Social network contingency,symbolic management,and boundary stretching

A firm's structural position within corporate networks may affect the extent to which it engages in boundary stretching practices. Since social norms support low CEO compensation, offering high CEO compensation in China can be seen as a boundary stretching practice. Setting up a compensation committee (CC) may be viewed as a form of symbolic management in China. We argue that firms operating within central corporate network positions opt to pay higher CEO compensation without engaging in symbolic management. On the other hand, firms operating in structural hole positions tend to either pay lower CEO compensation or use CCs as a symbolic management tool in order to pay higher CEO compensation. Our hypotheses are largely supported based on 7,618 firm‐year observations in China. Copyright © 2013 John Wiley & Sons, Ltd.     

Human Capital and CEO Compensation during Institutional Transitions

Firms appoint CEOs with different types of human capital in order to manage resource dependencies. How CEOs are compensated thus can be conceptualized as a valuation process of how boards view the value of CEOs' human capital. Two types of human capital – international experience and political ties – have emerged as potential drivers of CEO compensation during institutional transitions. But how they impact CEO compensation has remained unclear. We develop a resource dependence‐based, contingency framework to focus on the external and internal factors that enable or constrain human capital to impact CEO compensation. Because of the tremendous regional diversity within China, externally, we focus on the level of marketization of the region in which firms are headquartered. Internally, we pay attention to two corporate governance mechanisms: politically connected outside directors and compensation committee. Data from 10,329 firm‐year observations at 94 per cent of listed firms in China largely support our framework. Overall, our study contributes to resource dependence research by extending this research to the context of institutional transitions with a focus on how human capital impacts CEO compensation.     

State-level FDI and within-occupation wage inequality in the United States

Our paper explores the relationship between inward foreign direct investment (FDI) and within-occupation wage inequality at the state level in the U.S. We argue that sectoral FDI may affect different occupations differently, and our study looks at possible heterogeneous effects of sectoral FDI on wage inequality for 22 occupations. Using data over 1999–2007, our results show that state-level manufacturing FDI tends to reduce wage inequality, measured by the ratio of the 90th percentile wage and the 10th percentile wage in an occupation. Manufacturing FDI is significantly associated with less wage inequality in the production occupations and the construction and extraction occupations. In contrast, non-manufacturing FDI is associated with increased within-occupation wage inequality in the arts, design, entertainment, sports, and media occupations, as well as the transportation and material moving occupations. Non-manufacturing FDI is associated with decreased wage inequality in the sales and related occupations.     

The Impact of Dividend Covenants on Investment and Operating Performance

This paper examines the influence of dividend covenants in corporate bonds on investment and operating performance. Prior literature analytically demonstrates that by limiting dividend distribution to shareholders, dividend restrictions effectively place a minimum on investment expenditures. This suggests a positive relation between dividend covenants and investment. The literature also conjectures that the influence of dividend covenants on investment (1) mitigates the under‐investment problem associated with debt financing; or (2) exacerbates over‐investment. We empirically document that the presence of dividend covenants is associated with a higher level of investment and poorer future performance. Further analyses confirm that the higher level of investment is consistent with dividend covenants exacerbating over‐investment, not mitigating under‐investment. Our results shed light on the cost aspect of dividend covenants proposed in prior literature.     

Foreign Direct Investment Outflows and Business‐cycle Fluctuations*

This paper investigates business‐cycle effects for a country’s foreign direct investment (FDI) outflows. Ordinary least squares and panel regressions show that volatility in economic growth has a negative and significant impact on FDI outflows. Furthermore, we find different types of shocks have asymmetric impacts on FDI outflows. In other words, fluctuations of the same magnitude in a boom and a recession have different effects on FDI outflows. This relationship is more evident in OECD countries. We also include exchange rate volatility, lagged business‐cycle measure, and control for potential endogeneity problems as robustness checks. Our findings are robust across different specifications.     

Monopoly pricing in the binary herding model

How should a monopolist price when selling to buyers who learn from each other’s decisions? Focusing on the case in which the common value of the good is binary and each buyer receives a binary private signal about that value, we completely answer this question for all values of the production cost, the precision of the buyers’ signals, and the seller’s discount factor. Unexpectedly, we find that there is a region of parameters for which learning stops at intermediate and at extreme beliefs, but not at beliefs that lie between those intermediate and extreme beliefs.     

Bargaining Economies with Patient and Impatient Agents: Equilibria and Intermediation

This paper investigates the characteristics of steady-state equilibria in a bargaining economy in which there are both patient and impatient agents and the possibility of intermediation arising in such an economy. The equilibrium in the unmediated economy is inefficient if the proportion of impatient agents is sufficiently high. There is a simple fee mechanism, which induces patient and impatient agents to trade in separate groups, under which there is always an efficient equilibrium. Such separation is also induced by the option to trade at fixed prices, and profit-seeking intermediaries have an incentive to facilitate such trade.Journal of Economic LiteratureClassification Number: C78.     

What Promotes Online Group-Buying? A Cross-Cultural Comparison Study between China and the United States

Considering the universal prosperity of online group-buying (OGB), this research study used online surveys to gauge the impact of perceived risk, opinion seeking, and hedonistic/recreational and brand conscious decision-making styles on consumers' OGB intention in two diametrically distinguished countries—China and the United States. The research findings indicated both cultural similarities and differences in the mechanisms underlying Chinese and American consumers' OGB intention. Perceived risk emerged as the most important predictor in the U.S. data while brand consciousness was the key driver of Chinese consumers' OGB intention. Promotion and management implications based on the research findings are also presented.     

Measuring customer-based place brand equity (CBPBE): an investment attractiveness perspective

Place branding has increasingly gained attention in last the two decades. However, there is a lack of measuring instrument for place branding effectiveness and subsequent place brand equity. This study develops a measurement instrument for customer-based place brand equity (CBPBE) for a place from the investment attractiveness perspective. Exploratory factor analysis followed by confirmatory factor analysis were used which resulted in an 11-item CBPBE scale. The dimensions of the scale consist of brand awareness, brand image, perceived quality, and brand loyalty. The study makes both theoretical and managerial contributions by offering a refined scale for the measurement of CBPBE which provides a tool for effective place branding activities and strategies.