Financial Modernization in US Banking Markets: A Local or Global Event?

Abstract:   We test the hypothesis that the passage of the Financial Services Modernization Act (FSMA) of 1999 has spillover effects cross‐nationally, using a sample of US, non‐US transactional (Australian, Canadian, and UK), and relationship (German, Japanese, Dutch, and Swiss) banks. Our results suggest that financial modernization in the US has limited cross‐national effects. We find strong evidence that US banks were affected favorably. Although we detect some evidence of significant reactions by banks in certain countries, a closer examination reveals that the reaction is most likely attributable to events in the respective countries during the event period. We do find, however, that non‐US transactional banks have been more likely to elect financial holding company status compared to relationship banks, suggesting they are positioning themselves to exploit the expanded opportunity set created by the FSMA. Nonetheless, the majority of elections have been made by US banks. In general, the results suggest that the respective banking markets are efficient in filtering events that are largely country‐specific with only limited implications for other international banks.     

The softness of medical production and implications for specifying hospital outputs

This paper considers the implications of an inarticulate medical production function when specifying and interpreting estimated hospital production functions. Lack of scientific knowledge regarding the relationship between medical inputs and outputs results in variations in styles of care, and medical payment contains inefficient production incentives. These production distortions are implicit in reported hospital data. Empirical results of this study provide information regarding the extent and direction of bias resulting from estimating production functions using reported outputs under retrospective cost-reimbursement.     

Preparing for the professional futures field:: Observations from the UHCLC futures program

The futures field is an arena of increasing interest and activity. This article seeks to: (1) provide general information about key information sources for directed inquiry into futures studies; (2) sketch the origins and current status of the graduate program in Studies of the Future offered by the University of Houston at Clear Lake City—currently the largest and most comprehensive program of its kind; (3) Describe the methodology used in a recent strategic planning and program development project to update the UHCLC program; and (4) convey some guiding observations on teaching and research in futures studies, and on helping students find appropriate employment.     

Effects of an Employee Volunteering Program on the Work Force: The ABN-AMRO Case

One of the new ways used by companies to demonstrate their social responsibility is to encourage employee volunteering, whereby employees engage in socially beneficial activities on company time, while being paid by the company. The reasoning is that it is good for employee motivation (internal effects) and good for the company reputation (external effects). This article reports an empirical investigation of the internal effects of employee volunteering conducted amongst employees of the Dutch ABN-AMRO bank. The study showed that (a) socio-demographic characteristics from employee volunteers markedly differ from those of non-volunteers and community volunteers and (b) employee volunteering seems to have positive effects on attitudes and behavior towards the organization.     

Personality and Saving Behavior Among Older Adults

This study investigates how psychological characteristics influence saving behavior within a sample of 1,380 U.S. preretirees aged 50–70 from the Health and Retirement Study (HRS). Using the 3M Model of Motivation and Personality as a theoretical basis, structural equation model results revealed that financial self‐efficacy (FSE) directly explains saving behavior and is central to understanding the link between other psychological characteristics and the saving behavior of older adults. Through higher FSE, increased positive affect and reduced negative affect indirectly supported saving behavior. Moreover, the results revealed personality traits indirectly explained saving behavior. Conscientiousness and extroversion indirectly supported saving behavior; whereas openness to experience and neuroticism indirectly undermined saving behavior. This study connects broad personality traits with saving behavior, which provides information about how older adults' psychological composition is related to their saving practices.     

The role of tax regulation and compensation contracts in the decision to voluntarily expense employee stock options

We show that firms with executive bonuses that qualify for deduction under Internal Revenue Code Section 162(m) were less likely to expense stock option compensation (SOC) in 2002. Additionally, the more likely it is that a qualified firm will incur re-contracting costs, the less likely it is that the firm will expense SOC. CEOs of qualified firms that also expense SOC receive smaller bonuses than CEOs of expensing firms that are not qualified under 162(m), and the lower 162(m) bonuses are not offset by higher SOC. Our results suggest that 162(m) tax incentives are an important determinant of the decision to expense SOC.     

Diversification to mitigate expropriation in the tobacco industry

While it is well established that diversifying acquisitions by large, cash-rich firms destroy shareholder wealth, we document positive abnormal returns to such acquisitions in the tobacco industry. We show that these abnormal returns are associated with proxies for lower expected expropriation costs. Specifically, we show that wealth creation increases in the degree of domestic geographic expansion afforded by the acquisition (increasing tobacco firms’ influence in more political districts) and in the liquidity of tobacco firms’ assets (converting cash to harder-to-expropriate operating assets). We also show that the threat of expropriation constrains payments to shareholders before expropriation becomes certain in 1998.     

Venture capitalist monitoring: Evidence from governance structures

We examine the impact of venture capitalist (VC) involvement, quality and exit on corporate governance structures at the time of and subsequent to an initial public offering (IPO). Venture capital backed firms utilize governance structures with greater levels of monitoring at the time of an IPO compared to non-backed firms, but this difference begins to dissipate over time. While short-lived, IPOs backed by high quality VCs have greater overall monitoring levels than those IPOs backed by low quality VCs. IPOs backed by high quality VCs use significantly more equity-based compensation than their low quality counterparts. Finally, the exit of a VC materially alters the governance structure of firms. Measures of governance decline following the departure of a venture capital firm. Overall, the presence of a venture capitalist affects governance structures of firms both at the IPO and through the early years as public firms.     

A preliminary look at readmission and mortality among chronically critically ill and other medically complex Medicare patients

Chronically critically ill and other medically complex patients (CCI/MC-Ps) are those who are hospitalized with long-term intensive care needs and require extended periods of hospital-level care. CCI/MC-Ps may be at higher risk for readmission and mortality than other populations due to the severe nature their illnesses. This article examines factors that lead to increased probability of hospital readmission or mortality among CCI/MC Medicare patients. Logistic regression analyses are used to examine mortality and readmissions among the CCI/MC population. Numerous factors including length of stay in the acute hospital, age and gender affect whether a patient is readmitted to the acute care hospital within 90 days of discharge or dies within 60 days following a hospital stay.