effect of a data breach on shareholder wealth is negative and statistically significant. Based on a cross-sectional analysis of the cumulative abnormal returns, we find a negative association between market reaction and firms that are less forthcoming about the details of the breach. We also find that firms with higher market-to-book ratios experience greater negative abnormal returns associated with a data breach. Further, we find that firm size and subsidiary status mitigate the negative effect of a data breach on the firm's stock price and that the negative market reaction to a data breach is more significant in the most recent time periods of the sample.     

A Bootstrap Method for Identifying and Evaluating a Structural Vector Autoregression*

Graph‐theoretic methods of causal search based on the ideas of Pearl (2000), Spirtes et al. (2000), and others have been applied by a number of researchers to economic data, particularly by Swanson and Granger (1997) to the problem of finding a data‐based contemporaneous causal order for the structural vector autoregression, rather than, as is typically done, assuming a weakly justified Choleski order. Demiralp and Hoover (2003) provided Monte Carlo evidence that such methods were effective, provided that signal strengths were sufficiently high. Unfortunately, in applications to actual data, such Monte Carlo simulations are of limited value, as the causal structure of the true data‐generating process is necessarily unknown. In this paper, we present a bootstrap procedure that can be applied to actual data (i.e. without knowledge of the true causal structure). We show with an applied example and a simulation study that the procedure is an effective tool for assessing our confidence in causal orders identified by graph‐theoretic search algorithms.     

Analysis of space–time variability in agriculture and the environment with geostatistics

This paper gives an overview of space–time variability in agriculture and the environment. Analysis is based upon geostatistics in the framework of linear regression theory. Common procedures for spatial data are extended towards the space–time domain. Several practical studies are presented. The first study describes the use of REML to estimate semi-variogram models within the presence of trends. The second study describes the use of probability maps in an environmental statistical study. The third study describes the use of geostatistics in modelling the development of a disease in cabbage. Studies are evaluated using quadratic scoring rules.     

Cross-country interdependencies in growth dynamics: A model of output growth in the G7 economies, 1960–1994

Cross-Country Interdependencies in Growth Dynamics: A Model of Output Growth in the G7 Economies, 1960–1994. — Recently developed methods in time series analysis are employed to study output growth across the G7 economies. The methods accommodate the interdependencies that exist between economies’ growth, and provide the means for analyzing the sources of shocks to output growth and for examining the time profiles of the shock effects. Sophisticated dynamic adjustments in output are identified, due to lagged responses to shocks, the feedback of effects across countries, and the differential speeds of response to different types of shock. Among the shocks considered, those to world trade and oil prices are shown to significantly affect many countries’ output levels.     

Recognising Uniqueness in the Technology Key Learning Area: The Search for Meaning

The purpose of this study was to investigate areas of significance which were related to the understanding of technology and technology education, identified by teachers introducing the key learning area, technology, into their primary school classrooms for the first time. Working from Australia's national document on technology education, A Statement on Technology for Australian Schools (Curriculum Corporation, 1994), two teachers wrestled with how to fit this new curriculum area into their current classroom programs, their understandings of technology as a phenomenon and with their beliefs about teaching and learning in general. The study showed that the teachers made sense of technology education as it related to, from their perspectives, ideas about and aspects of primary school classrooms with which they felt comfortable. Implications for professional development include the need to acknowledge and value the prior experiences and understandings of primary teachers. The challenge for teachers in implementing technology education is gaining a conceptualisation of the learning area, which in some respects, is very like other more familiar learning areas in the primary curriculum, but in many other respects, unique.     

The timeliness of performance information in determining executive compensation

We study whether boards of directors concentrate on performance near compensation decision times rather than providing consistent incentives for chief executive officers (CEO) throughout the fiscal year. We show empirically that managers can profit by moving sales revenue among fiscal quarters. Though this may suggest that boards use short-term trends when determining rewards, we find evidence consistent with boards tying pay to recent sales growth so as to use the best information about future performance. We also find that the timing of profits throughout the year does not affect CEO pay, which may suggest that smoothing firm income is important to CEOs.