AUDIT MARKET FAILURE

The auditing profession has called for the current regime of unlimited liability to be replaced with liability caps. The Department of Trade and Industry has tabled proposals to reform the structure of the market for audit services. These proposals fall short of meeting the demand for liability limitation but modify the current regime inasmuch as auditor liability, though uncapped, would be proportional to the damage caused by audit failure. This step is unlikely to remedy audit market failure. This article argues the distortion of market incentives in audit markets can be traced to government intervention and the remedy lies in replacing government intervention with competition.     

Russia’s reluctance to ratify Kyoto: an economic analysis

It became apparent at the UN World Climate Change Conference, which took place from September 29 to October 3 in Moscow at the invitation of the Russian government, that ratification of the Kyoto Protocol by the Russian Federation is, at the least, uncertain. This could mean that the first international climate treaty will not become legally binding. What is the economic rationale behind Russian climate policy? What would be the effect of non-ratification?     

A Study of the Financial Impact of Dairy Manure Storage Systems in Northeast Kansas

In 1997, the Black Vermillion Dairy Environmental Cooperative (DEC) was started with an Environmental Protection Agency 319A grant. The DEC partially funded construction of manure storage projects at ten of thirty-seven Kansas dairies located in the Black Vermillion Watershed. The facilities were later studied using net present value (NPV) to evaluate their cost effectiveness. The NPV analysis showed that in most cases, investing in a manure storage structure can be profitable for the dairy. However, cost-share assistance often will be needed in order to have positive pre-tax and after-tax NPVs.     

To Be or Not to Be Price Conscious—a Segment‐Based Analysis of Compromise Effects in Market‐Like Framings

Numerous researchers have investigated the compromise effect, according to which a middle option of a consideration set is assumed to be perceived more attractive by consumers, thus becoming more likely to be chosen than the extreme options. However, a closer examination of the experimental designs that were used in previous studies on compromise effects clearly reveals a lack of realism in terms of forced choices between fictitious options in hypothetical choice settings of student samples. This article reports two consecutively implemented studies demonstrating that the compromise effect is robust even in an enhanced design that incorporates basic conditions of real purchase decisions in laboratory‐based experiments. Specifically, the relative share of the middle option increases significantly in an overall analysis when experienced consumers make unforced decisions between real brands in a binding choice context. However, segmented analysis indicates substantial differences, meaning that (1) the compromise effect is strong and significant among quality‐seeking consumers, whereas (2) the compromise effect is weak and insignificant among price‐conscious subjects.     

The Effect of Stylistic Product Information on Consumers’ Aesthetic Responses

This paper investigates the effect of stylistic information about a product, defined as verbal product information aimed at helping consumers to interpret a product's visual design, on consumers’ aesthetic responses. The results of three experimental studies show that for consumers with higher centrality of visual product aesthetics (CVPA), stylistic information positively influences aesthetic responses through perceived meaningfulness of product design (i.e., the extent to which an individual is able to make sense of a product's visual appearance and understands what it represents). Further, these effects translate into consumers’ purchase intentions. For consumers with lower CVPA, stylistic information neither affects aesthetic responses nor perceived meaningfulness of product design. These findings contribute to existing research on consumers’ aesthetic processing by highlighting the importance for consumers to grasp a product's design meaning in order to maximally appreciate its visual appeal.     

Do bilateral investment treaties attract foreign direct investment? The role of international dispute settlement provisions

This paper studies the effects of the strength of bilateral investment treaties (BITs) on foreign direct investment (FDI) activity. We develop an index for the strength of international dispute settlement provisions included in BITs in order to examine the role the content of BITs plays in attracting FDI. To this end, we make use of data from UNCTAD's International Investment Agreement Mapping Project and measure the provision strength of 2,571 BITs. Using panel data of bilateral and total FDI inflows and inward FDI stocks, we study the effect of BITs on FDI. Our main finding indicates that stronger international dispute settlement provisions in BITs are indeed associated with positive effects on FDI activity.     

Thomas Aquinas on the conduct of sales

In the Summa theologiae, Thomas Aquinas treated the conduct of sales. Aquinas took into consideration writings on the subject in the Bible, Antiquity, and early Christianity. Aquinas differentiated between selling and mis-selling; showed that sales intermediation was an integral component of an economy; and concluded that salespeople were entitled to earn profit. Aquinas overturned a consensus that had obtained in Stoicism and early Christianity regarding duties to disclose private information on volatility of price. Aquinian disposition of the sales process anticipated the economics of information asymmetry.     

The impact of carbon disclosure mandates on emissions and financial operating performance

Review of Accounting Studies - We examine the impact of a disclosure mandate for greenhouse gas emissions on firms’ subsequent emission levels and financial operating performance. For...     

Estimating the effects of non‐discriminatory trade policies within structural gravity models

We propose a simple method to identify the effects of unilateral and non‐discriminatory trade policies on bilateral trade within a theoretically consistent empirical gravity model. Specifically, we argue that structural gravity estimations should be performed with data that include not only international trade flows but also intra‐national trade flows. The use of intra‐national sales allows identification of the effects of non‐discriminatory trade policies such as most favoured nation tariffs, even in the presence of exporter and importer fixed effects. A byproduct of our approach is that it can be used to recover estimates of the trade elasticity, a key parameter for quantitative trade models. We demonstrate the effectiveness of our techniques in the case of most favoured nation tariffs and “time to export” as representative non‐discriminatory determinants of trade on the importer and on the exporter side, respectively. Our methods can be extended to quantify the impact on trade of any country‐specific characteristics as well as any non‐trade policies.     

Sustaining the Flow of External Ideas: The Role of Dual Social Identity across Communities and Organizations

Firm‐hosted online communities are increasingly a part of innovation efforts that seek to provide a flow of external ideas into organizations. However, many online communities do not gain traction or die out over time. One possible but underresearched driver of sustained engagement by members of firm‐hosted communities is a social identity that makes community members feel like they are part of the firm. We sought to empirically derive the organizational practices that support community members having a dual social identity with both communities and organizations. We completed extensive field work and over 90 interviews regarding two firms that had a history of sustained engagement by members of their communities: T‐shirt firm Threadless and automotive firm Local Motors. We identified eight organizational practices that supported dual social identity. Four of these practices made members perceive a porous boundary between firm and community, including an “open house” policy and hiring from the community. Another four practices made members feel supported in community efforts, including promoting community projects and having top management active in the community. We describe the practices in detail and the implications for firms using online communities as one component of their portfolio of innovation efforts.