Decreasing Utility for Money and Optimal Corporate Debt Ratio

Increasing the ratio of debt capital to total capital increases leverage or sensitivity of equity earnings per share to changes in pretax earnings on composite capital. If (1) total capital needs, and (2) probabilistic pretax earnings on composite capital are held fixed while the debt ratio is increased, the result is an increased variability of after tax earnings per dollar of equity capital. With the “price” (variability) growing with still further increases in debt ratio, “nonuniform utility of money” concepts are helpful in revealing this growing variability as an “investor barrier” to still greater debt ratios.     

An empirical investigation of the effectiveness of an integrated service recovery system

Although service recovery has become an increasingly-studied topic in the operations management literature, robust theories and accompanying empirical studies have only begun to emerge. For example, while many authors have identified and measured the specific activities that are perceived by consumers as effective ways to recover from failure, much less attention has been directed at the systematic structuring of recovery efforts to consistently ensure customer satisfaction and achieve improved, long-term organizational outcomes. Building on recent research that identified the principal constructs of service recovery, this study seeks to explore the relative effectiveness of an integrated service recovery system. Data from 158 service organizations are used to explore the relationship between the system and its associated recovery outcomes. Results indicate that a complete recovery system defined by seven distinct dimensions (formalization, decentralization, comprehensiveness, accessibility, influence, human intensity, and system intensity,) significantly impacts internal capability improvements as well as externally-perceived outcomes (i.e., speed, employee empathy, and recovery effectiveness) while both of these outcomes have a significant impact on customer satisfaction and market performance attributed to service recovery     

COUNTERING THE ASSAULT ON CAPITALISM

Capitalism is the most efficient system for solving problems and for advancing human welfare. Yet it faces opposition both from intellectuals and those with vested interests in big government. If business leaders would push for ‘liberate to stimulate policies’, they might succeed in creating a freer tomorrow and solving more of humanity's problems.     

What Plato Knew About Enron

This paper applies Plato’s cave allegory to Enron’s success and downfall. Plato’s famous tale of cave dwellers illustrates the different levels of truth and understanding. These levels include images, the sources of images, and the ultimate reality behind both. The paper first describes these levels of perception as they apply to Plato’s cave dwellers and then provides a brief history of the rise of Enron. Then we apply Plato’s levels of understanding to Enron, showing how the company created its image and presented information to support that image, and how the public eventually emerged from the cave to realize the truth about Enron’s actual accounting practices and financial state, which led to the corporation’s downfall. We find Plato’s allegory both useful in analyzing the relationship between Enron and the public and instructive about the power and moral responsibility of Enron’s executives.     

Wage and employment effects of a wage norm

Most transition countries used tax‐supported wage norms in the early 1990s, as a part of their market liberalization programmes. This article analyses how a firm‐level tax (or subsidy) on deviations from a pre‐set wage norm may promote employment by rotating the labour demand curve perceived by the workers’ union around the value of the norm. We derive the conditions under which it yields a positive employment effect. We test the effect of the norm on the wages on a sample of Polish firms in 1990 and 1991. The data support the role of the wage norm on the position of the perceived labour demand curve and the role of the tax rate on its slope.     

Correction: Social Accountability,Ethics, and the Occupy Wall Street Protests

Journal of Business Ethics -     

Firm Heterogeneity and Export Pricing in India

We examine export pricing by Indian manufacturing firms in the early 2000s using a unique data set that matches firm characteristics with product and destination‐level trade data. We find that, in contrast to China and other countries, firm productivity is negatively associated with export prices, and export prices are negatively associated with distance while positively associated with remoteness. Our conjecture is that Indian innovation costs, which are higher than China's, drive down the scope for quality differentiation causing a negative association between productivity and prices. To the best of our knowledge, this is the first empirical evidence consistent with heterogenous goods and short quality ladders, a theoretical possibility noted in the study by Antoniades (2012), an outcome that arises here because of domestic Indian economic and regulatory features.     

Valuation and classification of company issued cash and share-puts

This paper examines whether investors’ valuations of cash and share-put warrants are influenced by their potential differential effect on firm solvency. It is motivated by the enactment of SFAS 150, which requires that all contingent put warrant obligations be classified as balance sheet liabilities regardless of put type. Consistent with the critics of SFAS150, we show that market participants differentially value cash and share-puts based on their solvency characteristics beyond the firm’s recorded assets and liabilities. Our results add to existing capital structure literature by suggesting that complex financial instruments (such as cash and share-puts) be reported separately from each other on a firm’s balance sheet.

True burden of drowning: compiling data to meet the new definition

The objective and aim of the study was to compile empirical data to quantify the underestimation of the true burden of drowning and to compare drowning rates using commonly reported codes compared with those revealed by use of the full range of drowning codes in ICD version 10. The authors reviewed mortality data (1999-2002) from Australia and the USA and compiled data to compare the burden of 'unintentional drowning' with that of 'all drowning'. In both Australia and the USA, drowning mortality is more than 35% higher when a full range of codes is examined. A more comprehensive representation of the drowning problem is needed to assist in strengthening prevention activities.