Rules versus discretion - A disinflation case

This paper compares a strict inflation target regime to a conservative central bank regime to determine the monetary regime appropriate for a disinflation process. The analysis shows that in a two-period model, in which policymakers face given first-period inflationary expectations, a strict inflation target could be preferred to the appointment of a conservative central banker who has discretion. The result differs from that of Rogoff (1985), who assumed rational expectations and concluded that a conservative central banker is always preferable. The disadvantage of the conservative central banker derives from his tendency to accelerate disinflation relative to rate that maximizes social welfare.JEL Classification: E52, E58The authors are grateful to Alex Cukierman, Nissan Liviatan, Allan Drazen, Amit Friedman and Yoav Friedmann for their useful suggestions. We also thank the anonymous referees for helpful comments. Earlier versions of this paper were presented at the Tel Aviv University macroeconomic workshop, at the Research Department seminar, Bank of Israel, and at the Bank of Israels conference on Macroeconomic Policy, October 2002.     

Leadership,Creative Problem‐Solving Capacity,and Creative Performance: The Importance of Knowledge Sharing

This article presents two studies that examine whether leader supportive behaviors facilitate knowledge sharing and employee creative problem‐solving capacity, thereby enhancing creative performance. The findings from both studies indicate that leader supportive behaviors are directly and indirectly related, through both internal and external knowledge sharing, to employee creative problem‐solving capacity. In addition, creative problem solving was related to the two dimensions of creative performance—fluency and originality. However, a test of the mediation model indicated that creative problem solving only mediated the relationship between internal knowledge sharing creative performance and originality. These findings highlight the complex process by which leaders facilitate both internal and external knowledge sharing and employee creative problem‐solving capacity, thereby improving employee creative performance.     

Beliefs about social responsibility at work: comparisons between managers and non‐managers over time and cross‐nationally

We examine the link between the growing emphasis on corporate social responsibility at the organizational level and beliefs about social responsibility at work (SRW) expressed by individuals. Drawing from theories of professionalism and diffusion of innovations (including practices and beliefs), we advance hypotheses about beliefs of managers and non‐managers in 11 countries at two time periods, and use a unique international data set to test our hypotheses. Our general prediction that managers would score higher than non‐managers on a measure of SRW was not supported. However, further analysis revealed a more complex relationship moderated by the contextual factors of time frame and country inequality level. We discuss implications and extensions for future research.     

Evidence on the Trade-Off between Risk and Return for IPO and SEO Firms

Do the low long‐run average returns of equity issuers reflect underperformance due to mispricing or the risk characteristics of the issuing firms? We shed new light on this question by examining how institutional lenders price loans of equity issuing firms. Accounting for standard risk factors, we find that equity issuing firms' expected debt return is equivalent to the expected debt return of nonissuing firms, implying that institutional lenders perceive equity issuers to be as risky as similar nonissuing firms. In general, institutional lenders perceive small and high book‐to‐market borrowers as systematically riskier than larger borrowers with low book‐to‐market ratios, consistent with the asset pricing approach in Fama and French (1993) . Finally, we find that firms' expected debt returns decline after equity offerings, consistent with recent theoretical arguments suggesting that firm risk should decline following an equity offering. Overall, our analysis provides novel evidence consistent with risk‐based explanations for the observed equity returns following IPOs and SEOs.     

Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex‐Dividend Pricing before and after Decimalization

By the end of January 2001, all NYSE stocks had converted their price quotations from 1/8s and 1/16s to decimals. This study examines the effect of this change in price quotations on ex‐dividend day activity. We find that abnormal ex‐dividend day returns increase in the 1/16 and decimal pricing eras, relative to the 1/8 era, which is inconsistent with microstructure explanations of ex‐day price movements. We also find that abnormal returns increase in conjunction with a May 1997 reduction in the capital gains tax rate, as they should if relative taxation of dividends and capital gains affects ex‐day pricing.     

Responding Destructively in Leadership Situations: The Role of Personal Values and Problem Construction

This study explored the influence of personal values on destructive leader behavior. Student participants completed a managerial assessment center that presented them with ambiguous leadership decisions and problems. Destructive behavior was defined as harming organizational members or striving for short-term gains over long-term organizational goals. Results revealed that individuals with self-enhancement values were more destructive than individuals with self-transcendence values were, with the core values of power (self-enhancement) and universalism (self-transcendence) being most influential. Results also showed that individuals defined and structured leadership problems in a manner that reflected their value systems, which in turn affected the problem solutions they generated.     

Managerial Response to the May 2003 Dividend Tax Cut

We survey 328 financial executives to determine the effects of the May 2003 dividend tax cut. We find that the tax cut led to initiations and dividend increases at some firms. However, executives say that among the factors that affect dividend policy, the tax rate reduction is less important than the stability of future cash flows, cash holdings, and the historic level of dividends. Tax effects have roughly the same importance as attracting institutional investors and the availability of profitable investments. We also find that press releases only occasionally mention the dividend tax cut as the reason for an initiation.     

A brigade model for the management of service volunteers: lessons from the former Soviet Union

This is a case study of a volunteer programme in a community welfare centre in St Petersburg, Russia. It is suggested that the successful and long‐term activation of its 900 volunteers can be credited to the programme's structural and managerial characteristics. These include: a formal and hierarchical structure and management; clearly defined privileges and obligations; small working groups called ‘brigades’; a comprehensive support system for volunteers and a variety of volunteer opportunities and participation benefits. Advantages and limitations of the programme are discussed, as well as the applicability of some of its principles to other settings. The research demonstrates the importance of contextual and socio‐cultural variables to the debate on the relevance to volunteer work of managerial principles applied with paid employees. Copyright © 2004 Henry Stewart Publications     

Signaling safety

Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the following: (1) both dividend changes and repurchase announcements signal changes in cash-flow volatility (in opposite directions); (2) larger cash-flow volatility changes come with larger announcement returns; and (3) neither discount-rate news, nor the level of cash-flow news, nor total stock return volatility change following dividend changes. We conclude cash-flow news—and not discount-rate news—drive payout policy, and payout policy conveys information about future cash-flow volatility.     

Caveat Compounder: A Warning about Using the Daily CRSP Equal-Weighted Index to Compute Long-Run Excess Returns

This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal-weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal-weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one-third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them.