It pays to have friends

Currently, a director is classified as independent if he or she has neither financial nor familial ties to the CEO or to the firm. We add another dimension: social ties. Using a unique data set, we find that 87% of boards are conventionally independent but that only 62% are conventionally and socially independent. Furthermore, firms whose boards are conventionally and socially independent award a significantly lower level of compensation, exhibit stronger pay-performance sensitivity, and exhibit stronger turnover-performance sensitivity than firms whose boards are only conventionally independent. Our results suggest that social ties do matter and that, consequently, a considerable percentage of the conventionally independent boards are substantively not.     

Price-based return comovement

Similarly priced stocks move together. Stocks that undergo splits experience an increase in comovement with low-priced stocks and a decrease in their comovement with high-priced stocks. Price-based comovement is not explained by economic fundamentals, firm size, or changes in liquidity or information diffusion. The shift in comovement following splits is greater for large stocks, high-priced stocks, and when investor sentiment is high. In the full cross-section, price-based portfolios explain variation in stock-level returns after controlling for movements in the market and industry portfolios as well as portfolios based on size, book-to-market, transaction costs, and return momentum. The results suggest that investors categorize stocks based on price.     

PRIVATE BENEFITS: OWNERSHIP VERSUS CONTROL

We empirically decompose private benefits into benefits accruing from ownership and benefits accruing from control. We document that private benefits increase slowly with respect to the ownership level but increase rapidly with respect to the blockholder's likelihood of exercising control. The decomposition of private benefits allows us to quantify the magnitude of nonpecuniary private benefits by examining the block premium when the blockholder's likelihood of exercising control is close to zero. We find that the size of nonpecuniary private benefits ranges from 0.61% to 5.92% of the share price, or 18% to 29% of the total private benefits.     

Bootstrap refinements in tests of microstructure frictions

Bootstrapping is often used as a substitute for asymptotic distributions when the latter are not available. Recent developments in the theory of the bootstrap show that combining the bootstrap with a known asymptotic distribution yields inferences that improve on those drawn from asymptotic distribution theory or bootstrapping alone. We review the key to obtaining the improvement and compare asymptotic and bootstrap inferences of three variance ratio tests used in microstructure research. The more precise bootstrap inferences lead to conclusions that differ from those found in extant research on transitory volatility. Asymptotic tests are biased toward rejection, and bootstrap and asymptotic critical values are not generally close to each other. These findings suggest that the more precise bootstrap inferences should be used in future applications of these tests, as well as in various other empirical applications where intradaily or other high frequency data are modeled using vector autoregressions     

Strong reciprocity and team production: Theory and evidence

Punishment of shirkers is often an effective means of attenuating incentive problems and sustaining coordination in work teams. Explanations of the motivation to punish generally rely either on small group size or on a Folk theorem that requires coordinated punishment and, hence, highly accurate information concerning the behavior of each player. We provide a model of team production in which the punishment of shirkers depends on strong reciprocity: the willingness of some team members to contribute altruistically to a joint project and also to bear costs in order to discipline fellow members who do not contribute. This alternative does not require small group size, complex coordinated punishing activities, or implausible informational assumptions. An experimental public goods game provides evidence for the behavioral relevance of strong reciprocity and how it differs from unconditional altruism.     

A strategy for enhancing senior tourists’ well-being perception: focusing on the experience economy

This study was designed to examine how to form well-being perception in the senior tourism industry. More specifically, this study proposed (1) the casual relationships between four dimensions of the experience economy (i.e. education, entertainment, esthetics, and escapism) and well-being perception, (2) the effects of well-being perception on consumer attitudes toward a brand, brand attachment, and brand loyalty, and (3) the moderating role of advertising effectiveness. Data were collected from 323 senior tourists in Korea. The results showed that all of the four dimensions have a positive influence on well-being perception, which in turn positively affects outcome variables. Lastly, this study found that advertising effectiveness has an important moderating function in the relationship between education and well-being perception.     

First-class airline travellers' perception of luxury goods and its effect on loyalty formation

This study examines how first-class airline travellers' perception of luxury goods influences the formation of their loyalty to first-class flights. Based on the proposed hypotheses, a conceptual model was developed and tested using empirical data collected from a sample of 202 first-class airline travellers in the USA. The results indicate that the five types of perceptions of luxury goods (e.g. quality, hedonism, conspicuousness, exclusivity, and the extended self) were generally associated with consumer attitudes towards first-class flights and thus led to well-being perceptions and perceived price fairness. In addition, well-being perceptions enhanced perceived price fairness, customer identification, and loyalty. Finally, alternative attractiveness moderated the relationship between consumer attitudes towards first-class flights and perceived price fairness. The results have important theoretical and managerial implications.     

Are founder CEOs more overconfident than professional CEOs? Evidence from S&P 1500 companies

Research summary : We provide evidence that founder chief executive officers (CEOs) of large S&P 1500 companies are more overconfident than their nonfounder counterparts (“professional CEOs”). We measure overconfidence via tone of CEO tweets, tone of CEO statements during earnings conference calls, management earnings forecasts, and CEO option‐exercise behavior. Compared with professional CEOs, founder CEOs use more optimistic language on Twitter and during earnings conference calls. In addition, founder CEOs are more likely to issue earnings forecasts that are too high; they are also more likely to perceive their firms to be undervalued, as implied by their option‐exercise behavior. We provide evidence that, to date, investors appear unaware of this “overconfidence bias” among founders. Managerial summary : This article helps to explain why firms managed by founder chief executive officers (CEOs) behave differently from those managed by professional CEOs. We study a sample of S&P 1500 firms and find strong evidence that founder CEOs are more overconfident than professional CEOs. To date, investors appear unaware of this overconfidence bias among founders. Our study should help firm stakeholders, including investors, employees, suppliers, and customers, put the statements and actions of founder CEOs in perspective. Our study should also help members of corporate boards make more informed decisions about whether to retain (or bring back) founder CEOs or hire professional CEOs. Copyright © 2016 John Wiley & Sons, Ltd.     

The digital divide experienced by older consumers in smart environments

The continuing transition of the Internet from wired to mobile has facilitated changes in Internet use. By focusing on older consumers as a potentially disadvantaged group, this study examines whether smart environments have the potential to bridge the digital divide. Data were derived from an analysis of the 2013 South Korean Information Divide data set (n = 2386 for those 60 years and older; n = 5841 for those under 60 years). The existence of a digital divide in the smart environment was verified by comparing younger and older South Koreans; this showed that continuing consumer education is needed to enhance older people's experience and skills regarding information and in its use of communication technology. The digital divide was measured based on three aspects: accessibility, competence, and usage. In smart environments, gaps in accessibility and competence between the age groups increased whereas the gap in information usage decreased. Compared with the personal computer‐based environment, members of both groups in the smart environment exhibited increased usage levels with regard to social relationship services, while the gap between the groups with regard to use of convenience services was reduced.     

Optimal Export Taxes with an Endogenous Location

Export tax policy is one of the most debated issues in many developing countries. Those countries with strong natural advantages in the production of primary commodities, such as agricultural and livestock products, coffee, jute, rubber, and others, have attained at particular times a position as dominant suppliers in international trade. They have often used export taxes on those commodities to obtain foreign exchange and/or government tax revenues. This paper provides a normative analysis to examine how the inclusion of economic space affects export tax policy and to compare optimal export taxes under endogenous location with optimal export taxes under exogenous location, both in the short run and in the long run.