How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation

While numerous studies have examined the impact that powerful CEOs have on their compensation and overall firm decisions, relatively little is known about how powerful CFOs influence their compensation and important firm financial reporting and operational outcomes. This is somewhat surprising given the critical role CFOs play in the financial reporting process of a firm. Using managerial power theory (Bebchuk and Fried in J Econ Perspect 17:71–92, 2003) and the theory of power and self-focus (Pitesa and Thau in Acad Manag J 56(3):635–658, 2013), we predict that powerful CFOs employ a two-part strategy to camouflage excessive incentive compensation above what efficient contracting would dictate. First, powerful CFOs use their power and influence to negotiate shorter incentive pay duration to maximize the present value of their performance—based compensation. Second, when their incentive equity compensation vests, we suggest that CFOs manage earnings to further enhance their personal income. Consistent with our theoretical expectations, we find higher levels of income-increasing accrual-based earnings management and real transactions management, a potentially unethical practice, in firms with powerful CFOs who have short pay durations. We discuss the implications of our analysis in the context of mitigating CFO power and managing the ethical environment “tone at the top.”     

What doesn't kill you makes you stronger: The evolution of competition and entry‐order advantages in economically turbulent contexts

We examine the evolution of competition and entry‐order advantages in markets under macroeconomic distress. Through formal modeling of early‐mover advantages along industry life cycles subjected to economic shocks and based on simulation findings, we propose that such shocks exogenously induce temporary industry discontinuities that shift the relative value of distinct asset endowments, thereby switching the bases for competitive advantages vis‐à‐vis those found in stable contexts. A vital trade‐off then emerges between a firm's financial flexibility and its pace of investments in isolating mechanisms, such that the former operates as a contingency factor for the latter. As such, flexibility superiority boosts early‐entrants' advantages, while it alternatively gives laggards a much desired strength to out trump first‐mover rivals. Our study informs entry‐order advantage theory and management practice in economically turbulent contexts. Copyright © 2013 John Wiley & Sons, Ltd.     

Extending Rosenberg's idea about conjoint effects

In Rosenberg's work can be found the basis for both a path analytical approach-where relationships between variables are explained—and an R Square measurement—where a variable is explained—for nominal variables. The first approach has been expanded enormously by different authors. In this article we dig into the R Square alike problem. The ideas of predictability and accounted variation—in terms of percentage changed over time—and a simple statistic like percentages are on the basis of the measurements that we present, with a similar aim as the R square, but applied to contingency tables. For cross-sectional data this measurement is based on the percentage of cases in a category of the dependent variable for the particular combination of categories of the predictor ones making this figure as big as possible. We call this measurement the Coefficient of Predictability, P Square, and its value can be interpreted as the percentage of unpredictability which is accounted for by the variables in the model. With change data we try to explain why the percentage of cases in a category of a variable changes over time. This means that we have to look at the relationship between time and this variable, controlling for another set of variables. The variation is explained when the relationship gets down to zero, and the closer to this value, the better the explanatory power of the variables in our model. We call D Square to this measurement of accounted variation.     

Extreme Bounds Analysis in Early Warning Systems for Currency Crises

Open Economies Review - Selecting early warning indicators to predict currency crises is not straightforward, because there are several mechanisms that lead up to currency crises and these...     

Child Labor and School Achievement in Latin America

Child labor’s effect on academic achievement is estimatedusing unique data on third and fourth graders in nine Latin-Americancountries. Cross-country variation in truancy regulations providesan exogenous shift in the ages of children normally in thesegrades, providing exogenous variation in the opportunity costof children’s time. Least squares estimates suggest thatchild labor lowers test scores, but those estimates are biasedtoward zero. Corrected estimates are still negative and statisticallysignificant. Children working 1 standard deviation above themean have average scores that are 16 percent lower on mathematicsexaminations and 11 percent lower on language examinations,consistent with the estimates of the adverse impact of childlabor on returns to schooling.     

Distribution Equity: Creating Value through Managing Knowledge Relationships with Distribution Channels

We introduce the concept of distribution equity torepresent the asset value of a distribution relationship. Distributionequity is characterized as the increase in options value ofmarketing opportunities that result when a firm effectively utilizesits knowledge relationships with an existing distribution channelpartner to create and market its products. By providing a frameworkcharacterizing various forms of knowledge in a channel partnerrelationship and the ways in which they can increase the optionsvalue of a firm's product development and marketing opportunities,we provide a framework for improving the management of distributionequity.     

Impact of gentrification on environmental pressure in service micro‐enterprises

The study investigates whether local service micro‐enterprises (MEPs) in gentrifying neighborhoods face increasing complaints triggering inspections and regulatory pressure. Environmental records from 1992 to 2000 were reviewed for 383 filling stations, motor vehicle repair firms and dry cleaners in five Chicago neighborhoods. Significant differences in the number of complaints and inspections were found between gentrifying and gentrified neighborhoods, especially in the higher‐income gentrified neighborhood. No significant difference was found in enforcement. Regulatory pressure from environmental agencies adds to the financial, social and other regulatory pressures facing service MEPs that drove away or closed manufacturing firms in the past. Alternatively, new market opportunities with regulatory and social pressure could provide incentives to improve environmental behavior. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.     

Foresight analysis of agricultural sector at regional level

The objective of this paper is to carry out a foresight analysis of the agricultural sector in Castilla y León (Spain) for 2020. The methodology used to build the various scenarios is prospective analysis. We first performed a structural analysis in order to identify the key driving forces that characterize the evolution of the sector in this region (agricultural production, demand for agricultural products and institutional framework). We then carried out a morphological analysis that generated a range of “partial scenarios” from which we finally built four “global scenarios”. These last scenarios characterize the possible trends in the variables of change previously identified. Lastly, the common key parameters of each global scenario were quantified by means of the Delphi method. The characterization of scenarios has a double practical interest. First of all, they can explain the cause-effect relationships of the processes of change that affect agriculture in this region of Spain. Secondly, they are a powerful tool to stimulate an in-depth reflection of how the design and implementation of current agricultural policies will affect the already fragile agricultural sector of Castilla y León. This study thus aims to support decision-making processes at regional level.