Economics Insights @ CBS

Both managerial ownership and performance are endogenously determined by exogenous (and only partly observed) changes in the firm's contracting environment. We extend the cross-sectional results of Demsetz and Lehn (1985), (Journal of Political Economy, 93, 1155?1177) and use panel data to show that managerial ownership is explained by key variables in the contracting environment in ways consistent with the predictions of principal-agent models. A large fraction of the cross-sectional variation in managerial ownership is explained by unobserved firm heterogeneity.

We analyze forms of synergy between emic and etic approaches to research on culture and cognition. Drawing on the justice judgment literature, we describe dynamics through which the two approaches stimulate each other's progress. Moreover, we delineate ways in which integrative emic/etic frameworks overcome limitations of narrower frameworks in modeling culture and cognition. Finally, we identify advantages of integrative frameworks in guiding responses to the diverse justice sensitivities in international organizations.

This paper lays out alternative equity valuation models that involve forecasting for finite periods and shows how they are related to each other. It contrasts dividend discounting models, discounted cash flow models, and "residual income" models based on accrual accounting. It shows that some models that are apparently different yield the same valuation. It gives the general form of the terminal value calculation in these models and shows how this calculation serves to correct errors in the model.