Voters prefer more qualified mayors,but does it matter for public finances? Evidence for Germany

This paper studies the importance of politicians’ qualification, in terms of education and experience, for fiscal outcomes. The analysis is based on a large panel for 2031 German municipalities for which we have collected information on municipal budgets as well as the election results and qualification levels of mayoral candidates. We principally use a regression discontinuity design focusing on close elections to estimate causal effects. We find that mayors with prior experience in office have a tendency to reduce the level of local public debt, lower total municipal expenditures and decrease the local taxes, even though these results are only significant in some specifications. In contrast, the education level of the mayor exerts no significant effects on the overall fiscal performance of the municipality. The results are partly surprising as both education and experience are shown to matter greatly in the electoral success of mayoral candidates.     

Signaling,network externalities,and subsidies

A signal may be more effective the greater the number of people who use the same signal, thereby creating a network externality and potentially generating multiple equilibria. A subsidy to the signal can increase efficiency, and the signalers may benefit from the subsidy even if they pay taxes to finance it. But people who benefit from the signal may oppose too large a subsidy, because a large subsidy could destroy the signaling value.     

Migrate or not? The effects of regulation SHO on options trading activities

In this study, we investigate the effects of stock short-sale constraints on options trading by exploiting two US Securities and Exchange Commission rule changes under Regulation SHO: Rule 203 (locate and close-out requirements) and Rule 202T (temporary removal of short-sale price tests). We find that stock short selling activities decrease (increase) significantly after Rule 203 (Rule 202T) implementation, supporting the validity of Rule 203 (Rule 202T) as an exogenous increase (decrease) in short-sale constraints. Options volume increases significantly after Rule 203 went into effect and the result is more pronounced among firms with lower levels of institutional ownership and smaller options bid-ask spreads. Therefore, the evidence from Rule 203 suggests that investors may use options as substitutes for stock short sales when short selling is less feasible or more costly due to the locate and delivery requirements. In contrast, we find no significant change in the options trading volume of pilot stocks during the pilot program of Rule 202T. Overall, our results indicate that the impact of short-sale constraints on options trading varies with the types of constraints affected.     

(Unusual) weather and stock returns—I am not in the mood for mood: further evidence from international markets

This paper investigates the explanatory power of weather variables deviations in two leading international financial trading centres (New York and London) on 58 global stock indices over the period September 2000 to December 2013. The empirical results find that unusual deviations of weather variables from their monthly averages have a statistically significant effect on stock returns across global returns. The paper also attempts to explain these effects through the sales and energy prices mechanisms. The results provide strong support to both mechanisms.     

Short and long-term interactions between venture capital returns and the macroeconomy: evidence for the United States

The main purpose of this paper is to empirically model the influence of macroeconomic and financial variables on the performance of risk capital in the US. We start our investigation using a static long-run equilibrium model. In contrast to previous studies, we analyze the effect of several factors simultaneously within the framework of a vector error correction model (VECM). This allows us to study short- and long-term interactions to overcome the problem of endogeneity, and to discover causal mechanisms. The results show that the value of venture capital investments is positively related to industrial production, the exit channel Nasdaq, and the long-term interest rate. However, the value of venture capital investments is negatively related to the short-term interest rate. According to the short-term dynamics, VEC Granger causality confirms that only industrial production influences venture capital performance, while venture capital returns Granger causes Nasdaq performance.     

Value chain capability,value strategies and firm default risk

Firm stakeholders are paying more attention to the firm risks rather than merely focusing on returns. Among those risks, a firm's ability to repay its debt increasingly becomes a yardstick to evaluate a firm and predict the security level of returning its borrowings. This situation is directly related to a firm's default risk. The current article links the firm's value strategies and capabilities to firm default risk reduction. Specifically, this article conceptualizes and operationalizes a new firm capability, value chain capability, and examines how this capability and two firm value strategies, R&D and advertising, reduce the firm's default risk. Meanwhile, the authors formulate the value chain capability's moderating effects on the relationships between the two value strategies and firm default risk. The findings suggest that value chain capability and advertising help the firm reduce default risk. R&D will have the same effect only when a firm has high value chain capability.     

Consumer adoption of Internet banking in Jordan: Examining the role of hedonic motivation,habit, self-efficacy and trust

Despite the rapid growth of Internet banking (IB), customers in developing countries still hesitate to adopt this technology and its use in the Middle East remains low. This study aims to identify and examine the factors that predict behavioural intention and adoption of IB in Jordan. Four factors – hedonic motivation, habit, self-efficacy and trust – are proposed in a conceptual model. Data was collected by means of a survey with bank customers in Jordan. Structural equation modelling (SEM) was used to analyse the data. The results strongly supported the conceptual model. Further, hedonic motivation, habit, self-efficacy and trust were all confirmed to have a significant influence on behavioural intention. Trust was found to be strongly predicted by both hedonic motivation and self-efficacy. This study provides both academics and practitioners with an insight into the factors that can be used to encourage customer adoption of IB specifically in a Middle East context.     

What Plato Knew About Enron

This paper applies Plato’s cave allegory to Enron’s success and downfall. Plato’s famous tale of cave dwellers illustrates the different levels of truth and understanding. These levels include images, the sources of images, and the ultimate reality behind both. The paper first describes these levels of perception as they apply to Plato’s cave dwellers and then provides a brief history of the rise of Enron. Then we apply Plato’s levels of understanding to Enron, showing how the company created its image and presented information to support that image, and how the public eventually emerged from the cave to realize the truth about Enron’s actual accounting practices and financial state, which led to the corporation’s downfall. We find Plato’s allegory both useful in analyzing the relationship between Enron and the public and instructive about the power and moral responsibility of Enron’s executives.