Compensation in the Post‐FIN 48 Period: The Case of Contracting on Tax Performance and Uncertainty

Academic and anecdotal evidence indicates that incentive systems often provide short‐term payouts without regard for long‐term consequences. New detailed disclosures mandated by FIN No. 48, Accounting for Uncertainty in Income Taxes, enable us to use a tax setting to investigate whether boards adjust performance‐based pay for uncertainty. We find managers’ bonus payouts are positively associated with tax performance; however, bonus payouts are lower when measures of ex ante tax uncertainty are higher. Our results are robust to tests of alternative explanations including financial reporting aggressiveness, overall firm risk, and other forms of compensation. Further, we document that the relation between bonus compensation and tax performance has changed in the post‐FIN No. 48 period. Specifically, we identify a significant association between bonus payout and GAAP ETR only in the pre‐FIN No. 48 period and a significant association between bonus payout and cash ETR only in the post‐FIN No. 48 period, suggesting that the relation between compensation and tax avoidance should be examined carefully with particular attention to the post‐FIN No. 48 period.     

An Empirical Evaluation of the Effect of Peer and Managerial Ethical Behaviors and the Ethical Predispositions of Prospective Advertising Employees

An advertising firm's ethical culture (as defined by the firm's managerial and peer ethical behaviors) may affect the employees' comfort levels and ethical behaviors. In this research, scenarios were used to describe advertising firms with various ethical cultures. Respondents' perceived comfort levels in working for the firms described in the scenarios and the respondents' behavioral intentions when faced with various advertising situations were assessed. Results of the study indicate that peer ethical behavior exerts a strong influence on the comfort or discomfort level and the ethical behavioral intentions of potential advertising employees. Further, the strong influence exerted by peers seems to transcend the ethical behavior of the manager and carry over to the attitude toward the entire corporate advertising environment. This study provides insights for firms and researchers interested in assessing the impact of an advertising firm's ethical culture on potential employees.     

Why is the teen birth rate in the United States so high and why does it matter?

Teens in the United States are far more likely to give birth than in any other industrialized country in the world. U.S. teens are two and a half times as likely to give birth as compared to teens in Canada, around four times as likely as teens in Germany or Norway, and almost 10 times as likely as teens in Switzerland. Among more developed countries, Russia has the next highest teen birth rate after the United States, but an American teenage girl is still around 25 percent more likely to give birth than her counterpart in Russia. Moreover, these statistics incorporate the almost 40 percent fall in the teen birth rate that the United States has experienced over the past two decades. Differences across U.S. states are quite dramatic as well. A teenage girl in Mississippi is four times more likely to give birth than a teenage girl in New Hampshire--and 15 times more likely to give birth as a teen compared to a teenage girl in Switzerland. This paper has two overarching goals: understanding why the teen birth rate is so high in the United States and understanding why it matters. Thus, we begin by examining multiple sources of data to put current rates of teen childbearing into the perspective of cross-country comparisons and recent historical context. We examine teen birth rates alongside pregnancy, abortion, and "shotgun" marriage rates as well as the antecedent behaviors of sexual activity and contraceptive use. We seek insights as to why the rate of teen childbearing is so unusually high in the United States as a whole, and in some U.S. states in particular. We argue that explanations that economists have tended to study are unable to account for any sizable share of the variation in teen childbearing rates across place. We describe some recent empirical work demonstrating that variation in income inequality across U.S. states and developed countries can explain a sizable share of the geographic variation in teen childbearing. To the extent that income inequality is associated with a lack of economic opportunity and heightened social marginalization for those at the bottom of the distribution, this empirical finding is potentially consistent with the ideas that other social scientists have been promoting for decades but which have been largely untested with large data sets and standard econometric methods. Our reading of the totality of evidence leads us to conclude that being on a low economic trajectory in life leads many teenage girls to have children while they are young and unmarried and that poor outcomes seen later in life (relative to teens who do not have children) are simply the continuation of the original low economic trajectory. That is, teen childbearing is explained by the low economic trajectory but is not an additional cause of later difficulties in life. Surprisingly, teen birth itself does not appear to have much direct economic consequence. Moreover, no silver bullet such as expanding access to contraception or abstinence education will solve this particular social problem. Our view is that teen childbearing is so high in the United States because of underlying social and economic problems. It reflects a decision among a set of girls to "drop-out" of the economic mainstream; they choose non-marital motherhood at a young age instead of investing in their own economic progress because they feel they have little chance of advancement. This thesis suggests that to address teen childbearing in America will require addressing some difficult social problems: in particular, the perceived and actual lack of economic opportunity among those at the bottom of the economic ladder.     

Towards Ending the Silence: Working Women Caring for Children with Chronic Illness

This paper presents stories from women who work and care for a child with a significant chronic illness or disability. The purpose of this paper is to move towards ending the silence on their lives. A three-phase emergent research design responds to the question: What is life like for a full-time worker who is concurrently the primary carer of a chronically ill child? This paper considers the theory of Silencing the Self (Jack, 1991) in relation to the emergent themes of “Otherness” and “Doing it All.” As in Jack’s study, these women also engaged in silencing of the self. However, unlike the respondents in Jack’s study, these women did not demonstrate feelings of worthlessness and hopelessness for the future, nor were they alone in contributing to their silence. Indeed, many experienced silencing behaviors from others around them, and many rallied against the silence, not accepting that their burden should continue. Consideration of Jack’s theory is made to point out the distinctions between the women in this study and Jack’s study, and analytical commentary is provided to demonstrate the relevance of this analysis in light of the current debates surrounding the Work–Home Conflict and the rising levels of informal care provided by women in our communities.     

Wrongful firing in violation of public policy: Who gets fired and why

We extend the whistle-blowing literature to the context of wrongful firings that violate a public policy. Our results suggest that the incidence of wrongful firings varies, depending on the employee’s gender and tenure, and the industry in which the organization operates. Wrongful firings do not occur more frequently in certain occupations, since firms wrongfully discharge professional and managerial employees as often as employees in technical, clerical, and laborer occupations. We also show that gender, tenure, occupation, and industry, in combination, can distinguish between three types of wrongful firings in violation of public policy. Our results support the application of theory and empirical research on whistle-blowing to the wrongful firing context, aiding researchers interested in developing explanations of wrongful firings in violation of public policy. For managers, our study points to the need to develop more effective responses to employees exercising legal rights, refusing to participate in illegal or unethical activities, and performing a public duty or obligation, such as whistle-blowing.     

The role of medium content and ad format congruity in influencing advertising outcomes

This study examines how (in)congruence regarding the format of the ad and the context in which the ad is placed influences ad recognition, perceived advertiser sensitivity, ad comprehension, and persuasion. Highly visual or informational ads were placed congruently or incongruently within a(n) highly visual or informational surrounding context. There was some positive support for mismatching the format of the ad and surrounding context in terms of ad recognition. Specifically, a highly visual ad placed within a highly informational setting resulted in the greatest ad recognition. However, in terms of the audience's perceptions of advertiser sensitivity, subjective ad comprehension, and ad persuasion, there was more positive support for matching the format of the ad with that of the surrounding context. In this regard, it is better to place visual ads congruently within visual contexts. Theories from information processing and hemispheric lateralization are drawn on to support this research.     

THE PERFORMANCE OF BANK‐MANAGED MUTUAL FUNDS

The ability of banks to offer proprietary mutual funds has expanded over recent years, and the mutual fund industry has been a significant growth area for banks. I examine the growth and performance of bank proprietary bond mutual funds. The empirical results show no evidence that bank‐managed mutual funds underperform nonbank funds. I find some evidence that bank managers are more conservative than nonbank managers in terms of investment strategy and that banks appear more likely to target individual rather than institutional investors. Also, I find that abnormal fund performance does not appear to be a significant determinant of the net asset flows into and out of bank‐managed mutual funds. Rather, the results suggest bank investors rely mainly on past marketing information and the general reputation of the bank. JEL classification: G11, G21     

The Approval of Over-the-Counter HIV Tests: Playing Fair When Making the Rules

This paper looks at some of the ethical concerns regarding a recent application to the U.S. Food and Drug Administration (FDA) for approval of the sale of HIV tests over-the-counter (OTC) directly to consumers. The concept of at-home HIV testing is not new, but OraSure Technologies Inc., a U.S. manufacturer of rapid HIV tests, is now seeking FDA approval to take at-home testing one step further to enable consumers to test themselves and interpret the results without the assistance of an outside party. This paper reviews some of the purported benefits and potential risks of at-home HIV testing, and looks at the way one Canadian company is attempting to address the potential risks. In doing so, this paper brings to the fore concerns regarding corporate involvement in the regulatory approval of biotech products.     

Does regulation substitute or complement governance?

We examine whether firms utilize governance systems and increased monitoring mechanisms when information asymmetry and managerial discretion are limited. Given that such monitoring is costly, we expect regulated firms to use less monitoring if regulation substitutes for governance. Using data from initial public offerings, we document that regulated firms have greater proportions of monitoring directors and larger boards as well as use similar amounts of equity-based compensation as non-regulated firms. Further, regulated and unregulated firms are analogous in terms of observed trade-offs between traditional monitoring mechanisms and insider ownership. Finally, regulated firms appear to decrease monitoring following a period of deregulation. These findings support the hypothesis that regulation and governance are complements and are consistent with the notion that regulators pressure firms to adopt effective monitoring structures.