Organization-Harm vs. Organization-Gain Ethical Issues: An Exploratory Examination of the Effects of Organizational Commitment

The existing literature on the relationship between organizational commitment and ethical decision making suggests that ethical decision makers with higher organizational commitment are less likely to engage in ethically questionable behaviors. The ethical behaviors previously studied in an organizational commitment context have been organization-harm issues in which the organization was harmed and the individual benefited (e.g., overstating an expense report). There is another class of ethical issues in an organizational context, however. These other issues, termed organization-gain issues, focus on the organization obtaining a benefit while outsiders, such as investors, are harmed (e.g., overstating reported revenue). We explore whether individuals with higher organizational commitment are more or less likely to engage in questionable behaviors that benefit the organization. Results of our study indicate that individuals with higher organizational commitment are less likely to engage in ethically questionable behaviors, regardless of whether the behaviors are organization-harm or organizational-gain issues.     

Earnings losses of displaced workers and the business cycle: An analysis with administrative data

This paper examines the earnings losses of displaced workers over the business cycle. Long-term earnings losses for these workers during a recessionary period are 1.7 to 3.9 times larger than for those observed during a period of economic growth.     

How Costly is Hospital Quality? A Revealed‐Preference Approach

We analyze the cost of quality improvement in hospitals, dealing with two challenges. Hospital quality is multidimensional and hard to measure, while unobserved productivity may influence quality supply. We infer the quality of hospitals in Los Angeles from patient choices. We then incorporate ‘revealed quality’ into a cost function, instrumenting with hospital demand. We find that revealed quality differentiates hospitals, but is not strongly correlated with clinical quality. Revealed quality is quite costly, and tends to increase with hospital productivity. Thus, non-clinical aspects of the hospital experience (perhaps including patient amenities) play important roles in hospital demand, competition, and costs.     

Are Agricultural PACs Monolithic? An Empirical Investigation of Political Contributions from Agricultural Subsectors

This article analyzes donation strategies of agricultural PACs by examining and testing a variety of variables theoretically related to contributions and formally testing for equivalence of donation strategies across PACs of varying levels of aggregation. Both chambers of the 108^th Congress were modeled, with particular attention paid to the targeting of different power or influence sources within the legislature. Results showed significant heterogeneity across PAC subaggregates within a chamber, as well as between chambers, in terms of overall strategy and magnitude of marginal impacts. Evidence supporting the conditional party government hypothesis was mixed and subindustry specific, with chairmanships apparently less important in the Senate than in the House.     

Enterprise risk management: An empirical analysis of factors associated with the extent of implementation

Enterprise risk management (ERM) has emerged as a new paradigm for managing the portfolio of risks that face organizations, and policy makers continue to focus on mechanisms to improve corporate governance and risk management. Despite these developments, there is little research on factors associated with the implementation of ERM. Research is needed to provide insights as to why some organizations are responding to changing risk profiles by embracing ERM and others are not.This exploratory study examines factors associated with the stage of ERM implementation at a variety of US and international organizations. Based on data gathered from 123 organizations, we find the stage of ERM implementation to be positively related to the presence of a chief risk officer, board independence, CEO and CFO apparent support for ERM, the presence of a Big Four auditor, entity size, and entities in the banking, education, and insurance industries. We also find US organizations to have less-developed ERM processes than international organizations. We believe this paper will provide an initial foundation for more advanced research about ERM.     

Incentive contracts,corporate governance,and privatization funds in Romania

This paper analyzes the governance problems of the Romanian Private Ownership Funds (POFs), critical institutions both in the privatization process and in the future ownership and control structure of the Romanian economy. Although the POFs share similar problems with mass privatization intermediaries elsewhere, the satisfactory performance of Romanian funds faces additional obstacles due to the bureaucratic character of their initial organization, the continuing involvement of the state in their governance and operation, and the complexity of the tasks that they are supposed to accomplish. The POFs are charged not only with governing companies and managing their portfolios, but with part of the task of selling the remaining state shareholdings. We review instruments of corporate governance that could potentially induce them to perform these tasks, and conclude that the standard practices are likely to be seriously deficient in the case of the Romanian POFs. One possibility which has not yet been adopted is an incentive payment scheme for POF executives. We analyze the difficulties of implementing such a scheme with a multi-task principal-agent model, and propose a practical solution to the incentive design problem. We argue that, while some such method is certainly necessary to induce the POFs to perform their assigned tasks even approximately, it is by no means sufficient to enliven the Romanian privatization process. The author is grateful for a research grant from the National Council for Soviet and East European Research, received through the Center for Economic Policy Research at Stanford University. Encouragement from Ralph W. Pfouts, discussion with Alexander Dyck, and comments from Roman Frydman on an earlier draft are gratefully acknowledged.     

Board Characteristics and Audit Fees*

This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee “quality” are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees.     

Wealth Effects of Acquiring Financially Distressed Firms

The purpose of the present research is to study target and acquirer shareholder wealth effects of acquisition announcements in which the target is financially distressed. The abnormal returns and the dollar abnormal gains to both the target and acquiring firms are examined according to whether the mode of acquisition is a merger or a tender offer. A regression analysis is also undertaken to examine the importance of the mode of acquisition, an industry effect, and tax variables in determining the abnormal dollar gains in acquisitions of financially distressed targets.     

Analysing the job characteristics model: new support from a cross-section of establishments

We evaluate the empirical relevance of the Job Characteristics Model of Hackman and Oldham in the modern organizational environment using unique, nationally representative data from a survey of British establishments. The data contain information on a large number of establishments and multiple workers within each establishment. The results generally support the Job Characteristics Model's predictions that task variety and worker autonomy are positively associated with labour productivity and product quality and that autonomy is positively associated with worker satisfaction. In contrast to previous studies, we find the results for task variety are stronger for the performance-related outcomes than for worker satisfaction. The theoretically predicted moderating effect of context satisfaction is largely unsupported in the data.