DO PSYCHOLOGICAL SHOCKS AFFECT FINANCIAL RISK TAKING BEHAVIOR? A STUDY OF U.S. VETERANS

Traditional economic theories assume that individuals are endowed with certain risk preferences that are unaltered by experiences. However, recent evidence indicates that macroeconomic shocks do have an effect on an individual's willingness to take financial risks. In the context of investment decisions, we examine empirically whether an individual's risk preferences are affected by other types of traumatic life experiences. Using a unique proprietary data set, we investigate whether personal traumatic experiences—such as the combat experiences of veterans—have long‐term effects on financial risk‐taking behavior. We find that having experienced combat decreases the probability of investing in risky assets. Key policy implications are noted. (JEL G11, D14)     

The Impact of Consulting Services on Audit Quality: An Experimental Approach

We use experimental markets to examine whether providing consulting services to a non‐audit client impacts audit quality. Our paper directly addresses concerns raised by the Public Company Accounting Oversight Board that the largest public accounting firms’ growth in their consulting practices threatens audit quality. We conduct an experiment proposed using a registration‐based editorial process. We compare a baseline where the auditor does not provide consulting services to conditions where auditors provide consulting to audit clients or where auditors only provide consulting services to non‐audit clients. Our unique design provides evidence on whether providing consulting to non‐audit clients strengthens the salience of a client‐cooperative social norm that reduces audit quality. We do not find differences in audit quality by condition in our planned analysis, however we find greater variation in audit quality in the conditions where auditors provide consulting services compared to the baseline. In unplanned analyses, our results suggest providing consulting services increases auditor cooperation with managers, increasing audit quality when managers prefer high audit quality and decreasing audit quality when managers prefer low audit quality.     

PROFITABILITY,TRANSACTIONAL ALIGNMENT,AND ORGANIZATIONAL MORTALITY IN THE U.S. TRUCKING INDUSTRY

The winds of creative destruction rarely blow more fiercely than in a newly deregulated environment. Managers simultaneously face a novel focus on operating efficiency and an onslaught of new competitors. What must managers do to enable their firms to survive in such an environment? What factors bear on firms’ survival? This paper presents an analysis of mortality of large motor carriers in the U.S. interstate for-hire trucking industry after deregulation. It examines this phenomenon through a multidisciplinary lens that encompasses organizational ecology, neoclassical economics, and transaction cost economics. The paper posits that carrier mortality is a function of both firm-level and industry-level attributes, which are drawn from both ecological and economic theories. While each of these theories separately informs motor carrier mortality, the inclusion of predictions derived from both disciplines in one model significantly increases explanatory power over either theory evaluated alone. The empirical analysis is among the first to show increased mortality when firms do not adhere to operating policies consistent with transaction cost minimization principles. In sum, managers are well advised to adopt a multidisciplinary approach to strategy to ensure their firms’ survival. © 1997 by John Wiley & Sons, Ltd.     

阿灵顿的独立往事

每个互联网创业公司后面都有一群看上去无所不知的窥探者。