the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

declining volatility in the u s automobile industry dramatic changes in the volatility of output occurred in the u s auto industry in the early 1980s namely output volatility declined the covariance of inventory investment and sales grew more negative and adjustments to production schedules which in earlier decades stemmed primarily from plants hiring and laying off workers were more often accomplished with changes in average hours per worker after the mid 1980s using a linear quadratic inventory model with intensive and extensive labor adjustments we show how all of these changes could have stemmed from one underlying factor a decline in the persistence of motor vehicle sales jel g31 l25 l62 m11

a neglected aspect of the housing market the caretakers of peri urban accra ghana in housing markets in sub saharan africa construction is predominantly undertaken by individuals rather than by the state or private companies due to lack of housing finance the construction process takes many years hence owners often engage live in caretakers to protect their property based on fieldwork conducted in peri urban accra this paper explores why the demand for caretakers arises why there is a supply of caretakers who the caretakers are and their living conditions although life as a caretaker is far from ideal the demand for and supply of caretakers are likely to continue for the foreseeable future caretaking is a form of housing tenancy which is overlooked in housing and labour laws and practices and hence demands more attention from both researchers and policy makers

corporate governance of banks a survey this paper reviews the empirical literature on the corporate governance of banks we start by highlighting the main differences between banks and nonfinancial firms and focus on three characteristics that make banks special i regulation ii the capital structure of banks and iii the complexity and opacity of their business and structure next we discuss the characteristics of corporate governance in banks and how they differ from the governance of nonfinancial firms we then review the evidence on three governance mechanisms i boards ii ownership structures and iii executive compensation our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions such as the positive negative association between board independence size and performance do not hold for banks also existing work provides no conclusive results regarding the relationship between different governance mechanisms and various measures for banks performance we discuss potential explanations for these mixed results

interest rates and bank profitability additional evidence note large banking organizations 1978 assets greater than 2 billion are well hedged against interest rate fluctuations 2 when market rates change their revenues and costs adjust equally quickly leaving net current operating earnings largely unaffected at the other institutional extreme thrift institutions have seriously mismatched balanced sheets 1 4 causing their earnings to fluctuate violently when interest rates change small commercial banks in many ways lie between their larger counterparts and the thrifts small banks share the predominantly retail orientation of thrifts often holding large mortgage portfolios but have access to a broader range of asset and liability powers it is therefore unclear ex ante whether small banks bear a greater resemblance to thrifts or large commercial banks in terms of interest rate risk exposure to resolve the issue empirically this note applies the methodology of 2 to a set of sixty smaller banks the empirical results are similar to the results for large banks the data do not support the conventional wisdom that banks chronically and extensively borrow short and lend long

on the driving forces behind cyclical movements in employment and job reallocation theory restricts short run job creation and destruction responses and cumulative employment and job reallocation responses to allocative and aggregate shocks we formulate these restrictions and implement them for postwar data on u s manufacturing allocative shocks are the main driving force behind cyclical movements in job reallocation but their contribution to employment fluctuations varies greatly across alternative identification assumptions also the data compel one or both of the following inferences aggregate shocks greatly alter the shape and not just the mean of the cross sectional density of employment growth rates allocative shocks cause short run reductions in aggregate employment

a theory of the stakeholder corporation there is a widely held view within the general public that large corporations should act in the interests of a broader group of agents than just their shareholders the stake holder view this paper presents a framework where this idea can be justified the point of departure is the observation that a large firm typically faces endogenous risks that may have a significant impact on the workers it employs and the consumers it serves these risks generate externalities on these stakeholders which are not inter nalized by shareholders as a result in the competitive equilibrium there is under investment in the prevention of these risks we suggest that this under investment problem can be alleviated if firms are instructed to maximize the total welfare of their stakeholders rather than shareholder value alone stakeholder equilibrium the stake holder equilibrium can be implemented by introducing new property rights employee rights and consumer rights and instructing managers to maximize the total value of the firm the value of these rights plus shareholder value if there is only one firm the stakeholder equilibrium is pareto optimal however this is not true with more than one firm and or heterogeneous agents which illustrates some of the limits of the stake holder model

trend employment growth and the bunching of job creation and destruction research using u s manufacturing data finds that job destruction fluctuates more over time than job creation but some new data indicate that this behavior is not shared in growing sectors where job creation varies more an explanation for this finding based on the interaction between s s type adjustment and trend employment growth delivers some tight predictions for the relationship between trend growth and the volatility of creation relative to destruction although it scores some notable successes the simple s s based model augmented with a low frequency trend cannot fully account for the strength of the empirical relationship between relative gross flow volatility and trend growth across one digit industries

grown up business cycles the entry rate of u s employer businesses has declined for more than 30 years we use a novel dynamic decomposition framework to show that regardless of its causes the direct effects of the continued decline in the entry rate and its delayed effects on the firm age distribution together play a major role in the slowing of trend employment growth and the emergence of jobless recoveries we identify changing demographic structure of the population and increased import competition as leading factors behind the decline in startup activity received september 1 2015 editorial decision april 5 2018 by editor francesca cornelli authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

endogeneity and the dynamics of internal corporate governance abstract we use a well developed dynamic panel generalized method of moments gmm estimator to alleviate endogeneity concerns in two aspects of corporate governance research the effect of board structure on firm performance and the determinants of board structure the estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity we re examine the relation between board structure and performance using the gmm estimator in a panel of 6 000 firms over a period from 1991 to 2003 and find no causal relation between board structure and current firm performance we illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased we discuss where it may be appropriate to consider the dynamic panel gmm estimator in corporate governance research as well as caveats to its use

returns and risks of u s bank foreign currency activities in this paper the risks and returns on u s banks foreign currency positions are analyzed in a portfolio setting when both exchange rate and foreign interest rate risks are present it is shown that u s banks could achieve considerable reductions in risk by optimally selecting their foreign currency positions actual foreign currency portfolio returns generated from expected exchange rate changes and exchange rate surprises were positive on average but those generated from interest rate surprises were negative although the total portfolio returns were positive on a risk adjusted basis bank return performance was relatively poor nevertheless despite this relatively poor performance the risk of ruin or failure for a representative bank from foreign currency activities was found to be approximately zero when judged in comparison to the capital funds

you either pay more advance rent or you move out landlords ladies and tenants dilemmas in the low income housing market in accra ghana policy makers world wide are concerned about severe housing problems experienced in cities of the developing world this paper examines the rental housing situation in accra ghana it presents findings of a qualitative investigation of the experiences of property owners n 21 and tenants n 23 in an informal private housing market that caters to the housing needs of an expanding section of accra residents but lacks an institutional framework for regulating landlord lady tenant relations the specific focus of the investigation is on perceptions of an intensifying tenancy management practice called the advance rent system overall the findings reveal severe rental housing pressures and conflicting relations between renters and property owners rooted in asymmetrical perceptions regarding this system the paper describes the conditions that shape landlords ladies behaviours towards renters and their reactions to what are generally perceived as fraudulent tenure terms that property owners arbitrarily

government involvement in the corporate governance of banks on march 18 1976 the swedish parliament voted on a bill that if approved would have substantially increased both the scale and scope of government representation on bank boards since parliament was hung the outcome of the vote was decided by a lottery we exploit this lottery to study the causal effect on shareholder value of government involvement in the corporate governance of banks we find that the rejection of the bill resulted in positive abnormal returns that persisted in the following days our results suggest that unsolicited government involvement in the corporate governance of banks is harmful for owners jel codes g14 g34 g38

all for one or all for three empirical evidence of paradox theory in the triple bottom line abstract we empirically examine the triple bottom line of a sample of 746 firms from 2003 to 2013 the business case for sustainability advocates for corporate responsibilities only if they strengthen profits in contrast paradox theory states that managers should embrace the tensions between multiple bottom lines seeking simultaneous benefits combining data from kld and compustat we find strong supporting evidence for paradox theory first the findings suggest that the three components of the triple bottom line move in tandem rather than being mutually exclusive where high poor performance in one dimension relates to high poor performance in the other two dimensions regardless of the economic conditions second using the great recession as an exogenous shock we find supporting evidence for paradox theory lastly we link paradox theory and its implication on market valuation we find that the more components achieved at a high level the higher the market valuation with the valuation increasing per component achieved we conclude that the traditional focus on scarcity and the mutual exclusivity of sustainability goals is not empirically supported in our study instead we find compelling evidence for the abundance perspective of paradox theory and the simultaneous achievement of sustainability goals our results highlight that in viewing three bottom lines managers should embrace any ostensible tensions to find creative ways to address all three instead of all for one

toward a stakeholder theory of the firm the saturn partnership this paper seeks to engage the organization theory community in contemporary debates over the role of the corporation in american society by using the case of the saturn corporation to develop and illustrate a stakeholder theory of the firm one normative and three positive questions are posed for a stakeholder theory the normative question is why should stakeholder models be given serious consideration at this moment in history the positive questions are 1 under what conditions is a stakeholder firm likely to emerge in the united states 2 what are the critical determinants of performance in a stakeholder firm and 3 what will determine the sustainability and diffusion of this organizational form in the american environment the history design features and dynamics of the labormanagement partnership at saturn are used to illustrate and interpret a specific case of employees as stakeholders saturn s original mission governance structure and internal processes fit the characteristics of a stakeholder firm employees establish themselves as influential definitive stakeholders by using their knowledge to improve organizational performance the local union likewise contributes to firm performance by organizing workers into a dense social network that contributes to problem solving conflict resolution and quality improvement however the legal and political environment in which the firm operates produces considerable uncertainty over the sustainability and diffusion of saturn s features in particular and the stakeholder organizational form in general additional hypotheses and research questions are proposed to continue theory building around the more general model of the stakeholder firm researchers are encouraged to take up the analysis of stakeholder models and thereby contribute to the contemporary and future debates over the role of the corporation in american society

the time varying volatility of macroeconomic fluctuations we investigate the sources of the important shifts in the volatility of us mac roeconomic variables in the postwar period to this end we propose the esti mation of dsge models allowing for time variation in the volatility of the structural innovations we apply our estimation strategy to a large scale model of the business cycle and find that shocks specific to the equilibrium condition of investment account for most of the sharp decline in volatility of the last two decades jel c51 e32

an econometric and cultural analysis of rent control in kumasi ghana an empirical analysis of rent control in kumasi ghana is presented based upon a consumer demand model for housing controlled rent to income ratios are exceptionally low for a developing country moreover the asante housing market exhibits unusual cultural attributes and problems in estimating the without rent control situation benefits and costs of rent control are presented by housing types and income levels and distributional impacts assessed

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

the pricing of interest rate risk evidence from the stock market this paper addresses the issue of whether firms are required to pay an ex ante premium to investors for bearing the risk of interest rate changes a two factor apt model with the market and changes in the yield on long term government bonds as factors is employed the paper shows that empirically most of the interest sensitive stocks are in the utility industries and that there is reasonable evidence that the interest factor is priced in the sense of the apt several sources for the interest sensitivity are considered and regulatory lags are focused on as a likely candidate some firms exhibit ex post sensitivity in their stock returns to unanticipated changes in interest rates are these firms required to pay investors ex ante for bearing this risk of interest rate changes the framework for examining pricing of unanticipated interest rate changes is a two factor apt model with the market and changes in the yield on long term government bonds as factors the issue is whether the interest rate change premium is significant to study this the paper uses full information maximum likelihood fiml estimation on groups of twenty five individual firms with both cross equation constraints and withinequation nonlinear constraints on the parameters as mandated by the apt model whether the risk of unanticipated changes in interest rates is priced in the market is of particular interest with regard to regulated firms regulated firms especially electric utilities turn out to comprise the big majority of firms that are sensitive to unanticipated interest rate changes after some preliminary investigation the analysis focuses on electric utilities much empirical work on the apt relies on factor analysis e g roll and ross 30 bower bower and logue 5 use factor analysis in comparing the apt and the capm to explain utilities returns the present paper however uses observable variables at the macro level chan chen and hsieh cch 7 and chen roll and ross crr 8 also examine apt models with specific macroeconomic factors cch and crr use a traditional fama macbeth type of cross sectional estimation approach in the premia calculations rather than a fiml approach gibbons and stambaugh have applied fiml techniques to models using only the market as an explanatory variable gibbons 20 used a noniterative algorithm on portfolios of firms equivalent to a two step cross sectional approach stam

the effects of the international banking act on domestic bank profitability and risk the passage of the international banking act of 1978 was the first major step towards imposing consistent and uniform federal regulations on the growing number of foreign banks entering the united states prior to this date foreign banks had been subject to a patchwork of state laws of varying degrees of stringency covering their entry expansion and portfolio behavior see white 1982 and walker 1983 the net result of this patchwork of state regulation was that by 1978 foreign banks had developed certain competitive advantages over domestic banks these advantages emanated from the fact that foreign bank branches and agencies i were not required to meet federal reserve determined reserve requirements on liabilities such as large cds and ii they were not subject to federal laws governing interstate banking the 1927 mcfadden act and activity diversification the 1933 glass steagall act and the 1956 bank holding company act including its 1970 amendments however foreign banks were also subject to certain disadvantages compared to domestic banks in particular they were inhibited from entering into retail banking markets by being ineligible for fdic insurance and being denied access to fed services such as check collection and the discount window to eliminate these discrepancies in relative regulation the international banking act iba was introduced in the house of representatives in february 1978 re

the joint design of unemployment insurance and employment protection a first pass unemployment insurance and employment protection are typically discussed and studied in isolation in this paper we argue that they are tightly linked and we focus on their joint optimal design in a simple model with risk averse workers risk neutral firms and random shocks to productivity we show that in the first best unemployment insurance comes with employment protection in the form of layoff taxes indeed optimality requires that layoff taxes be equal to unemployment benefits we then explore the implications of four broad categories of deviations from first best limits on insurance limits on layoff taxes ex post wage bargaining and ex ante heterogeneity of firms or workers we show how the design must be modified in each case finally we draw out the implications of our analysis for current policy debates and reform proposals from the financing of unemployment insurance to the respective roles of severance payments and unemployment benefits

job flows jobless recoveries and the great moderation abstract this paper explores a link between the decline in employment volatility and the onset of jobless recoveries observed since the mid 1980s using a time series of job flow estimates for manufacturing that covers the entire postwar period i show that job creation and job destruction rates have fallen and become less cyclical this has increased the importance of reallocative shocks relative to aggregate shocks in explaining their time series fluctuations despite the increased importance of reallocation it is a change in the responses of job flows to aggregate shocks which are now larger and more persistent that lead to the onset of jobless recoveries the decline in the cyclicality of temporary layoffs and the rise in the use of employment services cannot account for these altered responses

the sensitivity of bank stock returns to market interest and exchange rate risks abstract this paper presents and estimates a multifactor model of bank stock returns that incorporates market return interest rate and exchange rate risk factors a model of the optimizing behavior of an international banking firm is used to derive the sensitivity coefficients of the alternative factors regression equations are estimated that are based on either actual or unexpected values of the underlying factors with a post october 1979 time dummy variable and with a money center bank dummy variable standard results are obtained for the market and interest rate variables while new results are derived for the exchange rate variable the specific effects of the latter variable are found to be dependent on the time period of observation and the money center status of banks