Economics at the FTC: Physician Acquisitions, Standard Essential Patents, and Accuracy of Credit Reporting

Economists at the Federal Trade Commission pursue the agency’s competition and consumer protection missions. In this year’s essay, with respect to antitrust we discuss the analysis that is used in two areas where the Commission has recently been active: physician combinations and standard essential patents. In consumer protection, we discuss the FTC’s recently released national study of the accuracy of consumer credit reports.     

Measuring the Academic Self-Efficacy of First-year Accounting Students

Abstract

This study measured the levels of academic self-efficacy of first-year accounting students. It also investigated whether there were any gender differences and the extent to which efficacy levels explained variation in academic performance. Overall the analysis revealed that many students lacked the confidence to participate fully in the academic activities associated with their accounting modules. Specifically, they were reluctant to seek help, they lacked the confidence to study effectively or to engage in independent reading and note-taking, and 40% of them were unable to judge the standard required to do well in examinations. The findings demonstrated that being confident in one's ability to understand the course content, to attempt questions in advance of tutorials, and to meet deadlines were associated with achieving significantly better results in the accounting modules. Interestingly, very few gender differences were identified. The paper concludes by considering the implications of the findings for accounting educators.     

Zooming in VS zooming out on value co-creation: Consequences for BtoB research

The concept of value co-creation is now taken for granted in the marketing community. It is the result of what we consider as a premature closure of this concept. The aim of this article is to prevent this premature closure by confronting what this discipline has produced thus far in order to highlight the breadth of situations that this concept presumes to encompass. To achieve this, we analyze a selection of articles published in special issues of marketing journals that were dedicated to value co-creation and/or service dominant logic. This sample enables us to point to the risks of being locked into a zoom-out approach to economic exchange: an arbitrary reduction of the vast heterogeneity of exchange phenomena and an inability to account for the complexity of these phenomena. Because value co-creation is a conception that is in conflict with the zoom-in approach to exchange phenomena, our intent is to conduct a healthy rebalancing of perspectives on economic exchange and thereby keep the controversy alive.     

Female labour force intermittency and current earnings: switching regression model with unknown sample selection

Using the Health and Retirement Survey from the USA, this paper finds a 16% selectivity-corrected wage penalty among women who engage in intermittent labour market activity. This penalty is experienced at a low level of intermittent activity, but appears to not play an important role in a woman's decision to undertake such activity. In addition, employer preferences appear to play a larger role than human capital atrophy in the determination of the wage penalty.     

Asset Revaluations and Debt Contracting

The research question investigated is: Do managers of Australian firms use upward asset revaluations to reduce debt contracting costs? Prior research, using sample periods from the 1970s and early 1980s, provides evidence that asset revaluations are used to reduce the costs of debt contracting (see Whittred and Chan, 1992; Brown et al., 1992; Cotter and Zimmer, 1995). However, considerable changes to the institutional set-ting have occurred in the past decade. These institutional changes include increased regulation of asset revaluations and disclosures, changes in the macroeconomic environment, and changes in the Australian debt market. Particularly, there has been a shift in emphasis from public to private debt. The relationship between asset revaluations and debt contracting is examined in the current setting, using refined measures of contracting variables. Interestingly, the results of prior research do not replicate in the current setting. In order to further examine the potential impact of changes to the institutional setting, a series of interviews with chief financial officers is undertaken. The conclusion drawn from this additional analysis is that the relatively closer relationship between firms and their bankers in the current institutional setting has caused many firms to choose footnote disclosure of undervalued assets in preference to recognizing an upward asset revaluation in the balance sheet.     

The Impact of Industrial Design Effectiveness on Corporate Financial Performance*

Despite the growing recognition of industrial design's value in creating sustainable competitive advantage, few studies have attempted to quantify the contribution that design makes to company financial performance. This article examines the relationship between industrial design and company financial performance in order to assess industrial design's contribution to this performance. Effective industrial design was evaluated by asking a panel of 138 industrial design experts to rank the industrial design effectiveness of publicly traded firms within nine selected manufacturing industries; the ranking process yielded 93 firms. Based on the rankings, firms within each industry were divided into two groups: those judged as exhibiting high design effectiveness versus those judged as low in design effectiveness. Audited financial data reported to the SEC across a seven‐year period from 1995 to 2001 were used to evaluate financial performance. Using traditional financial ratios senior managers consider essential performance measures, those firms with high design effectiveness were hypothesized to have higher returns on sales, returns on assets, and growth rates of sales, net income, and cash flow than firms with low design effectiveness. High design effectiveness firms further were hypothesized to have higher stock market returns. These comprehensive, corporate financial measures incorporate expenditures made on industrial design (industrial designers' salaries, design consultants' fees, computer‐aided industrial design equipment) and expenditures that designers influence through their design choices (material costs, manufacturing equipment). This analysis reveals that firms rated as having “good” design were stronger on all measures except growth rate measures. These results provide strong evidence that good industrial design is related to corporate financial performance and stock market performance even after considering expenditures on industrial design. Further, the patterns of financial performance over the seven‐year horizon suggest that these effects are persistent.     

Board and Monitoring Committee Independence

This study focuses on the composition of boards of directors and their monitoring committees (audit and compensation) for large Australian companies. For firms whose boards use a committee structure, much of the monitoring responsibility of the board is expected to rest with the independent committee members. We document a positive association between the proportion of independent directors on the full board and its monitoring committees, and a greater proportion of independent directors on both audit and compensation committees than the full board. Our hypotheses tests involve an examination of the impact of other mechanisms used to control agency conflicts on full board and committee independence, and the association between this independence and firm value. We find that full board independence is associated with low management ownership and an absence of substantial shareholders. Audit committee independence is associated with reduced monitoring by debtholders when leverage is low. While we predict a positive relationship between board and monitoring committee independence and firm value, our results do not support this conjecture.     

Questioning the use of ‘local democracy’ as a discursive strategy for political mobilization in Los Angeles,Montreal and Toronto

Between 1997 and 2002, homeowners in various parts of Los Angeles sought to secede from the City. At the same time, in Toronto, the province of Ontario forced the amalgamation of six municipalities forming a new megacity of 2.4 million. Residents mobilized for several months. In 2000, the province of Quebec forced the merger of 28 local municipalities in Montreal, forming a new city of 1.8 million. Angst came mostly from suburban Anglophone municipalities, where it was felt mergers would affect linguistic privileges. In the three cases, but stemming from different positions on the Left‐Right political spectrum, social actors claimed more local autonomy ‘in the name of local democracy’. Comparing these cases where institutional reforms and claims for local autonomy captured the political agenda, the article asks whether the use of ‘local democracy’ as a legitimizing tool for territorial claims may point to the emergence of a new generalized discursive strategy. Comparing variations in interpretations, and locating them in their respective local political cultures and in relation to the political positioning of claiming groups, highlights the processes by which socio‐political movements mobilize residents to their cause while avoiding accusations of NIMBYism. In the end, the article questions the moral tone attached to the expression ‘local democracy’.     

Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment

We examine chief executive officer remuneration disclosure in Australia from 1998 to 2004. Disclosure was first required by the Company Law Review Act 1998 (CLRA98). Despite CLRA98's clear intentions, firms generally failed to comply until the requirements were formalized by Director and Executive Disclosures by Disclosing Entities (AASB1046), issued in 2004. For a sample of 124 firms, we find significant improvements in disclosure concurrent both with CLRA98 and AASB1046. We also find firm size, corporate governance, auditor quality, cross‐listing status and public scrutiny to be significant explanations of disclosure. Our results indicate that high quality disclosures will only come about through detailed, black letter requirements and that principle‐based legislation involving interpretative discretion is unlikely to produce the desired level of disclosure.