Inflation persistence in the Euro area before and after the European Monetary Union

This paper provides new evidence on inflation persistence before and after the European Monetary Union (EMU). Taking into account fractional integration of inflation, we confirm that inflation dynamics differed considerably across Euro area countries before the start of EMU. Since 1999, however, results obtained from panel estimation indicate that the degree of long run inflation persistence has converged. In line with theoretical predictions, we find that the persistence of inflation has significantly decreased in the Euro area, probably as a result of the more effective monetary policy of the ECB.     

Sensitivity of the weighting summation decision method to incorrect application

The weighting summation decision method is commonly used and misused for multiobjective decisions. The formal requirements of this method are outlined and some of the kinds of errors that are commonly made in applying it are discussed. Monte Carlo simulation is used to assess the potential that five classes of errors have for causing incorrect decisions. An index is developed which quantifies the complexity of decision problems. The simulations demonstrate that complexity can be about twice as important to quality of decisions as are errors in applying the weighting summation.     

Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis

Trade credit has been shown to be an important source of short-term finance for smaller firms but small firms are also suppliers of trade credit. There is little empirical evidence on the credit granting decisions of small firms. Previous empirical work (Petersen and Rajan, 1997; and Ng, Smith and Smith, 1999) has focused on credit granting and investment in accounts receivable in larger firms. In this paper we look at the influences on credit granting for the smallest firms, using a sample of firms with an average of 10 employees. As in previous studies we find that product and demand characteristics influence credit terms. Moreover, we find evidence that firm size affects credit extension choices directly by setting limits on the possibilities for economies of scale, but it also impacts indirectly by affecting the firm's access to finance and its bargaining strength vis-à-vis suppliers. The dominant position of larger customers in bargaining with small suppliers constrains the impact of other factors on the firm's choice of credit terms. Small firms are also under pressure to conform to industry norms, although lack of resources can be a limiting factor. Constrained firms may make use of two-part terms in an attempt to improve their cashflow.     

Kleinkindbetreuung: Wahlfreiheit durch subventionierte Krippenplätze?

In der aktuellen Debatte über die Betreuung von Kleinkindern wird über die Wahlfreiheit der Eltern zwischen verschiedenen Betreuungsm?glichkeiten und deren Finanzierung gestritten. Welche Gründe gibt es für die Subventionierung von Krippenpl?tzen? Wie steht es um ihre ordnungspolitische Rechtfertigung? Ist ein Mangel an Krippenpl?tzen eine Folge von Marktversagen? Welche Verzerrungen k?nnen durch die Subventionierung ausgel?st werden? Vera Bünnagel, 30, Dipl.-Volkswirtin, ist Wissenschaftliche Mitarbeiterin am Otto-Wolff-Institut für Wirtschaftsordnung und am Institut für Wirtschaftspolitik an der Universit?t zu K?ln; Dr. Barbara Henman, 41, ist Wissenschaftliche Mitarbeiterin am Institut für Wirtschaftspolitik an der Universit?t zu K?ln. Die Autorinnen danken Benedikt Langner für wertvolle Anregungen und Diskussionen. Der Beitrag entstand im Rahmen des Otto-Wolff-Forschungsprojekts „Die Rolle des Staates bei der Kinderbetreuung“.     

Restructuring and Firm Value: The Effects of Profitability and Restructuring Purpose

This study extends prior research on the information content of restructuring charges. We find that the relationship between restructuring activities and returns during the restructuring charge year is different for loss firms than for profit firms. Restructurings that are primarily intended to either eliminate personnel or exit a line of business are positively associated with returns of the loss firms, suggesting that investors view these activities as value-increasing. In contrast, common stock returns of profit firms exhibit a nonpositive association with restructuring charges. Overall, our results point to the role of the context and the content of the restructuring announcement in the market's assessment of the value relevance of restructuring charges reported in the financial statements.     

Confidentiality decisions: The reasoning process of CPAS in resolving ethical dilemmas

As in other professions, such as law and medicine, accounting has a Code of Professional Conduct (Code) that members are expected to abide by. In today's legalistic society, however, the question of “what is the right thing to do,” is often confused with “what is legal?” In many instances, this may present a conflict between adhering to the Code and doing what some may perceive as proper ethical behavior. This paper examines (1) the reasoning process that CPAs use in resolving ethical issues related to confidentiality; and, (2) whether or not there is a perceived conflict in adhering to the Code and the moral values of some CPAs. The results indicate that although most CPAs sampled resolve ethical issues in accordance with the Code, such decisions do not always reflect their belief of what is morally right. Although the results are useful in understanding how some CPAs reason in making moral choices involving confidentiality decisions, care should be exercised in drawing further inferences from this study due to the limited sample size.     

Asymmetric effects of inflation shocks on inflation uncertainty

The empirically documented regularity that dis-inflationary shocks are associated with larger output changes than are positive shocks presents an interesting puzzle to macroeconomists. This paper presents, and empirically supports, a new explanation for this asymmetry. The authors show, using a TARCH model, that negative inflationary shocks result in greater inflation uncertainty than positive shocks. As Friedman [1977] argues, and a body of empirical evidence demonstrates, inflation uncertainty leads to lower output growth. Drawing on this explanation, this essay points to an avenue by which the output asymmetry of inflationary shocks can be explained.     

Predicting corporate social responsiveness: A model drawn from three perspectives

Most studies of corporate social responsiveness (CSR) focus on the relationship between CSR and profit. Here, we use three perspectives (institutional theory, economic theory and agency theory) to explain CSR. Industry norms, market share and indicators of management reputation predict variance in CSR. The combined perspectives improve understanding of both CSR and the CSR-profit relationship in two ways. First, they suggest that CSR levels and their relationship with profit will vary by industry. Second, they suggest that stock market measures and accounting measures will respond differently to CSR measures. Stock market measures lead, while accounting measures lag, CSR.Dr. Barbara Beliveau is an Assistant Professor of Finance at the University of Connecticut. She has published inThe Journal of Risk and Insurance andThe Journal of Insurance: Issues and Practices. Her current research deals with efficient market theory and other issues in applied microeconomics and finance.Dr. Melville Cottrill is an Associate Professor of Management at Southern Connecticut State University, where he is also director of the school's small business outreach efforts. In addition to teaching, Dr. Cottrill remains a member of State and Federal Bars.Dr. Hugh O'Neill is an Associate Professor of Strategy in the Kenan-Flagler School of Business at the University of North Carolina, Chapel Hill. He has also served at Grand Valley State University and the University of Connecticut. His current research included investigations of management decision making, downsizing, and Board of Director involvement in CSR.