Domain knowledge,ability, and the principal's authority relations

I consider how different managerial traits affect the authority relation between a principal and his agent. An increase in the principal's domain knowledge—which enhances his capability to verify the agent's recommendations—leads to an increase in the proportion of the agent's recommendations that are approved, an increase in the agent's initiative, and is unambiguously beneficial to the principal and to the agent. In contrast, an increase in the principal's general ability to explore additional alternatives on his own leads to the principal making a larger proportion of the decisions. This discourages the agent's initiative and can adversely affect the principal.     

The contribution of Project-based-learning to high-achievers’ acquisition of technological knowledge and skills

The main goals of this study were to look after the technological knowledge construction process by high-school high-achievers, and their ability to design and implement solutions for technological problems. More specifically, we examine the contribution of Project-based-learning (PBL), as pedagogical means for supporting the students’ knowledge acquisition and problem-solving process. The findings show a significant increase in formal knowledge as measured by standardized matriculation exams; an expansion in the scope of technological knowledge acquired and implemented, and in the scope of knowledge resources utilized for the projects; a high level of overall performance as regards to the set of design skills studied; a positive change in attitude towards technology and technological studies; the emergence of consistent design styles by individuals and groups along their work in the projects.     

COGNITIVE DISSONANCE AND MUTUAL FUND INVESTORS

We present evidence from questionnaire responses of mutual fund investors about recollections of past fund performance. We find that investor memories exhibit a positive bias, consistent with current psychological models. We find that the degree of bias is conditional upon previous investor choice, a phenomenon related to the well-known theory of cognitive dissonance. Psychological and economic frictions in the mutual fund industry are examined via a cross-sectional study of equity mutual funds. We find an unusually high frequency of poorly performing funds, consistent with investor “inertia.” We also examine the differential responses of investment dollars to past performance, controlling for survivorship. These show that the effect is confined to the top quartile. We find little evidence that the response to poor performance is unusual.     

Dividends from unrealized earnings and default risk

Review of Accounting Studies - Using hand-collected data on Israeli firms’ unrealized earnings and debt restructurings following adoption of the International Financial Reporting Standards...     

Components of effective devaluation and the domestic rate of inflation: The case of Israel

Developing countries have frequently resorted to effective devaluation by changing either their formal rate of exchange, or by using non-formal components, such as taxes and subsidies. The ensuing increase in the domestic price of imports has inflationary effects. This paper analyses the Israeli experience to investigate the inflationary effects of increases in import prices and alternative methods of devaluation. It is found that formal and non-formal devaluation appear to have the same long-run effects on the price level, but are not the same in timing: A formal devaluation leads more quickly to increases in domestic prices.     

Search Costs and Investment in Quality

In this paper we analyze how lower search costs affect firms' incentives to invest in quality. We identify two conflicting effects. On the one hand, lower search costs increase incentives to invest in quality by eroding the market share of low quality firms and increasing the market share of high quality firms. On the other hand, by intensifying price competition, lower search costs adversely affect high quality firms more than low quality firms. The net effect of a change in the search cost on quality is shown to depend on the initial quality distribution. There is a critical value such that, if the proportion of high quality firms is initially below this value, lower search costs increase this proportion, whereas if the initial quality is above this value, lower search cost decreases the proportion of high quality firms. We show that our results are consistent with a ‘superstar effect.’     

Commitment, Exchange Autonomy, and the Boundary of the Hierarchical Firm

In this article, I present a theory of the boundary of the firmthat accounts for some important characteristics of real-worldmultidivisional firms: operative decisions are in the handsof middle managers who are rewarded based on the performanceof their units, managers' decisions are subject to approvaland intervention by the top management of the firm, and managersare better informed regarding the affairs of their divisions.In this setup, the integration of an intermediate input supplierand its buyer as separate divisions within a single firm isdesirable, as long as the choice of trading partners can becredibly delegated to the divisions' managers. I show that thisis satisfied not only under the assumption of full commitmentby the general office of the firm but also, remarkably, if ithas no commitment power whatsoever. An explanation of the boundaryof the firm emerges only if the general office retains somelimited commitment power. I show that the general office mandatesinternal trades in more instances than would have been optimalwith full commitment, adversely affecting the levels of investmentundertaken by the divisions' managers. In such cases, it canbe optimal to have the trade conducted between nonintegratedparties.