Payout policy,financial flexibility,and agency costs of free cash flow

This paper explains how firms choose between dividends and open-market repurchase programs, the prevailing method that firms use to disburse cash today. While earlier theories about payout policy are motivated by signaling, the motivation for payout in this paper is to prevent the waste of free cash by self-interested insiders. In the model, dividends prevent free cash waste by forcing cash out, but result in underinvestment if the cash paid out is later needed for operations. Open-market programs stimulate payout by providing personal gains to informed insiders that are associated with the firm's repurchase trade. Yet, they also avoid the underinvestment problem by leaving insiders the option to cancel the payout. Because their execution is optional, however, open-market programs only partially prevent the waste of free cash. The model provides testable predictions that are generally consistent with the empirical evidence.     

THE WAR ON DRUGS 2.0: DARKNET FENTANYL'S RISE AND THE EFFECTS OF REGULATORY AND LAW ENFORCEMENT ACTION

U.S. overdose deaths attributed to synthetic opioids, such as fentanyl, have increased from under 3,000 in 2013 to nearly 20,000 in 2016, making up half of all opioid‐related overdose deaths. Using web scrapes of darknet markets from 2014 to 2016, I provide historical prices for fentanyl and its most popular analogues and find that fentanyl vendors priced fentanyl in 2014 at a 90% discount compared to an equivalent dose of heroin. Using regression discontinuity, I evaluate the effects of two major law enforcement and regulatory events. I find minimal lasting effects of U.S. legal actions intended to disrupt darknet markets, but there are statistically significant indications of a price increase corresponding with regulatory action in China. Despite these indications of some regulatory success, fentanyl prices remained approximately 90% cheaper than heroin. (JEL I18, K42)     

Damaging democracy? Security provision and turnout in Afghan elections†

In emerging democracies, elections are encouraged as a route to democratization. However, not only does violence often threaten these elections, but citizens often view as corrupt the security forces deployed to combat violence. We examine the effects of such security provision. In Afghanistan's 2010 parliamentary election, polling centers with similar histories of pre‐election violence unintentionally received different deployments of the Afghan National Police, enabling identification of police's effects on turnout. Using data from the universe of polling sites and various household surveys, data usually unavailable in conflict settings, we estimate increases in police presence decreased voter turnout by an average of 30%. Our results adjudicate between competing theoretical mechanisms through which security forces could affect turnout, and show behavior is not driven by voter anticipation of election‐day violence. This highlights a pitfall for building government legitimacy via elections in weakly institutionalized and conflict‐affected states.     

Auditor benchmarking of client disclosures

Review of Accounting Studies - We examine auditors’ disclosure benchmarking, which we define as auditors’ acquisition of nonclient financial statement information for the purpose of...     

A goal-oriented pharmaceutical research and development organization: an eleven-year experience

Pharmaceutical R & D effort is multidisciplinary and matrix in management form, but variable in organizational detail. Upjohn's discipline-oriented organization (coordination matrix) of 11 years ago is compared to its current organization consisting of a goal-oriented, leadership matrix and a simultaneously existing coordination matrix. Product development success and individual performances were similar for the concurrent coordination matrix and leadership matrix. Consensus on candidate product identification and execution of development plans is easier with a leadership matrix than with a coordination matrix, but flexible response to new or changing goals seems more likely with a coordination matrix. The location of candidate product advocacy differed in the two types of organization. Strategies effected over the 11-year period to overcome inherent limitations of goal-oriented organizations and functional organizations included the maintenance of competing yet synergistic, functional, and goal-oriented organizations, a strong publication and basic research policy, and a Troika' approach to candidate selection and development in the functional organization.     

Valuation of tax expense

As tax expense reflects value lost to taxes paid, it should be negatively associated with value, provided nontax, value-relevant information is controlled for. However, valuation regressions estimated in prior research—using contemporaneous tax expense and nontax variables—document substantial variation in the coefficients on tax expense, ranging from significant negative to significant positive values. We show this variation is (a) caused by the omission of expected future profitability, and (b) explained by many factors that cause variation in the correlations among included variables and omitted future profitability. Unfortunately, difficulties associated with separating the impact of individual factors hampers tax research investigating determinants of the value relevance of tax expense.     

“Evolutionary” and “revolutionary” events affecting HRM in Israel: 1948–2008

In Western countries, HRM strategies, policies and practices commonly develop in a gradual and incremental “evolutionary” way, but unforeseen domestic or external events can also engender “revolutionary” rapid changes. This paper reviews the major evolutionary and revolutionary changes arising from internal and external sources that Israel has experienced since the founding of the State in 1948, which stem primarily from the political, economic, societal and technological spheres. Israel's HRM has been required to take on new roles to adjust to these changes. A set of propositions derived from a 2-dimensional conceptual model associating source (internal/external) with nature (evolutionary/revolutionary) of change is put forward to account for HRM responses and operations in Israel.     

Ex Ante Bond Returns and the Liquidity Preference Hypothesis

We provide a formal test of the liquidity preference hypothesis (LPH), that is, the monotonicity of ex ante term premiums, using nonparametric estimates that do not require a structural model for conditional expected returns. Although the point estimates of the term premiums are consistent with previous conclusions in the literature regarding violations of the LPH, the test statistics are generally insignificant, even when powerful conditioning information is used. These results illustrate the importance of correctly accounting for correlations across maturities and of formally testing the inequality restrictions implied by the LPH.     

The Impact of Scale,Complexity, and Service Quality on the Administrative Costs of Pension Funds: A Cross‐Country Comparison

Administrative costs per participant appear to vary widely across pension funds in different countries. Using unique data on 90 pension funds over the period 2004–2008, this article examines the impact of scale, the complexity of pension plans, and service quality on the administrative costs of pension funds, and compares those costs across Australia, Canada, the Netherlands, and the United States. We find that, except for Canada, large unused economies of scale exist. Higher service quality and more complex pension plans significantly raise costs. Administrative costs vary significantly across pension fund types, with differences amounting to 100 percent.     

Ethical Climate and Managerial Success in China

This study examines perceptions of ethical climate and ethical practices of 118 successful Chinese managers among business students and managers in the Zhejiang province of China. The impact of different ethical climate types on perceived ethical practices of successful managers was also investigated. The “rules” was the most reported, and “independence” was the least reported, among the various climate types. A majority of the respondents perceive successful managers as ethical. In addition, those who believed that their organization had a “rules” climate perceived a strong positive link between success and ethical behavior. None of the other climate types had an impact on the link between success and ethical behavior.