Organizations & Markets

This paper discusses some existing and potential roles of financial reporting disclosures. The focus is on what are conventionally termed mandatory disclosures, although as Sunder (1997) points out the distinction between mandatory and voluntary is somewhat arbitrary. The paper views disclosure through the lens of incentives. Accounting disclosures are a component of the broad set of information shareholders, debt holders, and other accountees have to assess the stewardship of accountors.

Are teachers' impacts on students' test scores ("value-added") a good measure of their quality? This question has sparked debate largely because of disagreement about (1) whether value-added (VA) provides unbiased estimates of teachers' impacts on student achievement and (2) whether high-VA teachers improve students' long-term outcomes. We address these two issues by analyzing school district data from grades 3–8 for 2.5 million children linked to tax records on parent characteristics and adult outcomes.

Political theorists of globalization have argued that foreign inflows to a society can give rise to collective-identity closure — social movements aiming to narrow the in-group, and exclude minorities. In this research we investigate whether exposure to the mixing of a foreign culture with one's heritage culture can evoke need for closure, a motive that engenders ethnocentric social judgments.

Sovereign Wealth Funds (SWFs) are state-owned investment funds with combined asset holdings that are fast approaching four trillion dollars. Recently emerging as a major force in global financial markets, SWFs have other distinctive features besides their state-owned status: they are mainly located in developing countries and are intimately tied to energy and commodities exports, and they carry virtually no liabilities and have little redemption risk, which allows them to take a longer-term investment outlook than most other institutional investors.

Defaults arising from illiquidity can lead to private workouts, formal bankruptcy proceedings or even liquidation. All these outcomes can result in deadweight losses. Corporate illiquidity in the presence of realistic capital market frictions can be managed by a) equity dilution, b) carrying positive cash balances, or c) entering into loan commitments with a syndicate of lenders. An efficient way to manage illiquidity is to rely on mechanisms that transfer cash from "good states" into "bad states" (i.e., financial distress) without wasting liquidity in the process.

A growing literature suggests that even in the absence of any ability to predict returns, holding options on the benchmarks or trading frequently can generate positive alpha. The ratio of alpha to its tracking error appraises a fund's performance. This paper derives the performance-maximizing strategy, which turns out to be a variant of a buy-write strategy, and the least upper bound on such performance enhancement. If common equity indices are used as benchmarks, the potential alpha generated from trading frequently can be substantial in magnitude, but it carries considerable risk.

What discount rate should the government use to measure the financial status of various government programs and the impact of potential policy changes? How, if at all, should the discount rate take into account the risk of the underlying cash flows? We examine these questions in the context of one of the largest components of the U.S. budget: Social Security. Official measures of the U.S. Social Security system's present value funding shortfall are computed using the risk-free interest rate.

Over the years, the level of analytical rigor has risen in articles published in marketing academic journals. While, ceteris paribus, rigor is desirable, there is a growing sense that rigor has become a, if not the, goal for research in marketing. Consequently, other desirable characteristics, such as relevance, communicability, and simplicity, have been downplayed, to the detriment of the field of marketing.

This paper analyzes longitudinal state-level data during the period 1995–2004 to investigate whether use of newer prescription drugs has reduced the ratio of the number of workers receiving Social Security Disability Insurance benefits to the working-age population (the “DI recipiency rate”).