POLITICAL COMPETITION WITH CAMPAIGN CONTRIBUTIONS AND INFORMATIVE ADVERTISING

This paper presents a theory of political competition with campaign contributions and informative political advertising. Policy‐motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like‐minded candidates. Contributions are used to finance advertising campaigns that provide voters with information about candidates' ideologies. Voters update their beliefs rationally given the information they have received. The paper uses the theory to analyze the welfare economics of contribution limits. Such limits are shown to redistribute welfare from ordinary citizens to members of interest groups. (JEL: D72, H40)     

ENDOGENOUS LOBBYING

In this article, we present a citizen‐candidate model of representative democracy with endogenous lobbying. We find that lobbying induces policy compromise and always affects equilibrium policy outcomes. In particular, even though the policy preferences of lobbies are relatively extreme, lobbying biases the outcome of the political process toward the center of the policy space, and extreme policies cannot emerge in equilibrium. Moreover, in equilibrium, not all lobbies participate in the policy‐making process. (JEL: D72, D74, D78)     

Technology Investment and Management Accounting Practice

Management accounting techniques and information are often accused of having many limitations that are likely to constrain investment in new technology. However, relatively little is known about the actual influence of management accounting practices on investment decisions. The empirical evidence of this research shows that new technology investment decisions are both highly complex and political. These decision attributes give rise to a protracted, circuitous, decision process that is very different from the rational model which dominates the capital budgeting literature. The research also shows that the management accounting system captures only a fraction of the information generated by this process and consequently has a relatively low influence on these investment decisions.     

Is time consistency compatible with risk aversion?

Managerial decision models applied in operations research, finance, information management, and many other disciplines are typically both dynamic and stochastic. When decisions at different points in time are allowed, the question arises what conditions guarantee the absence of incentives to deviate from the ex ante optimal policy at later dates. We term such a policy time consistent. A well-known result states that additively separable objective functions ensure time consistency under risk neutrality. Unfortunately, this is no longer true when decision makers are risk averse. Then, (much) more restrictive assumptions are needed. The aim of this paper is to provide clear-cut conditions that ensure time consistency in an expected utility framework. Our main findings are twofold: on the one hand, constant absolute risk aversion can guarantee time consistency when final values are under consideration. On the other hand, time consistency and risk aversion are incompatible when intertemporal payments are aggregated by means of net present values.     

Financial reporting in Europe: Prospects for research

This paper is a commentary on the future of financial reporting in Europe and on how research into accounting issues can be relevant to policy makers. Combining scholarship in accounting with scholarship in management can offer insight into national and global issues where accounting communicates information that affects managerial decisions at the microeconomic level and political decisions at the macroeconomic level. The paper cites examples of recent research in financial reporting and points to the current work plans of leading policy makers to illustrate the potential for researchers to influence policy directions. The context of financial reporting, nationally and globally, and the data available in the public domain, provide continued opportunities for researchers investigating accounting issues in the private sector and the public sector.     

Expertise-based lobbying and accounting regulation

It has long been recognised that accounting regulation is not a mere technical exercise but one that takes place in a political context and lobbying has been examined in numerous empirical studies. Most of these studies address lobbying of the accounting standard setter. However, standard setting is embedded in a political and institutional context. In their decision-making, these institutions depend on the expertise of potentially self-interested lobbyists. This expertise-provision element tends to be ignored in most lobbying studies. The present paper proposes an analytical model of lobbying of an accounting regulator that explicitly focuses on the provision of relevant information by lobbyists. It suggests that lobbying will generally be non-controversial, i.e. either those opposed to a standard will lobby or those favouring it, but not both. Analysis of the model furthermore implies an important role for the regulator’s ex ante leanings, both perceived and real, even when the regulator treats all information received impartially. This implies an important role for the institutional context of accounting regulation.     

Informational impediments to the use of capital budgeting models

The primary purpose of this study was to empirically examine whether or not informational impediments impair or alter decision making, with specific focus on capital budgeting decisions. Based on detailed interviews of senior corporate executives, it appears that management information systems (MIS) are less than adequate in providing the information items required to utilize the non-naive methods of capital budgeting. It is therefore suggested that the MIS concept be vastly broadened in regard to such decisions.     

Risk Assessment Can Be a Game‐Changing Information Technology—But Too Often It Isn't

The printing press was a game‐changing information technology. Risk assessment could be also. At present, risk assessments are commonly used as one‐time decision aids: they provide justification for a particular decision, and afterwards usually sit on a shelf. However, when viewed as information technologies, their potential uses are much broader. Risk assessments: (1) are repositories of structured information and a medium for communication; (2) embody evaluative structures for setting priorities; (3) can preserve information over time and permit asynchronous communication, thus encouraging learning and adaptation; and (4) explicitly address uncertain futures. Moreover, because of their “what‐if” capabilities, risk assessments can serve as a platform for constructive discussion among parties that hold different values. The evolution of risk assessment in the nuclear industry shows how such attributes have been used to lower core‐melt risks substantially through improved templates for maintenance and more effective coordination with regulators (although risk assessment has been less commonly used in improving emergency‐response capabilities). The end result of this evolution in the nuclear industry has been the development of “living” risk assessments that are updated more or less in real time to answer even routine operational questions. Similar but untapped opportunities abound for the use of living risk assessments to reduce risks in small operational decisions as well as large policy decisions in other areas of hazard management. They can also help improve understanding of and communication about risks, and future risk assessment and management. Realization of these opportunities will require significant changes in incentives and active promotion by the risk analytic community.     

基于产品生命周期的多阶段剩余收益项目决策模型

剩余收益模型（Residual Income Model，RIM）是评估公司权益价值的经典模型，特别地，奥尔森系列剩余收益模型由于可以利用历史财务与会计数据而得到广泛运用。本文在一般剩余收益模型的基础上，运用规范研究、逻辑推理等方法，基于产品生命周期理论，即项目处于产品生命周期的不同阶段时，其净资产收益率不同，在增长期的净资产收益率持续上升，衰退期的净资产收益率持续下降，而成熟期的净资产收益率则围绕行业平均水平波动，从理论上就项目投资价值的评估构建了多阶段剩余收益项目决策模型，并就所构建的多阶段剩余收益项目决策模型进行参数赋值分析。研究结果表明该新构建的决策模型具有较好的理论和运用价值，可以作为一种有效的项目投资决策模型。本文的研究一是拓展了剩余收益模型的应用，从主要用于对公司权益价值的估值拓展至对项目投资决策的评估；二是有利于寻求项目投资决策的价值最大化。     

Zur Rolle versunkener Kosten in aufeinander folgenden IT-Outsourcing-Entscheidungen

Despite the ongoing theoretical and practical investigations of IT outsourcing, there are still a large number of projects that are unsuccessful or even fail all along the line. Studies in the decision-making literature indicate that psychological effects in the evaluation of decision-relevant facts may be one relevant reason for unsuccessful decisions. By conducting a quantitative empirical study with German IT decision makers, we investigate the influence of non-rational factors within consecutive IT outsourcing decisions. We show that beside the rational economic factors (transaction, production and the rational part of switching costs) also non-rational switching costs in terms of sunk cost do significantly contribute to the explanation of consecutive IT outsourcing decisions. Furthermore, we examine moderating effects that affect the non-rational behavior of IT decision makers. Besides the theoretical contribution to analyze the effects of sunk cost on both an individual and organizational level, we also derive practical implications. In consecutive IT outsourcing decisions, the non-rational behavior triggered by sunk cost can for example be reduced by replacing the decision maker or consult a decision team when sunk cost play a considerable role.     

The Quality of Stakeholder-Based Decisions

The increased use of stakeholder processes in environmental decision making has raised concerns about the quality of decisions these processes produce. Some claim that stakeholders make inadequate use of scientific information and analysis and are all too ready to sacrifice technical quality for political expediency. This article looks to the case study record to examine the quality of the decisions from stakeholder-based processes. The data for the analysis come from a "case survey," in which researchers coded information from 239 published case studies of stakeholder involvement in environmental decision making. These cases reflect a diversity of planning, management, and implementation activities carried out by environmental and natural resource agencies at many levels of government. Overall, the case-study record suggests that there should be little concern that stakeholder processes are resulting in low-quality decisions. The majority of cases contain evidence of stakeholders improving decisions over the status quo; adding new information, ideas, and analysis; and having adequate access to technical and scientific resources. Indeed, data suggest that it is the more intensive stakeholder processes--precisely those that have aroused recent concern--that are more likely to result in higher-quality decisions.     

A political economy of accounting standard setting

In recent years accounting researchers have identified “political” lobbying as a problem for accounting standard setting. This paper presents a simple game-theoretic analysis of the political process to identify situations where companies have incentives to lobby the political principal instead of participating in the usual due process of accounting standard setting. Analysis of the model suggests that “political” lobbying is more likely to happen in the EU than in the US. Furthermore it is suggested that if the relevant standard setters wish to achieve harmonization of accounting standards between the EU and the US, European companies have more lobbying leverage than their American counterparts because there are more European veto players than American ones.     

The Effects of Information Overload on Software Project Risk Assessment*

Managers are responsible for providing effective information technology governance of the software development process. Ineffective governance leads to serious resource misallocations and negative consequences concerning Sarbanes‐Oxley compliance. In order for managers to make informed decisions about software development projects, they often need more information than is available through normal information channels, that is, they need an in‐depth review of the at‐risk project. Such in‐depth reviews, however, are costly. Hence, accurate identification of at‐risk projects for in‐depth review is critical to management's ability to govern. This research considers how two factors, information load and time pressure, affect the quality of the project‐selection process. We examine quality by observing the decision strategies involved and then relating these strategies to subsequent decision making. An experiment was conducted with experienced information systems auditors using a combination of policy‐capturing and computerized process‐tracing techniques. The participants in our study cope with information overload by accelerating their decision‐making process and adopting noncompensatory decision processes. Contrary to prior research, our process‐tracing analysis suggests that participants rarely filter information, thus implying that decision makers are unable to process all the information. Coping by resorting to noncompensatory strategies did not decrease decision quality unless combined with accelerated information processing. Participants also increase their weight on the software project risk factors that they repeatedly access and that they view for longer periods of time. The theoretical contributions and practical implications regarding what actions managers can take to reduce the negative impact of information overload are discussed.     

Political connections,gender diversity and compensation policy

In this paper we analyze the influence of corporate governance, specifically political connections and gender diversity, on board and managers’ remuneration in savings banks in Spain. We also analyze whether financial experience moderates the relation between political experience and board compensation. To the best of our knowledge, the effects of having politicians on remuneration levels of financial firm have not been studied. Connections are important in hiring decisions and in generating business so it is interesting to explore whether they are important when it comes to compensation policies. We use a panel data and financial and corporate governance information from 44 savings banks for the period 2004–2009. Our results show that the previous political activity of the chairperson positively influences board remuneration. Our study provides the first evidence for a link between political connection and compensation policy, showing that, in addition to the standard firm-level factors, political and financial experience are material determinants of economic significance in compensation policies. Specifically, we show that financial expertise may substitute for governance mechanisms that are lacking in firms with weak governance environments (e.g. saving banks with high politicization).     

Changing risk preferences in supply chain inventory decisions

The risk preferences of managers may cause their inventory ordering decisions to deviate from the optimal policy. Past studies in operations management have produced mixed results. This study examines this proposition using decision data collected from a supply chain experiment. This article finds that changing the risk preferences of managers with respect to demand changes and supplier failures is a significant behavioural factor in explaining deviations in ordering decisions. This result provides an additional behavioural cause in explaining the bullwhip effect in supply chains. It also provides insights on the challenges for reducing the bullwhip effect in supply chains.     

Managing Wildfire Events: Risk‐Based Decision Making Among a Group of Federal Fire Managers

Managing wildfire events to achieve multiple management objectives involves a high degree of decision complexity and uncertainty, increasing the likelihood that decisions will be informed by experience‐based heuristics triggered by available cues at the time of the decision. The research reported here tests the prevalence of three risk‐based biases among 206 individuals in the USDA Forest Service with authority to choose how to manage a wildfire event (i.e., line officers and incident command personnel). The results indicate that the subjects exhibited loss aversion, choosing the safe option more often when the consequences of the choice were framed as potential gains, but this tendency was less pronounced among those with risk seeking attitudes. The subjects also exhibited discounting, choosing to minimize short‐term over long‐term risk due to a belief that future risk could be controlled, but this tendency was less pronounced among those with more experience. Finally, the subjects, in particular those with more experience, demonstrated a status quo bias, choosing suppression more often when their reported status quo was suppression. The results of this study point to a need to carefully construct the decision process to ensure that the uncertainty and conflicting objectives inherent in wildfire management do not result in the overuse of common heuristics. Individual attitudes toward risk or an agency culture of risk aversion may counterbalance such heuristics, whereas increased experience may lead to overconfident intuitive judgments and a failure to incorporate new and relevant information into the decision.     

认知偏差、债务政策选择偏好和资本结构税收效应

本文针对管理者认知偏差对其债务政策选择的影响问题进行研究,通过建立认知偏差影响下的最优资本结构决策模型,从行为金融学的角度研究了债务政策选择的税收效应,并以中国上市公司2006-2009年的数据为样本,使用多元回归分析等方法对相关结论进行了实证检验。研究表明:上市公司的债务政策受到了认知偏差的影响,即随着财务困境成本的不断增大,上市公司对其变化的敏感性不断降低;认知偏差严重时,上市公司会选择过度保守负债或过度积极负债,导致最优资本结构与税率无关;认知偏差不严重时,上市公司会选择适度负债,且负债水平与税率正相关。结论表明中国上市公司需要更为客观地评价财务困境成本,更为理性地利用负债的税收收益,尽可能避免认知偏差对企业价值的损害。     

TRUST,COORDINATION, AND THE INDUSTRIAL ORGANIZATION OF POLITICAL ACTIVISM

We study political activism by several interest groups with private signals. When their ideological distance to the policymaker is small, a “low‐trust” regime prevails: agents frequently lobby even when it is unwarranted, taking advantage of the confirmation provided by others' activism; conversely, the policymaker responds only to generalized pressure. When ideological distance is large, a “high‐trust” regime prevails: lobbying behavior is disciplined by the potential contradiction from abstainers, and the policymaker's response threshold is correspondingly lower. Within some intermediate range, both equilibria coexist. We then study the optimal organization of influence activities, contrasting welfare levels when interest groups act independently and when they coordinate. (JEL: D72, D78, D82)     

Does insider shareholding matter to corporate payout reactions to tax reforms?

Theory indicates that since Germany’s 2001 Tax Reform Act non-qualified shareholders have strongly preferred share repurchases over dividends, even though qualified or corporate shareholders are typically expected to be indifferent between the two. By contrast, prior to the reform most shareholders preferred dividends. As payout policies may be driven by taxes but also by factors arising from asymmetric information of agents and principals, this raises the question whether payout decisions are driven by ownership structure, i.e., members of the management board or other influential shareholders such as blockholders. Kaserer et al. (Z Betriebswirtschaft 82, 2012) investigate the impact of insider shareholding on payout policy. Their study sheds light on the mechanisms behind corporate payout policies and provides important new insights into the influence that insiders’ actions have on payout policies. The authors leave issues like the impact of voting power and of dominant shareholder groups more or less untreated, hence preparing the floor for a whole series of interesting future empirical studies.