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Showing papers in "Social Science Research Network in 2011"


Posted Content
TL;DR: In this article, the authors present a framework that defines social media by using seven functional building blocks: identity, conversations, sharing, presence, relationships, reputation, and groups, and explain the implications that each block can have for how firms should engage with social media.
Abstract: Traditionally, consumers used the Internet to simply expend content: they read it, they watched it, and they used it to buy products and services. Increasingly, however, consumers are utilizing platforms – such as content sharing sites, blogs, social networking, and wikis – to create, modify, share, and discuss Internet content. This represents the social media phenomenon, which can now significantly impact a firm’s reputation, sales, and even survival. Yet, many executives eschew or ignore this form of media because they don’t understand what it is, the various forms it can take, and how to engage with it and learn. In response, we present a framework that defines social media by using seven functional building blocks: identity, conversations, sharing, presence, relationships, reputation, and groups. As different social media activities are defined by the extent to which they focus on some or all of these blocks, we explain the implications that each block can have for how firms should engage with social media. To conclude, we present a number of recommendations regarding how firms should develop strategies for monitoring, understanding, and responding to different social media activities.

3,551 citations


Posted Content
TL;DR: New and existing techniques are integrated into a comprehensive set of recommendations that can be used to give researchers in MIS and the behavioral sciences a framework for developing valid measures.
Abstract: Despite the fact that validating the measures of constructs is critical to building cumulative knowledge in MIS and the behavioral sciences, the process of scale development and validation continues to be a challenging activity. Undoubtedly, part of the problem is that many of the scale development procedures advocated in the literature are limited by the fact that they: (a) fail to adequately discuss how to develop appropriate conceptual definitions of the focal construct; (b) often fail to properly specify the measurement model that relates the latent construct to its indicators; and (c) underutilize techniques that provide evidence that the set of items used to represent the focal construct actually measures what it purports to measure. Therefore, the purpose of the present paper is to integrate new and existing techniques into a comprehensive set of recommendations that can be used to give researchers in MIS and the behavioral sciences a framework for developing valid measures. First, we briefly elaborate upon some of the limitations of current scale development practices. Following this, we discuss each of the steps in the scale development process while paying particular attention to the differences that are required when one is attempting to develop scales for constructs with formative indicators as opposed to constructs with reflective indicators. Finally, we discuss several things that should be done after the initial development of a scale to examine its generalizability and to enhance its usefulness.

1,966 citations


Posted Content
TL;DR: In this paper, the authors use a well-developed dynamic panel GMM estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structures.
Abstract: We use a well-developed dynamic panel GMM estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structure. The estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity. We re-examine the relation between board structure and performance using the GMM estimator in a panel of 6,000 firms over a period from 1991-2003, and find no causal relation between board structure and current firm performance. We illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased. We discuss where it may be appropriate to consider the dynamic panel GMM estimator in corporate governance research, as well as caveats to its use.

1,723 citations


Posted Content
TL;DR: By invoking a metaphor of illness, financial contagion implies an economic disorder, dislocation, or disease that spreads from one infected host to others by some mechanism.
Abstract: The phrase financial contagion draws on a concept whose root meaning lies in the field of epidemiology. Like almost all metaphors, this one has the power to illuminate and to mislead. Its referent is the spread of financial distress from one firm, market, asset class, nation, or geographical region to others. But, contagion carries with it other burdens of meaning. First, to refer to contagion, instead of merely to an epidemic, is to implicitly assert that there is a mechanism of transmission from one infected victim to other potential victims. For example, bubonic plague and malaria may give rise to epidemics, but these diseases are not contagious, being transmitted by the bite of a flea and the sting of a mosquito, rather than being spread fromone infected party to another. By contrast, some epidemics may be the result of truly contagious diseases in which the disease spreads directly from one victim to another through the direct transmittal of a pathogen, such as is the case with tuberculosis and AIDS. Second, because a contagious disease spreads from one infected host to others by some mechanism, the key to understanding such a malady is to comprehend the method of transmission. Finally, by invoking a metaphor of illness, financial contagion implies an economic disorder, dislocation, or disease.

1,598 citations


Journal ArticleDOI
TL;DR: This paper presented a model with leverage and margin constraints that vary across investors and time, and found evidence consistent with each of the model's five central predictions: constrained investors bid up high-beta assets, high beta is associated with low alpha, as they find empirically for U.S. equities, 20 international equity markets, Treasury bonds, corporate bonds, and futures.
Abstract: We present a model with leverage and margin constraints that vary across investors and time. We find evidence consistent with each of the model’s five central predictions: (1) Since constrained investors bid up high-beta assets, high beta is associated with low alpha, as we find empirically for U.S. equities, 20 international equity markets, Treasury bonds, corporate bonds, and futures; (2) A betting-against-beta (BAB) factor, which is long leveraged low beta assets and short high-beta assets, produces significant positive risk-adjusted returns; (3) When funding constraints tighten, the return of the BAB factor is low; (4) Increased funding liquidity risk compresses betas toward one; (5) More constrained investors hold riskier assets.

1,431 citations


Posted Content
TL;DR: The authors study whether managers use real activities manipulation and accrual-based earnings management as substitutes in managing earnings and find that managers trade off the two earnings management methods based on their relative costs.
Abstract: I study whether managers use real activities manipulation and accrual-based earnings management as substitutes in managing earnings. I find that managers trade off the two earnings management methods based on their relative costs and that managers adjust the level of accrual-based earnings management according to the level of real activities manipulation realized. Using an empirical model that incorporates the costs associated with the two earnings management methods and captures managers’ sequential decisions, I document large sample evidence consistent with managers using real activities manipulation and accrual-based earnings management as substitutes.

1,422 citations


Journal ArticleDOI
TL;DR: GeoDist as mentioned in this paper provides several geographical variables, in particular bilateral distances measured using city-level data to assess the geographic distribution of population inside each nation, and calculates different measures of bilateral distances available for most countries across the world (225 countries in the current version of the database).
Abstract: GeoDist makes available the exhaustive set of gravity variables used in Mayer and Zignago (2005). GeoDist provides several geographical variables, in particular bilateral distances measured using citylevel data to assess the geographic distribution of population inside each nation. We have calculated different measures of bilateral distances available for most countries across the world (225 countries in the current version of the database). For most of them, different calculations of “intra-national distances” are also available. The GeoDist webpage provides two distinct files: a country-specific one (geo_cepii) and a dyadic one (dist_cepii) including a set of different distance and common dummy variables used in gravity equations to identify particular links between countries such as colonial past, common languages, contiguity. We try to improve upon the existing similar datasets in terms of geographical coverage, quality of measurement and number of variables provided.

1,349 citations


Journal ArticleDOI
TL;DR: This paper analyzed how changes in government policy affect stock prices and found that stock prices should fall at the announcements of policy changes, on average, if uncertainty about government policy is large, and also if the policy change is preceded by a short or shallow economic downturn.
Abstract: We analyze how changes in government policy affect stock prices. Our general equilibrium model features uncertainty about government policy and a government whose decisions have both economic and non-economic motives. The model makes numerous empirical predictions. Stock prices should fall at the announcements of policy changes, on average. The price fall should be large if uncertainty about government policy is large, and also if the policy change is preceded by a short or shallow economic downturn. Policy changes should increase volatilities and correlations among stocks. The jump risk premium associated with policy decisions should be positive, on average.

1,234 citations


Journal ArticleDOI
TL;DR: The authors found that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin's Q over the following years, consistent with the idea that firms choose boards to maximize value.
Abstract: In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.

1,216 citations


Journal ArticleDOI
TL;DR: In this paper, the authors argue that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations and that the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages.
Abstract: This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers as well as their role as indirect suppliers to chains of downstream sectors. Such higher-order interconnections capture the possibility of “cascade effects” whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also indirectly to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the “sparseness” of the input-output matrix is unrelated to the nature of aggregate fluctuations.

1,174 citations


Journal ArticleDOI
TL;DR: This paper analyzes two well-known network theories, Granovetter's strength of weak ties theory and Burt's structural holes theory, to identify characteristic elements of network theorizing and argues that both theories share an underlying theoretical model, which is labelled the network flow model, from which they derive additional implications.
Abstract: Research on social networks has grown considerably in the last decade. However, there is a certain amount of confusion about network theory — for example, what it is, what is distinctive about it, and how to generate new theory. This paper attempts to remedy the situation by clarifying the fundamental concepts of the field (such as the network) and characterizing how network reasoning works. We start by considering the definition of network, noting some confusion caused by two different perspectives, which we refer to as realist and nominalist. We then analyze two well-known network theories, Granovetter’s strength of weak ties, to identify characteristic elements of network theorizing. We argue that both theories share an underlying theoretical model, which we label the network flow model, from which we derive additional implications. We also discuss network phenomena that do not appear to fit the flow model and discuss the possibility of a second fundamental model, which we call the bond model. We close with a discussion of the merits of model-based network theorizing for facilitating the generation of new theory, as well as a discussion of endogeneity in network theorizing.

Posted Content
TL;DR: The imbrication metaphor is used to suggest how a human agency approach to technology can usefully incorporate notions of material agency into its explanations of organizational change.
Abstract: Employees in many contemporary organizations work with flexible routines and flexible technologies. When those employees find that they are unable to achieve their goals in the current environment, how do they decide whether they should change the composition of their routines or the materiality of the technologies with which they work? The perspective advanced in this paper suggests that the answer to this question depends on how human and material agencies – the basic building blocks common to both routines and technologies – are imbricated. Imbrication of human and material agencies creates infrastructure in the form of routines and technologies that people use to carry out their work. Routine or technological infrastructure used at any given moment is the result of previous imbrications of human and material agencies. People draw on this infrastructure to construct a perception that a technology either constrains their ability to achieve their goals, or that the technology affords the possibility of achieving new goals. The case of a computer simulation technology for automotive design is used to illustrate this framework suggests that perceptions of constraint leads people to change their technologies while perceptions of affordance lead people to change their routines. I use this imbrication metaphor to suggest how a human agency approach to technology can usefully incorporate notions of material agency into its explanations of organizational change.

Posted Content
TL;DR: In this article, a new framework for carrying out process tracing is proposed, which integrates discussions of process tracing and causal-process observations, gives greater attention to description as a key contribution, and emphasizes the causal sequence in which process-tracing observations can be situated.
Abstract: Process tracing is a fundamental method of qualitative analysis. While it is often invoked by scholars as they examine qualitative data, too frequently this tool is neither adequately understood nor rigorously applied. This deficit motivates the present article, which offers a new framework for carrying out process tracing. This reformulation integrates discussions of process tracing and causal-process observations, gives greater attention to description as a key contribution, and emphasizes the causal sequence in which process-tracing observations can be situated. In the current period of major innovation in quantitative tools for causal inference, this reformulation is part of a wider, parallel effort to achieve greater systematization of qualitative methods. A key point here is that these methods can add inferential leverage too often lacking in quantitative analysis. The presentation is accompanied by teaching exercises, which focus on three examples from international relations, one from American politics, two from comparative politics, and one from public health/epidemiology.

Posted Content
TL;DR: In this article, the authors examine practice diffusion in an environment where competing logics exist, focusing on how organizational and practice variations are institutionally shaped, and how trustee and performance logics in the mutual fund industry that were rooted in different geographic locations (Boston and New York) led to variation in how mutual funds established contracts with independent professional money management firms.
Abstract: This paper examines practice diffusion in an environment where competing logics exist, focusing on how organizational and practice variations are institutionally shaped. Empirically, I study how trustee and performance logics in the mutual fund industry that were rooted in different geographic locations (Boston and New York) led to variation in how mutual funds established contracts with independent professional money management firms. This focus on competing logics redirects institutional research away from isomorphism and the segregation of institutional and technical forces, and towards an appreciation of how multiple forms of rationality provide a foundation for ongoing struggle and change in organizational fields. Implications for the dominant two-stage institutional model of diffusion as well as research on institutions, organizations, and professions are discussed.

Journal ArticleDOI
TL;DR: This article analyzed the drivers of international waves in capital flows and found that global factors, especially global risk, are the most important determinants of these episodes, while domestic macroeconomic characteristics are generally less important, although changes in domestic economic growth influence episodes caused by foreigners.
Abstract: This paper analyzes the drivers of international waves in capital flows. We build on the literature on “sudden stops” and “bonanzas” to develop a new methodology for identifying episodes of extreme capital flow movements using quarterly data on gross inflows and gross outflows, differentiating activity by foreigners and domestics. We identify episodes of “surge”, “stop”, “flight”, and “retrenchment” and show how our approach yields fundamentally different results than the previous literature that used measures of net flows. Global factors, especially global risk, are the most important determinants of these episodes. Contagion, especially through trade and the bilateral exposure of banking systems, is important in determining stop and retrenchment episodes. Domestic macroeconomic characteristics are generally less important, although changes in domestic economic growth influence episodes caused by foreigners. We find little role for capital controls in reducing capital flow waves. The results help provide insights for different theoretical approaches explaining crises and capital flow volatility.

Posted Content
TL;DR: In this paper, a dynamic simultaneous equation system is used to characterize the effect of online word-of-mouth (WOM) on the movie industry, showing that both a movie's box office revenue and WOM valence significantly influence WOM volume.
Abstract: There are growing interests in understanding how word-of-mouth (WOM) on the Internet is generated and how it influences consumers' purchase decisions at retail outlets. A unique aspect of the WOM effect is the presence of a positive feedback mechanism between WOM and retail sales. We characterize the process through a dynamic simultaneous equation system, in which we separate the effect of online WOM as both a precursor to and an outcome of retail sales. We apply our approach to the movie industry, showing that both a movie's box office revenue and WOM valence significantly influence WOM volume. WOM volume in turn leads to higher box office performance. This positive feedback mechanism highlights the importance of WOM in generating and sustaining retail revenue.

Journal ArticleDOI
TL;DR: In this article, the authors examined the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries and found that the issuance of standalone corporate social responsibility (CSR) reports is associated with lower analyst forecast error.
Abstract: We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of standalone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the issuance of standalone CSR reports is associated with lower analyst forecast error. This relationship is stronger in countries that are more stakeholder-oriented — i.e., in countries where CSR performance is more likely to affect firm financial performance. The relationship is also stronger for firms and countries with more opaque financial disclosure, suggesting that issuance of standalone CSR reports plays a role complementary to financial disclosure. These results hold after we control for various factors related to firm financial transparency and other potentially confounding institutional factors. Collectively, our findings have important implications for academics and practitioners in understanding the function of CSR disclosure in financial markets.

Journal ArticleDOI
TL;DR: In this article, the authors document significant time series momentum in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments they consider, and find persistence in returns for 1 to 12 months that partially reverses over longer horizons.
Abstract: We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for 1 to 12 months that partially reverses over longer horizons, consistent with sentiment theories of initial under-reaction and delayed over-reaction. A diversified portfolio of time series momentum strategies across all asset classes delivers substantial abnormal returns with little exposure to standard asset pricing factors and performs best during extreme markets. Examining the trading activities of speculators and hedgers, we find that speculators profit from time series momentum at the expense of hedgers.

ReportDOI
TL;DR: One of the earliest and most central insights of the literature on economic development is that development entails structural change as mentioned in this paper, and that countries that manage to pull themselves out of poverty and get richer are those that are able to diversify away from agriculture and other traditional products.
Abstract: One of the earliest and most central insights of the literature on economic development is that development entails structural change. The countries that manage to pull themselves out of poverty and get richer are those that are able to diversify away from agriculture and other traditional products. As labour and other resources move from agriculture into modern economic activities, overall productivity rises and incomes expand. The speed with which this structural transformation takes place is the key factor that differentiates successful countries from unsuccessful ones.

Posted Content
TL;DR: The methodology of properly calculating the levelized cost of electricity for solar PV is reviewed, correcting the misconceptions made in the assumptions found throughout the literature and a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions.
Abstract: As the solar photovoltaic (PV) matures, the economic feasibility of PV projects are increasingly being evaluated using the levelized cost of electricity (LCOE) generation in order to be compared to other electricity generation technologies. Unfortunately, there is lack of clarity of reporting assumptions, justifications and degree of completeness in LCOE calculations, which produces widely varying and contradictory results. This paper reviews the methodology of properly calculating the LCOE for solar PV, correcting the misconceptions made in the assumptions found throughout the literature. Then a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions. A numerical example is provided with variable ranges to test sensitivity, allowing for conclusions to be drawn on the most important variables. Grid parity is considered when the LCOE of solar PV is comparable with grid electrical prices of conventional technologies and is the industry target for cost-effectiveness. Given the state of the art in the technology and favorable financing terms it is clear that PV has already obtained grid parity in specific locations and as installed costs continue to decline, grid electricity prices continue to escalate, and industry experience increases, PV will become an increasingly economically advantageous source of electricity over expanding geographical regions.

Journal ArticleDOI
TL;DR: In this paper, a new and unique dataset based on the German Community Innovation Survey conducted in 2009 was used to test whether different types of eco-innovations (according to their environmental impacts) are driven by different factors.
Abstract: Empirical analyses of the determinants of environmental innovations were rarely able to distinguish between different areas of environmental impacts. The paper tries to close this gap by employing a new and unique dataset based on the German Community Innovation Survey conducted in 2009. The main purpose of the paper is to test whether different types of eco-innovations (according to their environmental impacts) are driven by different factors. Besides a complex set of different supply, firm specific and demand factors, the literature on the determinants of environmental innovations accentuates the important role of regulation, cost savings and customer benefits. We find that current and expected government regulation is particularly important for pushing firms to reduce air (e.g. CO2, SO2 or NOx) as well as water or noise emissions, avoid hazardous substances and increase recyclability of products. Cost savings are an important motivation for reducing energy and material use, pointing to the role of energy and raw materials prices as well as taxation as drivers for eco-innovation. Customer requirements are another important source for eco-innovations, particularly with regard to products with improved environmental performance and process innovations that increase material efficiency, reduce energy consumption and waste and the use of dangerous substances. Firms confirm a high importance of expected future regulations for all environmental product innovations.

Journal ArticleDOI
TL;DR: This article examined the detrimental consequences of financial market imperfections for international trade and developed a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability.
Abstract: This paper examines the detrimental consequences of financial market imperfections for international trade. I develop a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability. Applying this model to aggregate trade data, I study the mechanisms through which credit constraints operate. First, financial development increases countries' exports above and beyond its impact on overall production. Firm selection into exporting accounts for a third of the trade-specific effect, while two thirds are due to reductions in firm-level exports. Second, financially advanced economies export a wider range of products and their exports experience less product turnover. Finally, while all countries service large destinations, exporters with superior financial institutions have more trading partners and also enter smaller markets. All of these effects are magnified in financially vulnerable sectors. These results have important policy implications for less developed economies that rely on exports for economic growth but suffer from poor financial contractibility.

Posted Content
TL;DR: In this article, the authors examine the external (both institutional and market), organizational and individual drivers of greenwashing and offer recommendations for managers, policymakers, and NGOs to decrease its prevalence.
Abstract: More and more firms are engaging in greenwashing, misleading consumers about firm environmental performance or the environmental benefits of a product or service. The skyrocketing incidence of greenwashing can have profound negative effects on consumer and investor confidence in environmentally friendly firms and products. Mitigating greenwashing is particularly challenging in a context of limited and uncertain regulation. This article examine the external (both institutional and market), organizational and individual drivers of greenwashing and offers recommendations for managers, policymakers, and NGOs to decrease its prevalence.

Journal ArticleDOI
TL;DR: Around the world, financial literacy is critical to retirement security and instrumental variables estimates show that the effects of financial literacy on retirement planning tend to be underestimated.
Abstract: In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average. Other common patterns are also evident: women are less financially literate than men and are aware of this shortfall. More educated people are more informed, yet education is far from a perfect proxy for literacy. There are also ethnic/racial and regional differences: city-dwellers in Russia are better informed than their rural counterparts, while in the U.S., African Americans and Hispanics are relatively less literate than others. Moreover, the more financially literate are also those most likely to plan for retirement. In fact, answering one additional financial question correctly is associated with a 3-4 percentage point higher chance of planning for retirement in countries as diverse as Germany, the U.S., Japan, and Sweden; in the Netherlands, it boosts planning by 10 percentage points. Finally, using instrumental variables, we show that these estimates probably underestimate the effects of financial literacy on retirement planning. In sum, around the world, financial literacy is critical to retirement security.

Journal ArticleDOI
TL;DR: The authors proposed a measure of managerial ability, based on managers' efficiency in generating revenues, which is available for a large sample of firms and outperforms existing ability measures and finds that the measure is strongly associated with manager fixed effects, and that stock price reactions to CEO turnover are positive (negative) when assessing the outgoing CEO as low (high) ability.
Abstract: In this paper we propose a measure of managerial ability, based on managers’ efficiency in generating revenues, which is available for a large sample of firms and outperforms existing ability measures. We find that our measure is strongly associated with manager fixed effects, and that the stock price reactions to CEO turnovers are positive (negative) when we assess the outgoing CEO as low (high) ability. We also find that replacing CEOs with more (less) able CEOs is associated with improvements (declines) in subsequent firm performance. We conclude with a demonstration of the potential of the measure. We find that the negative relation between equity financing and future abnormal returns documented in prior research is mitigated by managerial ability, as more able managers appear to utilize equity issuance proceeds more effectively, illustrating that our more precise measure of managerial ability will allow researchers to pursue studies that were previously difficult to conduct.

Posted Content
TL;DR: The authors analyzes how blockholders can exert governance even if they cannot intervene in a firm's operations and shows that they can encourage investment by impounding its effects into prices, which encourages managers to invest for long run growth rather than short-term profits.
Abstract: This paper analyzes how blockholders can exert governance even if they cannot intervene in a firm's operations. Blockholders have strong incentives to monitor the firm's fundamental value, since they can sell their stakes upon negative information. By trading on private information (following the "Wall Street Rule"), they cause prices to reflect fundamental value rather than current earnings. This in turn encourages managers to invest for long-run growth rather than short-term profits. Contrary to the view that the U.S.'s liquid markets and transient shareholders exacerbate myopia, I show that they can encourage investment by impounding its effects into prices.

Posted Content
TL;DR: The 2011 Human Development Report argues that the urgent global challenges of sustainability and equity must be addressed together and identifies policies on the national and global level that could spur mutually reinforcing progress towards these interlinked goals as mentioned in this paper.
Abstract: The 2011 Human Development Report argues that the urgent global challenges of sustainability and equity must be addressed together – and identifies policies on the national and global level that could spur mutually reinforcing progress towards these interlinked goals. Bold action is needed on both fronts, the Report contends, if the recent human development progress for most of the world’s poor majority is to be sustained, for the benefit of future generations as well as for those living today. Past Reports have shown that living standards in most countries have been rising – and converging – for several decades now. Yet the 2011 Report projects a disturbing reversal of those trends if environmental deterioration and social inequalities continue to intensify, with the least developed countries diverging downwards from global patterns of progress by 2050.The Report shows further how the world’s most disadvantaged people suffer the most from environmental degradation, including in their immediate personal environment, and disproportionately lack political power, making it all the harder for the world community to reach agreement on needed global policy changes. The Report also outlines great potential for positive synergies in the quest for greater equality and sustainability, especially at the national level. The Report further emphasizes the human right to a healthy environment, the importance of integrating social equity into environmental policies, and the critical importance of public participation and official accountability. The 2011 Report concludes with a call for bold new approaches to global development financing and environmental controls, arguing that these measures are both essential and feasible.

Journal ArticleDOI
TL;DR: It is found that the online friendships of borrowers act as signals of credit quality and increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex post default rates.
Abstract: We study the online market for peer-to-peer (P2P) lending, in which individuals bid on unsecured microloans sought by other individual borrowers. Using a large sample of consummated and failed listings from the largest online P2P lending marketplace - Prosper.com, we find that the online friendships of borrowers act as signals of credit quality. Friendships increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex-post default rates. The economic effects of friendships show a striking gradation based on the roles and identities of the friends. We discuss the implications of our findings for the disintermediation of financial markets and the design of decentralized electronic markets.

Journal ArticleDOI
TL;DR: The authors provides an overview of the key theoretical and empirical insights into the Porter Hypothesis, draws policy implications from these insights, and sketches out major research themes going forward, as well as highlights the major research topics going forward.
Abstract: Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (PH). Yet even today, we find conflicting evidence and alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights into the PH to date, draws policy implications from these insights, and sketches out major research themes going forward.

Journal ArticleDOI
TL;DR: In this article, the authors propose several connectedness measures built from pieces of variance decompositions, and argue that they provide natural and insightful measures of connectedness among financial asset returns and volatilities.
Abstract: We propose several connectedness measures built from pieces of variance decompositions, and we argue that they provide natural and insightful measures of connectedness among fi nancial asset returns and volatilities. We also show that variance decompositions define weighted, directed networks, so that our connectedness measures are intimately-related to key measures of connectedness used in the network literature. Building on these insights, we track both average and daily time-varying connectedness of major U.S. financial institutions' stock return volatilities in recent years, including during the financial crisis of 2007-2008.