From home country to home base: A dynamic approach to the liability of foreignness

We argue that the influence of the home country wanes as the firm increases its geographic reach. We introduce the concept of the “home base” to capture the effect of the set of countries in which the firm operates. We expect the dynamic liability of foreignness defined relative to the home base to be a better predictor than the static liability of foreignness defined relative to the home country. We also expect the diversity of foreign experience to increase foreign market entry. We find support for these hypotheses with data on Chinese listed firms investing abroad between 1991 and 2007. Copyright © 2014 John Wiley & Sons, Ltd.     

The effect of smileys as motivational incentives on children’s fruit and vegetable choice,consumption and waste: A field experiment in schools in five European countries

To assess whether smiley stamps work as a motivational incentive to promote fruit and vegetable eating among children, we conducted a field experiment in ten primary schools in five European countries using one control and one treatment school per country. The six-week experiment was split into three two-week phases before, during and after the smiley was implemented. During the smiley phase, the children received a smiley stamp for choosing a portion of fruits or vegetables. We find an increase attributed to the smiley stamp on children’s fruit and vegetable choice and consumption, but also waste. Comparing the effects across countries, we observe significant variations in the smiley effect. This study thus demonstrates, in general, that a low-cost, easy-to-implement incentive such as a smiley stamp has the potential to motivate school children to increase their fruit and vegetable consumption; the study simultaneously underscores the high relevance of context for the effects of incentives.     

Household portfolio choice before and after a house purchase

Using a unique administrative panel data from Denmark, this article documents the dynamic evolution of households' financial wealth, the equity market participation rate (extensive margin), and the conditional risky asset share of financial wealth (intensive margin) over a 7-year period around a house purchase. We find that households' equity market participation rate falls during the year of house purchase. Conditional on participation, the risky asset share of financial wealth follows a V-shape around the house purchase. It decreases and reaches the lowest point 1 year before a house purchase, but jumps up immediately after. This finding suggests that of the three channels identified in the literature that are related to the risky asset demand after a house purchase, the debt retirement channel and the diversification effect dominate the liquidity concern.     

资源优势与条件约束下的次优选择：高青县区域担保圈风险处置案例

当前县域企业融资尤其是县域骨干企业融资多采取互保联保的捆绑担保模式,在经济波动条件下,容易产生区域担保圈风险的传递问题。区域担保圈风险的多发、频发所产生的多米诺骨牌效应,对区域金融经济乃至社会稳定产生巨大影响。山东省高青县在处理区域内多起担保圈风险事件中,实施分类处置、理性救助,将辖内涉及多家企业和多家金融机构的多起典型担保圈风险成功化解,但财政实际上是对银行不良担保行为的被动埋单,是资源优势与条件约束下的次优选择。治理和防范区域担保圈风险应更多地从产生问题根源角度采取市场的方式进行规范和引导,防患于未然。本文为化解和反思担保圈风险提供了可参考的案例。     

Optimal mean-reversion strategy in the presence of bid-ask spread and delays in capital allocations

A portfolio optimization problem for an investor who trades T-bills and a mean-reverting stock in the presence of proportional and convex transaction costs is considered. The proportional transaction cost represents a bid-ask spread, while the convex transaction cost is used to model delays in capital allocations. I utilize the historical bid-ask spread in US stock market and assume that the stock reverts on yearly basis, while an investor follows monthly changes in the stock price. It is found that proportional transaction cost has a relatively weak effect on the expected return and the Sharpe ratio of the investor's portfolio. Meantime, the presence of delays in capital allocations has a dramatic impact on the expected return and the Sharpe ratio of the investor's portfolio. I also find the robust optimal strategy in the presence of model uncertainty and show that the latter increases the effective risk aversion of the investor and makes her view the stock as more risky.     

Entry Mode Choice and Performance: Evidence from Taiwanese FDI in China

This paper examines entry mode choices between wholly owned subsidiaries (WOSs) and joint ventures (JVs) and the impact on performance for Taiwanese foreign direct investment in China. Taiwan and China share common cultural traits, so Taiwanese investors inherently prefer WOSs because these investors are acquainted with local conditions in China. This paper shows that even if WOSs are a natural choice, transaction cost theory is applicable in explaining the adoption of JVs by Taiwanese firms when investing in China. Firms that choose WOSs generally have higher sales growth and superior profitability. However, the smaller the subsidiary and the less experienced the firm, the more likely that JVs will have better performance.     

Location strategies for agglomeration economies

Because agglomeration economies may create competitive advantage and each location has a unique array of agglomeration economies, where should firms locate? We combine fundamental economic and strategy concepts to: (1) determine when firms must locate proximately to access factor pools; (2) show that factor pools controlled by fewer firms are less useful to new entrants; and (3) demonstrate that certain firms risk aiding competitors when contributing to efficient factor pools. We find support for our predictions with a test on new U.S. manufacturing entrants from 1985 to 1994, using an empirical specification that separates agglomeration levels from agglomeration economies. Copyright © 2013 John Wiley & Sons, Ltd.     

Why Do Western European Firms Issue Convertibles Instead of Straight Debt or Equity?

Unlike their US counterparts, European convertible debt issuers tend to be large companies with small debt‐ and equity‐related financing costs. Therefore, it is puzzling why these firms issue convertibles instead of standard financing instruments. This paper examines European convertible debt issuer motivations by estimating a security choice model that incorporates convertibles, straight debt, and equity. We find that European convertibles are used as sweetened debt, not as delayed equity. This motivation is reflected in the debt‐like design of most European convertible issues.     

The Impact of R&D Intensity on Demand for Specialist Auditor Services*

The audit fee research literature argues that auditors' costs of developing brand name reputations, including top‐tier designation and recognition for industry specialization, are compensated through audit fee premiums. Audited firms reduce agency costs by engaging high‐quality auditors who monitor the levels and reporting of discretionary expenditures and accruals. In this study we examine whether specialist auditor choice is associated with a particular discretionary expenditure ‐ research and development (R&D). For a large sample of U.S. companies from a range of industries, we find strong evidence that R&D intensity is positively associated with firms' choices of auditors who specialize in auditing R&D contracts. Additionally, we find that R&D intensive firms tend to appoint top‐tier auditors. We use simultaneous equations to control for interrelationships between dependent variables in addition to single‐equation ordinary least squares (OLS) and logistic regression models. Our results are particularly strong in tests using samples of small firms whose auditor choice is not constrained by the need to appoint a top‐tier auditor to ensure the auditor's financial independence from the client.     

The Use and Abuse of Accounting in the Public Sector Financial Management Reform Program in Australia

Accrual accounting has been central to financial management reforms designed to promote greater efficiency, effectiveness and accountability in the Australian public sector. This is the setting for the article; however, the issues covered apply to all nations that have reformed their public sectors over recent years. The results of the reforms have been mixed. While accrual accounting has had some beneficial results for the above purposes, the benefits have been offset by aspects of accounting misuse resulting largely from adoption of the business model of accrual accounting, termination of the former cash accounting system, and adoption of some questionable marketization reforms which appear to be more driven by the objective of reducing the size of government rather than enhancing efficiency of operations. Because Treasury believed that the business model was not appropriate for budget fiscal policy purposes, it introduced a second combined accrual and cash accounting system—the Government Finance Statistics system. The use of two accrual accounting systems reporting different results caused much confusion in parliament.