Do accruals exacerbate information asymmetry in the market?

A considerable body of evidence, both archival and experimental, suggests that accounting accruals are heterogeneously interpreted by investors. We examine whether the information asymmetry among investors arising from this heterogeneous interpretation, implied in these empirical results, affects transactions costs in the form of the adverse selection component of the bid-ask spread. We examine this impact both, in a yearly setting and around the first release of quarterly accrual information. The results of the study provide empirical evidence of a positive association between the adverse selection component and accruals in the yearly analysis. Since wider bid-ask spreads are both theoretically and empirically linked to higher stock returns (Brennan & Subrahmanyam, 1996), our results provide a transaction cost basis for understanding one possible factor underlying the linkage between accruals and cost of equity capital, and accruals and information risk pricing as documented in Francis et al. (2005) and Ecker et al. (2006).     

The determinants of corporate board size and composition: An empirical analysis

Using a unique panel dataset that tracks corporate board development from a firm's IPO through 10 years later, we find that: (i) board size and independence increase as firms grow and diversify over time; (ii) board size—but not board independence—reflects a tradeoff between the firm-specific benefits and costs of monitoring; and (iii) board independence is negatively related to the manager's influence and positively related to constraints on that influence. These results indicate that economic considerations—in particular, the specific nature of the firm's competitive environment and managerial team—help explain cross-sectional variation in corporate board size and composition. Nonetheless, much of the variation in board structures remains unexplained, suggesting that idiosyncratic factors affect many individual boards’ characteristics.     

An Earned Income Tax Credit in the Netherlands: Simulations with the MIMIC Model

In recent policy discussions in the Netherlands, the Earned Income Tax Credit (EITC) has been put forward as an instrument to reduce the unemployment rate among low-skilled workers. Using MIMIC, CPB's applied general equilibrium model for the Netherlands, this article discusses the economic impact of different forms of the EITC. The analysis reveals that moderately targeting the EITC to the unskilled makes the instrument more effective in reducing unemployment. The targeting concept features decreasing returns, however. Indeed, it may be counterproductive if the EITC is targeted at a very small income range. Furthermore, targeting the EITC to the low skilled induces adverse effects on the quality and quantity of labour supply because it raises the marginal tax burden on medium-income workers.     

Motivation: How to increase project team performance

Stimulating team member performance requires a project manager to harness many different interpersonal skills. The level of enthusiasm applied toward project efforts has a direct impact on the project results. Because motivation can inspire, encourage, and stimulate individuals to achieve common goals through teamwork, it is in the project manager's best interest to drive toward project success through the creation and maintenance of a motivating environment for all members of the team.     

Price Commitments in Standard Setting under Asymmetric Information*

Standards may create market power for the holders of standard essential patents (SEPs). To address these concerns, the literature advocates price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about profitability. In this setting, price commitments increase efficiency not only by curbing SEP holders' market power, but also by alleviating distortions in the design of the royalty scheme. We derive conditions under which price commitments can be implemented using a simple royalty cap as used in practice.     

Generalized vs. specific locus of control expectancies of chief executive officers

Hodgkinson (1992) recently advocated in this journal that measures of generalized control expectancies, such as the well known Rotter I-E scale (Rotter, 1966), are not suited to study the relationship between the locus of control beliefs of Chief Executive Officers (CEOs) on the one hand and strategic, structural and performance variables on the other hand. According to Hodgkinson (1992) a more specific scale, measuring strategic control expectancies, should be used in future research. We argue and empirically illustrate that such a methodology will not lead to interesting research results in the ‘strategic leadership’ domain. More specifically, measures of firm-specific control expectancies are likely to be influenced by the CEO's perception of the situational context of the firm and are therefore not indicative of fundamental personality differences between CEOs. Consequently, such measures cannot give an answer to the basic research question whether and why the personality of CEOs plays an important role in explaining organizational behavior and performance.     

Plugs versus placements: A comparison of alternatives for within‐program brand exposure

A study is presented that compares two forms of within‐program brand appearances: product placements and celebrity plugs. Evidence suggests that plugs may often have a retention advantage over placements. This advantage is hypothesized to arise from differences in the way plugs and placements are often presented. Specifically, differences in presentation contexts may create differences in how memory for plugs and placements is organized. This, in turn, may allow plugs to receive more frequent rehearsal during subsequent viewing of a show in which a brand has appeared. © 2004 Wiley Periodicals, Inc.     

Evaluating the Appropriateness of Market Segmentation Solutions Using Artificial Neural Networks and the Membership Clustering Criterion

The appropriateness of a given segmentation solution is a key consideration in all marketing segmentation studies. By appropriate, it is meant that not only has the optimal segmentation solution been identified, but also that the proper number of segments to market to has been correctly specified. This research focuses on the second, and more fundamental, issue of determining the appropriate number of segments in a marketplace. If the appropriate number of segments is over-specified, marketers may over-segment the market and treat audience segments separately that could effectively be treated inclusively. Conversely, if the appropriate number of segments is under-specified, marketers may under-segment the market and fail to identify distinct, viable segments that should be marketed to separately.The issue of market under- and over-segmentation may be addressed with the membership clustering criterion (MCC), an analytical technique based on fuzzy sets derived from artificial neural networks (mathematical models of animal nervous systems). Using artificial and real world data sets, we empirically test the MCC, compare it to existing methods for determining the number of segments in a market, and demonstrate its advantages in evaluating the appropriateness of marketing to different numbers of market segments.     

A proposed cure for the information explosion

The marketing information system is intended to solve the businessman's dilemma of having too much information of the wrong kind in the wrong form. The ideal system should generate an orderly flow of pertinent data for decision making, providing instantaneous information for each management level. The author describes the steps in the construction of such a system: obtaining support; reviewing and appraising the marketing organization and its policies; organizing development; and determining the level of sophistication. More and more such systems will be established as managers recognize their contribution in utilizing the information explosion.     

Tax policy in a matching model with training

This paper develops a model of search on the labour market withtraining. We explore how the combination of an average job taxand a marginal wage tax can be used to alleviate inefficienciesin job matching and, at the same time, raise a positive revenuewith minimal distortions in search and training. We find that(i) a wage tax is less distortionary to raise revenue than isa job tax if training is not distorted initially; (ii) thisconclusion may reverse in the presence of training distortions;(iii) marginal wage taxes are less distortionary in economieswhere bargaining parties can commit to the wage profile.