We use a vignette-based survey experiment to elicit respondents’ assessments of the fairness of race-based hiring decisions and compare these assessments with the predictions of four preregistered ethical frameworks. While conservative respondents are much more accepting of discriminatory actions than others, respondents of all political leanings rate the relative fairness of different actions in a very similar way. A two-group framework in which one group (mostly self-described conservatives) values employers’ decision rights, the other has utilitarian concerns, and both groups use the same race-blind rules to assign relative fairness levels to actions explains our data well.

We study the influence of perceived auditor quality on investment decisions by bond mutual fund investors. Audits of bond mutual funds require significant auditor expertise. Fund managers estimate daily the fair market values of holdings that are often opaque and illiquid. Managers can use their discretion to manipulate their fund's performance results. While it is known that investment flows into funds that report good past performance, little evidence exists about whether investors' confidence in the reliability of fund financial reports is influenced by auditor quality. Using hand‐collected data from SEC filings, we find that the positive association between reported performance and investment flows is stronger for funds with auditors who are industry specialists and are longer‐tenured, as well as for funds that pay higher audit fees. We do not find that auditor office size strengthens the association. We also find that the presence of industry‐specialist auditors, long‐tenured auditors, and higher audit fees lead to additional disclosure in the form of emphasis‐of‐matter. This study contributes to the streams of research investigating perceived audit quality, fund investment decisions, and auditing for financial services.

This paper documents the range of portfolio manager ownership in the funds they manage and examines whether higher ownership is associated with improved future performance. Almost half of all managers have ownership stakes in their funds, though the absolute investment is modest. Future risk-adjusted performance is positively related to managerial ownership, with performance improving by about 3 basis points for each basis point of managerial ownership. These findings persist after controlling for various measures of fund board effectiveness. Fund manager ownership is higher in funds with better past performance, lower front-end loads, smaller size, longer managerial tenure, and funds affiliated with smaller families. It is also higher in funds with higher board member compensation and in equity funds relative to bond funds. Future performance is positively related to the component of ownership that can be predicted by other variables, as well as the unpredictable component. Our findings support the notion that managerial ownership has desirable incentive alignment attributes for mutual fund investors and indicate that the disclosure of this information is useful in making portfolio allocation decisions.

Prior research finds that investors respond more favorably to a disaggregated earnings forecast than to an aggregated one. The present study examines whether this initial favorable effect on investors’ decisions leads to investors giving management the benefit of the doubt, or backfires in the event of a subsequent earnings surprise announcement. The results of our experiment indicate a “backfire effect” consistent with Expectation Violation Theory. We find that investors’ negative reactions to an earnings surprise are stronger if they first observed a disaggregated forecast than if they first saw an aggregated forecast. The largest downward adjustment in investment interest occurs when the disaggregated forecast is later found to be overstated. This study provides evidence of the complexity of the effect of disaggregated earnings forecast and adds to the literature concerning the costs and benefits of accounting information disaggregation.

This study considers the experience of china's one-child policy to examine how fertility restrictions affect economic and social outcomes over a lifetime. Using variations in these penalties across provinces and over time, we find that exposure to stricter fertility restrictions when young leads to higher education levels, more white-collar jobs, delayed marriage, and lower fertility rates. Further consequences include lower rates of residing with the elderly and higher household income, consumption, and savings. Finally, exposure to stricter fertility restrictions in early life increases female empowerment. Overall, fertility restrictions imposed when people are young have powerful effects throughout their life cycle.

This paper describes the design and behavior of an experimental economy with the structure of the Ramsey-Cass-Koopmans model of optimal growth. The experiment includes three different implementations of the model: a decentralized implementation with multiple agents and a market for capital, a treatment where individual subjects are placed in the role of social planners, and a treatment where the social planner consists of five agents making a joint decision. The findings highlight the role of market institutions in facilitating convergence to the optimal steady state.

This paper studies the real effects of losing political capital by exploiting exogenous shocks from the sudden deaths of politically connected independent directors in Chinese firms. Using difference-in-differences estimation, we find that upon losing political capital, a firm boosts its physical capital expenditures by 28%, or 2.93 percentage points, which is an order of magnitude larger than estimates from the United States. The loss of political capital leads to a decrease in the economic benefits a firm can obtain, in terms of bank loans, tax benefits, and government subsidies, and an increase in its production costs. Our evidence suggests that private firms use physical capital investment as a substitute for political capital.