When Does Pre‐IPO Financial Reporting Trigger Post‐IPO Legal Consequences?

Prior research suggests that the fear of litigation precludes most managers from manipulating earnings in the initial public offering (IPO) setting. Yet, managers' restraint is perhaps unwarranted: research has not yet linked instances of aggressive pre‐IPO reporting to increased litigation risk. This paper investigates when aggressive IPO reporting triggers legal consequences. Examining 2,037 IPOs, we find that even when ex post evidence indicates the presence of earnings inflation, litigation is more likely to occur when investors have relied on the suspect earnings during the pricing process. Why might investors rely on some firms' abnormal accruals when valuing the IPO and yet discount the abnormal accruals of other firms? Our analyses suggest that IPO investors incorporate abnormal accrual information into IPO prices in situations where accruals are more likely to reflect information and where other sources of information to help investors make pricing decisions are lacking or are less reliable. In these situations, we find that abnormal accruals do positively correlate with future performance, validating investors' use of this information when pricing these offerings. Yet, when ex post performance reveals that these pre‐IPO abnormal accruals were in fact inflated, we find that litigation emerges to allow harmed shareholders to recover losses incurred dating back to the pricing process—importantly, investors are only harmed if they used those abnormal accruals in pricing the IPO. Collectively, our evidence indicates that litigation in response to earnings inflation does indeed surface in the IPO setting—but only when investors need it to settle the score.     

Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion

This paper exploits a major mid-1990s expansion in the U.S. Department of Veterans Affairs health care system to provide evidence on the labor market effects of expanding health insurance availability. Using data from the Current Population Survey, we employ a difference-in-differences strategy to compare the labor market behavior of older veterans and non-veterans before and after the VA health benefits expansion to test the impact of public health insurance on labor supply. We find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non-employer based insurance. Workers with some college education or a college degree are more likely to transition into self-employment, a result consistent with “job-lock” effects. However, less-educated workers are more likely to leave self-employment, a result suggesting that the positive income effect from receiving public insurance dominates the “job-lock” effect for these workers. Some relatively disadvantaged sub-populations may also increase their labor supply after gaining greater access to public insurance, consistent with complementary positive health effects of health care access or decreased work disincentives for these groups. We conclude that this reform has affected employment and retirement decisions, and suggest that future moves toward universal coverage or expansions of Medicare are likely to have significant labor market effects.     

Opportunities for Air Pollutant and Greenhouse Gas Emission Reduction through Local Transport Planning

This paper has three main objectives: firstly, to provide quantitative information on the potential greenhouse gas and air pollutant emissions reductions resulting from a number of future road transport scenarios; secondly, to illustrate the emission reduction measures available to local transport planners; and thirdly, to highlight the potential for these measures to be integrated into strategies that deliver other transport priorities. The results are drawn from a case study of Norfolk in the UK. We conclude that while technology can play a large part in reducing emissions of air pollutants, demand management is crucial to the delivery of long term greenhouse gas emission reduction and ultimately of air pollutant emissions too.     

Relationship marketing in A B2C context: The moderating role of personality traits

More and more, retailers are investing in relationship building as a strategy for enhancing customer retention in the business-to-customer (B2C) context. However, some marketing scholars have expressed concern over the usefulness of relationship marketing under certain conditions. As such, this study investigates the moderating role of personality traits on the relationship between satisfaction-driven relationship quality and behavioral loyalty. Based on a sample of 158 retail shoppers, we find that customers’ overall satisfaction with the retailer leads to quality customer–firm relationships and ultimately, behavioral loyalty to the retailer. We also found that the impact of relationship quality on behavioral loyalty depends on the consumer's personality traits, i.e., consumer innovativeness, variety seeking, and relationship proneness. These findings extend the extant relationship literature by showing that the value of relationship marketing is not universal, thereby refining our understanding of the relationship between customer behavior and relationship marketing. Implications for academics and managers are discussed.     

Opportunistic customer complaining: Causes, consequences, and managerial alternatives

Should a hospitality firm yield to a customer complaint that is suspected [or even known] to be opportunistic? While the answer to this question varies based upon numerous factors, this conceptual article synthesizes multiple streams of empirical research to enumerate: (1) customer-centric, firm-centric [such as the influence of firm size], and relationship-centric determinants of opportunistic customer complaining; (2) means of detecting whether a complaint is opportunistic [such as through employee knowledge of operations]; and (3) potential consequences to the firm of yielding and not yielding to opportunistic complaints.     

Compensation in the Post‐FIN 48 Period: The Case of Contracting on Tax Performance and Uncertainty

Academic and anecdotal evidence indicates that incentive systems often provide short‐term payouts without regard for long‐term consequences. New detailed disclosures mandated by FIN No. 48, Accounting for Uncertainty in Income Taxes, enable us to use a tax setting to investigate whether boards adjust performance‐based pay for uncertainty. We find managers’ bonus payouts are positively associated with tax performance; however, bonus payouts are lower when measures of ex ante tax uncertainty are higher. Our results are robust to tests of alternative explanations including financial reporting aggressiveness, overall firm risk, and other forms of compensation. Further, we document that the relation between bonus compensation and tax performance has changed in the post‐FIN No. 48 period. Specifically, we identify a significant association between bonus payout and GAAP ETR only in the pre‐FIN No. 48 period and a significant association between bonus payout and cash ETR only in the post‐FIN No. 48 period, suggesting that the relation between compensation and tax avoidance should be examined carefully with particular attention to the post‐FIN No. 48 period.     

ECONOMIC POLICY UNCERTAINTY AND BOARD MONITORING: EVIDENCE FROM CEO TURNOVERS

We examine whether economic policy uncertainty (EPU) affects a board's chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as firms with an identifiable heir apparent are not influenced by high EPU. Likewise, voluntary CEO turnovers are not affected by EPU. Overall, our results provide evidence that boards make personnel decisions in response to external macroeconomic pressures.     

Measuring entrepreneurial passion: Conceptual foundations and scale validation

Along with other affective and emotional dimensions, passion is at the heart of entrepreneurship. Yet past research on entrepreneurial passion (EP) has been hindered by the lack of a sound measurement instrument. Through a series of empirical studies conducted with samples from relevant populations, we develop and validate an instrument to capture EP and its inherent dimensions. We show that the task-specific dimensions of EP (intense positive feelings toward the domains of inventing, founding and developing, and the centrality of these domains to entrepreneurs' self-identity) are conceptually and empirically distinct from one another, and from other emotions and cognitions known to play a role in entrepreneurship. Our theory and results indicate that proper measurement of entrepreneurial passion incorporates the interaction between entrepreneurs' feelings and identity centrality for each domain. We discuss the implications of our model, instrument and findings for future research on the affective components of innovation and entrepreneurship. We also develop specific guidelines for using our validated instrument in future research.     

An Empirical Evaluation of the Effect of Peer and Managerial Ethical Behaviors and the Ethical Predispositions of Prospective Advertising Employees

An advertising firm's ethical culture (as defined by the firm's managerial and peer ethical behaviors) may affect the employees' comfort levels and ethical behaviors. In this research, scenarios were used to describe advertising firms with various ethical cultures. Respondents' perceived comfort levels in working for the firms described in the scenarios and the respondents' behavioral intentions when faced with various advertising situations were assessed. Results of the study indicate that peer ethical behavior exerts a strong influence on the comfort or discomfort level and the ethical behavioral intentions of potential advertising employees. Further, the strong influence exerted by peers seems to transcend the ethical behavior of the manager and carry over to the attitude toward the entire corporate advertising environment. This study provides insights for firms and researchers interested in assessing the impact of an advertising firm's ethical culture on potential employees.     

Why is the teen birth rate in the United States so high and why does it matter?

Teens in the United States are far more likely to give birth than in any other industrialized country in the world. U.S. teens are two and a half times as likely to give birth as compared to teens in Canada, around four times as likely as teens in Germany or Norway, and almost 10 times as likely as teens in Switzerland. Among more developed countries, Russia has the next highest teen birth rate after the United States, but an American teenage girl is still around 25 percent more likely to give birth than her counterpart in Russia. Moreover, these statistics incorporate the almost 40 percent fall in the teen birth rate that the United States has experienced over the past two decades. Differences across U.S. states are quite dramatic as well. A teenage girl in Mississippi is four times more likely to give birth than a teenage girl in New Hampshire--and 15 times more likely to give birth as a teen compared to a teenage girl in Switzerland. This paper has two overarching goals: understanding why the teen birth rate is so high in the United States and understanding why it matters. Thus, we begin by examining multiple sources of data to put current rates of teen childbearing into the perspective of cross-country comparisons and recent historical context. We examine teen birth rates alongside pregnancy, abortion, and "shotgun" marriage rates as well as the antecedent behaviors of sexual activity and contraceptive use. We seek insights as to why the rate of teen childbearing is so unusually high in the United States as a whole, and in some U.S. states in particular. We argue that explanations that economists have tended to study are unable to account for any sizable share of the variation in teen childbearing rates across place. We describe some recent empirical work demonstrating that variation in income inequality across U.S. states and developed countries can explain a sizable share of the geographic variation in teen childbearing. To the extent that income inequality is associated with a lack of economic opportunity and heightened social marginalization for those at the bottom of the distribution, this empirical finding is potentially consistent with the ideas that other social scientists have been promoting for decades but which have been largely untested with large data sets and standard econometric methods. Our reading of the totality of evidence leads us to conclude that being on a low economic trajectory in life leads many teenage girls to have children while they are young and unmarried and that poor outcomes seen later in life (relative to teens who do not have children) are simply the continuation of the original low economic trajectory. That is, teen childbearing is explained by the low economic trajectory but is not an additional cause of later difficulties in life. Surprisingly, teen birth itself does not appear to have much direct economic consequence. Moreover, no silver bullet such as expanding access to contraception or abstinence education will solve this particular social problem. Our view is that teen childbearing is so high in the United States because of underlying social and economic problems. It reflects a decision among a set of girls to "drop-out" of the economic mainstream; they choose non-marital motherhood at a young age instead of investing in their own economic progress because they feel they have little chance of advancement. This thesis suggests that to address teen childbearing in America will require addressing some difficult social problems: in particular, the perceived and actual lack of economic opportunity among those at the bottom of the economic ladder.