Employee stock ownership and financial performance in European countries: The moderating effects of uncertainty avoidance and social trust

This study investigates how the effect of employee stock ownership on financial performance may hinge on the diverse cultural and societal contexts of European countries. Based on agency and national culture theories, we hypothesize that the positive relationship between employee stock ownership and return on assets (ROA) is stronger in those nations with lower uncertainty avoidance and higher social trust. Using a multisource, time‐lagged, large‐scale dataset of 1,741 firms from 21 countries in Europe, our multilevel, random coefficient modeling analysis found evidence for these hypotheses, suggesting that uncertainty avoidance and social trust serve as important contextual cues in predicting the linkage between employee stock ownership and financial performance. Our supplemental analysis with distinction between the managerial and nonmanagerial employee stock ownership further indicates managerial employee stock ownership has a direct positive effect on ROA. Although nonmanagerial employee stock ownership had a nonsignificant association with ROA, the relationship was positive and significant when uncertainty avoidance was low and social trust was high. This research contributes to the existing literature by illuminating some of the contextual influences altering the effectiveness of employee stock ownership. Our findings also offer practical suggestions for effectively using employee stock ownership.     

Anchored putter ban: An examination of whether anchored putting impacts career success and putting performance

The Professional Golfers' Association (PGA) Tour ban on anchored putting (Rule 14‐1b) took effect on January 1, 2016. The ban remains controversial because the governance decision appears to have been made without adequate empirical evidence. Accordingly, to investigate the efficacy of the ban, the impact of using anchored putters on PGA golfers' career success and putting performance was examined. PGA golfers ranked in the top 125 were studied from 2009 to 2015. The analysis revealed an anchored putter offered no unfair advantage with regard to improving players' career success or putting performance when compared with standard putter usage by PGA golfers.     

The Political Economy of Confucian Harmony: A Xunzian Vision

A global market economy of pure instrumental rationality now poses a growing threat, jeopardizing common citizenship, the capacity for human flourishing, and harmony between humans and nature. Growing skepticism about the sustainability of market capitalism and its moral legitimacy propels us to search for a new economic model in which humans are no longer held hostage to the unbridled pursuit of self‐interest and limitless possession at the expense of the well‐being of others and nature and that attempts to overcome the old conflict between capitalism and socialism. We can call this alternative model “moral economy,” an economic system that reconciles private interests with the public good broadly construed. In this article I reconstruct the Confucian ideal of moral economy by paying close attention to Xunzi's ethical and political thought. Xunzi, one of the key classical Confucians, stipulates the threshold of sufficiency by extending the ruler's care to the most destitute of society as well as giving moral priority to their basic needs without dismissing the foundational importance of individual merit and contribution. Rejecting both pure economic meritocracy and dogmatic egalitarianism, Xunzian Confucianism aims to create a political economy of harmony where various distributive values (need, equality, and merit, among other things) each have their own place.     

Premia for correlated default risk

Using data on corporate default experience in the U.S. and market rates of CDX index and tranche swaps of various maturities, we estimate reduced-form models of correlated default timing in the CDX High Yield and Investment Grade portfolios under actual and risk-neutral probabilities. The striking contrast between the estimated processes followed by the actual and risk-neutral arrival intensities of defaults, and between the parameters governing the actual and risk-neutral dynamics of the risk-neutral intensities, indicates the presence of substantial default risk premia in CDX swap market rates. The effects of risk premia on swap rates covary strongly across maturities, and depend on general stock market volatility and several measures of credit spreads. Large moves in the effects of these premia on swap rates have natural interpretations in terms of economic and financial market developments during the sample period, April 2004 to October 2007. Our results suggest that a large portion of the movements in CDX swap market rates observed during the sample period may be caused by changing attitudes toward correlated default risk rather than changes in the economic factors affecting the actual risk of clustered defaults, which ultimately governs swap payoffs.     

What drives racial segregation? New evidence using Census microdata

Using restricted Census microdata that link households to the Census block in which they live, this paper re-examines the question of whether racial differences in sociodemographic characteristics can explain observed levels of racial segregation. We develop a simple measurement framework designed to make use of the rich joint distribution of individual and neighborhood characteristics that these data provide, analyzing segregation patterns in the San Francisco Bay Area. The results indicate that racial differences in the collective set of characteristics we consider do have the potential to explain a considerable amount of the observed segregation, although more so for Asians and especially Hispanics than whites and blacks. Different sociodemographic factors emerge as potentially important for each race.     

PARTISAN ADVOCATES

This paper studies the problem of an uninformed decision maker who acquires expert advice prior to making a decision. I show that it is less costly to hire partisan agents than impartial agents, especially under advocacy, and that the decision maker prefers partisan advocacy to other forms of institutions. I also extend the literature, originating with Dewatripont and Tirole ( 1999 ), to a setting with contracts that condition on information provided and not just the decision made.     

Inflation targeting and real exchange rates: A bias correction approach

This paper examines whether inflation targeting (IT) influences purchasing power parity (PPP) by a bias correction approach under cross-sectional dependence. The recursive mean adjustment (RMA) method proposed by So and Shin (1999) and Shin and So (2001) is employed to correct a downward bias in half-life estimates of real exchange rates. More importantly, the empirical results show that IT lowers variability of real exchange rates and plays an important role in providing favorable evidence for long-run PPP.     

The effect of reporting errors on the cross-country relationship between inequality and crime

This paper analyzes reporting errors in crime data to see how they impact econometric estimates, particularly of the key relationship between inequality and crime. Criminal victimization surveys of 140,000 respondents in 37 industrial, transition and developing countries are used. Comparing the crimes experienced by these respondents with those reported to the police, non-random and mean-reverting errors are apparent. Time-varying factors affect the propensity of victims to report crimes to the police, undermining the use of country-specific fixed effects as a means of dealing with measurement error in official crime data. These errors substantially attenuate both cross-sectional and panel estimates of the partial correlation between inequality and crime.     

The Antonelli Versus Hicks Elasticity of Complementarity and Inverse Input Demand Systems

A true measure of input substitution associated with exogenous changes in input quantities requires that the output level be held constant. To this effect, this study presents the Antonelli elasticity of complementarity characterised by the distance function. The more common Hicks elasticity of complementarity assumes that marginal cost is constant and hence does not capture pure substitution effects. The two elasticities of complementarity are related to inverse demand systems and are shown to be equivalent under constant returns to scale. A framework for estimating the Antonelli elasticity from the uncompensated demand system is presented. Estimation results reveal substantial bias of input substitutability with the use of Hicks' measure.     

A day without a search engine: an experimental study of online and offline searches

With the evolution of the Web and development of web-based search engines, online searching has become a common method for obtaining information. Given this popularity, the question arises as to how much time people save by using search engines for their information needs compared to offline sources, as well as how online searching affects both search experiences and search outcomes. Using a random sample of queries from a major search engine and a sample of reference questions from the Internet Public Library (IPL), we conduct a real-effort experiment to compare online and offline search experiences and outcomes. We find that participants are significantly more likely to find an answer on the Web (100 %), compared to offline searching (between 87 % and 90 %). Restricting our analysis to the set of questions in which participants find answers in both treatments, a Web search takes on average 7 (9) minutes, whereas the corresponding offline search takes 22 (19) minutes for a search-engine (IPL) question. Furthermore, while raters judge library sources to be significantly more trustworthy and authoritative than the corresponding Web sources, they judge Web sources as significantly more relevant. Balancing all factors, we find that the overall source quality is not significantly different between the two treatments for the set of search-engine questions. However, for IPL questions, we find that non-Web sources are judged to have significantly higher overall quality than the corresponding Web sources. In comparison, for factual questions, Web search results are significantly more likely to be correct (66 % vs. 43 %). Lastly, post-search questionnaires reveal that participants find online searching more enjoyable than offline searching.