Oil shocks,policy uncertainty and stock returns in China

This paper examines the interdependence of China's policy uncertainty, the global oil market and stock market returns in China. A structural VAR model is estimated that shows that a positive shock to economic policy uncertainty in China has a delayed negative effect on global oil production, real oil prices and real stock market returns. Shocks to oil market‐specific demand significantly raise China's economic policy uncertainty and reduce the real stock market returns. As measured by a spillover index, the interdependence between these variables has been rising since 2003 as China's influence in the oil market has increased. An equivalent spillover index calculated for the US is smaller and has been largely flat over time.     

The influence of consumer decision‐making styles on online apparel consumption by college students

Apparel purchases now constitute one of the fastest‐growing segments of e‐commerce. Thus, there are strong theoretical and managerial reasons to better understand consumer characteristics associated with buying apparel online. This paper investigates motivations for online apparel consumption using the Consumer Styles Inventory. Data from a sample of 357 US college students showed that quality consciousness, brand consciousness, fashion consciousness, hedonistic shopping, impulsiveness and brand loyalty were positively correlated with online apparel shopping. Price sensitivity was negatively correlated with online spending.     

Trembles in extensive games with ambiguity averse players

We introduce and analyze three definitions of equilibrium for finite extensive games with imperfect information and ambiguity averse players. In a setting where players’ preferences are represented by maxmin expected utility, as characterized in Gilboa and Schmeidler (J Math Econ 18(2):141–153, 1989), our definitions capture the intuition that players may consider the possibility of slight arbitrary mistakes. This generalizes the idea leading to trembling-hand perfect equilibrium as introduced in Selten (Int J Game Theory 4(1):25–55, 1975), by allowing for ambiguous trembles characterized by sets of distributions. We prove existence for two of our equilibrium notions and relate our definitions to standard equilibrium concepts with expected utility maximizing players. Our analysis shows that ambiguity aversion can lead to behavioral implications that are distinct from those attained under expected utility maximization, even if ambiguous beliefs only arise from the possibility of slight mistakes in the implementation of unambiguous strategies.     

Improving the Effect of Guarantees: The Role of a Retailer's Reputation

This research examines the interaction of two cues, retailer reputation and guarantees on evaluations. Extending Mandler's (1982) incongruity framework, we illustrate across three studies how moderately incongruent signals can be combined to enhance evaluations. Unique to our application of moderate incongruity, however, is the fact that guarantee cues can be incongruent with the retailer's reputation, in terms of domain (e.g., price matching guarantee (PMG) offered by provider whose reputation is based on service, not pricing) or valence (e.g., PMG offered by retailer known for carrying expensive merchandize). This dual perspective on the source of incongruity (domain or valence) is important and highlights when guarantees enhance evaluations.     

How does earnings management influence investor’s perceptions of firm value? Survey evidence from financial analysts

Survey evidence shows CFOs to believe that earnings management can enhance investor valuation of their firms. This evidence raises the question of correspondence between the beliefs of CFOs and investors. Surveying financial analysts to gain insight into how earnings management influences investor perception of firm value, we find analysts’ and CFOs’ beliefs to be generally consistent. We find that analysts perceive meeting earnings benchmarks and smoothing earnings to enhance investor perception of firm value and all earnings management actions to reach a benchmark, save share repurchases, to be value destroying. CFOs, however, are reluctant to repurchase shares, preferring to use techniques viewed by analysts as value destroying (e.g., reductions in discretionary spending). Analysts’ inability to unravel such techniques perhaps explains CFOs’ preferences.     

Independent director incentives: Where do talented directors spend their limited time and energy?

We study reputation incentives in the director labor market and find that directors with multiple directorships distribute their effort unequally based on the directorship's relative prestige. When directors experience an exogenous increase in a directorship's relative ranking, their board attendance rate increases and subsequent firm performance improves. Also, directors are less willing to relinquish their relatively more prestigious directorships, even when firm performance declines. Finally, forced Chief Executive Officer departure sensitivity to poor performance rises when a larger fraction of independent directors view the board as relatively more prestigious. We conclude that director reputation is a powerful incentive for independent directors.     

The accounting implication of banking deregulation: an event study of Gramm-Leach-Bliley Act (1999)

Bank regulation has undergone almost a complete circle from the Glass-Steagall Act (GSA, 1933), through a period of deregulation since 1980s, culminating in the repeal of GSA by the Gramm-Leach-Bliley Act (GLBA, 1999), to the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA, 2010), which attempted to restore some of the rules under GSA. The GLBA allowed the largest U.S. bank holding companies to expand into more market-sensitive business activities, which contributed to a significant increase in their market, operating and accounting risks. Despite increasing reporting requirements, bank accounting information decreased in value relevance in terms of both earnings quality and Statistical Cost Relationship during the post-GLBA period. The increasing opaqueness in the bank accounting information weakened market efficiency and had a negative impact on the effectiveness of regulatory supervision. Lessons learned from the repeal of GSA are timely and relevant to the implementation of DFA.     

Cooperation in environmental policy: a spatial approach

Inefficient competition in emissions taxes for foreign direct investment creates benefits from international cooperation. In the presence of cross-border pollution, proximate (neighboring) countries have greater incentives to cooperate than distant ones as illustrated by a model of tax competition for mobile capital. Spatial econometrics is used to estimate participation in 110 international environmental treaties by 139 countries over 20 years. Empirical evidence of increased cooperation among proximate countries is provided. Furthermore, strategic responses in treaty participation vary across country groups between OECD and non-OECD countries and are most evident in regional agreements.     

Resource allocation strategy for innovation portfolio management

Our study demonstrates empirically that the choice of resource allocation strategy affects innovation performance. Allocating resources to a broader range of innovation projects increases new product sales, an effect that appears to outweigh that of resource intensity. In addition, we find that the performance benefit of breadth is higher for firms that allocate resources selectively at later stages of the innovation process. This breadth‐selectiveness effect is greatest for firms intending to create relatively more novel products, departing further from their knowledge base. Based on these results, we theorize that breadth increases performance because it spreads firms' bets on unproven innovative endeavors. Limiting resource commitments by selecting out deteriorating projects prevents an escalation in the costs of breadth. This advantage increases with the uncertainty implicit in greater innovative intent. The paper thus contributes to theory of how resource allocation strategies influence performance outcomes of innovation project portfolios. Copyright © 2013 John Wiley & Sons, Ltd.