Economics Insights @ CBS

Following the efficiency logic that argues process quality management provides an important basis for firms’ internal controls over their innovation activities, this study which is set within emerging markets extends the literature by shedding light upon an interesting phenomenon: employing process quality management reduces purchasing risk for potential customers by conveying valuable information regarding the firms who employ it (a symbolic logic argument).

We study the intertemporal properties of accounting conservatism with a focus on managerial incentives. In our main model, conservatism results in smaller expected payouts to the manager (agent) in early periods and larger expected payouts in later periods. Conservatism shifts (ambiguous) evidence that might be used to recognize good performance in early periods to later periods. In later periods, good performance is less informative, since good news might mean good current period performance and might also mean good prior period performance whose recognition was delayed.

This paper studies how hedge fund activism impacts corporate innovation. Firms targeted by activists improve their innovation efficiency over the five-year period following hedge fund intervention. Despite a tightening in research and development (R&D) expenditures, target firms increase innovation output, as measured by both patent counts and citations, with stronger effects among firms with more diversified innovation portfolios. Reallocation of innovative resources, redeployment of human capital, and change to board-level expertise all contribute to improve target firms' innovation.

We use a very accurate panel of all individual spending, income, balances, and credit limits from a financial aggregation app and document significant payday responses of spending to the arrival of both regular and irregular income. These payday responses are clean, robust, and homogeneous for all income and spending categories throughout the income distribution. Spending responses to income are typically explained by households' capital structures: households that hold little or no liquid wealth have to consume hand-to-mouth.

Although the rates of economic inequality in the United States are at their highest since the onset of The Great Depression, many Americans do not seem as concerned as may be expected. This apparent lack of concern has been attributed to people's deeply-entrenched belief in economic mobility -- the belief that through hard work, determination, and skill people are able to rise up the economic ladder. Little is known, however, about why Americans so strongly believe in economic mobility.