Showing papers in "Social Science Research Network in 2003"

Abstract: Undertaking a review of the literature is an important part of any research project. The researcher both maps and assesses the relevant intellectual territory in order to specify a research question which will further develop the knowledge base. However, traditional 'narrative' reviews frequently lack thoroughness, and in many cases are not undertaken as genuine pieces of investigatory science. Consequently they can lack a means for making sense of what the collection of studies is saying. These reviews can be biased by the researcher and often lack rigour. Furthermore, the use of reviews of the available evidence to provide insights and guidance for intervention into operational needs of practitioners and policymakers has largely been of secondary importance. For practitioners, making sense of a mass of often-contradictory evidence has become progressively harder. The quality of evidence underpinning decision-making and action has been questioned, for inadequate or incomplete evidence seriously impedes policy formulation and implementation. In exploring ways in which evidence-informed management reviews might be achieved, the authors evaluate the process of systematic review used in the medical sciences. Over the last fifteen years, medical science has attempted to improve the review process by synthesizing research in a systematic, transparent, and reproducible manner with the twin aims of enhancing the knowledge base and informing policymaking and practice. This paper evaluates the extent to which the process of systematic review can be applied to the management field in order to produce a reliable knowledge stock and enhanced practice by developing context-sensitive research. The paper highlights the challenges in developing an appropriate methodology.

Abstract: A number of panel unit root tests that allow for cross section dependence have been proposed in the literature, notably by Bai and Ng (2002), Moon and Perron (2003), and Phillips and Sul (2002) who use orthogonalization type procedures to asymptotically eliminate the cross dependence of the series before standard panel unit root tests are applied to the transformed series. In this paper we propose a simple alternative test where the standard DF (or ADF) regressions are augmented with the cross section averages of lagged levels and first-differences of the individual series. A truncated version of the CADF statistics is also considered. New asymptotic results are obtained both for the individual CADF statistics, and their simple averages. It is shown that the CADF_i statistics are asymptotically similar and do not depend on the factor loadings under joint asymptotics where N (cross section dimension) and T (time series dimension) tends to infinity, such that N/T tends to k, where k is a fixed finite non-zero constant. But they are asymptotically correlated due to their dependence on the common factor. Despite this it is shown that the limit distribution of the average CADF statistic exists and its critical values are tabulated. The small sample properties of the proposed tests are investigated by Monte Carlo experiments, for a variety of models. It is shown that the cross sectionally augmented panel unit root tests have satisfactory size and power even for relatively small values of N and T. This is particularly true of cross sectionally augmented and truncated versions of the simple average t-test of Im, Pesaran and Shin, and Choi's inverse normal combination test.

Abstract: Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporation.

Abstract: This article disentangles the incentive and entrenchment effects of large ownership. Using data for 1,301 publicly traded corporations in eight East Asian economies, we find that firm value increases with the cash-flow ownership of the largest shareholder, consistent with a positive incentive effect. But firm value falls when the control rights of the largest shareholder exceed its cash-flow ownership, consistent with an entrenchment effect. Given that concentrated corporate ownership is predominant in most countries, these findings have relevance for corporate governance across the world.

Abstract: Twenty years ago, in the pages of the, Journal of Common Market Studies, Hedley Bull launched a searing critique of the European Community's "civilian power" in international affairs. Since that time the increasing role of the European Union (EU) in areas of security and defence policy has led to a seductiveness in adopting the notion of "military power Europe". In contrast, I will attempt to argue that by thinking beyond traditional conceptions of the EU's international role and examining the case study of its international pursuit of the abolition of the death penalty, we may best conceive of the EU as a "normative power Europe".

Abstract: This handbook chapter studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature in relation to those models. This allows us to give a precise characterisation of some of the main theoretical underpinnings of urban agglomeration economies, to discuss modelling issues that arise when working with these tools, and to compare different sources of agglomeration economies in terms of the aggregate urban outcomes they produce as well as in terms of their normative implications.

Abstract: Information technology (IT) acceptance research has yielded many competing models, each with different sets of acceptance determinants. In this paper, we: (1) review user acceptance literature and discuss eight prominent models, (2) empirically compare the eight models and their extensions, (3) formulate a unified model that integrates elements across the eight models, and (4) empirically validate the unified model. The eight models reviewed are the theory of reasoned action, the technology acceptance model, the motivational model, the theory of planned behavior, a model combining the technology acceptance model and the theory of planned behavior, the model of PC utilization, the innovation diffusion theory, and the social cognitive theory. Using data from four organizations over a six-month period with three points of measurement, the eight models explained between 17 percent and 53 percent of the variance in user intentions to use information technology. Next, a unified model, called the Unified Theory of Acceptance and Use of Technology (UTAUT), was formulated, with four core determinants of intention and usage, and up to four moderators of key relationships. UTAUT was then tested using the original data and found to outperform the eight individual models (adjusted R2 of 69 percent). UTAUT was then confirmed with data from two new organizations with similar results (adjusted R2 of 70 percent). UTAUT thus provides a useful tool for managers needing to assess the likelihood of success for new technology introductions and helps them understand the drivers of acceptance in order to proactively design interventions (including training, marketing, etc.) targeted at populations of users that may be less inclined to adopt and use new systems. The paper also makes several recommendations for future research including developing a deeper understanding of the dynamic influences studied here, refining measurement of the core constructs used in UTAUT, and understanding the organizational outcomes associated with new technology use.

Abstract: The appropriate resources are necessary but insufficient to achieve a competitive advantage. Resources must also be managed effectively. Herein, we develop a resource management process model composed of three components that can lead to a competitive advantage. These components include the resource inventory (evaluating, adding, and shedding), resource bundling, and resource leveraging. We examine resource management in family firms and thus explore the unique characteristics of five resources and attributes of family firms that provide potential advantages over nonfamily firms. The resources are human capital, social capital, patient capital, survivability capital, along with the governance structure attribute.

Abstract: Evidence from research conducted on corporate accounting indicates that the interaction of environmental factors influences disclosure practices. The purpose of this study is to examine the importance of various corporate governance and cultural (race and education) characteristics, in addition to firm-specific factors, as possible determinants of voluntary (non-mandatory accounting and non-accounting information) disclosures in the annual reports of Malaysian listed corporations. The results of the regression analysis indicate significant associations (at the 5 percent level) between two corporate governance variables (viz. chair who is a non-executive director and domination of family members on boards) and the extent of voluntary disclosure. This finding has implications for corporate governance policy formulation by the Malaysian Institute of Corporate Governance (MISG). One cultural factor (proportion of Malay directors on the board) is significantly associated (at the 5 percent level) with the extent of voluntary disclosure suggesting that governmental focus on culture may solicit a response to secrecy from those who feel threatened.

Abstract: This paper surveys the most important developments in multivariate ARCH-type modelling. It reviews the model specifications, the inference methods, and the main areas of application of these models in financial econometrics.

Abstract: This paper considers alternative policies for promoting skill formation that are targeted to different stages of the life cycle. We demonstrate the importance of both cognitive and noncognitive skills that are formed early in the life cycle in accounting for racial, ethnic and family background gaps in schooling and other dimensions of socioeconomic success. Most of the gaps in college attendance and delay are determined by early family factors. Children from better families and with high ability earn higher returns to schooling. We find only a limited role for tuition policy or family income supplements in eliminating schooling and college attendance gaps. At most 8% of American youth are credit constrained in the traditional usage of that term. The evidence points to a high return to early interventions and a low return to remedial or compensatory interventions later in the life cycle. Skill and ability beget future skill and ability. At current levels of funding, traditional policies like tuition subsidies, improvements in school quality, job training and tax rebates are unlikely to be effective in closing gaps.

Abstract: This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. Boards of publicly traded companies with dispersed ownership, we argue, cannot be expected to bargain at arm's length with managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers' performance. We show that the managerial power approach can explain many features of the executive compensation landscape, including ones that many researchers have long viewed as puzzling. Among other things, we discuss option plan design, stealth compensation, executive loans, payments to departing executives, retirement benefits, the use of compensation consultants, and the observed relationship between CEO power and pay. We also explain how managerial influence might lead to substantially inefficient arrangements that produce weak or even perverse incentives.

Abstract: We investigate corporate transparency, defined as the availability of firm-specific information to those outside publicly traded firms, and viewed as the joint output of multi-faceted systems whose components collectively produce, gather, validate and disseminate information to market participants. We factor analyze an extensive range of measures capturing countries' firm-specific information environments, and isolate two factors interpreted as financial transparency and governance transparency. We investigate whether these factors vary with the countries' legal/judicial regimes and political economies. Our main multivariate result is that the governance transparency factor is primary related to a country's legal/judicial regime, while the financial transparency factor is primarily related to political economy.

Abstract: For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade. The debate was originally fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of GATT negotiations, both of which occurred at a time when concerns over global warming, species extinction and industrial pollution were rising. Recently it has been intensified by the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations. The debate has often been unproductive. It has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence. The purpose of this essay is set out what we currently know about the environmental consequences of economic growth and international trade. We critically review both theory and empirical work to answer three basic questions. What do we know about the relationship between international trade, economic growth and the environment? How can this evidence help us evaluate ongoing policy debates? Where do we go from here?

Abstract: The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.

Abstract: The relation between working capital management and corporate profitability is investigated for a sample of 1009 large Belgian non-financial firms for the 1992-1996 period. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle is used as a comprehensive measure of working capital management. The results suggest that managers can increase corporate profitability by reducing the number of days accounts receivable and inventories. Less profitable firms wait longer to pay their bills.

Abstract: The article discusses how should policy-makers choose defaults regarding organ donors. First, consider that every policy must have a no-action default, and defaults impose physical, cognitive, and, in the case of donation, emotional costs on those who must change their status. Second, note that defaults can lead to two kinds of misclassification, willing donors who are not identified or people who become donors against their wishes. Changes in defaults could increase donations in the United States of additional thousands of donors a year. Because each donor can be used for about three transplants, the consequences are substantial in lives saved.

Abstract: This paper models firms' choices between alternative means of presenting information, and the effects of different presentations on market prices when investors have limited attention and processing power. In a market equilibrium with partially attentive investors, we examine the effects of alternative: levels of discretion in pro forma earnings disclosure, methods of accounting for employee option compensation, and degrees of aggregation in reporting. We derive empirical implications relating pro forma adjustments, option compensation, the growth, persistence, and informativeness of earnings, short-run managerial incentives, and other firm characteristics to stock price reactions, misvaluation, long-run abnormal returns, and corporate decisions.

Abstract: We propose and axiomatize a model of preferences over acts such that the decision maker evaluates acts according to the expectation (over a set of probability measures) of an increasing transformation of an act's expected utility. This expectation is calculated using a subjective probability over the set of probability measures that the decision maker thinks are relevant given her subjective information. A key feature of our model is that it achieves a separation between ambiguity, identified as a characteristic of the decision maker's subjective information, and ambiguity attitude, a characteristic of the decision maker's tastes. We show that attitudes towards risk are characterized by the shape of the von Neumann-Morgenstern utility function, as usual, while attitudes towards ambiguity are characterized by the shape of the increasing transformation applied to expected utilities. We show that the negative exponential form of this transformation is the special case of constant ambiguity aversion. Ambiguity itself is defined behaviorally and is shown to be characterized by properties of the subjective set of measures. This characterization of ambiguity is formally related to the definitions of subjective ambiguity advanced by Epstein-Zhang (2001) and Ghirardato-Marinacci (2002). One advantage of this model is that the well-developed machinery for dealing with risk attitudes can be applied as well to ambiguity attitudes. The model is also distinct from many in the literature on ambiguity in that it allows smooth, rather than kinked, indifference curves. This leads to different behavior and improved tractability, while still sharing the main features (e.g., Ellsberg's Paradox, etc.). The Maxmin EU model (e.g., Gilboa and Schmeidler (1989)) with a given set of measures may be seen as an extreme case of our model with infinite ambiguity aversion. Two illustrative applications to portfolio choice are offered.

Abstract: Creditor reliance on accounting-based debt covenants suggests that debtors are potentially concerned with board of director characteristics that influence the financial accounting process. In a sample of S&P 500 firms, we find that the cost of debt financing is inversely related to board independence and board size. We also examine the impact of audit committee characteristics on corporate yields spreads as audit committees are the direct mechanism that boards use to monitor the financial accounting process. We find that fully independent audit committees are associated with a significantly lower cost of debt financing. Similarly, yield spreads are also negatively related to audit committee size and the number of audit committee meetings. Overall, these results provide market-based evidence that boards and audit committees are important elements affecting the reliability of financial reports.

Abstract: This study examines the relationship between demographic diversity on boards of directors with firm financial performance. This relationship is examined using 1993 and 1998 financial performance data (return on asset and investment) and the percentage of women and minorities on boards of directors for 127 large US companies. Correlation and regression analyses indicate board diversity is positively associated with these financial indicators of firm performance. Implications for both strategic human resource management and future research are discussed.

Abstract: Community governance is the set of small group social interactions that, with market and state, determine economic outcomes. We argue (i) community governance addresses some common market and state failures but typically relies on insider-outsider distinctions that may be morally repugnant and economically costly; (ii) the individual motivations supporting community governance are not captured by either selfishness or altruism; (iii) communities, markets and states are complements, not substitutes; (iv) when poorly designed, markets and states crowd out communities; (v) some distributions of property rights are better than others at fostering community governance; and (vi) communities will probably increase in importance in the future.

Abstract: This paper considers methods for modelling the production function for cognitive achievement in a way that captures theoretical notions that child development is a cumulative process depending on the history of family and school inputs and on innate ability. It develops a general modelling framework that accommodates many of the estimating equations used in the literatures. It considers different ways of addressing data limitations, and it makes precise the identifying assumptions needed to justify alternative approaches. Commonly used specifications are shown to place restrictive assumptions on the production technology. Ways of testing modelling assumptions and of relaxing them are discussed.

Abstract: Es gibt nur wenige vergleichende Studien uber reale und geschatzte Kosten derEntwicklung von Verkehrsinfrastruktur. Wo solche Studien vorliegen, beziehen siesich auf Einzelfalle, oder die Stichprobe ist zu klein, um systematische statistische Analysen zuzulassen (Bruzelius et al. 1998, Fouracre et al. 1990, Hall 1980, Nijkamp/Ubbels 1999, Pickrell 1990, Skamris/Flyvbjerg 1997, Szyliowicz/Goetz 1995, Walmsley/Pickett 1992). Nach unserem Kenntnisstand ist bislang nur eine Studie veroffentlicht, die auf der Basis von 66 Transportprojekten einen breit angelegtenZugang wahlt und erste Schritte auf dem Weg zu einer stichhaltigen statistischen Analyse unternimmt (Merewitz 1973a, 1973b).Existing comparative studies of actual and estimated costs in transportation infrastructure development are few. Where such studies exist, they are typically single-case studies or they cover a sample of projects too small to allow systematic, statistical analyses (Bruzelius et al., 1998; Fouracre et al., 1990; Hall, 1980; Nijkamp & Ubbels, 1999; Pickrell, 1990; Skamris & Flyvbjerg, 1997; Szyliowicz & Goetz, 1995; Walmsley & Pickett, 1992). To our knowledge, only one study exists that, with a sample of 66 transportation projects, approaches a large-sample study and takes a first step toward valid statistical analysis (Merewitz, 1973a, 1973b).The English version of this article can be found at: http://www.ssrn.com/abstract=2278415Den Svenska versionen av denna artikel finns pa: http://papers.ssrn.com/abstract=2278382La versione italiana di questo documento e disponibile al seguente link: http://www.ssrn.com/abstract=2278294

Abstract: This paper challenges the findings of Frankel, Johnson and Nelson (FJN) (2002). The results of our discretionary accruals tests differ from FJN's when we adjust discretionary current accruals for firm performance. In our earnings benchmark tests, in contrast to FJN we find no statistically significant association between firms meeting analyst forecasts and auditor fees. Our market reaction tests also provide different results than those reported by FJN. Overall, our study indicates that FJN's results are sensitive to research design choices, and we find no systematic evidence supporting their claim that auditors violate their independence as a result of clients purchasing relatively more nonaudit services.

Abstract: We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10 - 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to capture the importance of internal governance generates annualized abnormal returns of 8%, though only in the presence of high vulnerability to takeovers. Further, we show that the complementary relation exists for firms with lower industry-adjusted leverage and is stronger for smaller firms. The complementary relation is confirmed using accounting measures of profitability. Using data on acquisitions, firm level Q's and accounting performance, we explore possible interpretations, providing preliminary evidence for a risk effect as well.

Abstract: The set of associations consumers have about a brand is an important component of brand equity. This paper focuses on reference groups as a source of brand associations, which can be linked to one's mental representation of self to meet self-verification or self-enhancement goals. We conceptualize this linkage at an aggregate level in terms of self-brand connections, i.e., the extent to which individuals have incorporated a brand into their self-concept. Two studies show that brands used by member groups and aspiration groups can become connected to consumers' mental representation of self as they use these brands to define and create their self-concepts. Results from Experiment 1 show that the degree to which member group and aspiration group usage influences individual self-brand connections is contingent upon the degree to which the individual belongs to a member group or wishes to belong to an aspiration group. Experiment 2 finds that for individuals with self-enhancement goals, aspiration group brand use has a greater impact on self-brand connections; for individuals with self-verification goals, on the other hand, member group use has a greater impact.

Abstract: Some natural resources - oil and minerals in particular - exert a negative and nonlinear impact on growth via their deleterious impact on institutional quality. We show this result to be very robust. The Nigerian experience provides telling confirmation of this aspect of natural resources. Waste and poor institutional quality stemming from oil appear to have been primarily responsible for Nigeria's poor long-run economic performance. We propose a solution for addressing this resource curse which involves directly distributing the oil revenues to the public. Even with all the difficulties that will no doubt plague its actual implementation, our proposal will, at the least, be vastly superior to the status quo. At best, however, it could fundamentally improve the quality of public institutions and, as a result, durably raise long-run growth performance.

Abstract: This paper considers the relationship between the stocks and flows of learning across levels in an overall organizational learning system. A survey instrument based on the Strategic Learning Assessment Map (SLAM) was administered to 15 individuals representing senior-, middle- and non-management levels from each of 32 organizations, resulting in a total sample of 480 respondents. This research supports the premise that there is a positive relationship between the stocks of learning at all levels and business performance. Furthermore, the proposition that the misalignment of stocks and flows in an overall organizational learning system is negatively associated with business performance is also supported.

Abstract: Is 'Europeanization' as disappointing a term as it is fashionable? Should it be abandoned, or is it useful for understanding European transformations? Five uses are discussed and it is argued that research need not be hampered by competing definitions as long as their meaning, the phenomena in focus, the simplifying assumption used, the models of change and the theoretical challenges involved, are clarified and kept separate. The research challenge is one of model building, not one of inventing definitions. While it is premature to abandon the term, its usefulness may be more limited than its widespread use could indicate. Europeanization may be less useful as an explanatory concept than as an attention-directing device and a starting point for further exploration.