The effect of business taxation on the location of industry

A theoretical and econometric model is specified which permits the estimation of the effect of local taxes on economic activity in a locality. A location elasticity of ?0.35 is found for manufacturing activity in New York City with respect to business taxes, while no significant elasticity is found for nonmanufacturing activity. The deadweight losses and revenue effects of the tax are analyzed and calculated, as are the optimal second-best taxes for a locality.     

The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change

Most research on corporate directors has focused on two roles: agency and resource dependence. While these two roles are theoretically and practically distinct, previous research has used the same classification scheme for measuring board composition regardless of role examined. Our paper examines the resource dependence role of directors and posits that the widely used insider/outsider categorizations do not adequately capture this role of directors. A taxonomy of directors is presented specifically for studying the resource dependence role. We then apply the taxonomy to a sample of US airline firms undergoing deregulation, and examine how board composition changes parallel the changing resource dependence needs of the firms. We conclude that the board's function as a link to the external environment is an important one, and that firms respond to significant changes in their external environment by altering board composition.     

Commitment and Lapse Behavior in Long‐Term Insurance: A Case Study

This article presents a case study of a portfolio of individual long‐term insurance contracts sold by a Spanish mutual company. We describe the risk levels, the rating structure, and the implied cross‐subsidies on a portfolio of policies providing health, life, and long‐term care insurance. We show evidence of reclassification risk through the history of disability spells. We also analyze the lapse behavior and seek to provide a rationale for the portfolio’s dynamics. We discuss the lack of commitment from the policyholders (lapses) and from the mutual company (which took a run‐off decision). Finally, we draw conclusions regarding the design of such contracts.     

Life Expectancy in 2040: What Do Clinical Experts Expect?

We use expert clinical and public health opinion to estimate likely changes in the prevention and treatment of important disease conditions and how they will affect future life expectancy. Focus groups were held including clinical and public health faculty with expertise in the six leading causes of death in the United States. Mortality rates and life tables for 2040 were derived by sex and age. Life expectancy at age 20 and 65 was compared to figures published by the Social Security Administration and to estimates from the Lee-Carter method. There was agreement among all three approaches that life expectancy at age 20 will increase by approximately one year per decade for females and males between now and 2040. According to the clinical experts, 70% of the improvement in life expectancy will occur in cardiovascular disease and cancer, while in the last 30 years most of the improvement has occurred in cardiovascular disease. Expert opinion suggests that most of the increase in life expectancy will be attributable to the already achieved reduction in smoking rates, especially for women.     

On the duality principle in option pricing: semimartingale setting

The purpose of this paper is to describe the appropriate mathematical framework for the study of the duality principle in option pricing. We consider models where prices evolve as general exponential semimartingales and provide a complete characterization of the dual process under the dual measure. Particular cases of these models are the ones driven by Brownian motions and by Lévy processes, which have been considered in several papers. Generally speaking, the duality principle states that the calculation of the price of a call option for a model with price process S=e ^H (with respect to the measure P) is equivalent to the calculation of the price of a put option for a suitable dual model S′=e ^H′ (with respect to the dual measure P′). More sophisticated duality results are derived for a broad spectrum of exotic options. The second named author acknowledges the financial support from the Deutsche Forschungsgemeinschaft (DFG, Eb 66/9-2). This research was carried out while the third named author was supported by the Alexander von Humboldt foundation.     

Sustainability accounting regulation in Spanish public sector organizations

In 2011, the Spanish government made sustainability accounting mandatory for public sector organizations. This paper documents why, despite the new legislation, the quantity and quality of sustainability accounting practices remains low.     

A Corporate Social Responsibility Framework for Accounting Research

Over the past two decades, there has been growing interest in corporate social responsibility (CSR) among accounting scholars. As a testament to this growing interest, two review papers on CSR were published last year in accounting journals. Implicitly guiding hypothesis development in CSR studies is the notion of a conflict between shareholders and stakeholders. We define CSR in terms of a win-win situation for shareholders and stakeholders: a CSR framework for strategic business purposes. We provide evidence supporting this outlook for CSR using cases pertaining to specific companies and findings from archival empirical studies. According to our CSR framework, resources allocated for CSR activity also help propel business strategy; as such, it is difficult to isolate CSR inputs and/or outputs due to problems of non-separability and multidimensionality. While measurement is a challenge, our framework nonetheless opens up various promising avenues for future research.     

Top management team incentive heterogeneity,strategic investment behavior,and performance: A contingency theory of incentive alignment

Research summary : We develop and test a contingency theory of the influence of top management team (TMT) performance‐contingent incentives on manager–shareholder interest alignment. Our results support our theory by showing that although TMTs engage in significantly higher levels of acquisition investment when their average incentive levels increase, investors' responses to those large investments are generally negative. More importantly, however, we further find that within‐TMT incentive heterogeneity conditions that effect, such that investors evaluate TMTs' large acquisition investments more positively as the variance in those top managers' incentive values increases. Thus, within‐TMT incentive heterogeneity appears to increase manager–shareholder interest alignment, in the context of large acquisition investments. Managerial summary : We find that as the average value of TMTs' incentives increase, relative to their total pay, they invest more in acquisitions and investors' respond negatively to the announcement of those deals. However, we further show that investors respond more positively to acquisitions announced by TMTs whose members' incentive values vary (some TMT members hold higher incentives and others hold lower). Results imply that when TMT members hold differing incentives levels, they approach investments from divergent perspectives, scrutinize those investments more heavily, and make better decisions, relative to TMTs with similar incentives. They also suggest that boards seeking tighter manager–shareholder interest alignment may benefit from introducing variance into TMT members' incentive structures, as doing so appears to create divergent preferences that can improve team decision making. Copyright © 2016 John Wiley & Sons, Ltd.