The aftermath of public attention on accounting improprieties: Effects on securities class action settlements

This research examines the effect on securities case settlements from the public focus on accounting fraud immediately following Enron and other large accounting debacles. In addition, to the extent that an ‘Enron-effect’ occurred, behavioral theory suggests that such an effect would likely dissipate over time. Therefore, I also investigate whether in very recent years an impact from the prior attention on accounting fraud diminishes with the passage of time. Results indicate that following the increased media and public attention upon accounting fraud, characteristics of securities cases that were the focus of this increased attention are associated with incrementally higher settlement amounts - specifically large cases involving financial restatements and cases involving intentional misstatements, i.e., accounting irregularities.Findings regarding whether an ‘Enron-effect’ has dissipated with the passage of time are mixed. Overall, results contrast with prior research, which did not find support for an ‘Enron-effect’ on securities case settlements, and suggest that future events that capture public attention may cause defendants in certain securities cases to pay higher amounts, not necessarily because of their own culpability.     

Inequality and Growth in European Regions: Towards a Place-based Approach

Abstract

Does agglomeration matter for growth? This paper addresses this question by evaluating the impact that intra-regional income distribution has on regional growth in Europe. By using a spatially augmented Solow growth model, we investigate the convergence process among 188 EU regions between 1991 and 2004 and extend the traditional growth models to account for the impact of regional inequality on growth, as well as the effects of interaction among regions. Our assumption is that existing levels of inequality between sub-regional territorial units could positively contribute to regional economic growth in Europe, through the positive effects generated by the emergence of agglomeration economies. Our results show that while we cannot find any overall significant relationship in Europe between agglomeration and growth, once we distinguish between Objective 1 and Non-objective 1 regions we are able to find that agglomeration positively impacts subsequent growth, but only in the less developed regions.     

Time will tell: interaction effects of franchising percentages and age on franchisor mortality rates

Drawing from franchising and organizational ecology literatures, we hypothesize that franchising provides benefits to franchisors by addressing issues of adverse selection, moral hazard, holdup, obsolescence, and senescence. We assert that, over time, these benefits increase such that the more a franchise chain utilizes franchisees rather than company-owned outlets, the greater the franchising benefits accrue to the franchisor. We test our propositions by studying the mortality rates of 393 franchise organizations in the U.S. automotive products and services sector over the 21-year time period 1985–2005, using proportional hazard analysis. We find that older franchise chains with higher percentages of franchised units have lower mortality rates than older franchise chains with lower percentages of franchised units. We also find that younger franchise chains with higher percentages of franchised units have higher mortality rates than younger franchise chains with lower percentages of franchised units.     

A Longitudinal Study of the Impact of R&D,Patents, and Product Innovation on Firm Performance

Because of increasing levels of competition and decreasing product life cycles, a firm's ability to generate a continuous stream of innovations may be more important than ever in allowing a firm to improve profitability and maintain competitive advantage This paper investigates several issues that are central to an examination of the innovation productivity in a firm. First, the relationship between a firm's commitment to research and development and its innovative outcomes is examined. Two innovative outcomes are analyzed: (1) invention, which focuses on the development of new ideas; and (2) innovation, the development of commercially viable products or services from creative ideas. Invention is measured by the number of patents granted, and innovation is assessed by the number of new product announcements. Second, because many inventions ultimately result in marketable innovations and because patents may provide protection for new products, the relationship between patents and product announcements is also investigated. Finally, the ability of a firm to benefit from its inventions and innovations is studied by examining their separate effects on firm performance, measured as return on assets (ROA) and sales growth. Drawing from a sample of 272 firms in 35 industries over 19 years, the results from a model of simultaneous equations provided support for some of the hypotheses, but several other surprising findings were found. As expected, R&D spending was positively related to patents. This finding is consistent with others who argue that internal research capabilities, particularly those with a strong basic research component, is key to enabling a firm to generate creative outputs. More surprising was the finding of increasing returns to scale to R&D spending. While this contradicts much of the existing research, it is consistent with economic arguments for the advantages of scale in innovation. Also interesting is the finding that, while a significant curvilinear relationship exists between R&D spending and product announcements, it is not the predicted inverse‐U but instead a U‐shaped relationship. Consistent with previous work, product announcements were found to be positively related to both performance measures. A negative relationship was found between patents and both ROA and sales growth. While these findings were unexpected, they are intriguing and call into question the value of patents as protection mechanisms. In addition, these results may be resulting from the rise of strategic patenting, where an increasing number of firms are using patents as strategic weapons. As expected, a positive relationship was found between patents and new product announcements.     

Predicting teleworker success: an exploration of personality,motivational, situational,and job characteristics

This study explored personality and motivational traits related to teleworker performance and satisfaction, including sociability, need for achievement and autonomy, diligence and organisation. Situational factors were also compared between teleworkers and non‐teleworkers, such as number of children, job autonomy and job complexity. Implications for research and practice are discussed.     

The Effect of Fiscal Decentralization on Corruption: A Non‐linear Hypothesis

This study advances the literature on the effect of decentralization on corruption by proposing a theoretical motivation for the hypothesis that the corruption‐minimizing decentralization arrangement prescribes intermediate decentralization degrees: a ‘middle’ decision‐making power of local governors may mitigate the tradeoff between the rent‐seeking incentive for local politicians and the effectiveness of their voters’ monitoring. The estimation of a non‐linear empirical model strongly confirms that a decentralization degree between 15% and 21% minimizes corruption even through different estimation procedures, introduction of control variables and the use of internal and external IV and of alternative decentralization and corruption measurements.     

Methodological problems in the economic measurement of tourism: the need for new sources of information

Quality & Quantity - Tourism alone does not comprise an economic sector. Tourism activities are found in the agriculture, industry, and service sectors. As a result, tourism can contribute...     

Examining the Conditional Limits of Relational Governance: Specialized Assets,Performance Ambiguity,and Long‐Standing Ties

abstract Despite recognition of the benefits of relational governance in inter‐organizational exchanges, factors that may erode its value have received little examination. We extend the literature by asking whether self‐interested opportunities and long‐standing ties erode the positive association between relational governance and performance. Consistent with transaction cost and moral hazard logics, exchange hazards, particularly asset specificity and difficult performance measurement, dampen the positive association of relational governance and performance. We further find, consistent with recent inquiries into the dark side of embedded ties that the performance benefits associated with relational governance decline when parties rely on repeated partnerships.     

The Thrift IPO as the First Stage of its Subsequent Sale

Although the underpricing of initial public offerings (IPOs) has been well documented, the underpricing of foreign IPOs have received relatively little attention. In a comparative analysis of foreign and domestic IPOs in the U.S. market for the 1990-1993 period, we find that for a matched sample, foreign IPOs are significantly more underpriced. Our results are consistent with the models developed by Rock (1986), Beatty and Ritter (1986), and Carter and Manaster (1990). Examination of the characteristics of foreign IPOs reveals that they are more likely to be larger in size, employ more prestigious underwriters and are much more likely to list on the New York Stock Exchange (NYSE).     

On the Political Economy of Temporary Stabilization Programs

This paper provides a political economy explanation for temporary exchange-rate-based stabilization programs by focusing on the distributional effects of real exchange-rate appreciation. I propose an economy in which agents are endowed with either tradable or non-tradable goods. Under a cash-in-advance assumption, a temporary reduction in the devaluation rate induces a consumption boom accompanied by real appreciation, which hurts the owners of tradable goods. The owners of non-tradables have to weigh two opposing effects: an increase in the present value of non-tradable goods wealth and a negative intertemporal substitution effect. For reasonable parameter values, owners of non-tradables are better off.