OPPORTUNISTIC MATCHING IN THE HOUSING MARKET*

We construct a model of the housing market in which agents differ in their flow values while searching. Agents enter the market relaxed (with high flow values) but move to a desperate state (low flow values) at a Poisson rate if they have not already transacted. We characterize the equilibrium steady‐state matching pattern and the joint distribution of price and time to sale (for sellers). The expected price conditional on time to sale falls with time spent on the market, whereas the conditional variance of price first rises and then falls with time on the market.     

Ethical reflection and service internships

To achieve the goals of ethics education, students must have oportunities to develop both moral capacities (imagination, responsibility, and perseverance) and intellectual capacities (critical thinking). This article contends that service-based learning represents an important opportunity for integrative ethics education. It describes a program of leadership internships at North Central College in Naperville, Illinois, in which faculty members conduct a for-credit reflection seminar with students involved in service internships. The seminar is based upon student-written cases about ethical issues they face in their work settings.David C. Smith is Executive Vice President of the Council for Ethics in Economics, an association of leaders in busienss and the professions dedicated to strengthening the ethical fabric of business and economic life. Prior to joining the Council in August, 1994, he was Director of the campus-wide Leadership, Ethics, and Values Program at North Central College in Naperville, Illinois.     

Can Oxford heal itself?

The fast-growing HMO was hammered on Wall Street after revealing its massive computer problems. Those foul-ups are being fixed, but now comes the hard part--reclaiming the trust of stunned shareholders and outraged doctors.     

Demographic change and income inequality in the United States, 1976-1989

"The U.S. economy experienced significant increases in the degree of income inequality over the past two decades.... In this paper we consider the effects of race, age, female headship, and college education on the distribution of family income by developing a multivariate methodology that allows us to gauge the influence of one factor while holding other determinants of family incomes constant. Over the period studied we find that race had only a minor effect on the overall size distribution of income. Age had a somewhat greater effect than race. In contrast, the impact of female heads and college education were quite substantial. The multivariate estimates reveal that the effects of female heads and college education both increase the Gini to a much greater extent than the progressivity of federal income taxes decreases it. The effects of college education and female headed families on inequality have grown larger across time, while the influence of age has declined. We find that the effects of race on inequality have changed little over the 1976 to 1989 period."     

In search of a residual dividend policy

We survey 309 sample firms exhibiting behavior consistent with a residual dividend policy and their matched counterparts to learn how they set their dividend policies. The findings reveal that the sample firms are more likely than their counterparts to maintain a long-term dividend payout ratio, use long-run earnings forecasts in setting the dividend, and be unconcerned about the cost of raising external funds. Yet, firms behaving as though they follow a residual dividend policy generally do not profess to follow the policy. At best, the sample firms follow a “modified” residual policy in which they carefully manage their payout ratio and dividend trend. Although it may not be an explicit goal of such a dividend policy, consistently low free cash flow typically results.     

Feedback loops, fair value accounting and correlated investments

This paper presents and tests a model of the price dynamics that arise when investors fail to recognize the redundancy of unrealized gains and losses (“UGLs”) that are correlated with the firm’s past returns. Consistent with the predictions of our model, our experiment shows that a firm’s prices and earnings become highly volatile when correlated investment is large and correlated UGLs are made salient by comprehensive income reporting. The results suggest that including correlated UGLs in performance numbers could induce violations of weak-form efficiency that exacerbate volatility in share prices and earnings.     

Institutional evolution as an emerging focus in scenario planning

In this paper, we argue that institutional evolution should occupy a center stage in scenario development. During the last two decades, strategy models have neglected the institutional milieu, partly because analytical approaches to link institutional milieus and business contexts were underdeveloped. However, theoretical developments in institutional economics accomplished during this time period make it possible to connect the consequences of institutional evolution to strategy development. Further, with the increasing globalization of commerce, and the attendant complexity and turbulence in institutional evolution, particularly in emerging economies, significant opportunities for strategy related action may reside not in product markets but in institutional arenas. Institution-focused scenarios are therefore increasingly needed. We outline the key linkages between the institutional milieu and business contexts and illustrate how scenarios incorporating institutional parameters can shed light on the strategy context in the case of emerging economies.     

Bank CEO materialism: Risk controls,culture and tail risk

We investigate how the prevalence of materialistic bank CEOs has evolved over time, and how risk management policies, non-CEO executives’ behavior and tail risk vary with CEO materialism. We document that the proportion of banks run by materialistic CEOs increased significantly from 1994 to 2004, that the strength of risk management functions is significantly lower for banks with materialistic CEOs, and that non-CEO executives in banks with materialistic CEOs insider trade more aggressively around government intervention during the financial crisis. Finally, we find that banks with materialistic CEOs have significantly more downside tail risk relative to banks with non-materialistic CEOs.