Gestaltung der Abschlussprüferhaftung – Implikationen theoretischer Modelle

Business scandals such as Enron, WorldCom or Parmalat have sparked intense discussions on the quality of corporate governance as well as the trustworthiness of statutory auditors. It is therefore no surprise that regulators have issued a large number of new regulations concerning auditing. The civil liability of external auditors has not changed in Germany, but such changes have already been announced by the German government. An increase in the existing liability cap in cases of negligent misconduct and extended third-party liability are planned. As a consequence, the results of analytical research on this topic are highly relevant. This paper summarises and comments on prior analytical research, in particular its assumptions and results, and focuses on important elements for the design of a liability regime. To this end, the paper addresses the questions of joint–and-several vs. proportionate liability rules, negligent vs. strict liability regimes, the extent of third party liability, and limited vs. unlimited liability.     

The Morishima gross elasticity of substitution

We show that the Hotelling–Lau elasticity of substitution, an extension of the Allen–Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen–Uzawa elasticity identified by Blackorby and Russell [(1989) Am Econ Rev 79: 882–888]. An analogous extension of the Morishima elasticity of substitution to allow for output quantity changes preserves the salient properties of the original Hicksian notion of elasticity of substitution. We thank Paolo Bertoletti for drawing our attention to the issue addressed in this paper and for his comments on an earlier draft.     

Party alternation,divided government,and fiscal performance within US States

The literature on US state government fiscal performance has examined the role of institutional factors such as budget rules and divided government, but has largely ignored the impact of party alternation. This paper primarily focuses on whether party alternation in the governor’s office affects fiscal performance. Our hypothesis is that frequent party changes create a political environment that impacts fiscal performance. To further assess the impact of party alternation on fiscal performance, we consider our primary hypothesis in conjunction with the degree of division that exists between the governor’s office and the legislature. Using panel data from 37 states between 1971 and 2000 we test the hypothesis that frequent party alternation can be expected to affect fiscal performance and find strong support for the hypothesis. An earlier version of this paper was presented at the 2005 Public Choice Society Meetings. The authors would like to thank the conference participants, William Shughart, Charles Register, Jocelyn Evans, John D. Jackson, Amihai Glazer, and two anonymous referees for their comments. We would also like to thank Craig R. Stiller for his help in the collection of data. Any remaining errors remain the responsibility of the authors.     

The generalized Stackelberg equilibrium of the all-pay auction with complete information

We characterize the equilibrium of the all-pay auction with general convex cost of effort and sequential effort choices. We consider a set of n players who are arbitrarily partitioned into a group of players who choose their efforts ‘early’ and a group of players who choose ‘late’. Only the player with the lowest cost of effort has a positive payoff in any equilibrium. This payoff depends on his own timing vis-a-vis the timing of others. We also show that the choice of timing can be endogenized, in which case the strongest player typically chooses ‘late’, whereas all other players are indifferent with respect to their choice of timing. In the most prominent equilibrium the player with the lowest cost of effort wins the auction at zero aggregate cost. We thank Dan Kovenock and Luis C. Corchón for discussion and helpful comments. The usual caveat applies. Wolfgang Leininger likes to express his gratitude to Wissenschaftszentrum Berlin (WZB) for its generous hospitality and financial support.     

Contingent payments in selection contests

The early literature on research contests stressed the advantages of a fixed prize in inspiring R&D effort. More recently the focus has moved towards endogenizing the rewards to research activity in these tournament settings, since this can induce extra effort or enhance the surplus of the buyer. We focus on a research contest as a means of selecting a partner for an R&D enterprise, in an informational setting in which the established providers of R&D services know more about each others’ relative capabilities than does the buyer/sponsor. An alternative use of our model is in choosing between prospective patentees where the Patent Trading Office has less information on the patents than the competitors. This asymmetry creates a source of inefficiency if a rank order contest is used as a selection device; we show how the contest can be modified to improve selection efficiency, while maintaining its simplicity (as only ordinal information is required). The modification that we suggest involves endogenizing the prizes that are awarded contingent upon whether a contestant wins or loses the contest. Furthermore, the payment system and the selection mechanism are detail-free. This paper is part of the project “The Knowledge-Based Society” sponsored by the Research Council of Norway (project 172603/V10).     

Linear cumulative prospect theory with applications to portfolio selection and insurance demand

Abstract The present paper combines loss attitudes and linear utility by providing an axiomatic analysis of corresponding preferences in a cumulative prospect theory (CPT) framework. In a sense we derive a two-sided variant of Yaari’s dual theory, i.e., nonlinear probability weights in the presence of linear utility. The first important difference is that utility may have a kink at the status quo, which allows for the exhibition of loss aversion. Also, we may have different probability weighting functions for gains than for losses. We apply the model to both portfolio selection and insurance demand. Our results show that CPT with linear utility has more realistic implications than the dual theory since it implies only a weakened variant of plunging. Mathematics Subject Classification (2000): 91B08, 91B28, 91B30 Journal of Economic Literature Classification: D81, G11, G22     

Generalized linear mixed models with informative dropouts and missing covariates

Generalized linear mixed models (GLMM) are useful in many longitudinal data analyses. In the presence of informative dropouts and missing covariates, however, standard complete-data methods may not be applicable. In this article, we consider a likelihood method and an approximate method for GLMM with informative dropouts and missing covariates. The methods are implemented by Monte–Carlo EM algorithms combined with Gibbs sampler. The approximate method may lead to inconsistent estimators but is computationally more efficient than the likelihood method. The two methods are evaluated via a simulation study for longitudinal binary data, and appear to perform reasonably well. A dataset on mental distress is analyzed in details.     

Mind the Gap: A Journey to Sustainable Supply Chains

Many companies still view Corporate Social Responsibility (CSR) as solely philanthropy rather than addressing their material issues. A few companies that have began to see the strategic advantages of being socially responsible and addressing their social, environmental and economic challenges. Developing an effective strategy can reward companies with reputation enhancement, license to operate, avoiding litigation, recruitment and retention of employees and developing process, product and strategic innovations. One company who has realized the value of investing and integrating CSR into the business model is the apparel retailer Gap Inc. This article will examine the evolution of Gap Inc. and its work developing an effective labor standards assurance program and stakeholder engagement strategy transformed historically adversarial relationships with key stakeholders into collaborative multi-stakeholder partnerships. Particular attention is put towards Gap Inc.’s learnings in the process and how these new insights innovated the company’s CSR strategy over time. An erratum to this article can be found at     

The Limit Distribution of the Bootstrap for the Unit Root Test Statistic when the Residuals are Dependent

In this article, the unit root test for the AR(1) model with dependent residuals is considered. We adopt a bootstrap procedure to bootstrap the residuals with bootstrap sample size m less than the size n of the original sample. Under the assumptions that m → ∞ and m/n → 0, the convergence in probability of the bootstrap distribution function is established. Research supported by National Natural Science Foundation of China (No. 10471126)     

Does the Company Lawyer Have Your Back? A Brief Look at the Need for Personal Private Liability Insurance

There are four traditional uses of private personal liability insurance dating from the 1970s to the present (Hayes 1979; Sommers 2005) which pertain either to individuals or corporations. There is insurance to cover damage to rental cars, umbrella insurance to cover any injury to a guest at one’s home, insurance bought by corporations to cover potential corporate responsibility for actions of company representatives and insurance including misadventures with financial information and morally hazardous behavior as well as corporate required actions which are later deemed to be wrong or inappropriate. Employees need to find out if the employee manual provides for coverage for legal liabilities resulting out of performing job responsibilities. Due to a need to reduce company costs, many companies are reducing or eliminating coverage for employees for many types of actions. Private personal liability insurance gives you the peace of mind to know what you are covered for and for how long. Employee rights versus corporate budgets are at the core of this discussion.