Tax contracts and elections

In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government and voters may behave strategically. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambiguously improve the welfare of the median voter.     

Search in cities

The aim of this paper is to expose the recent developments of urban search models which incorporate a land market into a search-matching framework. Using these models, we will be able to explain why unemployment rates vary within a city, how city structure affects workers’ labor-market outcomes, how unemployment benefits and the job-destruction rate affect the growth of cities and why workers living far away from job centers search less intensively and experience higher unemployment rates than those residing closer to jobs. We are also able to explain why, as compared to whites, black workers spend more time commuting to work but travel less miles and search for jobs over a smaller area.     

The Market Perception of Convertible Debt Versus Straight Debt: some Empirical Evidence from U.S. Firms and Non-U.S. Firms Listed in the U.S.

Accounting for convertible debt has long been a source of controversy in the accounting profession in the U.S. Current U.S. accounting rules require classifying convertible debt at date of issuance as "entirely debt" until conversion, despite numerous studies that assert that convertible debt is not "entirely debt", but is a blend of debt and equity. Convertible debt has taken on international interest because of the issuance of International Accounting Standard (IAS) 32, Financial Instruments; Disclosure and Presentation, which prescribes reporting separate debt and equity components for convertible debt. This study examines convertible debt issued by U.S. firms and non-U.S. firms listed in the U.S. using a levels approach. Specifically, convertible debt is compared to straight debt and contrary to ex ante expectation, convertible debt was not found to be perceived as being significantly different than straight debt for U.S. firms for any years and is statistically different in only two of the six years tested for non-U.S. firms. The validity of this study's findings is underscored by its research design, which compares convertible debt and straight debt issued by the same firms. The findings suggest that investors regard reported amounts of convertible debt similar to straight debt in their assessment of firm value.     

Optimal Licensing Contracts and the Value of a Patent

We extend Kamien and Tauman's (1986) analysis of the value of a patent. We find that an inventor can always design a fixed fee plus royalty contract such that his revenue is equal to the profit a monopoly endowed with the innovation could make on the market. This implies that the social value of a patent can be strictly negative whenever the patented innovation is of bad quality. We also explain why a principal can have an interest in using performance-based contracts although the principal and the agents are risk-neutral, information is symmetric, and agents' actions are verifiable.     

Improving the business impact of foresight

Achieving an impact on business decision-makers with foresight does not appear to be an easy task. Therefore, the Macro Trends team at Deutsche Bank Research has formulated some criteria to guide foresight projects. They should aim to produce plausibility, provide convenience and inspiration as well as an appropriate time perspective with regard to the content of foresight results. In addition, a structured way of producing and delivering foresight, a seamless inclusion in organisational procedures, a high level of interaction with decision-makers, ideational entrepreneurship, innovation regarding communication with business people, and persistence and synchronisation with the business organisation are the key criteria for achieving a higher impact from foresight projects. To live up to these criteria, the Macro Trends team has developed a 'trend map' which provides a conceptual aggregation of trends - to provide orientation for decision-makers and stakeholders.     

Centralized and decentralized control polices for a two-stage stochastic supply chain with subcontracting

An analysis of control policies for a two-stage supply chain with subcontractors at each stage is presented when decisions at each stage concerning safety stocks, backorders, and subcontracting are made jointly or in a decentralized manner. The inventory/admission control policies considered are base stock, echelon base stock and partial backordering, and the objective is to maximize the mean profit rate of the system. The optimal control parameters are found by exhaustive search using Markov chains. From numerical examples it appears that the policies which manage jointly sales and production levels in each stage provide much higher overall (system) profits than decentralized policies, although the latter are individually more profitable for the second stage. In addition, partial backordering provides the system with an extra profit above those that result from the lost sales (no backordering) and complete backordering policies. Finally, a number of numerical results show the impact of variations in certain system parameters on the optimal control parameters and the corresponding profit.     

The idea of reproduction

The concept of social reproduction which helps to identify elements and relations decisive for a transition from one social formation to another is presented here as a contribution to the methodology of social forecasting. The theoretical schema is constructed and tested in a retrospective forecasting exercise. The same methods are then applied to qualify the elements of change in contemporary society.     

SMEs and the fallacy of formalising CSR

There exists increasing pressure for small and medium‐sized enterprises (SMEs) to engage in corporate social responsibility (CSR) practices, including social reporting. Curiously in this promotional programme of CSR reporting, the only group whose ideas are not sought in this debate are the SME leaders themselves. The present ethnographic field analysis, based on discussions within entrepreneurs' circles, tends to suggest that the argument for expanding formalisation of CSR to SMEs rests upon several fallacies. It implicitly assumes that an apparent solution for large multinationals can be transposed to SMEs, and it underestimates the drawbacks of bureaucracy. Moreover, many SMEs experience inconsistency between the idealistic CSR communication of some large companies and their actions, especially in the supply chain. The author concludes that reports do not constitute the validation for real CSR, nor the proof of superior ethical behaviour. Formalisation can even be counterproductive. Conversely, the absence of social reporting does not imply that SMEs do not behave responsible. CSR in SMEs needs a specific approach, adapted to the informal nature and entrepreneurial character of the small business. The essence of CSR lies in the implementation of responsible business practices. It lies in the right attitudes, in the corporate culture, not in formalisation.     

Ownership concentration and corporate governance practices: substitution or expropriation effects?

The objective of this study is to analyze the relation between ownership concentration and corporate governance practices of a group of Canadian companies listed on the Toronto Stock Exchange. We rely on the corporate governance index developed by the Report on Business (ROB) in 2002. Our empirical results are consistent with the expropriation effect argument that predicts a negative relation between deviation from the one share‐one vote rule and corporate governance best practices. In this context, the dominant shareholder has incentives to maintain weak internal controls in order to facilitate expropriation. In addition, consistent with prior research, our results give partial support to the substitution effect argument by showing a negative impact of ownership concentration on the board composition subindex. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.