Using Best–Worst Scaling Methodology to Investigate Consumer Ethical Beliefs Across Countries

This study uses best–worst scaling experiments to examine differences across six countries in the attitudes of consumers towards social and ethical issues that included both product related issues (such as recycled packaging) and general social factors (such as human rights). The experiments were conducted using over 600 respondents from Germany, Spain, Turkey, USA, India, and Korea. The results show that there is indeed some variation in the attitudes towards social and ethical issues across these six countries. However, what is more telling are the similarities seen and the extent to which individual variation dominates observable demographics and country-based variables. Pat Auger is Associate Professor at the Melbourne Business School. Timothy M. Devinney is Professor and Director of the Centre for Corporate Change at the Australian Graduate School of Management. Jordan J. Louviere is Professor of Marketing at the University of Technology, Sydney.     

Threat of falling high status and corporate bribery: Evidence from the revealed accounting records of two South Korean presidents

Research Summary: Social status and its dynamics may be an important predictor of which firms will engage in large‐scale bribery. Prior theory is incomplete, however, and prior studies have lacked comprehensive and reliable data on firm‐level bribery decisions. We offer a new theoretical prediction and a novel data set on high‐level corruption in South Korea, where the accounting records of two presidents in the 1987–1992 era were exposed to after‐the‐fact legal and public scrutiny. We find that, controlling for a range of alternative explanations, the threat of falling high status—that is, the combination of longstanding high social status with current‐period mediocre economic performance relative to that of industry peers—is a statistically and economically meaningful predictor of increases in the amount of large‐scale corporate bribery. Managerial Summary: What leads companies to engage in large‐scale bribery of senior politicians? Our concept of “threat of falling high status” refers to a circumstance where companies that have historically enjoyed high status through their owner families’ elite marriage networks experience mediocre economic performance relative to their peers. We show that this threat of falling high status is a notable determinant of large‐scale corporate bribery of senior politicians, using court data on corporate bribery of two South Korean presidents during 1987–1992. The implication of our study is twofold. Companies can strengthen internal control systems to avoid any large‐scale illegal activities at a higher level. Law enforcement agencies can also implement targeted monitoring programs to preempt illegal activities among companies facing the threat of falling high status.     

Scholarly achievement and accounting journal editorial board membership

The importance of editorial boards to the peer review process makes it imperative that board members be selected on the basis of proven records of scholarly achievement as demonstrated by publications in peer-reviewed journals and subsequent citations to those publications. Although research in accounting has looked at the composition of editorial boards, the scholarly achievement of editorial board members has not been examined. The purpose of our study is to empirically investigate the scholarly achievement of editorial board members of selected accounting journals. We find that the top accounting journals may not be using the same criteria in selecting editorial board members. Further, the level of achievement of the editorial board members and their articles’ impact factors were often inconsistent with the perceived ranking of the journals in which they served. A discussion and implications of our results are also provided.     

An exploratory analysis of the effect of numbers of choice sets in designed choice experiments: an airline choice application

Stated choice (SC) experiments are increasingly adopted as the empirical source of information on how individuals respond to current and potential travel contexts. The accumulated experience with SC data has been heavily conditioned on analyst prejudices about the acceptable complexity of the data collection instrument, especially the number of profiles (or treatments) given to each sampled individual (and the number of attributes and alternatives to be processed). It is not uncommon for analysts to impose very stringent limitations on the complexity of an SC experiment. A review of the literature suggests that very little is known about the basis for rejecting complex designs or accepting simple designs. In this paper, we develop a complex design as the basis for an SC study, producing a fractional factorial of 32 rows. However, we then truncate the fraction by administering 4, 8, 16, 24 and 32 profiles to a sample of individuals in Australia and New Zealand faced with the decision to fly (or not to fly) between Australia and New Zealand by alternative airlines and fare regimes. Statistical comparisons of elasticities (an appropriate behavioural basis for comparisons) suggest that the empirical gains within the context of a linear specification of the utility expression associated with each alternative in a discrete choice model may be quite marginal.     

Shareholder activism and voluntary disclosure

We examine the relation between shareholder activism and voluntary disclosure. An important consequence of voluntary disclosure is less adverse selection in the capital markets. One class of traders that finds less adverse selection unprofitable is activist investors who target mispriced firms whose valuations they can improve. Consistent with this idea, we find that managers issue earnings and sales forecasts more frequently when their firm is more at risk of attack by activist investors, and that these additional disclosures reduce the likelihood of becoming an activist’s target. These additional disclosures also prompt a positive price reaction, contain more precise guidance, and exceed prevailing market expectations. These findings imply that managers use voluntary disclosure to preempt activism at their firm, and that activists prefer to target relatively opaque firms.     

Stock returns forecasting with metals: sentiment vs. fundamentals

Using six prominent metal commodities, we provide evidence on the out-of-sample forecasting of stock returns for the market indices of the G7 countries, for which there is little prior evidence in this context. We find precious metals (gold and silver) can improve forecast accuracy relative to the benchmark and performs well compared to forecast combinations. From an economic gains perspective, forecasting returns provides certainty equivalent gains in a market timing strategy for the G7 countries. These certainty equivalent gains are large enough to make active portfolio management attractive, even for individual investors. Gains remain after considering reasonable transaction costs.     

Do investment banks listen to their own analysts?

To what extent conflicts of interest affect the investment value of sell-side analyst research is an ongoing debate. We approach this issue from a new direction by investigating how asset-management divisions of investment banks use stock recommendations issued by their own analysts. Based on holdings changes around initiations, upgrades, and downgrades from 1993 to 2003, we find that these bank-affiliated investors follow recommendations from sell-side analysts in general, increasing (decreasing) their relative holdings following positive (negative) recommendations. More importantly, these investors respond more strongly to recommendations issued by their own analysts than to those issued by analysts affiliated with other banks, especially for recommendations on small and low-analyst-coverage firms. Thus, we find that investment banks “eat their own cooking,” showing that these presumably sophisticated institutional investors view sell-side recommendations as having investment value, particularly when the recommendations come from their own analysts.     

Experimental tests of the Somatic Marker hypothesis

Damasio's [Descarte's Error: Emotion, Rationality and the Human Brain. Putnam (Grosset Books), New York, 1994] Somatic Marker hypothesis posits that emotion-generated mental markers influence our decisions and, in particular, tend to curb inherent tendencies to seek risk, to be impatient and to be callous in social situations. Ventromedial (VM) prefrontal cortex damage interferes with this marking process, resulting in risk seeking behavior, impatience and socially inappropriate behavior. In the present study, we present 27 normal controls and 17 patients with prefrontal cortex lesions with batteries of questions designed to probe their attitudes toward risk, intertemporal preferences and behavior in social contexts. The results demonstrate that VM patients are no more risk seeking, impatient, or prone to behavior in socially inappropriate manners than normal subjects. Indeed, we find no significant differences of any sort between the two groups of subjects on any the dimensions investigated. We discuss why VM cortex damage in humans appears to influence decisions in certain circumstances but not in others.