How beliefs influence behaviour: Confucianism and innovation in China

Previous studies have analysed how religious beliefs may affect economic activity. We extend this literature by examining how Confucianism is linked to innovation activity at the firm level in China. We analyse the relationship between Confucianism and several proxies for input and outputs of innovation activities. Our results show that Confucianism is significantly related to lower levels of innovation activity regardless of which measure for firm-level innovation we use. We also find that the nature of ultimate ownership influences this relationship, with innovation among state-controlled firms being significantly more affected by Confucianism. This study thus adds to the understanding of how traditional belief systems influence behaviour among economic actors.     

Conspicuous Leisure: Optimal Income Taxation When Both Relative Consumption and Relative Leisure Matter*

In previous studies on public policy under relative‐consumption concerns, leisure comparisons have been ignored. In this paper, we consider a two‐type optimal non‐linear income tax model, in which people care about both their relative consumption and their relative leisure. Increased consumption positionality typically implies higher marginal income tax rates for both ability types, whereas leisure positionality has an offsetting role. However, this offsetting role is not symmetric; concern about relative leisure implies a progressive income tax component (i.e., a component that is larger for the high‐ability type than for the low‐ability type). Leisure positionality does not modify the policy rule for public‐good provision.     

EXPLAINING THE UTILIZATION OF RELATIVE PERFORMANCE EVALUATION IN LOCAL GOVERNMENT: A MULTI-THEORETICAL STUDY USING DATA FROM SWEDEN

One of the more lasting imprints that New Public Management (NPM) has made in the public sector is an increase in the popularity of performance measurement. In Sweden, performance measurement has gained popularity in the public sector, not least at the local government level with the use of relative performance evaluation (RPE). Because utilization of RPE is a decentralized and optional mode of governance, a somewhat heterogeneous practice has evolved. The aim of this paper is to examine the causes of this differentiated practice. We jointly examine economic, political and institutional/cultural explanations in order to account for the utilization of RPE. The empirical material consists of archival data and a questionnaire sent to all Swedish municipalities in late 2005. We show that RPE adoption and use partly has different antecedents and that the institutional/cultural perspective appears to have greater explanatory power than economic and political, not least as a consequence of the potential to explain decoupling and the importance of change facilitating capabilities. The investigation contributes specifically to the literature on the utilization of RPE in local governments and more generally to the literature on why and to what extent management accounting practices are utilized.     

New evidence on cross-country differences in job satisfaction using anchoring vignettes

This paper presents results on cross-country comparison of job satisfaction across seven EU countries taking into account that people in different countries may perceive subjective questions differently. We apply a chopit model approach where the threshold parameters in an ordered probit model are re-scaled through anchoring vignettes. Compared to a traditional ordered probit model, which yields the familiar result that Denmark and Finland are ranked in the very top, the country ranking is altered when the chopit model is applied. In this case, the Scandinavian countries are ranked somewhat lower while workers from the Netherlands are found to have the highest level of job satisfaction. These results suggest that cultural differences in the way people perceive subjective questions about satisfaction make simple cross-country comparison misleading.     

Asian sovereign debt and country risk

This paper analyzes systematic risk of sovereign bonds in four East Asian countries: China, Malaysia, Philippines, and Thailand. A bivariate stochastic volatility model that allows for time-varying correlation is estimated with Markov Chain Monte Carlo simulation. The volatilities and correlation are then used to calculate the time-varying betas. The results show that country-specific systematic risk in Asian sovereign bonds varies over time. When adjusting for inherent exchange rate risk, the pattern of systematic risk is similar, even though the level is generally lower. The findings have important implications for international portfolio managers that invest in emerging sovereign bonds and those who need benchmark instruments to analyze risk in assets such as corporate bonds in the emerging Asian financial markets.     

Choices of savings options related to trust in banks’ competence,benevolence and stability

The study investigates whether beliefs in professional investor skill in conjunction with trust in banks and other fund managers explain choices of options for long-term savings. From questionnaire data obtained for a population-based sample (n=178) and a sample of undergraduates (n=186), two index measures were constructed, one of beliefs in the skill of professional investors and another of trust in fund managers. The trust index was aggregated for the three interrelated components: competence, benevolence and stability. Regression analyses of the likelihood of savings in an actively managed fund showed an expected effect of investor-skill beliefs that was mediated by trust in the fund manager. In addition, self-reported knowledge played a larger role than trust for choices of passively managed index funds and in particular for own investment in stocks.     

Stochastic volatility and time-varying country risk in emerging markets

This study suggests an alternative method to estimate time-varying country risk. We first apply a new multivariate stochastic volatility (SV) model to a set of emerging stock markets. To estimate the SV model, we use a Bayesian Markov chain Monte Carlo simulation procedure. By applying the deviance information criterion, we show that the new model performs well relative to alternative multivariate SV models. We then compute the conditional betas for the different markets and compare the results with an often-used procedure based on multivariate GARCH models. We show that the new multivariate SV model more accurately captures the time-varying nature of country risk. The conditional betas show signs of large variations, indicating the importance of taking time-varying country risk into consideration when managing emerging market portfolios.     

Corporate Spin-offs and the Significance of Founders’ Informal Relations

Research on corporate spin-offs has suggested that spin-off firms have advantages over other new entrants in an industry because of their origin. These advantages have been argued to lie with the founders’ prior industry experience, and with the opportunity to form sourcing agreements with the parent firms. This paper inquires into an additional aspect of prior experience, founders’ informal relations. The use and benefits of such informal relations to source resources necessary for growth were analysed in three spin-offs in the Swedish telecommunications industry. The findings show that the spin-offs derived a variety of benefits from the use of founders’ informal relations, in particular in staffing the spin-offs, but also to acquire resources when other means of sourcing were unavailable. The results indicate that future research on corporate spin-offs as well as corporate spin-outs may need to account better for this variable in order to explain spin-off growth, and hence success.