The implications of empirical data for risk

It is of interest for national governments to assess strategic issues such as natural hazards and anthropogenic threats with some reference to risk, in order to support prioritisation of treatment solutions. With most threats of strategic relevance such as earthquakes, pandemics and terrorism following a distribution in size of events, representation of the risk for a threat as a single frequency–consequence pair is often inadequate as this single pair may exclude a significant portion of data and their contribution to total risk. Identifying the entire distribution of event sizes and their frequencies is better suited for understanding the relative contributions to total risk from high and low consequence events. If the distribution of event sizes does follow a law, the finite size of data-sets makes identifying the law difficult. This paper outlines the steps required to utilise empirical data to inform the risk of strategic threats and support decision-makers to prioritise treatment options according to their relative contributions to total risk. Potential pitfalls and limitations are also described.     

Institutional Investment Patterns in Troubled Corporations: A Sociological analysis

A bstract . Classical or neo-classical economic theories do not adequately explain institutional investment patterns in troubled corporations. Macroeconomic perspectives contend that abstract market forces direct investment capital away from troubled companies, and that bankruptcy weeds weak firms out of the economy for the general good. Microeconomic perspectives focus on the seemingly autonomous decisions of firms and their managers, where bad management leads to troubled and bankrupt firms and a corresponding loss of investment in these companies. Neither perspective is useful for understanding recent patterns of institutional investment. A more critical, sociological perspective for understanding these investment patterns has two main threads. First, investment activity is embedded in more general social relationships and cannot be understood strictly on "economic" grounds and with "economic" ideas. Second, social power—rather than abstract market forces —is critical in fostering specific investment patterns. More specifically, the organizational power of large financial firms may be the pivotal factor shaping investment patterns in troubled companies. Recent case studies of troubled and bankrupt corporations demonstrate the usefulness of this more sociological perspective, and suggest areas for future research.     

A critical review of algorithms in HRM: Definition,theory, and practice

The recent surge of interest concerning data analytics in both business and academia has been accompanied by significant advances in the commercialization of HRM (Human Resource Management)-related algorithmic applications. Our review of the literature uncovered 22 high quality academic papers and 122 practitioner-oriented items (e.g., popular press and trade journals). As part of our review, we draw several distinctions between the typical use of HRM algorithms and more traditional statistical applications. We find that while HRM algorithmic applications tend not to be especially theory-driven, the “black box” label often invoked by critics of these efforts is not entirely appropriate. Instead, HRM-related algorithms are best characterized as heuristics. In considering the implications of our findings, we note that there is already evidence of a research-practitioner divide; relative to scholarly efforts, practitioner interest in HRM algorithms has grown exponentially in recent years.     

对话:中国人的外汇与美国人的外债

每一位美国经济学家都会说中国经济的高速增长会对美国消费者有直接影响。但是怎么影响,影响究竟有多大?本刊特约编辑杰姆斯·巴茨(James Barth)博士和《美国新闻与世界报道》首席文案里克纽曼之间的对话,生动贴切地道出了美国老百姓的切身体会和疑虑。     

The joint determination of audit fees, non-audit fees, and abnormal accruals

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by modeling the confluence of audit fees, fees for non-audit services and abnormal accruals in a system of simultaneous equations. Our joint estimation provides a starting point to look simultaneously at several competing theories. Using audit and non-audit fee data from the UK for 1994–2000, we find evidence consistent with knowledge spillovers (or economies of scope) from auditing to non-audit services and from non-audit services to auditing. While knowledge spillovers from non-audit services to auditing have been found in prior research [e.g. see Simunic, 1984], the presence of knowledge spillovers from auditing to non-audit services is a new result. Contrary to recent results in Ferguson et al. (2000) and Frankel et al. (2002), we do not find support for the assertion that fees for non-audit services increase abnormal accruals. In fact, contrary to the results in Ashbaugh et al. (2003) and Chung and Kallapur (2003), we find that non-audit fees decrease abnormal accruals, which we attribute to the productive effects of non-audit services. We also find evidence that audit fees increase abnormal accruals, consistent with behavioral theories of unconscious influence or bias in the auditor-client relation. The findings are robust to tests with US data. JEL Classification C30 · M40 · M41 · M49     

Internet cautions: Experimental games with internet partners

We report the results of experiments conducted over the internet between two different laboratories. Each subject at one site is matched with a subject at another site in a trust game experiment. We investigate whether subjects believe they are really matched with another person, and suggest a methodology for ensuring that subjects’ beliefs are accurate. Results show that skepticism can lead to misleading results. If subjects do not believe they are matched with a real person, they trust too much: i.e., they trust the experimenter rather than their partner. JEL Classification C9