U.S. Welfare Reform: What's Relevant for Europe?

This paper reviews the U.S. welfare reform efforts over the1990s and the effects of these reforms to date. Seven "lessons"of potential interest to European observers are discussed, withparticular attention to the conclusions of more recent research.Such research indicates, for example, that more effective programscontain both positive and negative incentives, utilise work-firstas well as job training programs, and provide some importantsupports beyond just job and work skills. The paper ends withsome speculations about why European policy-makers are becomingmore interested in U.S. welfare reform experiments than theyhave been in the past. (JEL I3, J2, H1)     

Financial accounting choice and earnings management

This paper presents a case that exposes students in graduate accounting or MBA financial accounting classes to the concepts of accounting choice and earnings management. In the case, students role-play as a manager who, facing conflicting incentives, must make and defend three expense estimates for a hypothetical company. Students also read selected business press articles that introduce earnings management and that highlight the importance of the issue to the business community. The articles give students some background from which to approach the choices they will make with respect to the financial statements.     

Evolving Market Efficiency with an Application to Some Bulgarian Shares

With new technically advanced methods and computers at our disposal, the efficient market hypothesis is once again being debated. At the same time, we are witnessing an unprecedented growth in both existing and new financial markets. These new markets are often in economies which have just recently embraced free market economics; we term these stock markets infant markets. Such stock markets are obviously not efficient in allocating the supply of savings to productive capital. We do not test whether or not these infant markets are informationally efficient, but instead examine whether and how they are becoming more efficient. We propose modelling the excess returns of individual securities using a multi-factor model with time-varying coefficients and generalised auto-regressive conditional heteroskedastic (GARCH) errors. If the markets are becoming more informationally efficient or the agents are learning, we would expect this to manifest itself as the time-varying coefficients becoming more stable as time increases. We test our model using data on four Bulgarian shares. First, we estimate an AR(2) model and a GARCH-M(1,1) model for the shares. Then, we estimated our AR(2) model with time varying coefficients and GARCH type errors. We find varying levels of efficiency and varying speeds of movement towards efficiency within our sample of four shares. This revised version was published online in July 2006 with corrections to the Cover Date.     

Racing To Invest? The Dynamics of Competition in Ethical Drug Discovery

Recent advances in the theoretical literature have greatly expanded our understanding of the forces that shape the competitive dynamics of research and development, but a paucity of sufficiently detailed empirical data has left these insights relatively untested. We draw on unusually detailed qualitative and quantitative infernal data provided at the research program level by 10 major pharmaceutical firms to explore the usefulness of the modern literature as a source of insight into the dynamics of competition in ethical drug discovery. Our analysis focuses on one particularly compelling aspect of the literature: the suggestion that in “winner take all situations,” competition in R&D becomes a Prisoner's Dilemma, leading to overinvestment in research. Without adequate measures of the social return to innovation, we can say nothing about whether there is “too much” or “too little” research undertaken by the industry, but our results do not support the suggestion that R&D investment in drug discovery is driven by the “tit-for-tat” or simple reaction function models hinted at by the institutional literature. First, R&D investment is only weakly correlated across firms once common responses to exogenous shocks are accounted far, and second, rivals' R&D results are positively correlated with own research productivity, which we interpret as evidence for extensive R&D spillovers rather than the depletion externality implied by “winner take all” models. These results are not, of themselves, sufficient to reject the hypothesis that investment behavior in the industry is driven by strategic considerations since there is theoretical support for a wide variety of observable behavior as equilibrium outcomes of strategic interaction. Nonetheless, they suggest that the more extreme forms of rent dissipation identified in the literature are probably poor characterizations of the reality of competition in pharmaceuticals. Our results point both to the need to develop theories that incorporate richer models of possible payoff structures, adjustment costs, and firm heterogeneity and to the need to collect empirical data that is comprehensive enough to enable one to test them.     

Alternative Models of Recreational Off-Highway Vehicle Site Demand

A controversial recreation activity is off-highway vehicle use. Off-highway vehicle use is controversial because it is incompatible with most other activities and is extremely hard on natural eco-systems. This study estimates utility theoretic incomplete demand systems for four off-highway vehicle sites. Since two sets of restrictions are equally consistent with utility theory both are imposed and the best fitting restrictions are identified using Voung’s non-nested testing scheme. The demand system is modeled using both Poisson and negative binomial II distributions. Data are provided by a survey conducted at four recreational off-highway vehicle (OHV) sites in western North Carolina.     

International capital flows under asymmetric information and costly monitoring: implications of debt and equity financing

Abstract.  The impact of increased equity trade on a small open economy is examined. Stochastic second‐period output depends on first‐period investment. Owing to information asymmetries, domestic agents cannot reveal credibly the level of first‐period investment to international financiers. Consistent with recent proposals to strengthen the international financial system, domestic firms choose to incur self‐monitoring costs to increase capital inflows. As an alternative to borrowing, domestic agents may sell ownership claims to second‐period output. When equity claims convey information, equity trade is preferred to international borrowing, consistent with developing economies' observed reliance on international equity relative to debt in recent years. JEL Classification: F41, G15     

Compositional Effects of Capital Controls – Theory and Evidence

This paper examines the effects of capital controls on the composition of inter‐national capital flows, paying particular attention to debt inflows versus equity inflows. A two‐period small open economy model with stochastic second‐period output and asymmetric information between domestic agents and international financiers is utilised to generate predictions regarding the effects of capital controls on the relative use of debt versus equity for financing first‐period investment. These capital control implications are then investigated with quarterly frequency panel data for Latin America. Capital controls are found to significantly affect the composition of the capital account.     

Let’s Talk about Language: A Review of Language‐Sensitive Research in International Management

This paper explores the assumptions underlying the core concept of language used in the growing field of language‐sensitive research in international management. We reviewed 92 articles on the topic of language(s) in multinational corporations published during the period 1997‐2015, and applied a linguistic lens to uncover how these articles ‘talk about language’. The assumptions found in these articles can be grouped into three complementary categories that take a structural, functional or social practice view of language. We go beyond the review by also reflecting on the consequences that these underlying assumptions have for the study of language in multinationals. We consider the social practice view the most promising one, and propose a future research agenda for advancing it and thereby contributing to theorizing about the multinational corporation more broadly.     

Application of EMSs in a hotel context: A case study

In the last decade, hotel companies have become increasingly interested in the application of environmental management systems (EMSs). However, research on the effectiveness of EMSs in the hotel industry has been sparse. This study aims to address this research gap by exploring and evaluating the application of EMSs in a hotel context. Various approaches to EMSs are identified in the literature on environmental management and EMSs, including six core EMS elements specific to the hotel industry context. To develop a rich and deep understanding of the application of EMSs in the hotel industry, a qualitative case study was conducted in which data were collected from three levels of employees, executive, supervisory and general, from an international hotel. A series of in-depth, semi-structured interviews were conducted and relevant documents were collected for analysis. Four influential factors were identified in the formation stage of the hotel's EMS: (1) Corporate governance, (2) Piloting activities, (3) Initial gap analysis and (4) Partnership with external consultancy. It was also found that the six elements identified in the environmental management literature play important roles in the implementation of EMS in this case. In addition, although EMSs can help promote a bottom-up approach to change, a top-down approach to implementing EMSs was more suitable for a hotel with a predominantly Chinese workforce, due to cultural issues. This study identified a number of factors specifically related to EMSs to complement mainstream environmental management research.