On the screening power of incentive schemes

We demonstrate the screening power of incentive schemes. The model is a synthesis of a signaling model and the principal-agent problem. A non-cooperative stage where the agent may send a signal precedes a contractual stage where the agent serves a principal under an incentive scheme. After establishing the existence of a revealing equilibrium in an environment with long-lived principals and overlapping contracts, the paper discusses the implications for efficiency of the distribution of surplus. Finally, it is shown that under commitment the agency relationship may serve self-selection purposes and hence reduce the need of costly signaling.     

An extension of Mohring's model for land rent distribution

In an early paper Herbert Mohring (J. Pol. Econ., 49 (1961)) presented a model for land rent distribution yielding the well-known result that the price of land must fall with the distance from the city center to offset transportation costs. Our paper is an extension of Mohring's model in which we relax some of his drastic simplifying assumptions. This extended model has been incorporated in a method for economic evaluation of city master plans which has been applied to a Swedish city. In this method the interdependence among housing, heating, and transportation, the durability of urban structures, and the uncertainty of future demand are explicitly considered within a cost-benefit approach. Some empirical results from this pilot study concerning land rent distributions are also presented here.     

Spatial dynamics and metropolitan change

"This special issue presents contributions to a collaborative effort to analyze 'the dynamics of metropolitan processes and policies'....[It] contains four papers which focus on industrial change and economic restructuring; two papers deal with population relocation and migration processes; one paper contains a study of economic cycles in space and one paper treats the assessment of urban investment and urban renewal projects." The geographic focus is on the developed countries.     

The future international tax environment and European tax harmonization: a personal view

This study examines whether the decision to voluntarily (i.e. without a statutory obligation) employ two audit firms to conduct a joint audit is related to audit quality. We use separate samples and empirical designs for public and privately held companies in Sweden, where a sufficient number of companies have a joint audit on a voluntary basis. Our empirical findings suggest that companies opting to employ joint audits have a higher degree of earnings conservatism, lower abnormal accruals, better credit ratings and lower perceived risk of becoming insolvent within the next year than other firms. These findings are robust to the use of a propensity score matching technique to control for the differences in client characteristics between firms that employ joint audits and those that use single Big 4 auditors (i.e. auditor self-selection). We also find evidence that the choice of a joint audit is associated with substantial increases in the fees paid by the client firm, suggesting a higher perceived level of quality. Collectively, our analyses support the view that voluntary joint audits are positively associated with audit quality in a relatively low litigious setting both for public and private firms.     

Internationalization in different industrial contexts

The important questions in a firm's internationalization strategy deal with which national markets they should enter and the order in which the chosen markets should be entered. Different theoretical scenarios provide a range of answers to these questions. In this article, it is argued that the appropriateness of the theories depends on the industrial context to which it is applied. The international development of some Swedish firms in mature and high-growth industries is discussed. Whether a theory is appropriate depends on the firms' degree of internationalization and whether the industry is mature or growing. International entrepreneurship literature has been shown to enhance understanding of the early stages of a firms' internationalization in growing industries.     

Modelling different types of multilateral co-operation between SMEs

This paper focuses on a theoretical modelling of multilateral SME co-operation. A major part of the previous research has been done on dyadic or bilateral relationships between two partners in a vertical chain although new co-operative ventures increasingly involve multiple partners. The objectives of the paper are to accomplish a conceptualization of different types of multilateral co-operation between SMEs as a synthesis of longitudinal empirical observations and selected theoretical discussions of inter-firm co-operation, to bring out possible advantages and prerequisites of successful co-operation of these types, and to show how co-operation can develop from one basic model to another. The main point in the modelling of SME co-operation is that those who plan, promote or build up co-operative arrangements must know right from the beginning what kind of co-operative model a group of firms will strive for, because the prerequisites of successful co-operation are emphasized differently in different types of co-operation. The empirical examples also suggest that co-operation leads to co-operation, i.e. when a company once joins a net, it is more probable that the company gets access to other nets as well. The basic challenge thus is to get the small or medium-sized company to enter its first co-operative arrangement.     

Voluntary Auditing: A Synthesis of the Literature

Voluntary auditing has received increased attention from researchers in recent decades. Empirical studies that have examined demand for voluntary audits have suggested that regulatory intervention may not always be necessary, though some argue that regulators protect society from market failure by demanding statutory audits [Barton, J., & Waymire, G. (2004). Investor protection under unregulated financial reporting. Journal of Accounting and Economics, 38, 65–116]. To date, there has been no review of the literature on determinants of voluntary audits. I provide a research framework to categorize the attributes that affect demand for voluntary audits and identify areas that need further examination. While the given compact body of literature has served different purposes, two major reasons for voluntary auditing are apparent: the importance of audited financial statements to lenders and the intention to further deregulate audits for smaller companies to relieve cost burdens. However, I contribute to the auditing literature by identifying the main attributes associated with the demand for voluntary audit. In doing so, I develop a framework consisting of firm attributes, separation of ownership and control attributes, agency relationship attributes, management attributes, and signalling attributes.     

Short notes on Charlier's method for expansion of frequency functions in series

Abstract

1. In 1905 Charlier outlined some methods for the expansion of functions in series. ¹ C. V. L. Charlier, Über die Darstellung willkürlicher Funktionen (Meddelanden från Lunds Observatorium, Ser. I, nr 27). Particularly he was dealing with frequency functions, but the method has a more general application. As is well known there were two kinds of developments considered, namely in terms of the differentials and in terms of the differences of a conveniently chosen developing function. The outstanding examples are — respectively — the expansions of the so called types A and B. The difference series has later gained a special attention by its deduction being attached to the theory for generating functions. ² I. V. Uspensky, On Ch. Jordan's Series for Probability (Annals of Mathematics, Vol. 32, 1931). The true pivotal function in this respect seems, however, to be the moment generating function. In the following notes it will be shown that the differential series as well as difference series built up by the advancing and the central differences are obtainable in a similar way. By employing some convenient cumulants the different expansions can be written down compactly in symbolic forms which reveal their mutual formal relations. It will further be observed that Charlier's method of expansion is the inversion of a method indicated by Abel.     

Stock market valuation of R&D spending of firms acquiring targets from technologically abundant countries

In this paper, we aim to extend the internalization theory by Buckley and Casson [Buckley, P.J., Casson, M., 1976. The Future of Multinational Enterprise. Holmes & Meier, New York] and Caves [Caves, R.E., 1971. International corporations: the industrial economics of foreign investment. Economica 38, 1–27] in two respects. First, we hypothesize that synergies arising from a technology-oriented cross-border M&A increase the stock market value of an acquirer’s R&D spending. Second, we hypothesize that an acquirer’s access to a country with more favorable R&D environment through the target firm is the main source of synergy arising from intangibles in these M&As. Our empirical results of analyzing data from 10 most R&D active countries in Europe are consistent with these hypotheses and support our extension of the internalization theory. Specifically, we find that multinationality of a firm with intangible assets as such does not add value to R&D, but the combination of its own R&D with that of a firm located in a country with highly favorable R&D environment.