Self-Fulfilling Debt Crises

We characterize the values of government debt and the debt's maturitystructure under which financial crises brought on by a loss of confidence inthe government can arise within a dynamic, stochastic general equilibriummodel. We also characterize the optimal policy response of the government tothe threat of such a crisis. We show that when the country's fundamentalsplace it inside the crisis zone, the government may be motivated to reduceits debt and exit the crisis zone because this leads to an economic boom anda reduction in the interest rate on the government's debt. We show thatthis reduction can be gradual if debt is high or the probability of a crisisis low. We also show that, while lengthening the maturity of the debt canshrink the crisis zone, credibility-inducing policies can have perverseeffects.     

Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal

Research summary: Investing a firm's resources in corporate social responsibility (CSR) initiatives remains a contentious issue. While research suggests firm financial performance is the primary driver of CEO dismissal, we propose that CSR will provide important additional context when interpreting a firm's financial performance. Consistent with this prediction, our results suggest that past CSR decisions amplify the negative relationship between financial performance and CEO dismissal. Specifically, we find that greater prior investments in CSR appear to expose CEOs of firms with poor financial performance to a greater risk of dismissal. In contrast, greater past investments in CSR appear to help shield CEOs of firms with good financial performance from dismissal. These findings provide novel insight into how CEOs' career outcomes may be affected by earlier CSR decisions. Managerial summary: In this study, we examined a potential personal consequence for CEOs related to corporate social responsibility (CSR). We explored the role prior investments in CSR play when a board evaluates the firm's financial performance and considers whether or not to fire the CEO. Our results suggest that while financial performance sets the overall tone of a CEO's evaluation, CSR amplifies that baseline evaluation. Specifically, our results suggest that greater past investments in CSR appear to (a) greatly increase the likelihood of CEO dismissal when financial performance is poor, and (b) somewhat reduce the likelihood of CEO dismissal when financial performance is good. Thus, striving to deliver profits in a socially responsible manner may have both positive and negative personal consequences. Copyright © 2017 John Wiley & Sons, Ltd.     

Emerging Market Footholds and Knowledge: An Examination of New Product Launch Performance

As developed markets become more saturated, managers increasingly recognize the value of emerging markets as venues for growth opportunities. Yet, launching products into these markets is extremely risky due to weak institutional environments (e.g., lack of physical infrastructure), making success more uncertain. To alleviate this challenge, theory points to using emerging market footholds that yield market-specific knowledge. However, it is unclear whether knowledge is realized and, if so, what facets of harvested knowledge are effective in driving performance. Accordingly, we used data collected from a survey of business professionals to examine emerging market footholds and market-specific knowledge (i.e., customer, competitor, and logistics knowledge). Our results show that the extent of market presence held by an emerging market foothold is positively associated with all types of knowledge, yet only competitor and logistics knowledge—not customer knowledge—is positively associated with product launch performance. A supplemental sample of new product launches in developed markets revealed the opposite results wherein customer knowledge was the only significant predictor. Viewed collectively, the results suggest a market maturity threshold wherein logistics and competitive knowledge becomes less influential in driving performance, and customer knowledge becomes more influential.     

In‐house asset management in the Australian superannuation industry

We examine how executives from the Australian superannuation industry perceive and approach the choice between managing assets in‐house, versus outsourcing to external investment managers. We find that decision frameworks, as well as the perceived benefits and challenges of in‐house management, can be described in terms of four elements: costs, capabilities, alignment and governance. Industry participants address these four elements in diverse ways. This is reflected in a variety of decision approaches, aspects that are considered and emphasised in decision‐making, and implementation structures.     

Management bias across multiple accounting estimates

Review of Accounting Studies - We examine whether managers appear to aggregate bias in multiple subjective accrual estimates to meet or just beat analyst expectations. We also consider whether the...     

POVERTY, TNEQUALTTY, AND FAMTLY LIVING STANDARDS IMPACTS ACROSS SEVEN NATIONS: THE EFFECT OF NONCASH SUBSIDIES FOR HEALTH, EDUCATION AND HOUSING

The main aim of this paper has been to summarize the impact of noncash income–health and health education benefits, and imputed rent-on living standards, income distribution and poverty in seven nations at the beginning of the 1980s using the Luxembourg Income Study database. Our results do not give rise to a pattern of national differences in poverty rates or income inequality which are markedly different from that which emerges from previous LIS research based on cash income alone. While these results may be sensitive to the techniques used to measure and value noncash benefits in this paper, it appears that noncash income reinforces the redistributive impact or conventional (cash) tax-transfer mechanisms rather than acting to offset them in any major way.     

Impact of preferential procurement policies on minority-owned businesses

Financial data on minority firms that compete for business in government and corporate set-aside programs reveal that these firms lag behind their nonminority counterparts in important respects. They are, relative to nonminorities, (1) less profitable, (2) younger, and (3) much more highly leveraged. Large-scale minority enterprises are no longer the rarity that they were 20 years ago. These firms have not, however, achieved parity with their nonminority cohorts, and their unique traits—especially undercapitalization—continue to reflect the vestiges of discrimination.     

Trade union mergers and competition in British banking

This article examines union merger discussions in the clearing banks in relation to the model developed by Undy et al. ‘Emphasising the importance of ideological differences and the proposed distribution of power in the negotiations, it argues more stress be placed on internal political factors in explaining merger patterns.