Alphabeticity Bias in 401(k) Investing

Structural factors that cause irrational investment in defined contribution savings plans are of great concern. Using a proprietary database of 401(k) plans we show that alphabeticity—the order that fund names appear when listed in alphabetical order—significantly biases participants’ investment allocation decisions. While we show a larger impact as the number of funds in the plan increases, this bias is strong even when relatively few funds are available in the plan menu. Importantly, our findings suggest that a more strategic ordering of funds could result in favorable outcomes for participants.     

Critical dialogics,agonistic pluralism,and accounting information systems

We propose heteroglossic accounting as a context wherein accounting information systems may be conceptualized so as to provide a more complete and complex basis for including competing, and possibility incompatible, information needs associated with interested and diverse constituencies. Given that information needs to vary based on such dimensions as geography, values, views, and vision, one representation is unlikely to be adequate. Incorporating pluralistic perspectives facilitates more relevant comparisons required to derived criteria of judging among the viable alternatives, especially in cases where no one perspective can be shown to be inclusive. Agonistic pluralism employed in developing alternative accounting information systems provides insights into the underlying ideologies, assumptions, values, worldviews, and power relationships that inform alternative positions, indicating those being privileged. Accounting information systems conceptualization, development, and implementation based on the principles of critical dialogics recognizes the countervailing forces operating both pulling the dialog and debate toward hegemonic consensus as well as pushing it toward antagonistic separation.     

Pricing CDOs with state-dependent stochastic recovery rates

Up to the 2007 crisis, research within bottom-up CDO models mainly concentrated on the dependence between defaults. Since then, due to substantial increases in market prices of systemic credit risk protection, more attention has been paid to recovery rate assumptions. In this paper, we use stochastic orders theory to assess the impact of recovery on CDOs and show that, in a factor copula framework, a decrease of recovery rates leads to an increase of the expected loss on senior tranches, even though the expected loss on the portfolio is kept fixed. This result applies to a wide range of latent factor models and is not specific to the Gaussian copula model. We then suggest introducing stochastic recovery rates in such a way that the conditional on the factor expected loss (or, equivalently, the large portfolio approximation) is the same as in the recovery markdown case. However, granular portfolios behave differently. We show that a markdown is associated with riskier portfolios than when using the stochastic recovery rate framework. As a consequence, the expected loss on a senior tranche is larger in the former case, whatever the attachment point. We also deal with implementation and numerical issues related to the pricing of CDOs within the stochastic recovery rate framework. Due to differences across names regarding the conditional (on the factor) losses given default, the standard recursion approach becomes problematic. We suggest approximating the conditional on the factor loss distributions, through expansions around some base distribution. Finally, we show that the independence and comonotonic cases provide some easy to compute bounds on expected losses of senior or equity tranches.     

Do VCs use inside rounds to dilute founders? Some evidence from Silicon Valley

In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an “inside” round) at an artificially low valuation. Using a hand-collected dataset of Silicon Valley startup firms, we find little evidence that VCs use inside rounds to dilute founders. Instead, our findings suggest that inside rounds are generally used as “backstop financing” for startups that cannot attract new money, and these rounds are conducted at relatively high valuations (perhaps to reduce litigation risk).     

Is gold a hedge against inflation? A wavelet time-scale perspective

Among the many presumed characteristics of gold, the ability to act as an enduring store of value is frequently noted. In this paper, the ability of gold to dynamically hedge against inflation is examined for various holding periods using the continuous wavelet transformation. Gold is first established as both a short- and long-term hedge against realized inflation for a number of developed economies. Dynamic analysis demonstrates that these hedging properties are not limited to a single historical cohort. Next, gold is shown to comove with unexpected inflation across all countries examined, albeit with some variation in the direction of the relationship. Finally, the capacity of both gold futures and gold stocks to act as a hedge against inflation is demonstrated.     

Small sample evidence on the tourism-led growth hypothesis in Lebanon

This paper investigates the contribution of tourism to economic growth in Lebanon for the time period of 1995–2010. The presence of long-run and causal relationships is investigated applying the bounds testing approach to cointegration and Granger causality tests. Because of the small sample (T?=?16), econometric approaches and critical values used for testing receive special attention. Additionally, a number of diagnostic tests are utilised to ensure that the model is suitable and correct. Interestingly, our results reveal that tourism and economic growth are cointegrated. The Granger causality test indicates that the tourism-led growth hypothesis is valid for Lebanon. Therefore, policy initiatives promoting tourism ought to be further developed and implemented to stimulate economic growth and development for the economy of Lebanon.     

Creative Analogy As a Means of Articulating Incongruent Sponsorships

Sponsorship congruence refers to the extent to which associations held for a property are perceived as sharing content and meaning with those held for a brand. Congruence has been shown to enhance the benefits derived from sponsorship. Consequently, it is important for an incongruent sponsor to articulate how it is related to a property. Analogical articulation represents a creative way of resolving perceptions of incongruity. A contribution of the current research is that it is the first to distinguish sponsorship effects on the basis of articulation type. Across four studies in which analogical articulations of incongruent sponsorships are compared to unarticulated and nonanalogical articulations (for both congruent and incongruent sponsorships), we find that analogical articulations improve perceptions of an incongruent sponsor's fit with a property and also perceptions of the sponsorship alignment's creativity. Analogical articulations also elicited a more pronounced “aha” moment of insight, which was found to mediate the effect of analogical articulation on perceptions of fit and creativity. Finally, analogical articulations yielded greater recall of the sponsorship.     

“I know I can,but I don't fit”: Perceived fit,self-efficacy,and entrepreneurial intention

While extant literature generally suggests a positive relationship between entrepreneurial self-efficacy and entrepreneurial intention, several moderators have been identified – suggesting possible boundary conditions on that relationship. This paper introduces perceived person-entrepreneurship fit to entrepreneurship and shows that it moderates the relationship between entrepreneurial self-efficacy and entrepreneurial intention. Three studies are conducted which illuminate the utility of randomized experiments and methodological approaches to address limitations in the interpretation of empirical results. Studies 1 and 2 are randomized experiments to examine causality; Study 3 contains two correlational surveys to triangulate the results by examining whether the proposed effects withstand the influence of confounding variables in real-life. The findings indicate that when a strong perception of fit with entrepreneurship is achieved, entrepreneurial intention is strongly predicted by entrepreneurial self-efficacy. In contrast, if one perceives a low level of fit or no fit, entrepreneurial intention will be low, regardless of entrepreneurial self-efficacy.     

Communicative Action and Corporate Annual Reports

Annual reports are an important element in the genre of corporate public discourse. The reporting practices mandated by the Securities and Exchange Commission for all publicly traded corporations are intended to render the annual reports a legitimate and trustworthy medium through which management communicates information related to the financial performance of the firm. The following discussion represents an inaugural attempt to investigate the ethical characteristics of the discourse found in corporate annual reports using Habermas' principles of communicative action. In preparing the Management's Discussion and Analysis (MD&A) portion of the report, managers are charged with providing narrative information for investors and other interested third parties relevant to assessing the firm's financial condition. Previous rhetorical studies of the narrative portions of annual reports argue that they serve as means for both legitimate and distorted communication. We investigate this communication medium through the lens of Habermas' norms for communicative action, which require communicators to be comprehensible, truthful, sincere, and legitimate. The study represents an initial attempt to operationalization Habermas' principles of communicative action and to employ a methodology that facilitates their application to research within a business context. From one perspective, consistent with agency theory as specified by neoclassical economics, it would seem that firms anticipating worse-than-expected financial performance would be less likely to exhibit the Habermasian principles necessary for undistorted communication because they would attempt to strategically influence the message being communicated about the firm's financial position. Instead, employing rhetorical analysis software, Diction 5.0, we found that firms expecting both good and bad earnings surprises exhibited a higher level of communicative action than a composite average firm. Although preliminary in nature, our findings suggest that firms anticipating large earnings surprises, either high or low, use the narrative portion of the annual report as a vehicle through which to communicate information about managements' veracity and trustworthiness as well as the firm's financial position.