Lateral hiring and the performance of professional service firms: the moderating effects of leverage ratio

We theorized and tested the performance implications of the lateral hiring by professional service firms (i.e. law firms). Using a longitudinal dataset of lateral partner hires in 148 US law firms between the years of 2004 and 2008, the results indicated that the size of lateral hiring had a reversed U-shape relationship with the financial performance of a firm. In addition, the leverage ratio (i.e. the ratio between associate lawyers and partners) significantly moderated the reversed U-shape relationship between lateral hiring and firm performance, such that the placement of the bend in the curvilinear relationship, that is, the threshold, occurred more quickly at a low than at a high leverage ratio. This study contributes to the literature on strategic human resource management in professional service firms by providing empirical evidence on the effect of lateral hires and by emphasizing that lateral partner hiring should be considered with other important HR issues to fully capitalize lateral partners.     

Economic impact of hypoglycemia among insulin-treated patients with diabetes

Objective: The objective of this study was to assess the cost of hypoglycemic events among insulin-treated patients with diabetes and the potential cost savings to a hypothetical US health plan and employer of reducing hypoglycemic events with a device intervention.

Methods: A cost-calculator model was developed to estimate the direct costs of hypoglycemic events, accounting for diabetes type, age, and event severity. Model inputs were derived from published incidence rates of hypoglycemic events and direct medical costs. Assumed intervention efficacy was based on published studies of an emerging technology which yielded 72.2% (LGS Trial; ACTRN12610000024044) and 31.8% (ASPIRE Trial; NCT01497938) reductions in severe and non-severe hypoglycemic events, respectively. Model outcomes—including the number of severe (requiring medical assistance) and non-severe events, and direct/indirect medical costs (excluding intervention costs)—were evaluated over a 1-year period for a hypothetical health plan and employer perspectives.

Results: In a health plan with 10 million enrollees, patients without the intervention would have experienced 0.09 and 14.60 severe and non-severe hypoglycemic events per patient per year (PPPY), respectively (vs 0.02 severe and 9.96 non-severe events with the intervention). This translated into total direct medical cost savings of $45 million ($177 PPPY) for the health plan. For an employer with 100,000 employees, the intervention would have yielded additional savings of $492 PPPY in indirect costs.

Conclusion: Insulin-treated patients experience hypoglycemic events, which are associated with substantial direct and indirect medical costs. The cost savings of reducing hypoglycemic events need to be weighed against the costs of using diabetes device interventions.     

Corporate Political Connections and Tax Aggressiveness

This study investigates the relation between corporate political connections and tax aggressiveness. We study a broad array of corporate political activities, including the employment of connected directors, campaign contributions, and lobbying. Using a large hand‐collected data set of U.S. firms' political connections, we find that politically connected firms are more tax aggressive than nonconnected firms, after controlling for other determinants of tax aggressiveness, industry and year fixed effects, and the endogenous choice of being politically connected. Our findings are robust to various measures of political connections and tax aggressiveness. These results are consistent with the conjecture that politically connected firms are more tax aggressive because of their lower expected cost of tax enforcement, better information regarding tax law and enforcement changes, lower capital market pressure for transparency, and greater risk‐taking tendencies induced by political connections.     

Accounting Conservatism and Stock Price Crash Risk: Firm‐level Evidence

Using a large sample of U.S. firms during 1964–2007, we find that conditional conservatism is associated with a lower likelihood of a firm's future stock price crashes. This finding holds for multiple measures of conditional conservatism and crash risk and is robust to controlling for other known determinants of crash risk and firm‐fixed effects. Moreover, we find that the relation between conservatism and crash risk is more pronounced for firms with higher information asymmetry. Overall, our results are consistent with the notion that conditional conservatism limits managers’ incentive and ability to overstate performance and hide bad news from investors, which, in turn, reduces stock price crash risk.     

Provincial Output Spillovers in China： Global Vector Autoregressive Approach

The paper uses a global vector autoregressive model to examine provincial output spillover effects in China. We find that there are effective output spillovers from Guangdong, Liaoning and Zhejiang to other provinces in China, but trivial effects from Shanghai, Shandong, Sichuan and Xinjiang, and negative effects from Beijing. Foreign direct investment (FDI) in Guangdong and Liaoning is the main channel for creating provincial output spillovers, compared with domestic investment and exports. However, FDI spillovers tend to decrease, with spillovers from exports and domestic investment rising over time, so that the spillover effects in Guangdong and Liaoning are non‐persistent and highly volatile. Other channels of output spillover, such as domestic investment, should be enhanced. Impacts of shock from government expenditure on GDP vary significantly across time and provinces; inland and western provinces are most negatively affected. The heterogeneous spillover structure shows that regional policies might achieve better results than nationwide policies in reducing regional disparity.     

Do Skill Mismatches Create a Wage Penalty? Alternative Estimates for Korea*

In this paper, we estimate the wage penalty of skill mismatches among young Korean workers using propensity score matching (PSM) and ordinary least squares (OLS) methods. OLS estimates suggest that a moderate wage penalty results from skill mismatches: 3.8 percent for men and 5.6 percent for women. In contrast, PSM estimates suggest a weakly significant wage penalty for men and women only when kernel matching (KM) is used, but not when nearest neighbor matching(NNM) or radius matching (RM) techniques are used. These results contradict the findings of previous studies and suggest that there may not be a substantial wage penalty associated with skill mismatches.     

Dynamic management view: logic of profit seeking based on adaptation to technological change and needs evolution through needs-focused innovation

Scrutinising well-known models/theories in strategic management, this paper proposes dynamic management view (DMV) on the premise profit comes from adaptation to technological change and needs evolution through needs-focused innovation in a dynamic world. It firstly sets up the theoretical framework of DMV by taking business model to embrace explicit needs (the ultimate source of profit) and needs-focused innovation (the ultimate driver of profit seeking) as the very causal mechanism at the micro-foundations level, and technological change and needs evolution as the direct causal mechanisms of profit at the macro-foundations level from which it draws the universal and contingency rules of needs-focused innovation, derives the propositions about the adaptive goodness between explicit needs and needs-focused innovation, shows it works as the determinant of profit with the industrial experiences, and concludes DMV provides the rationale for a firm’s sustainability, the strategic decision rules for business model innovation and the theoretical foundation to build dynamic theory of profit seeking.     

Brand Analyses of U.S. Global and Local Brands in India: The Case of Levi's

ABSTRACT

This study investigates differences between U.S. global and local brands in the Indian market. Attitudes toward American products and the brand equity of U.S. global and local casual apparel brand in the Indian market are examined. It is postulated that global and local brand influence brand equity, which is composed of brand image, brand awareness, emotional value, perceived quality, brand loyalty, and purchase intention. A total of 411 college students in India participated in the survey. Using repeated measures ANOVA, this study finds that Indian consumers perceive global and local brands differently based on brand equity.     

Control-ownership wedge and investment sensitivity to stock price

This study examines whether insiders’ incentives for private control benefits affect investment sensitivity to stock price. While Chen et al. (2007) link stock price informativeness to firms’ learning from the stock market, we offer an alternative agency-cost based explanation. Using a total of 2822 firms from 22 countries in East Asia and Western Europe, we document a strong negative association between control-ownership wedge and investment-q sensitivity, suggesting that insiders’ incentives for private control benefit reduce their propensity to listen to the market. Furthermore, the negative impact of wedge on investment-q sensitivity is primarily driven by sub-optimal investments. Overall, we provide evidence that agency problem is an important factor that determines the learning from the stock market in capital allocation.