Doing Good While Behaving Badly: Checkout Charity Process Mechanisms

Journal of Business Ethics - Companies are increasingly using cause-related marketing campaigns to engage consumers during the purchase process and highlight their own corporate social...     

To push performance,check the leader’s power motive

The power motive, defined as the desire to impact the behavior and emotions of another person, has long been controversial. On one side, the exercise of power has been put forth as a fundamental human need greater in strength than the need to survive. On the other, it has been vilified for its potentially devastating consequences. We argue the latter view is distorted, and, by relying too heavily on it, we have come to misunderstand the essential nature of power and its use by leaders charged with driving performance. It is not the power motive that leads to corruption and tyranny, but rather how the power motive is channeled into behavior by other personality factors. Consequently, those charged with leader selection should place greater emphasis on how individuals with strong power motives differ in how they channel power. Doing so will support the selection of executives best equipped to deliver organizational performance.     

Signaling effects of recurrent list-price reductions on the likelihood of house sales

Recurrent list-price reductions for a house may signal the impatience of sellers to conclude a sell transaction more quickly, leading to more visits and a higher likelihood of being sold (positive signal). Recurrent list-price reductions may also provide a market signal that the listing is problematic and thus harder to sell without a list-price reduction, leading to a lower likelihood of being sold (negative signal). Unlike standard survival analysis, we investigate which signal prevails using a joint frailty model that accounts for the interdependence among recurrent list-price reductions and the association between the recurrent reductions and the sold event. Our novel data set contains the time-dated recurrent list-price reductions for each house listed on the market. The results from the joint frailty model show time-varying negative impacts of list-price reductions on the likelihood of a house sale, supporting the dominance of the negative signaling effects of recurrent list-price reductions. Although listings with frequent list-price reductions are less likely to be sold, sold houses sell at a higher ratio of sold price to last list price, which incorporates current market conditions and fairer pricing, holding constant the initial list price and the aggregate list-price reduction from the initial list price.     

Keeping up with the Joneses? Evidence from Peer Performance in the Banking Industry

This paper traces the reaction of US banks to ROE underperformance on liquidity creation, equity capital, and loan loss provisions. We find that banks change their structures in the subsequent quarter after underperformance by increasing their on-balance and off-balance sheet liquidity creation to increase profitability. Banks tend to increase their equity capital and improve their loan quality by lowering non-discretionary loan loss provisions to become safer. Banks signal their ability to overcome underperformance by increasing their discretionary loan loss provisions. Our results reveal that large banks rely mainly on off-balance sheet liquidity creation as their primary tool to recover from underperformance while medium-size and small banks adjust their equity capital to increase their safety.     

Optimal measure preserving derivatives revisited

This article clarifies the relationship between pricing kernel monotonicity and the existence of opportunities for stochastic arbitrage in a complete and frictionless market of derivative securities written on a market portfolio. The relationship depends on whether the payoff distribution of the market portfolio satisfies a technical condition called adequacy, meaning that it is atomless or is comprised of finitely many equally probable atoms. Under adequacy, pricing kernel nonmonotonicity is equivalent to the existence of a strong form of stochastic arbitrage involving distributional replication of the market portfolio at a lower price. If the adequacy condition is dropped then this equivalence no longer holds, but pricing kernel nonmonotonicity remains equivalent to the existence of a weaker form of stochastic arbitrage involving second-order stochastic dominance of the market portfolio at a lower price. A generalization of the optimal measure preserving derivative is obtained, which achieves distributional replication at the minimum cost of all second-order stochastically dominant securities under adequacy.     

Conflicts of interest and agent heterogeneity in buyer brokerage

This article investigates the incentives of agents working with buyers (buying agents) under the fixed percentage commission system and the implications on housing market outcomes. Our model shows that the absence of a binding contract creates a risk of losing clients for buying agents, which helps mitigate the conflict of interest between buying agents and their clients. Both the buying agent's prediction accuracy regarding their client's reservation prices and the level of tolerance given by the buyer to the buying agent affect the binding force. Results from simulations and empirical analyses using house transactions in Canada support our model predictions.     

A Model of Spillovers Through Labor Recruitment

This paper develops a model where spillovers can be generated through domestic firm recruitment of employees at a multinational corporation (MNC) where more advanced technologies are employed. It is shown that both spillover and no-spilover equilibria are possible in the model, depending on the marginal costs and benefits of recruitment. Spillover benefits depend on demand parameters and the technological capabilities of the domestic firm, and spillover costs are determined by the MNC's internal wage. Compared with the no-spillover equilibrium, spillovers lead to fewer technology transfers by the MNC and higher market prices. [031, F23]     

The market reaction to announced deep cuts in capital expenditures

The objective of the study reported in this paper was to examine the role of deep cuts in capital expenditures as a firm's strategy for becoming more efficient and, in turn, more competitive. Based on an empirical study, support is provided for the argument that deep cuts in capital expenditures may be a viable strategy for realigning corporate priorities toward a more efficient operation. The measure of performance utilized in this paper is the stock market reaction to announced deep cuts.