Cross-listing on a U.S. exchange does not bond foreign firms to follow the corporate governance rules of that exchange. Hand-collected data show that 80% of cross-listed firms opt out of at least one exchange governance rule, instead committing to observe the rules of their home country. Relative to firms that comply, firms that opt out have weaker governance practices in that they have a smaller share of independent directors. The decision to opt out reflects the relative costs and benefits of doing so. Cross-listed firms opt out more when coming from countries with weak corporate governance rules, but if firms based in such countries are growing and have a need for external finance, they are more likely to comply. Finally, opting out affects the value of cash holdings. For cross-listed firms based in countries with weak governance rules, a dollar of cash held inside the firm is worth $1.52 if the firm fully complies with U.S. exchange rules but just $0.32 if it is non-compliant.Alas, I did not find an ungated version. Another interesting paper by C. Fritz Foley is "Ethnic Innovation and U.S. Multinational Firm Activity." His webpage.
From an interesting paper by Foley et al.
Heinemann (2008), using data from the World Values Survey, finds empirical evidence in support of a deterioration of social norms by the welfare state: Both higher transfers and waves of high unemployment in macroeconomic downturns result in an increased willingness to claim transfers, even if one is legally not eligible to do so. (pp. 33-34).The paper by Jan Schnellenbach & Christian Schubert is here.
HT: Matthew Baker.
Labels: Public Choice
From a 2006 article by Roger Myerson titled "Learning From Schelling's Strategy of Conflict":
. . . [T]he same forces that help people to achieve consistent coordinated expectations in a successful society can become forces for inconsistency of expectations across societies in international relations. Indeed, in international conflicts throughout history, people on each side have regularly failed to understand the other side's perception of justice in their conflict. (p. 13).
. . . [I]nstitution's rules are rationally enforceable iff the utility maximizing best responses for any player are always legal strategies whenever the other players are all expected to use legal strategies (possibly with randomization). (p. 15).
. . . And we still need to learn Schelling's basic lesson that, in a realistic analysis of international conflict, we should consider our adversaries as rational intelligent decision-makers, whose interests are different from ours, but with whom we share a fundamental problem of coordinating mutual strategic expectations. (p- 23).Actually the article is not basic at all, and it made me remember very useful concepts such as "focal points" in the context of international conflict.
People believe that weather conditions influence their everyday work life, but to date, little is known about how weather affects individual productivity. Most people believe that bad weather conditions reduce productivity. In this research, we predict and find just the opposite. Drawing on cognitive psychology research, we propose that bad weather increases individual productivity by eliminating potential cognitive distractions resulting from good weather. When the weather is bad, individuals may focus more on their work rather than thinking about activities they could engage in outside of work. We tested our hypotheses using both field and lab data. First, we use field data on employees’ productivity from a mid-size bank in Japan, which we then match with daily weather data to investigate the effect of bad weather conditions (in terms of precipitation, visibility, and temperature) on productivity. Second, we use a laboratory experiment to examine the psychological mechanism explaining the relationship between bad weather and increased productivity. Our findings support our proposed model and suggest that worker productivity is higher on bad rather than good weather days. We discuss the implications of our findings for workers and managers.That is from a paper in the J Appl Psychol. A draft is here. That is "the problem," in the tropics there is generally good weather.
More interesting papers by one of the co-authors, Francesca Gino, are here.
This is an interesting paper by Axel Dreher, Pierre-Guillaume Méon, & Friedrich Schneider:
This paper assesses the relationship between institutions output, and productivity when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (“corrected”) factor productivity becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness.
The main rationale behind our results is that weak institutions not lead only to less factor accumulation, but also encourage participation in the shadow economy. The observed negative correlation between weak institutions and official output is therefore driven both by a reduction in production and a switch from the formal to the informal sector. Using official output to estimate the relationship between institutions and output implies that the production of countries with weaker institutions will be underestimated, thereby inflating the observed relationship. As a result, when shadow output is added to official output the correlation weakens. Using official output figures to compute TFP leads to the same bias. Thus, correcting official figures for the shadow economy also weakens the relationship between institutions and TFP, or even goes as far as removing it altogether. The essence of our results suggests that part of the observed relationships reported in the previous literature is not due to a reduction of output, but instead due to a switch from the formal to the informal sector. (p. 138).And the paper comes at a time when there seems to be a revival of discussions about GDP as an important statistic of the economy.
From a paper by Christian R. Grose where he explains why scholars of institutions in political science have not as frequently embraced field experiments. He also offers ideas of potential areas of application:
Principal-agent relationships can be tested using field experiments, particularly by using bureaucrats as subjects. Decades ago, Simon (1965, 34) stated that “field experiments have not been an important procedure for learning about organizational decision making.” Today, this claim could still be made even though there is much that could be learned by employing field experiments.It was published in the Annual Review of Political Science (Feb., 2014).
This article has provided evidence to suggest improvements in institutional quality can increase income mobility. Economic theory supports these findings because improvements in regulations and a less burdensome economy facilitate income mobility. However, the empirical estimates suggest that lack of corruption and secure property rights are associated with reductions in intergenerational earnings persistence. In short, the dream of income mobility can be supported with high quality institutions, independent of the Great Gatsby Effect.
The other hypothesis, that social transfer programs such as government spending on education and healthcare will increase income mobility for a society finds no support. This finding in conjunction with the first suggests that institutions matter (North, 1991) for income mobility by facilitating the entrepreneurial process. In order to allow everyone the opportunity to realize the dream of income mobility, countries must allow sound institutions to foster entrepreneurship. Only then will income mobility persist as a reality and not merely a dream. (p. 13).From the concluding remarks of this paper by Christopher J. Boudreaux (Journal of Institutional Economics, Feb. 2014). A draft is here.
This paper constructs a cross-country measure of the quality of education using a novel approach based on international test scores data. The first main finding is that there are large differences in education quality – one year of schooling in the U.S. is equivalent to three or more years of schooling in a number of low-income countries. I incorporate the estimated series for schooling quality in an accounting framework calibrated using evidence on Mincerian returns. This leads to the second important finding, which is that the fraction of income differences explained by the model rises substantially when one includes education quality; the increase is around 22percentage points.That is from this paper by Nicolai Kaarsen. A draft is here. The author adds:
Including the quality of human capital in a development accounting exercise increases the fraction of the variance of income explained by the model by around 0.25. The fraction of income differences explained by human capital alone is around 0.26, which is very close to the findings of Schoellman (2011), who uses immigrant data to estimate the quality of human capital.