A theory of gender differences in parental altruism

Abstract.  We offer a theory of gender differences in parental altruism based on the asymmetry that female fertility is constrained but male fertility is relatively unconstrained. Modelling human preferences as having been shaped during the Pleistocene, we derive evolutionarily stable, co‐evolved male and female preferences for altruism towards one's children. We demonstrate that there would be gender differences in parental altruism that depend on the relative abundance or scarcity of resources and the importance and substitutability of parental inputs in promoting the survival of offspring. The results point to greater altruism in females, under plausible conditions. JEL Classification: D64, J16, P46     

Quality-enhancing trade liberalization

This paper examines the effect of trade liberalization on the quality of industrial goods produced by a developing country. The intermediate goods used as inputs to industrial production are assumed to be non-traded and produced by firms with market power. It is shown here that for a certain range of human capital levels, exposure to free trade, instead of resulting in de-industrialization, can raise welfare through an improvement in the quality of domestically produced industrial goods.     

Pricing U.S. Dollar Index Futures Options: An Empirical Investigation

This paper develops a pricing model and empirically tests the pricing efficiency of options on the U.S. Dollar Index (USDX) futures contract. Empirical tests of the model indicate that the market consistently overprices these options relative to the derived model. This overpricing is more pronounced for out‐of‐the‐money options than for in‐the‐money options and more pronounced for put options than for call options. To validate the above results, delta neutral portfolios are created for one‐ and two‐day holding periods and consistently generate positive arbitrage profits, indicating that on average the market overprices the options on the USDX futures contracts.     

Firms’ fundamentals,macroeconomic variables and quarterly stock prices in the US

This paper modeled the effects of firms’ fundamentals such as total assets and long-term debt and of macroeconomic variables such as unemployment and interest rates on quarterly stock prices of over 3000 US firms in the period 2000–07. The merged CRSP/Compustat database was augmented by macroeconomic variables and comprehensive dynamic models were estimated by maximum likelihood taking into account heterogeneity across firms. Likelihood ratio statistics were developed for sequentially testing hypotheses regarding the adequacy of macroeconomic variables in the models. The main findings were that the estimated coefficients of lagged stock prices in simple dynamic random effects models were in the interval 0.90–0.95. Second, comprehensive dynamic models for stock prices showed that the firms’ earnings per share, total assets, long-term debt, dividends per share, and unemployment and interest rates were significant predictors; there were significant interactions between firms’ long-term debt and interest rates. Finally, implications of the results for corporate policies are discussed.     

Executive compensation, share repurchases and investment expenditures: econometric evidence from US firms

This paper modeled the dynamic inter-relationships between average salary, bonus, and stock options granted to top executives of 700 US firms using a merged ExecuComp and Compustat database. The effects of stock options granted and exercised on firms’ share repurchases and research and development and investment expenditures were investigated, taking into account simultaneity and distributional misspecification aspects. First, firms’ total assets, intangible assets, market-to-book value, and share repurchases were positively associated with the values of stock options granted. Second, stock options exercised in the previous year were significant predictors of share repurchases indicating that firms avoided dilution of earnings per share. Third, share repurchases and stock options granted were negatively associated with expenditures on research and development and long-term investments. Overall, the results suggest that high levels of stock options granted to executives and share repurchases are unlikely to have beneficial effects for raising future productivity.     

Market-based capabilities and financial performance of firms: insights into marketing’s contribution to firm value

While there is recognition that market-based capabilities contribute to a firm’s financial performance, the exposition is largely conceptual (Srivastava et al. Journal of Marketing 62:2–18, 1998; Journal of Marketing 63:168–179, 1999). Using a resource based view of the firm, the present study proposes that (1) market-based assets and capabilities of a firm impacts (2) performance in three market-facing business processes (new product development, supply-chain and customer management), which in turn, influence (3) the firm’s financial performance. It develops related hypotheses and tests the framework empirically. The study also examines for the first time the interrelationship among the three business processes and their impact on the market value of firms. Further, the study examines the moderating influence of two organizational variables—size and age of the firm. Overall, the major contribution of the study is that it offers a process linkage between capabilities, process performance and financial performance. The results of this research will provide strategic insights to managers on optimal customer management, product development and supply chain strategies.

The Effect of Internal Control Certification Regulatory Changes on Real and Accrual-based Earnings Management

ABSTRACT

This study examines the effect of changes in internal control certification requirements (ICCR) on the earnings management choices of Australian firms in the period 2007–2015. The Australian setting is unique as the certification requirements change from voluntary in 2004–2007 to mandatory in 2008–2014, before being abolished in 2015. Consistent with the notion that real earnings management (REM) is less susceptible to detection, the results suggest that firms place greater reliance on REM than on accrual-based earnings management (ABEM) when having to comply with certification requirements. In particular, I find voluntary certifiers have lower REM and ABEM relative to first-time certifiers in the mandatory period between 2008 and 2014, and there is an increase in REM activities among first-time mandatory period certifiers. Moreover, firms that discontinue certification, after the abolition of the requirement in 2015, switch from REM to ABEM. This suggests that regulatory ICCR changes affect firms’ earnings management choices.     

LIQUIDITY AND MATURITY EFFECTS AROUND NEWS RELEASES

We study the effects of liquidity and term-to-maturity following macroeconomic news announcements. To do this we select five instruments that differ in liquidity, or term-to-maturity, or both, and examine their response to the release of macroeconomic news. The results from this study suggest that variance on announcement days is higher in more liquid, longer term-to-maturity instruments. When instruments differ in both term-to-maturity and liquidity, term-to-maturity effects dominate. Tests for persistence in higher volatility in the five instruments following news releases show that most of the effects of the announcements seem to be well absorbed within fifteen minutes of the announcements. However, the evidence also suggests that the effects persist for longer periods in instruments that are more liquid. Term-to-maturity appears to have little or no effect in this instance.     

Exploiting International Stock Market Correlations with Open-end International Mutual Funds

Investors can exploit the correlations between international stock markets by trading no-load, open-end, international mutual funds. These investors in effect cheat passive investors because they buy the mutual funds at their net asset values, which do not reflect information released during the US trading day. The strategy we examine yields an annual rate of return 800 basis points above the S&P500, over a period of almost eight years.     

Endogenous Cartel Formation

This paper investigates the endogenous formation of cartels in a supergame framework in which cheating on the cartel agreement results in the ejection of only the defector from the cartel while collusion continue s amongst the non-cheating members. A more sophisticated notion of cartel stability than has been analysed hitherto is developed here, and it is shown that cartels are even less stable than they are generally believed to be. When firms produce heterogeneous goods and set prices, cartels comprising a small fraction of the industry's firms are shown to be viable. The emergence of two or more cartels within the same industry is seen not only to be a distinct possibility but also to be quite likely