In emerging-market countries, commercial institutions do not always develop sufficiently quickly or effectively to support ambitious entrepreneurs. How might intermediaries remedy these problems? We address this question by drawing on institutional literatures to develop the concept of “open system intermediaries.” Our research design involves examining business incubators in emerging markets as a form of open system intermediary.
While policies encouraging diffusion of new technologies provide incentives for adopting the focal good, they typically ignore the ecosystem of complementary goods and services. Based on existing literature on indirect network effects, we argue that when there is less availability of complementary goods, policies have a smaller impact on diffusion.
This paper examines the relation between tax enforcement and financial reporting quality. The government, due to its tax claim on firm profits, is de facto the largest minority shareholder in almost all corporations. Therefore, the government, like other shareholders, has an interest in the accurate reporting of (taxable) income and preventing insiders from siphoning corporate funds to obtain private benefits.
The behavioral response to public disclosure of income tax returns figures prominently in policy debates about its advisability. Although supporters stress that disclosure encourages tax compliance, policy debates proceed in the absence of empirical evidence about this, and any other, claimed behavioral impact.
This study asks whether investors learn differently from gains versus losses. I find experimental evidence that indicates that being in the negative domain leads individuals to form overly pessimistic beliefs about available investment options.
Individuals tend to give losses approximately 2-fold the weight that they give gains. Such approximations of loss aversion (LA) are almost always measured in the stimulus domain of money, rather than objects or pictures. Recent work on preference-based decision-making with a schedule-less keypress task (relative preference theory, RPT) has provided a mathematical formulation for LA similar to that in prospect theory (PT), but makes no parametric assumptions in the computation of LA, uses a variable tied to communication theory (i.e., the Shannon entropy or information), and works readily with non-monetary stimuli.
Life financial outcomes carry a significant heritable component, but the mechanisms by which genes influence financial choices remain unclear. Focusing on a polymorphism in the promoter region of the serotonin transporter gene (5-HTTLPR), we found that individuals possessing the short allele of this gene invested less in equities, were less engaged in actively making investment decisions, and had fewer credit lines.
We show that individuals’ macroeconomic expectations are influenced by their socioeconomic status (SES). Individuals with higher income or higher education levels are more optimistic about future macroeconomic developments, including business conditions, the national unemployment rate, and stock market returns.
This study examines whether the value a venture derives from an affiliation depends on its relative standing in the portfolio of all affiliations held by its partner. Relative standing refers to how the venture ranks among other ventures in the partner’s portfolio with respect to expected returns. The relative standing of a venture in its partner’s portfolio influences the venture’s access to the partner’s resources and the venture’s performance.
We take up Cochrane’s (2011) challenge to identify the firm characteristics that provide independent information about average U.S. monthly stock returns by simultaneously including 94 characteristics in Fama-MacBeth regressions that avoid overweighting microcaps and adjust for data snooping bias.
We investigate the number of and reasons for errors and questionable judgments that sell-side equity analysts make in constructing and executing discounted cash flow (DCF) equity valuation models. For a sample of 120 DCF models detailed in reports issued by U.S. brokers in 2012 and 2013, we estimate that analysts make a median of three theory-related and/or execution errors and four questionable economic judgments per DCF.
This study seeks to inform investment academics and practitioners by describing and analyzing the population of return predictive signals (RPS) publicly identified over the 40-year period 1970–2010. Our supraview brings to light new facts about RPS, including that more than 330 signals have been reported; the properties of newly discovered RPS are stable over time; and RPS with higher mean returns have larger standard deviations of returns and also higher Sharpe ratios.
This paper investigates whether greater competition increases or decreases individual bank and banking system risk. Using a new text-based measure of competition, and an instrumental variables analysis that exploits exogenous variation in bank deregulation, we provide robust evidence that greater competition increases both individual bank risk and a bank's contribution to system-wide risk.
Contrary to the guidance provided by regulators and industry associations suggesting that mortgage servicing rights (MSRs) be recorded as Level 3 assets, Altamuro and Zhang identify that 25 % of banks classify them as Level 2 assets. This variation in the asset classification of a single asset type provides a unique setting to examine the role of inputs in the fair value measurement process.
The design and use of standard processes are foundational recommendations in many operations practices. Yet, given the demonstrated performance benefits of standardized processes, it is surprising that they are often not followed consistently. One way to ensure greater compliance is by electronically monitoring the activities of individuals, although such aggressive monitoring poses the risk of inducing backlash.
The Hawthorne Effect is a prevalent observer effect that causes behavioral changes among participants of epidemiological studies or infection control interventions. The purpose of the review is to describe the origins of the Hawthorne Effect, to understand the term in relation to current scientific literature, to describe characteristics of the Hawthorne effect, and to discuss methods to quantify and overcome limitations associated with the Hawthorne Effect.
In order to deliver high quality, reliable, and consistent services safely, organizations develop professional standards. Despite the communication and reinforcement of these standards, they are often not followed consistently. Although previous research suggests that high job demands are associated with declines in compliance over lengthy intervals, we hypothesized – drawing on theoretical arguments focused on fatigue and depletion – that the impact of job demands on routine compliance with professional standards might accumulate much more quickly.
Competing technologies in emerging industries create uncertainties that discourage supplier investments. Open technology can induce supplier investments, but may also lead to intensified future competition. In this paper, we study competing manufacturers’ open-technology strategies. We show that despite the risk of intensifying future competition, open technologies by competing manufacturers may constitute an equilibrium and can indeed induce supplier investments.
This paper studies an optimal procurement mechanism for a newsvendor-like problem where the buyer's (newsvendor's) purchase price of the supplies is not fixed, but determined through interaction with candidate suppliers. The buyer has priors on the suppliers' costs but does not know their costs exactly. Recent literature has shown how the buyer can implement the optimal procurement mechanism by announcing a revenue function (specifying a payment for each quantity the buyer may purchase), then auctioning off the supply contract with the specified revenue function.
This paper studies an upstream supplier who quotes prices for a key component to multiple sellers that compete for an end-buyer's indivisible contract. At most one of the supplier's quotes may result in downstream contracting and hence produce revenue for her.