Empirical confirmation that the effect of macroeconomic fundamentals on exchange rates is economically important has been scarce. This paper employs a general GARCH specification with asymmetric responses to investigate the effect of 35 U.S. and German macroeconomic news announcements on the daily DM/$ exchange rate over the 1980-1998 period. We conclude that FX rates are strongly connected to real and nominal sector developments in both countries, and that real sector announcements influence the exchange rate more strongly than money or inflation announcements. We find that surprisingly high real growth appreciates the exchange rate and raises yields.
{"title":"Macroeconomic News and the DM/$ Exchange Rate","authors":"A. Protopapadakis, M. Flannery","doi":"10.2139/ssrn.2116608","DOIUrl":"https://doi.org/10.2139/ssrn.2116608","url":null,"abstract":"Empirical confirmation that the effect of macroeconomic fundamentals on exchange rates is economically important has been scarce. This paper employs a general GARCH specification with asymmetric responses to investigate the effect of 35 U.S. and German macroeconomic news announcements on the daily DM/$ exchange rate over the 1980-1998 period. We conclude that FX rates are strongly connected to real and nominal sector developments in both countries, and that real sector announcements influence the exchange rate more strongly than money or inflation announcements. We find that surprisingly high real growth appreciates the exchange rate and raises yields.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"292 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123111471","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We contribute to the current fiscal debate by examining the asset pricing effects of fiscal policies in a production-based general equilibrium model in which taxation affects corporate decisions by: i) distorting profits and investment; ii) reducing the cost of debt through a tax shield; and iii) weakening productivity growth. In settings with recursive preferences, these three tax-based channels generate sizable risk premia making tax uncertainty a first order concern. We document further that corporate tax smoothing significantly affects the cost of equity by altering the intertemporal distribution of consumption. While common tax smoothing increases the annual cost of equity by almost 1%, public financing policies aimed at stabilizing capital accumulation reduce both long-run consumption risk and the cost of capital, producing relevant welfare benefits.
{"title":"Fiscal Policies and Asset Prices","authors":"M. Croce, H. Kung, T. T. Nguyen, L. Schmid","doi":"10.2139/ssrn.1863956","DOIUrl":"https://doi.org/10.2139/ssrn.1863956","url":null,"abstract":"The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We contribute to the current fiscal debate by examining the asset pricing effects of fiscal policies in a production-based general equilibrium model in which taxation affects corporate decisions by: i) distorting profits and investment; ii) reducing the cost of debt through a tax shield; and iii) weakening productivity growth. In settings with recursive preferences, these three tax-based channels generate sizable risk premia making tax uncertainty a first order concern. We document further that corporate tax smoothing significantly affects the cost of equity by altering the intertemporal distribution of consumption. While common tax smoothing increases the annual cost of equity by almost 1%, public financing policies aimed at stabilizing capital accumulation reduce both long-run consumption risk and the cost of capital, producing relevant welfare benefits.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"54 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133396613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Almost all CEO and executive bonus plans have serious design flaws that limit their benefits dramatically. Such poorly designed executive bonus plans destroy value by providing incentives to manipulate the timing of earnings, mislead the board about organizational capabilities, take on excessive (or insufficient) risk, forgo profitable projects, and ignore the cost of capital. We describe the causes of the problems associated with widely prevalent executive bonus plans, and offer our recommendations for fixing them. We focus on choosing the right performance measure, determining how performance thresholds, targets, or benchmarks are set, and defining the pay-performance relation and how the relation changes over time. Finally we examine the role of banking bonuses in the recent financial crisis. While cultural and performance measurement issues certainly played a role in the recent crisis we find little or no evidence that banking bonuses per se were a major contributing factor.
{"title":"CEO Bonus Plans: And How to Fix Them","authors":"Kevin J. Murphy, M. C. Jensen","doi":"10.2139/ssrn.1935654","DOIUrl":"https://doi.org/10.2139/ssrn.1935654","url":null,"abstract":"Almost all CEO and executive bonus plans have serious design flaws that limit their benefits dramatically. Such poorly designed executive bonus plans destroy value by providing incentives to manipulate the timing of earnings, mislead the board about organizational capabilities, take on excessive (or insufficient) risk, forgo profitable projects, and ignore the cost of capital. We describe the causes of the problems associated with widely prevalent executive bonus plans, and offer our recommendations for fixing them. We focus on choosing the right performance measure, determining how performance thresholds, targets, or benchmarks are set, and defining the pay-performance relation and how the relation changes over time. Finally we examine the role of banking bonuses in the recent financial crisis. While cultural and performance measurement issues certainly played a role in the recent crisis we find little or no evidence that banking bonuses per se were a major contributing factor.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"191 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123451342","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent fiscal interventions have raised concerns about US public debt, future distortionary tax pressure, and long-run growth potential. We explore the long-run implications of public financing policies aimed at short-run stabilization when: (i) agents are sensitive to model uncertainty, as in Hansen and Sargent (2007), and (ii) growth is endogenous, as in Romer (1990). We find that countercyclical deficit policies promoting short-run stabilization reduce the price of model uncertainty at the cost of significantly increasing the amount of long-run risk. Ultimately these tax policies depress innovation and long-run growth and may produce welfare losses.
{"title":"The Market Price of Fiscal Uncertainty","authors":"M. Croce, T. T. Nguyen, L. Schmid","doi":"10.2139/ssrn.1952178","DOIUrl":"https://doi.org/10.2139/ssrn.1952178","url":null,"abstract":"Recent fiscal interventions have raised concerns about US public debt, future distortionary tax pressure, and long-run growth potential. We explore the long-run implications of public financing policies aimed at short-run stabilization when: (i) agents are sensitive to model uncertainty, as in Hansen and Sargent (2007), and (ii) growth is endogenous, as in Romer (1990). We find that countercyclical deficit policies promoting short-run stabilization reduce the price of model uncertainty at the cost of significantly increasing the amount of long-run risk. Ultimately these tax policies depress innovation and long-run growth and may produce welfare losses.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121498869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we study the stability of Group Purchasing Organizations (GPOs). GPOs exist in several sectors and benefit its members through quantity discounts and negotiation power when dealing with suppliers. However, despite several obvious benefits, GPOs suffer from member dissatisfaction due to unfair allocations of the accrued savings among its members. We first explore the benefits of allocation rules that are commonly reported as being used in practice. We characterize stable coalitional outcomes when these rules are used and provide conditions under which the grand coalition emerges as a tenable outcome. These conditions are somewhat restrictive. We then propose an allocation mechanism based on the marginal value of a member's contribution and find that this leads to stable GPOs in many scenarios of interest. In this analysis, we look at discount schedules that encompass a large class of practical schedules and analyze cases when purchasing requirements of the members are both exogenous as well as endogenous. We use a concept of stability that allows for players to be farsighted, i.e., players will consider the possibility that once they act (say by causing a defection), another coalition may react, and a third coalition might in turn react, and so on, nullifying their original advantage in making the initial move.
{"title":"Stable Group Purchasing Organizations","authors":"M. Nagarajan, Greys Sošić, Hao Zhang","doi":"10.2139/ssrn.1138918","DOIUrl":"https://doi.org/10.2139/ssrn.1138918","url":null,"abstract":"In this paper, we study the stability of Group Purchasing Organizations (GPOs). GPOs exist in several sectors and benefit its members through quantity discounts and negotiation power when dealing with suppliers. However, despite several obvious benefits, GPOs suffer from member dissatisfaction due to unfair allocations of the accrued savings among its members. We first explore the benefits of allocation rules that are commonly reported as being used in practice. We characterize stable coalitional outcomes when these rules are used and provide conditions under which the grand coalition emerges as a tenable outcome. These conditions are somewhat restrictive. We then propose an allocation mechanism based on the marginal value of a member's contribution and find that this leads to stable GPOs in many scenarios of interest. In this analysis, we look at discount schedules that encompass a large class of practical schedules and analyze cases when purchasing requirements of the members are both exogenous as well as endogenous. We use a concept of stability that allows for players to be farsighted, i.e., players will consider the possibility that once they act (say by causing a defection), another coalition may react, and a third coalition might in turn react, and so on, nullifying their original advantage in making the initial move.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131877013","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analizes a new variant of the Traveling Salesman Problem (TSP) in which nodes belong to various color classes and each color class must be visited as an entity. We show that the problem is APX-hard and provide exact solutions for special cases and a two-phase heuristic for the general case. Lastly, we analyze the worst case and asymptotic performanc of the heuristic.
{"title":"Analysis of the Traveling Salesman Problem with Flexible Colors","authors":"T. Roemer, R. Ahmadi, S. Dasu","doi":"10.2139/ssrn.1571842","DOIUrl":"https://doi.org/10.2139/ssrn.1571842","url":null,"abstract":"This paper analizes a new variant of the Traveling Salesman Problem (TSP) in which nodes belong to various color classes and each color class must be visited as an entity. We show that the problem is APX-hard and provide exact solutions for special cases and a two-phase heuristic for the general case. Lastly, we analyze the worst case and asymptotic performanc of the heuristic.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124409509","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Testimony of Kevin J. Murphy before the United States House of Representatives Committee on Financial Services, Hearing on Compensation Structure and Systemic Risk, June 11, 2009.
Kevin J. Murphy在2009年6月11日美国众议院金融服务委员会关于薪酬结构和系统性风险的听证会上的证词。
{"title":"Compensation Structure and Systemic Risk","authors":"Kevin J. Murphy","doi":"10.2139/SSRN.1461944","DOIUrl":"https://doi.org/10.2139/SSRN.1461944","url":null,"abstract":"Testimony of Kevin J. Murphy before the United States House of Representatives Committee on Financial Services, Hearing on Compensation Structure and Systemic Risk, June 11, 2009.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116404826","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Corporate boards are poorly equipped to deal with human capital management issues. Data from 116 firms show they lack expertise in human resources management and do not get information on the condition of their firms human capital.
{"title":"Human Capital Management: What are Boards Doing?","authors":"E. Lawler","doi":"10.2139/SSRN.1316560","DOIUrl":"https://doi.org/10.2139/SSRN.1316560","url":null,"abstract":"Corporate boards are poorly equipped to deal with human capital management issues. Data from 116 firms show they lack expertise in human resources management and do not get information on the condition of their firms human capital.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"2011 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123819016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
For at least the last decade, it has been hard to pick up a business book, article, or corporate annual report without seeing statements that stress the importance of human capital. Surveys of executives confirm that many believe that finding and developing the right people should be one of their top priorities. However, it is one thing to stress the importance of human capital; it is another for organizations to be designed to reflect the importance of human capital.This article looks at four areas where human capital should have a major impact on design: corporate boards, leadership, the human resource department, and information practices. In all of these areas there is a large gap between how most organizations operate and how they should operate in an organization that is built for human capital.Corporate boards should have both the expertise and the information needed in order to understand and advise on talent issues at all levels of the organization. They should focus on developing managers who can provide leadership.The HR Department should be the most important staff group. HR should have the best talent, the best information technology resources, and it should be a valued expert resource to the firm when it comes to strategy, change management, organization design, and talent management.
{"title":"Make Human Capital a Source of Competitive Advantage","authors":"E. Lawler","doi":"10.2139/ssrn.1311431","DOIUrl":"https://doi.org/10.2139/ssrn.1311431","url":null,"abstract":"For at least the last decade, it has been hard to pick up a business book, article, or corporate annual report without seeing statements that stress the importance of human capital. Surveys of executives confirm that many believe that finding and developing the right people should be one of their top priorities. However, it is one thing to stress the importance of human capital; it is another for organizations to be designed to reflect the importance of human capital.This article looks at four areas where human capital should have a major impact on design: corporate boards, leadership, the human resource department, and information practices. In all of these areas there is a large gap between how most organizations operate and how they should operate in an organization that is built for human capital.Corporate boards should have both the expertise and the information needed in order to understand and advise on talent issues at all levels of the organization. They should focus on developing managers who can provide leadership.The HR Department should be the most important staff group. HR should have the best talent, the best information technology resources, and it should be a valued expert resource to the firm when it comes to strategy, change management, organization design, and talent management.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121955173","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Food and Drug Administration (FDA) uses scientific procedures to evaluate regulated firms' new product applications. Much of its basic intellectual resources, in the form of scientific advisory committee members, come from research institutions. Regulated firms may seek connections to the FDA advisory committee members to affect the regulatory approval process. However, individual linkages may fail. The use of Scientific Advisory Boards (SAB) with multiple members provides redundant ties to the regulator, which means that the failure of each tie becomes less material. This paper is principally concerned with the firm's motivation to rebalance power imbalances rather than any actual regulatory outcomes. Controlling for alternative explanations, I find that dependence on the regulator is positively associated with the probability of having a SAB. Selected network diagrams add credibility to the hypothesis.
{"title":"Regulatory Dependence and Scientific Advisory Boards","authors":"J. Chok","doi":"10.2139/ssrn.1332510","DOIUrl":"https://doi.org/10.2139/ssrn.1332510","url":null,"abstract":"The Food and Drug Administration (FDA) uses scientific procedures to evaluate regulated firms' new product applications. Much of its basic intellectual resources, in the form of scientific advisory committee members, come from research institutions. Regulated firms may seek connections to the FDA advisory committee members to affect the regulatory approval process. However, individual linkages may fail. The use of Scientific Advisory Boards (SAB) with multiple members provides redundant ties to the regulator, which means that the failure of each tie becomes less material. This paper is principally concerned with the firm's motivation to rebalance power imbalances rather than any actual regulatory outcomes. Controlling for alternative explanations, I find that dependence on the regulator is positively associated with the probability of having a SAB. Selected network diagrams add credibility to the hypothesis.","PeriodicalId":332226,"journal":{"name":"USC Marshall School of Business Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131363904","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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