The Effects of CEO Trustworthiness on Directors’ Monitoring and Resource Provision

This research investigates the interplay between leadership styles and institutional corporate social responsibility (CSR) practices. A large-scale field survey of managers reveals that firms with greater transformational leadership are more likely to engage in institutional CSR practices, whereas transactional leadership is not associated with such practices. Furthermore, stakeholder-oriented marketing reinforces the positive link between transformational leadership and institutional CSR practices. Finally, transactional leadership enhances, whereas transformational leadership diminishes, the positive relationship between institutional CSR practices and organizational outcomes. This research highlights the differential roles that transformational and transactional leadership styles play for a firm’s institutional CSR practices and has significant implications for theory and practice.     

Alternative Corporate Governance Systems in Japanese Firms: Implications for a Shift to Stockholder-Centered Corporate Governance

In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.     

Footloose Capital and Comparative Advantage

We investigate the effect of country size differentials and Ricardian technology differences on firms’ location decisions using a two‐country, two‐good (homogeneous agricultural good and differentiated manufacturing products), two‐factor (labour and footloose capital) simple new economic geography model. We found that manufacturing firms may agglomerate in a country where the manufacturing sector has a comparative disadvantage. In addition, when country size differentials and Ricardian technology differences exist between two countries, the key factor influencing firms’ location decisions changes according to the level of trade liberalization, from being market size‐dependent to becoming technology‐dependent.     

The impact of firm strategy and foreign ownership on executive bonus compensation in Japanese firms

Building on information-processing perspectives and the Japanese contextual factors, this study investigates the relationships between firm strategy and executive bonus pay as well as the moderating role of foreign ownership on the strategy-compensation relationship in Japanese firms. We focus on R&D investment and product diversification as strategy variables and investigate their direct effects on executive bonus pay. Further, we examine the moderating effects of foreign ownership on the strategy-pay sensitivity. The results, based on a sample of the 148 largest industrial firms in Japan for the 1990-1997 period, show that both R&D investment and product diversification are positively related to executive bonus pay. Our findings also indicate that foreign ownership negatively moderates the relationships between the strategy variables and executive compensation, suggesting that foreign investors play an active monitoring role, reducing cash bonus payments when their invested firms choose to increase R&D or pursue diversification strategy.     

Interregional trade, industrial location and import infrastructure

The purpose of this study is to illustrate, with a simple two-region, two-good, two-factor model, how an improvement in one region’s import infrastructure can affect firms’ location decisions and the nature of the trading equilibrium. It is shown that, through improvements in import infrastructure, one region might divert high-tech industries to another region. This effect reduces the incentive to improve import infrastructure.     

Valuation of Residential Mortgage-Backed Securities with Default Risk Using an Intensity-Based Approach

This paper develops a valuation model for fixed-rate mortgages, mortgage pools, and residential mortgage-backed securities (RMBS's) using an intensity-based approach. This model incorporates full prepayment, partial prepayment, and default in valuing a mortgage. Full prepayment is further classified into “refinancing” and “sale of a house” depending on the reason. The time of occurrence of each of these three types of prepayment and default is modeled as the first jump time of a Cox process. Under these conditions, the valuation formula for a mortgage as well as a partial differential equation (PDE) that the mortgage value satisfies is provided. As for implementation of the model, the short-term riskless interest rate and the house price are adopted as state variables. Each intensity process is specified in a manner that allows a jump in intensity depending on the state variables and the borrower's incentive for prepayment or default. Through such specifications, it is shown that our model has characteristics similar to some structural models in previous literature. As for the numerical method for valuation, we propose a simple backward induction technique on a tree instead of the commonly used Monte Carlo method. Additionally, the method for estimating the model is discussed, and the results of numerical simulations are reported.This paper represents the view of the author and does note necessarily the views of the Mitsubishi UFJ Securities Co., Ltd. or members of its staff.     

Mostly harmless simulations? Using Monte Carlo studies for estimator selection

We consider two recent suggestions for how to perform an empirically motivated Monte Carlo study to help select a treatment effect estimator under unconfoundedness. We show theoretically that neither is likely to be informative except under restrictive conditions that are unlikely to be satisfied in many contexts. To test empirical relevance, we also apply the approaches to a real‐world setting where estimator performance is known. Both approaches are worse than random at selecting estimators that minimize absolute bias. They are better when selecting estimators that minimize mean squared error. However, using a simple bootstrap is at least as good and often better. For now, researchers would be best advised to use a range of estimators and compare estimates for robustness.     

Evolution of a dynamic ridesharing system based on rational behavior of users

A dynamic ridesharing system (DRS) is a system where users can find ridesharing partner(s) at any time, even shortly before making a trip. A DRS that does not consider individual preferences may cause dissatisfied matchings of users in a shared vehicle and lead to abandonment of DRS in the long term. To investigate the evolution of DRS, such as long-term adoption, this study develops a model of DRS considering the rational behavior and learning process of its users. User behavior is considered as travel mode choice and ridesharing partner choice decisions under the expected utility maximization concept. The day-to-day evolution of a DRS is simulated based on the proposed model, and the effects of user learning behaviors and some social factors pertinent to long-term DRS adoption are investigated.     

The Smithian ontology of ‘relative poverty’: revisiting the debate between Amartya Sen and Peter Townsend*

ABSTRACT

Although ‘relative poverty’ is a phrase of immediate recognition, wide circulation and an ever increasing acceptance in the last half century, the concept itself remains surprisingly undertheorised. This paper wishes to try and remedy this discursive deficiency by proposing an ontological elucidation of the nature of our needs. The author re-visits the dispute between Amartya Sen and Peter Townsend — a duel of crossed wires (if not sabres), which can be seen as representative of the various theoretical takes on the nature of relative poverty. While the dispute itself ended with an unfortunate misunderstanding between the two scholars, whose different disciplinary affiliations have done nothing but replicate the rift, the author nonetheless foregrounds the commonality between the two thinkers – their respective identification with Adam Smith. By exploring points of differences and convergence with Adam Smith’s own ontology of needs, which the author reconstructed elsewhere, the paper hopes to offer insights into the ontology of ‘relative poverty’ as well as to suggest that taking this ontology seriously would lead us inevitably to a re-examination of ‘economic methodology’.     

Shareholder Heterogeneity and Conflicting Goals: Strategic Investments in the Japanese Electronics Industry

This article investigates the effects of the changing institutional environment on strategic orientations of Japanese electronics firms during the 1990s. We examine the effects of three different types of shareholders on strategic directions of their invested firms. The first one, foreign portfolio investors, characterizes the emerging influence that pressed for change in corporate strategies. The two domestic shareholders, corporate investors and financial institutions, represent the conventional forces for continuity. Between the two domestic forces, though, while corporate investors attempted to maintain status quo, financial institutions have shifted towards market‐oriented behaviour of investment. Specifically, we explore: (1) the influence of each type of shareholder on a firm's diversification strategy and capital commitment; and (2) the moderating effects of firm performance on the relationships between ownership structure and strategic choices. The results suggest that foreign investors prefer the focused product portfolio and conservative capital commitment. They also prefer the reduction of capital investment when the financial performance of their invested firms is poor. Domestic financial institutions are now similarly sensitive to the performance of their invested firms when those firms make strategic investments. By contrast, domestic corporate shareholders remain indifferent to performance, while they aim to maintain relational business ties with invested firms.