the free cash flow hypothesis for sales growth and firm performance business is business and business must grow dr seuss the lorax the paper investigates the agency argument that sales growth in firms with free cash flow and without strong governance is less profitable than sales growth for firms without free cash flow it also tests whether strong governance conditions improve the performance of firms with free cash flow and or limit the investments in unprofitable sales growth consistent with agency theory firms with free cash flow gain less from sales growth than firms without free cash flow but different governance conditions affect sales growth and performance in different ways having substantial management stock ownership mitigates the influence of free cash flow on performance despite allowing higher sales growth in contrast outside blocks held by mutual funds reduce sales growth substantially but does not increase performance from sales growth copyright 2000 john wiley sons ltd

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

exchange and condom use in informal sexual relationships in urban kenya abstract this article investigates whether a market for unsafe sexual activity exists among nonmarital noncommercial sexual relationships in a high hiv aids environment the exchange of money for sex without a condom is well known within commercial sexual partnerships but it is unclear from the previous evidence whether markets can emerge among noncommercial relationships as well i use data on nonmarital sexual partnerships and transfers from kisumu kenya to investigate this question i define and measure transfers as material items given by a male to his female sexual partner including money and nonmonetary items such as gifts meals and rent i find a strong negative relationship between the level of transfers and condom use after controlling for male fixed effects and other important female and partnership characteristics i also find that nonmonetary transfers have the same relationship with condom use as monetary transfers furthermore i test the assumption that adolescent girls are particul

on the internationalization of corporate boards the case of nordic firms this study investigates the internationalization of corporate boards using a sample of 346 non financial listed nordic firms during 2001 2008 given a high level of international activity these firms have surprisingly few foreign directors the picture of international expertise changes considerably however if we also count the international experience of national directors the percentage of foreign directors is related primarily to financial internationalization rather than foreign sales and thus presumably to the monitoring rather than advisory functions the international experience of the nationals covaries with foreign sales and increases with the share of foreign directors thus both sources of international expertise should be considered when analyzing board internationalization

income shocks and gender gaps in education evidence from uganda abstract this paper uses exogenous variation in rainfall across districts in uganda to estimate the causal effects of household income shocks on children s enrollment and academic performance conditional on gender i find negative deviations in rainfall from the long term mean to have negative and highly significant effects on female enrollment in primary schools and the effect grows stronger for older girls i find no effect of rainfall variation on the enrollment of boys and young girls moreover i find that when schooling is free of charge and both marginal boys and girls are enrolled a negative income shock has an adverse effect on the test scores of female students while boys are not affected the results imply that households respond to income shocks by varying the amount of schooling and resources provided to girls while boys are to a large extent sheltered a finding consistent with a model where parents values of child labor differ across sexes

a cross country comparison of rural income generating activities summary this paper uses a newly constructed cross country database composed of comparable income aggregates to examine the full range of income generating activities carried out by rural households the analysis paints a clear picture of multiple activities across rural space in countries on all four continents though less so in the included african countries for most countries the largest share of income stems from off farm activities and the largest share of households has diversified sources of income diversification not specialization is the norm nevertheless agricultural sources of income remain critically important for rural livelihoods in all countries

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

do external grants to district governments discourage own revenue generation a look at local public finance dynamics in ghana summary using rich panel data on all of ghana s districts local public finances over 11 years this paper investigates the way that intergovernmental and other transfers to local governments affect local governments incentives to collect internally generated revenues and funds igf we find that despite an incentive scheme built into one of the major intergovernmental grants the flow of all grants taken together discourages rather than encourages igf this is reflected both in the depressing effect of transfers on igf levels as well as on igf growth

the impact of foreign board membership on firm value abstract this study examines the effect of foreign anglo american board membership on corporate performance measured in terms of firm value tobin s q using a sample of firms with headquarters in norway or sweden the study indicates a significantly higher value for firms that have outsider anglo american board member s after a variety of firm specific and corporate governance related factors have been controlled for we argue that this superior performance reflects the fact that these companies have successfully broken away from a partly segmented domestic capital market by importing an anglo american corporate governance system such an import signals a willingness on the part of the firm to expose itself to improved corporate governance and enhances its reputation in the financial market

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

economic determinants of land invasions this study estimates the effect of economic conditions on redistributive conflict we examine land invasions in brazil using a panel data set with over 50 000 municipality year observations adverse eco nomic shocks instrumented by rainfall cause the rural poor to invade and occupy large landholdings this effect exhibits substantial heterogeneity by land inequality and land tenure systems but not by other observable variables in highly unequal municipalities negative income shocks cause twice as many land invasions as in municipalities with average land inequality cross sectional estimates using fine within region variation also suggest the importance of land inequality in explaining redistributive conflict i introduction c onflict over land is endemic to many rural econo mies in environments marked by a highly skewed distribution of property incomplete land and credit markets poorly or unevenly enforced property rights and weak political institutions agents often resort to extralegal means to improve their economic positions the poor frequently invade private properties and occupy them until either forcibly expelled or granted official titles land conflict which is prevalent in many countries such as brazil south africa uganda and venezuela may distort the allocation of resources in the agricultural sector away from productive uses and thereby contribute to the persistence of rural poverty how do economic conditions affect this redistrib utive conflict this paper explores this question using a rich municipal level data set of 5 299 land invasions from 1988 to 2004 in brazil we follow miguel satyanath and sergenti 2004 by using rainfall as a source of exogenous variation to study the relationship between income and conflict and we find that adverse economic shocks cause the rural poor to invade large landholdings this effect exhibits considerable het erogeneity by land inequality and land tenure systems in highly unequal municipalities negative income shocks cause twice as many land invasions as in municipalities with average land inequality the effect of income shocks is even stronger in highly polarized municipalities as measured by the degree of bimodality in the land distribution cross sectional estimates using fine within region variation also suggest the importance of land inequality in explaining redistributive conflict we also find that income shocks cause significantly more land invasions in municipalities with a greater proportion of land under fixed rent contracts by contrast we find no evidence of heterogeneity on a range of other political and socioeconomic variables including political competition sharecropping police expenditures and social welfare spending recent microeconometric studies have examined two

internal equity financing and the performance of multinational subsidiaries in emerging economies we examine the internal equity financing of the multinational subsidiary which retains and reinvests its own earnings internal equity financing is a type of firm specific advantage fsa along with other traditional fsas in innovation research and development brands and management skills it also reflects subsidiary level financial management decision making here we test the contributions of internal equity financing and subsidiary level financial management decision making to subsidiary performance using original survey data from british multinational subsidiaries in six emerging countries in the south east asia region our first finding is that internal equity financing acts as an fsa to improve subsidiary performance our second finding is that over 90 of financing sources including capital investment by the parent firms in the british subsidiaries come from internal funding our third finding is that subsidiary level financial management decision making has a statistically significant positive impact on subsidiary performance our findings advance the theoretical empirical and managerial analysis of subsidiary performance in emerging economies

resistance to change in the corporate elite female directors appointments onto nordic boards in this empirical study we investigate the variation in firms response to institutional pressure for gender balanced boards focusing specifically on the preservation of prevailing practices of director selection and its impact on the representation of women on the board of directors using 8 years of data from publicly listed nordic corporations we show societal pressure to be one of the determinants of female directorship moreover in some corporations the director selection process may work to maintain a traditional type of board in such boards demographic diversity among male members appears to be associated with a lower share of female directors although we cannot establish wether this reflects discrimination or a desire to maintain critical competencies with this paper we add to the theoretical understanding of the factors underlying female board appointments by adopting an institutional theory lens to study female board representation viewing the demands for gender balanced boards in terms of societal pressure for the de institutionalization of the prevailing norms and practices we highlight preferences for maintaining established practices as a potentially important barrier to institutional change on these grounds we conjecture on the relationship between the gender diversity of boards and other diversity dimensions we suggest that a board room gender quota if implemented is supplemented by policies to ensure the transparency of board changes in order to prevent the crowding out of other diversity dimensions

the market reaction to international cross listings evidence from depositary receipts abstract this paper examines the stock price impact of international dual listings the sample consists of 181 firms from 35 countries that instituted their first depositary receipt program over the period 1985 1995 the market reaction to a depositary receipt program is larger in magnitude and more pervasive than previously reported the stock price reaction is related to choice of exchange geographical location i e emerging or developed markets and avenues for raising equity capital i e public versus private offerings

integrating behavioral choice into epidemiological models of aids increased hiv risk creates incentives for people with low sexual activity to reduce their activity but may make high activity people fatalistic leading them to reduce their activity only slightly or actually increase it if high activity people reduce their activity by a smaller proportion than low activity people the composition of the pool of available partners will worsen creating positive feedbacks and possibly multiple steady states early public health efforts may allow societies to reach more favorable steady states excerpt

testing theories of consumption behavior using information on aggregate shocks income seasonality and rainfall in rural india we develop an integrated framework for testing theories of consumption behavior by examining how agricultural households in rural india respond to anticipated and unanticipated seasonal income fluctuations using information on village level rainfall surprises we estimate idiosyncratic unanticipated income shocks by allowing weather risk to impact households differently depending on observable characteristics in applying our methodology to unique panel data on consumption debt and intrahousehold gift exchanges we address a number of shortcomings in previous tests of theories of consumption behavior yet we find no evidence against the hypothesis that households smooth idiosyncratic fluctuations in their income our approach also uncovers several interesting features of rural credit and insurance markets

explaining government growth in the u s states despite the explosive increase in the research program on government growth in recent years little work has been done on government growth disaggregated to the subnational level i examine the empirical validity of five competing models of government growth for the fifty u s states from 1945 to 1984 wagner s law fiscal illusion party control bureau voting and intergovernmental grant government size is defined in terms of state government spending as a proportion of total state economic output with separate implicit price deflators being employed for the public and private sectors based on a longitudinal test of these competing models the analysis uncovers strong empirical support for the bureau voting and intergovernmental grant models moderately weak support for the wagner s law model and virtually no support for the fiscal illusion and party control explanations these findings have important implications for the study of government growth in general and more specifically in the states

climate shocks and exports this paper uses international trade data to examine the effects of climate shocks on economic activity we examine panel models relating the annual growth rate of a country s exports in a particular product category to the country s weather in that year we find that a poor country being 1 degree celsius warmer in a given year reduces the growth rate of that country s exports by between 2 0 and 5 7 percentage points with no detectable effects in rich countries we find negative effects of temperature on exports of both agricultural products and light manufacturing products with little apparent effects on heavy industry or raw materials the results confirm large negative effects of temperature on poor countries economies and suggest that temperature affects a much wider range of economic activity than conventionally thought this abstract was borrowed from another version of this item

government spending and budget deficits in the industrial economies fiscal policy nouriel roubini and jeffrey sachs this paper examines the evolution of the size of government and of budget deficits in oecd economies we highlight the rapid increase in government spending in the 1970s the sharp rise in budget deficits and public debt after 1973 and the reversal in these trends in the 1980s the increase in the size of government was associated in part with the slowdown in growth after 1973 but also reflected gradual adjustment of the ratio of spending to output towards a long run target which depends on political and institutional characteristics of the economy the political orientation of the government the degree of wage indexation and the degree of stability of the political system such factors also explain the size of budget deficits when faced with an adverse shock subsequent deficit reduction requires a measure of political consensus we note that such consensus is hard to achieve in multi party coalitions in consequence countries with such a political structure tended in consequence countries with such a political structure tended toin consequence countries with such a political structure tended to experience much more rapid increases in their debt gnp ratios

vagabond shoes longing to stray why foreign firms list in the united states abstract how do firms that go public decide whether to list on a major stock exchange or locally using a unique data set on israeli ipos in the us and tel aviv we show that companies that list in the us are young and overwhelmingly high tech oriented we argue that high quality innovative firms are willing to incur additional costs associated with listing in the us in order to reveal their value and distinguish themselves from firms that issue stock back home costs of listing in the us include first day underpricing and relinquishing corporate control

ceo successor characteristics and the choice of foreign market entry mode an empirical study based on the upper echelons theory this study of 126 ceo successions and 271 foreign market entry events examines the relationships between successor ceo characteristics and choice of entry mode results indicate that ceo position tenure throughput functional background and international experience are associated with full control entry modes additionally these relationships were observed in the subgroup of high performing firms but not in the low performing subgroup

sexually transmitted infections sexual behavior and the hiv aids epidemic forty million people are infected with hiv worldwide twenty five million of them are in sub saharan africa this paper addresses the question of why africa has been so heavily affected by hiv and what explains the variation within africa i present a model that decomposes epidemic level into differences in sexual behavior and differences in viral transmission rates i argue using evidence drawn from the existing medical literature that africa has very high hiv transmission rates likely due to high rates of other untreated sexually transmitted infections while transmission rates in the united states are low the difference in transmission rates is large enough to explain the observed difference in prevalence between the united states and sub saharan africa the model also provides a good fit to cross country data within africa and suggests that in contrast to the intracontinental results differences within that continent can be attributed to differences in sexual behavior and epidemic timing the results suggest that cost effective policy interventions would focus on decreasing transmission rates within africa possibly by treating other untreated sexually transmitted infections authors

matchmaker matchmaker the effect of old boy networks on job match quality earnings and tenure firms often view job applicant referrals from current employees as more informative than direct applications or referrals through formal labor market intermediaries such as placement firms we argue that old boy networks reduce employers uncertainty about worker productivity using jovanovic s job matching model we show that workers hired through the old boy network should 1 earn higher initial salaries 2 experience lower subsequent wage growth on the job and 3 stay on the job longer than otherwise comparable workers hired from outside the network we find considerable support for this theory using data from the 1972 survey of natural and social scientists and engineers

performance and governance in microfinance institutions accepted version of article published in the journal journal of banking finance published version available on science direct http dx doi org 10 1016 j jbankfin 2008 11 009

a theory of prostitution prostitution is low skill labor intensive female and well paid this paper proposes a marriage market explanation to this puzzle if a prostitute compromises her marriage market prospects she will have to be compensated for forgone marriage market opportunities we discuss the link between poverty and prostitution and show that prostitution may decrease with male income if wives and prostitutes are drawn from the same pool of women we point to the role of male sex ratios and males in transit in sustaining high levels of prostitution and we discuss possible reasons for its low reputation and implications for marriage patterns

government ownership and corporate governance evidence from the eu the ongoing global financial crisis has led to the largest increase in state intervention since the great depression direct government ownership in publicly traded corporations has increased dramatically since 2008 how will this increase in public ownership affect the governance of these erstwhile private companies we examine the impact of government ownership on corporate governance using a sample of firms from the european union a region that is relatively familiar with active government participation our main finding is that government ownership is associated with lower governance quality we further show that while government intervention is negatively related to governance quality in civil law countries it is positively related to governance quality in common law countries finally we find that the preferential voting rights of golden shares are especially damaging to governance quality

do voters demand responsive governments evidence from indian disaster relief abstract using rainfall public relief and election data from india we examine how governments respond to adverse shocks and how voters react to these responses the data show that voters punish the incumbent party for weather events beyond its control however fewer voters punish the ruling party when its government responds vigorously to the crisis indicating that voters reward the government for responding to disasters we also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election in accordance with these electoral incentives governments appear to be more generous with disaster relief in election years these results describe how failures in electoral accountability can lead to suboptimal policy outcomes

is the allocation of resources within the household efficient new evidence from a randomized experiment i study whether households make pareto efficient intrahousehold resource allocation decisions combining randomized variation in women s income generated by the evaluation of the mexican progresa program with variation attributable to localized rainfall shocks as distribution factors in the collective model i find evidence favoring pareto optimality more specifically female specific income changes have positive effects on children s goods expenditures whereas changes due to rainfall shocks have a smaller influence on household public goods expenditures the evidence is consistent with female partners having greater sensitivity to own income changes and norms that oblige women to devote their earnings to meet collective consumption needs

an instrumental variables approach to estimating tax revenue elasticities evidence from sub saharan africa this paper exploits the significant response of real gdp growth of sub saharan african countries to exogenous international commodity price and rainfall shocks to construct instrumental variables estimates of the tax revenue elasticity iv estimates yield that a 1 increase in gdp increases tax revenues by up to 2 5

keeping it within bounds regression analysis of proportions in international business international business researchers commonly estimate proportions percentages rates or fractions so called proportional dependent variables in this paper we posit that two regression strategies are particularly pertinent to the international business field tobit and fractional regression reviewing recent international business research we find that while fractional regression is rarely used analyses from tobit regression are often incomplete or erroneously interpreted with consequences for the validity of the reported results accordingly we clarify how researchers should choose between tobit and fractional regression and interpret their results we present insights based on simple simulations and data examples with associated stata code and a decision tree for choosing between types of models for use with proportional dependent variables

understanding the determinants of managerial ownership and the link between ownership and performance comment abstract himmelberg et al j financial econom 53 1999 353 384 argue that fixed effects estimators should be used in examination of the relationship between managerial ownership and firm performance i show that managerial ownership while substantially different across firms typically changes slowly from year to year within a company with rational managers maximising long term utility small one year changes in ownership are not likely to reflect notable changes in incentives that would lead to substantive within year changes in performance by relying on within variation fixed effects estimators may not detect an effect of ownership on performance even if one exists

an evolutionary approach to understanding international business activity the co evolution of mnes and the institutional environment this paper examines the co evolution of mne activities and institutions external and internal to the firm we develop a theoretical framework for this analysis that draws on the more recent writings of douglass north on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness and of richard nelson on the co evolution of technology and institutions we link historical changes in the character of mne activities to changes in the institutional environment and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co evolution with the environment we argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of mne subsidiaries thus mne agency derives from more decentralized forms of experimentation in international corporate networks which competence creating nodes of new initiatives can co evolve with local institutions unlike most other streams of related literature our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms this form of co evolutionary analysis is increasingly important to understanding the interrelationships between mne activities and public policy

income shocks and hiv in africa we examine how variation in local economic conditions has shaped the aids epidemic in africa using data from over 200 000 individuals across 19 countries we match biomarker data on individuals serostatus to information on local rainfall shocks a large source of income variation for rural households we estimate infection rates in hiv endemic rural areas increase by 11 for every recent drought an effect that is statistically and economically significant income shocks explain up to 20 of variation in hiv prevalence across african countries suggesting existing approaches to hiv prevention could be bolstered by helping households manage income risk better the relationship between income and health has long been of interest to economists and a lengthy literature documents strong linkages between economic conditions and many important health outcomes currie 2009 there has been much less progress however in understanding the economic foundations of the hiv aids epidemic one of the most important global health challenges such an understanding might yield particular dividends in sub saharan africa ssa where over a million people continue to become newly infected with the disease each year unaids 2010 in this article we explore the role of negative income shocks in shaping the

geographical redistribution with disproportional representation a politico economic model of norwegian road projects politicians bias public policies to favor particular election districts according to the traditional common pool model districts facing low tax shares should receive relatively large government projects we suggest a swing voter model where the number of voters on the ideological cut point lack of party identification and number of district representatives per voter determine project sizes we analyze the allocation of state road investments in norway from 1973 1997 exploiting unique data on characteristics of voters legislative representation and tax prices in 19 election districts geographical representation to parliament is biased mostly due to an ancient constitution shares of swing voters and legislative over representation lead to higher levels of road investments while high levels of party identification reduce investments

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

from the editors endogeneity in international business research this essay builds on the exposition by thomas et al and focuses on analyzing cause and effect in international business research we attempt to explain how endogeneity problems occur and why they are so prevalent in international business research in a non technical fashion we then discuss the importance of explicitly identifying how the chosen research design best approximates a randomized controlled experiment finally we provide some guidelines on achieving this goal and emphasize the practices that seem most relevant to jibs reviewers in evaluating high quality international business research

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

aggregate local public sector investment and shocks norway 1946 1990 local public sector investment is determined in an environment of shifting economic conditions investments are investigated using an intertemporal decision model allowing for tests of forward looking behaviour and adjustments to expected and unexpected shocks the econometric analysis of the aggregate local public sector over the period 1946 1990 indicates that local and county governments are forward looking and have small adjustment costs to investment in a full investment demand model only unexpected changes of gross domestic product and unemployment are shown to be important in the short run the central government has arranged stable revenue growth of the local public sector but greater volatility in macroeconomic conditions has led to fluctuations in local public investment

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

foreign independent directors and the quality of legal institutions foreign directors can affect firm value through their advising and monitoring functions however the demand for these directors as well as their effect on firm performance is likely to be influenced by firm and country level characteristics in a large sample of non us firms we find that foreign directors are more likely to be associated with firms that have more foreign operations and an international shareholder base and firms that are located in countries with a limited supply of potentially qualified domestic directors countries with a smaller less well educated populace and lower levels of capital market development we also find that the association between foreign directors and firm performance is more positive in countries with lower quality legal institutions and when the director comes from a country with higher quality legal institutions than the firm s host country our study highlights the importance of considering national demographic factors and levels of capital market development when modeling the supply and demand for foreign directors and also underscores the importance of institutional quality in the foreign director s home and host country when assessing the effect of that director on firm performance

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

the effect of cultural distance on entry mode choice international diversification and mne performance a meta analysis although a growing literature indicates that cultural distance that is differences between national cultures is an important determinant of organizational actions and performance both empirical and theoretical concerns abound in this study the relationships of cultural distance with entry mode choice international diversification and mne performance are examined by meta analyzing data from 66 independent samples with cumulative sample sizes ranging from 2 255 to 24 152 regression results failed to provide statistical evidence of significant relationships between cultural distance and entry mode choice international diversification and mne performance the examination of moderator effects however yielded important results we found a strong negative association between cultural distance and entry mode choice for us based mnes the cultural distance international diversification relationship was negative for high technology industries while it was positive for other industries cultural distance also had a strong positive effect on mne performance for developed country investments a similar strong positive relationship was found between cultural distance and international diversification in studies with more recent samples results of this study indicate that substantial additional research is needed before the role of cultural distance is fully understood

the anglo american financial influence on ceo compensation in non anglo american firms this study examines the impact of anglo american financial markets on ceo compensation starting from a sample of norwegian and swedish listed firms we analyse this effect as manifested in the capital market anglo american cross listing and in the market for corporate control anglo american board membership these effects are analysed together with the geographically broader effect of the product and service market internationalisation of the firm we conclude that all three effects contribute positively to the level of ceo compensation we argue that the higher ceo compensation found in firms exposed to anglo american financial influence as compared with firms not subject to such influence reflects institutional contagion the demand for and supply of viable ceo candidates and a pay premium for increased risk of dismissal

the hidden costs of political instability evidence from kenya s 2007 election crisis abstract this paper studies the microeconomic impacts of the political crisis and civil conflict that immediately followed the december 2007 presidential election in kenya income expenditures and consumption dramatically declined for a broad segment of the rural population for the duration of the conflict to make up for the income shortfall women who supply transactional sex engaged in higher risk sex both during and after the crisis while this particular crisis was likely too short for these behavioral responses to seriously increase the risk of hiv or other stis for these women such responses could have long term repercussions for health in countries with longer or more frequent crises overall our results suggest that social unrest can be an important channel through which political instability can affect long term outcomes such as health

valuation effects of foreign company listings on u s exchanges this study examines post listing equity price performance of foreign firms which cross listed sponsored american depository receipts adrs on the new york and the american stock exchanges during the period 1982 1992 we use three valuation metrics price to book price to cash earnings and price to earnings which are adjusted for the home country and world industry indices to which the listing firm s stock belongs we find positive valuation effects associated with cross listing for both country benchmarked and industry benchmarked price ratios variables that proxy for home country characteristics such as governance styles disclosure quality market liquidity and so forth are unable to explain the cross sectional variation in the data our results thus suggest that cross listing in the u s enhances valuations for listing firms by simply reducing the overall effect of segmentation among different national securities markets

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

the effects of market segmentation and investor recognition on asset prices evidence from foreign stocks listing in the united states non u s firms cross listing shares on u s exchanges as american depositary receipts earn cumulative abnormal returns of 19 percent during the year before listing and an additional 1 20 percent during the listing week but incur a loss of 14 percent during the year following listing we show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing our tests provide support for the market segmentation hypothesis and merton s 1987 investor recognition hypothesis the globalization of u s capital markets has accelerated dramatically in the past decade increasing numbers of companies from overseas have chosen to either raise capital through global equity issues or prepare for future capital raising by way of cross listings on u s exchanges as of 1997 about 1 300 non u s companies have listed their shares for trading on the new york stock exchange nyse the american exchange amex the national association of securities dealers automation quotation nasdaq system or

cash or condition evidence from a cash transfer experiment this brief summarizes the results of a gender impact evaluation study entitled cash or condition evidence from a cash transfer experiment conducted from 2008 to the end of 2009 in malawi the study observed the impact of conditionality in cash transfer programs with two distinct interventions unconditional transfers uct arm and transfers conditional on school attendance cct arm targeted at adolescent girls in malawi on individual level dropout rates declined in both treatment arms however the uct arm is 43 percent as large as the cct arm the fraction of days attended in the cct arm is significantly higher than the uct cognitive ability math and english scores significantly improve for the cct but not for the uct probability of pregnancy and marriage were much lower in the uct arm the delays in marriage and fertility in the uct arm are found entirely among adolescent girls who dropped out of school after the start of the intervention improvements in human capital for the recipients of the cct are achieved at the cost of worse outcomes for people who drop out of school funding for the study derived from the global development network bill and melinda gates foundation national bureau of economic research nber africa project world bank research support budget grant world bank knowledge for change trust fund world development report 2007 small grants fund spanish impact evaluation fund and gender action plan trust fund

on the timing of marriage cattle and weather shocks abstractin this paper we focus on the timing of marriage of women whose marriages are associated with bride wealth payments these payments concern transfers from the family of the groom to the bride s family unmarried daughters could therefore be considered part of the asset portfolio of the household that at times of need can be cashed we investigate both theoretically and empirically to what extent the timing of marriage of a daughter is affected by the economic conditions of the household from which she originates we distinguish household specific wealth levels and two types of shocks correlated weather shocks and idiosyncratic wealth shocks we estimate a duration model using a unique panel survey of zimbabwean smallholder farmers the estimation results support the hypothesis that the timing of marriage is affected by household characteristics girls from households that experienced a negative idiosyncratic wealth shock are more likely to marry

selling labor low wage responses to productivity shocks in developing countries productivity risk is pervasive in underdeveloped countries this paper highlights a way in which underdevelopment exacerbates productivity risk productivity shocks cause larger changes in the wage when workers are poorer less able to migrate and more credit constrained because of such workers inelastic labor supply this equilibrium wage effect hurts workers in contrast it acts as insurance for landowners agricultural wage data for 257 districts in india for 1956 87 are used to test the predictions with rainfall as an instrument for agricultural productivity in districts with fewer banks or higher migration costs the wage is much more responsive to fluctuations in productivity

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

ownership structure investment and the corporate value an empirical analysis this paper examines the relation among ownership structure investment and corporate value focusing on whether ownership structure affects investment ordinary least squares regression results suggest that ownership structure affects investment and therefore corporate value however simultaneous regression results indicate that the endogeneity of ownership may affect these inferences suggesting that investment affects corporate value which in turn affects ownership structure the evidence shows that corporate value affects ownership structure but not vice versa these findings raise questions regarding the assumption that ownership structure is exogenously determined and bring into question the results in studies that treat ownership structure as exogenous

endogenous public sector budgeting to centralize or not in this paper the impact of budget size on a government s choice to centralize or decentralize the budgetary process is investigated using asymmetric information differing preferences and endogenous budgetary arrangements the central government chooses between a budgetary process that excludes the regional board centralization and one that includes the board decentralization in the determination of program budget levels it is predicted that the central government will decentralize the budgetary process at low and centralize at high overall budget levels switching from decentralization to centralization is predicted to

under the weather health schooling and economic consequences of early life rainfall life in rural areas of developing countries is prone to many kinds of risk such as illness or mortality of household members crop or other income loss due to natural phenomena weather insect infestations or fire for example and civil conflict in addition to their contemporaneous effects the effects of certain types of shocks may still be felt many years or even decades later from a public policy standpoint it is particularly important to identify shocks that have large long run effects moreover the mechanics underlying the persistence of shocks may be of con siderable interest for example a health shock may have a long run effect simply because the health shock itself persists over time alternately the health shock may not directly affect long run outcomes but it could affect some other outcome such as educational attainment that helps determine long run well being in this paper we focus on shocks that occur at the very beginning of life we ask how sensi tive long run individual well being is to environmental conditions around the time of birth in particular we examine the effect of weather shocks around the time of birth on the adult health education and socioeconomic outcomes of indonesian women and men born between 1953 and 1974 in addition we attempt to shed light on the intervening pathways connecting early life rainfall to adult outcomes illuminating the roles of health and educational attainment in deter mining adult socioeconomic status this investigation has considerable data requirements it necessitates information on weather shocks experienced by individuals several decades earlier as well as detailed current informa tion on adult outcomes we use information in the indonesian family life surveys ifls on an individual s year and location of birth and link each individual in that survey to locality specific rainfall data for their birth year for individuals born in rural areas on whom we focus rainfall variation across space and time should generate corresponding variation in agricultural output and thus household income to deal with measurement error in the rainfall data we run instrumental variables regressions where variables for rainfall measured at slightly more distant rainfall stations serve as instruments for rainfall in the individual s birthplace and birth year we examine the impact of early life rainfall on a range of adult outcomes observed in 2000 we find that higher early life rainfall leads to improved health schooling and socioeconomic status for women women with 20 percent higher rainfall relative to normal local rainfall in their year and location of birth are 3 8 percentage points less likely to self report poor or very poor health they attain 0 57 centimeters greater height attain 0 22 more completed grades of

cost disease in defense and public administration baumol and politics william baumol s model predicts a steady increase in relative public sector prices or costs because of the combination of slow productivity growth and wage growth similar to sectors wherein productivity is growing more quickly in this paper we extend the baumol model with political variables and analyze price growth in defense and public administration using norwegian data we find strong support for the mechanism of the baumol model since manufacturing productivity is the most important determinant of relative public sector prices greater political fragmentation has also contributed to the price growth but its quantitative effect is smaller than that of manufacturing productivity an analysis of a labor intensive private service restaurants and cafes supports the broader relevance of the baumol mechanism and the validity of the estimated effect of political fragmentation on the two sectors considered herein

local government grants and income tax revenue redistributive politics in norway 1900 1990 an important aspect of the welfare state is public provision of private goods primarily education and health care in norway the provision of these services has been organized through the local public sector the development of the welfare state has to a large extent been the development of welfare communes the important revenue sources of the local and county governments grants and income tax revenue have been controlled nationally and the paper addresses the determinants of these revenues during 1900 1990 the approach combines a demand model of local public services emphasizing price and income elasticities with a political economy model of central government ideology and strength the decision making is understood as bargaining between the government and interest groups and the political structure consequently is of importance for the policy outcome the analysis shows how politics matter and the results indicate that a minority coalition government implies 30 more grant and income tax revenue to local and county governments than one party majority in the long run

direct foreign ownership institutional investors and firm characteristics in this paper we characterize foreign ownership using a dataset of ownership and attributes of swedish rms the analysis reveals that foreigners show a preference for large rms rms paying low dividends and rms with large cash positions on their balance sheets when we further analyze the preference for large rms we nd that market liquidity and presence in international markets measured through export sales or listings on other exchanges seem to characterize foreign holdings better than rm size alone foreigners also tend to underweight rms with a dominant owner importantly we demonstrate that most of the features associated with foreign ownership are driven by the fact that foreign investors typically are mutual funds or other institutional investors hence we identify an institutional investor bias rather than a foreign investor bias finally using ownership data on a country level we conclude that the results are particularly strong among u s investors who comprise the largest institutions among foreign investors 2001 elsevier science s a all rights reserved jel classixcation g1 g15

training wages and sample selection estimating sharp bounds on treatment effects this paper empirically assesses the wage effects of the job corps program one of the largest federally funded job training programs in the u s even with the aid of a randomized experiment the impact of a training program on wages is difficult to study because of sample selection a pervasive problem in applied microeconometric research wage rates are only observed for those who are employed and employment status itself may be affected by the training program this paper develops an intuitive trimming procedure for bounding average treatment effects in the presence of sample selection in contrast to existing methods the procedure requires neither exclusion restrictions nor a bounded support for the outcome of interest identification results estimators and their asymptotic distribution are presented the bounds suggest that the program raised wages consistent with the notion that the job corps raises earnings by increasing human capital rather than solely through encouraging work the estimator is generally applicable to typical treatment evaluation problems in which there is nonrandom sample selection attrition copyright wiley blackwell