Evaluating the newer salesperson

This article reports the results of an experiment examining the effect pattern of performance and information format have on sales managers performance appraisal.     

The Ultimate Irrelevance Proposition in Finance?

I survey 457 published papers in top finance journals across two decades to assess whether these papers misuse tests of significance. More than 80% of published studies are diligent about distinguishing between statistical and economic significance and quantifying and interpreting the economic magnitudes of the statistical relationships they measure. Yet, only 10% of these acknowledge limits to the power of their tests and even fewer do anything about them. Recent demographic trends in publishing, such as larger co‐author teams and increased participation by non‐North American scholars, women, and those outside the top finance departments are not associated with these outcomes.     

Competition in fragmented markets: New evidence from the German banking industry in the light of the subprime crisis

Of all of the EU member states, Germany has the largest banking market. However, not all German banking institutions necessarily face fierce competition. Because the industry is highly fragmented, strict separation of the three existing banking pillars may impede competition, with negative effects on financial stability. We assess the competitive stances of 1,888 universal banks from 2001 to 2009 by using the Panzar–Rosse revenue test. We find evidence that measuring competition at an average country level does not necessarily generate valid evaluations of fragmented markets. In addition, we find no clear indication that either the particular objectives of cooperative and savings banks or the legal protection of these institutions impedes competition or discriminates against private banks. Therefore, as long as the relationship between competition and financial stability is dubious, the overall effect and the social costs or benefits of political measures that influence the structure of the German banking market are at least questionable.     

Small-cap equity mutual fund managers as liquidity providers

This paper examines the relation between the performance of small-cap equity mutual funds and the liquidity characteristics of their asset holdings. We study the trading behavior of fund managers and show that on average, they tend to buy less liquid stocks and sell more liquid stocks. We introduce the notion of net “liquidity creation” by fund managers and examine its role in explaining the cross section of small-cap equity mutual fund returns. Our empirical results show that on average, small-cap mutual fund managers are able to earn an additional 1.5% return per year as compensation for providing such liquidity services to the market.     

The relationship between net interest margin and noninterest income using a system estimation approach

This paper examines the determinants of bank net interest margin (NIM) and non-traditional banking activities (NII). A system estimation approach is employed to control for the simultaneity between NIM and NII for commercial banks in a group of 28 financially liberalized countries during the period between 1997 and 2004. We find a statistically significant negative relationship between NIM and NII for the period between 1997 and 2002. A generally positive but statistically insignificant association between NIM and NII is found for the subsequent period (2003–2004). Banks’ increasing involvement in non-traditional activities is negatively correlated with risk-adjusted profitability measures in the former subperiod, suggesting no obvious diversification benefits. However, the share of noninterest income is positively related to the return on assets (ROA) and the return on equity (ROE) for the latter subsample.     

Ageing and the tax implied in public pension schemes: simulations for selected OECD countries

A key figure suited to measuring intergenerational imbalances in unfunded public pension schemes is given by the ‘implicit tax rate’ imposed on each generation's lifetime income. The implicit tax arises from the fact that, quite generally, pension benefits fall short of actuarial returns to contributions paid to these systems while actively working. Under current pension policies, implicit tax rates will increase sharply for younger generations in most industrialised countries. In this paper, this is illustrated for the cases of France, Germany, Italy, Japan, Sweden, the UK and the USA. Nevertheless, there are remarkable differences across countries regarding both the level of implicit taxes and their development over successive age cohorts, which can be attributed to differences in ageing processes and in the institutional features of national pension systems. In addition, we can demonstrate how effective different approaches to pension reform are in smoothing the intergenerational profile of implicit tax rates.     

Growth through rigidity: An explanation for the rise in CEO pay

The dramatic rise in CEO compensation during the 1990s and early 2000s is a longstanding puzzle. In this paper, we show that much of the rise can be explained by a tendency of firms to grant the same number of options each year. Number-rigidity implies that the grant-date value of option awards will grow with firm equity returns, which were very high on average during the tech boom. Further, other forms of CEO compensation did not adjust to offset the dramatic growth in the value of option pay. Number-rigidity in options can also explain the increased dispersion in pay, the difference in growth between the US and other countries, and the increased correlation between pay and firm-specific equity returns. We present evidence that number-rigidity arose from a lack of sophistication about option valuation that is akin to money illusion. We show that regulatory changes requiring transparent expensing of the grant-date value of options led to a decline in number-rigidity and helps explain why executive pay increased less with equity returns during the housing boom in the mid-2000s.     

The retirement wealth of the baby boom generation

The paper compares the well-being of the baby boom generation (ages 40-55) in 2001 with the same age group in 1983. I find little evidence that their relative position deteriorated over the period. By some indicators, this generation has seen an improvement. In terms of income, the 40-55 age group was at about the same relative position in 2001 as in 1983. In terms of conventional wealth, there was some slippage over the period. In terms of mean augmented wealth (net worth plus pension and Social Security wealth), their relative position improved somewhat but in terms of median augmented wealth there was again some slippage.     

Evaluate the sales force as a business

High interest rates are posing serious problems for all business organizations and impact more heavily on those in the industrial sector. Cash flow difficulties result directly from high interest rates, which in turn produce pressure on the sales force: credit terms are tightened; customers are pushed to pay their bills more promptly; and, shipments are delayed because of reduced inventories. This set of difficult circumstances, however, provides an opportunity for management to achieve a long desired objective—making the efforts of the sales force more congruent with the profit and ROI goals of the enterprise.This article outlines the structure of a training program, consisting of seven sessions, that introduces business performance criteria to sales territory management.