Macroeconomic Fluctuations as Sources of Luck in CEO Compensation

Macroeconomic fluctuations in interest rates, exchange rates, and inflation can be considered sources of good or bad “luck” for corporate performance if management is unable to adjust operations to these fluctuations. Based on a sample of 2,091 US firms, we decompose the impacts of macroeconomic fluctuations on three measures of CEO compensation. Our study provides empirical support for the importance of considering macroeconomic fluctuations in designing CEO incentive schemes. It adds to the managerial power literature on moral hazard and CEO compensation by pinpointing the obvious risk that the CEO in an asymmetric and non-linear reward system will be inclined to prioritize his/her own cash flow at the expense of fulfilling an assumed agency role. The policy conclusion for remuneration committees and board of directors is to filter out macroeconomic influences on performance to be rewarded whenever an asymmetric compensation scheme has been opted for.     

The analysis of Taiwanese bank efficiency: Incorporating both external environment risk and internal risk

This study adopts a three-stage approach to estimate bank efficiency based on information obtained from 29 banks in Taiwan for the period from 2002 to 2004. In the first stage we employ super SBM (super slacks-based measure) to estimate the scores relating bank efficiency including internal risk. In the second stage a stochastic frontier regression model is then employed to estimate the external environment risk effects. In the third stage we employ the DEA method again to estimate the scores relating bank efficiency including the internal risk and excluding the external risk.     

Mean-downside-risk and mean-variance newsvendor models: Implications for sustainable fashion retailing

Newsvendor models have been well-established for studying supply chain management problems with fashionable products. In this paper, we explore the mean-downside-risk (MDR) and mean-variance (MV) newsvendor models under both the exogenous and endogenous retail price decision cases. We first construct analytical models with the MDR and MV objectives. We then show that the analytical solution schemes for both the MDR and MV problems are the same. With the measures for sustainability such as the expected quantity of goods leftover, the expected sales to expected goods leftover ratio, the rate of return on investment, and the probability of achieving a pre-determined profit target, we proceed to compare the levels of sustainability by the fashion retailers which employ the mean-risk and the risk neutral models. Insights are generated.     

Construal-level mind-sets and the perceived validity of marketing claims

Prior research shows that the repetition of unfamiliar statements increases their subjective truthfulness. The present research shows that truth ratings can also be increased without repetition. Several different manipulations of low-construal-level mind-sets increased the perceived validity of a wide variety of marketing claims across a broad spectrum of products and industries. Mismatched construals reduced this effect. The results suggest that concrete construals enhance truth ratings when consumers focus on their intuitive feelings and impressions but not when they process marketing claims analytically.     

Influence of Language of Packaging Labels on Consumers’ Buying Preferences

Can packaging labels of three different foreign languages (Korean, Japanese, and English) affect consumers’ preferences? In a month of field experiment involving 203 Chinese undergraduate students, this study used coffee as an experimental product and created a fictitious brand “7 AM COFFEE.” Using analysis of variance (ANOVA) as a statistical tool, the results of the experiment show that the English language represents the strongest effect for (1) consumers’ attention, (2) trust, (3) perceived quality, (4) taste perception, and (5) purchase intention. Moreover, consumers with high or low frequencies of drinking a coffee do not have a specific preference in relations to their attitude. The findings and discussion of this research provide better direction for marketing managers of beverages in establishing market strategies to promote products and generating appeal among coffee drinker.     

Modeling Corporate Citizenship and Its Relationship with Organizational Citizenship Behaviors

Citizenship, such as corporate citizenship and organizational citizenship, has been an important issue in business management for decades. This study proposes a research model from the perspectives of social identity and resource allocation, by examining the influence of corporate citizenship on organizational citizenship behaviors (OCBs). In the model, OCBs are positively influenced by perceived legal citizenship and perceived ethical citizenship, while negatively influenced by perceived discretionary citizenship. Empirical testing using a survey of personnel from 18 large firms confirms most of our hypothesized effects. Theoretical and managerial implications of our findings are discussed.     

The effects of stochastic wages and non-labor income on labor supply: update and extensions

The analysis of labor supply under risk has a long history dating back to Hicks (The theory of wages, St. Martin’s Press, New York, 2003) and Knight (Risk, uncertainty and profit, Kelly, New York, 1964). In the 1980s more technical papers investigated the impact of stochastic non-labor income and/or wage rate upon labor supply. In this paper, we show that the effect of a mean-preserving increase in risk in wage rate or non-labor income on labor supply is best understood as a special case of an Nth degree risk increase (as defined by Ekern (Econ Lett 6:329–333, 1980)) and the conditions for signing the effect of a higher-order risk increase in wage rate or non-labor income on labor supply are analogous to those for signing the effect of a simple non-stochastic decrease in wage rate or non-labor income. We thus extend, and provide new and more intuitive interpretations for, related earlier results.     

Does Trading Improve Individual Investor Performance?

From 52,649 accounts and 10,615,117 transaction records obtained from a renowned brokerage house in Taiwan we find that individual investors purchase 73.4% and sell 64.5% of their stock portfolios each month. This is more than ten times the statistics for their U.S. counterparts. In general, individual investors have positive abnormal returns from factor-based models. However, they would have earned higher returns from following a buy-and-hold strategy. We find a U-shaped rather than a monotonic turnover and performance relation. The results do not support the overconfidence argument proposed by Barber and Odean (2000, 2001) nor does the rational model of Grossman and Stiglitz (1980). We find that investors with large portfolio values tend to be informed traders whose excess trading does create performance value. We also investigate whether men are more overconfident than women and find that even though men trade more excessively than women, men's performance measures are not dramatically lower than women's. Specifically, the own-benchmark adjusted gross return for men is higher than that for women. The regression results indicate that electronic traders rather than men are overconfident.     

On the complete monotonicity of the compound geometric convolution with applications in risk theory

We prove that the complete monotonicity is preserved under mixed geometric compounding, and hence show that the ruin probability, the Laplace transform of the ruin time, and the density of the tail of the joint distribution of ruin and the deficit at ruin in the Sparre Andersen model are completely monotone if the claim size distribution has a completely monotone density.     

A social network analysis of leading semiconductor companies’ knowledge flow network

This study (1) constructs a knowledge flow network for leading semiconductor companies; (2) seeks out how leading semiconductor companies can attain knowledge competencies (through patent activities or network position) via social network analysis; and (3) proposes critical strategic suggestions regarding knowledge flow networks in the industry. The results show (1) that a knowledge flow network with no isolators and Asian semiconductor firms are closely connected with other firms all over the world; (2) that patent activities are positively associated with central network positions and firm performance; (3) that closeness centrality is helpful for patent citation activities and also helps to achieve better performance; and (4) that semiconductor companies in Asia are also closely connected with others in the world.