How are neighboring firms affected when a bank learns more about a given firm? We analyze exchange-rate-induced movements of Peruvian firms across a threshold that governs their regulatory treatment by banks. Firms that cross the threshold supply more information to their banks and experience a substantial increase in financing. We find positive spillover effects: the neighbors of the above-threshold firms also experience increased financing. These spillovers are confined to neighbors sharing a bank, and the performance of new loans to these neighbors improves, suggesting that the bank has become better informed about other local firms.

We surveyed 1,638 sales executives across 40 countries regarding their companies’ likelihood of asking sales to perform real earnings management (REM) actions when earnings pressure exists. Using this information, which we refer to as companies’ REM propensities, we study how company characteristics and environmental conditions relate to the responses received. The use of cash-flow incentives for sales personnel and the distribution of interfunctional power in favor of finance rather than sales are both associated with companies’ REM propensities. In addition, we show that sales executives preemptively change their behaviors in anticipation of top management's REM requests. Sales executives working for public companies and companies in the United States reported higher levels of REM propensity. The data also support an association between REM propensity and finance–sales conflict. These findings and others are compared and contrasted with existing empirical and survey-based research on REM throughout the paper.

T HIS BOOK is a big, ambitious undertaking, organized in 31 long chapters covering subjects which range from religion and civilization in economic life to money, banking, wages, and incentives. But, as the title suggests, it is essentially a research tool. It is meant not so much to be and reviewed as to be The test is whether people end up coming back to it more and more or less and less as time goes on. Judging from those areas of economics and sociology in which I have worked, I would predict people will return to The Handbook of Economic Sociology more and more. The chapter by Chris Tilly and Charles Tilly on labor market structures, the area I know best, is the most comprehensive review of the subject; it handles with rare sophistication, material drawn from across the social sciences. The essay by Alejandro Portes on the informal sector and that by Ivan Light and Stavros Karageorgis on the ethnic economy also consolidate areas of study dispersed over the literature of a variety of different disciplines. But I doubt that any single person is in a well-informed position to pass judgment on all of the essays in the volume. Nonetheless, the publication of a book like this provides an occasion to reflect upon the field of scholarly endeavor, to consider what it represents as a complement to conventional economics and, possibly, as an alternative. For this, it seems reasonable to the text, or at least peruse it, chapter by chapter. The first thing to be said about approaching The Handbook of Economic Sociology in that way is that it is a true handbook: The editors, Neil J. Smelser and Richard Swedberg, provide very little guidance on how it might be read as opposed to referred to. It has no real introduction. It invites readers to pick out chapters at random, following their own inclinations. This, moreover, turns out to be a very frustrating experience. It leaves one wondering what economic sociology is, or even, what economics is that economic sociology is not. Absent some other guide, one seems forced back to basic definitions. In introductory economics-at least when I teach it-we offer two of these. One defines economics broadly as the study of how people employ scarce resources and distribute them over time and among competing demands (Paul Samuelson 1961). The other is much narrower and more focused:

We use information extracted from a major proxy advisory service to test predictions from institutional theory regarding when and why audit committee ( AC ) members experience turnover because of evidence of ineffective governance. First, we broadly categorize AC ineffectiveness concerns as either (i) financial reporting failures or (ii) characteristics of individual AC members. Institutional theory suggests that the visible nature of the first category is more likely to threaten perceptions of AC legitimacy and hence prompt turnover, which is what we find. We then enrich the analysis by interacting the AC ‐member ineffectiveness indicators with the extent of shareholder protest votes, finding that shareholder dissent elevates the turnover effects of both categories of ineffectiveness, as institutional theory would predict. Finally, we find that otherwise effective AC members face an increased likelihood of turnover if they serve on the AC when financial reporting failures are discovered, even if they were not on the AC when the events precipitating the failures occurred. Overall, our findings support the institutional theoretic premise that boards take remedial actions when necessary to restore perceived legitimacy.

We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.

James J. Heckman, John Eric Humphries, and Tim Kautz make a powerful case for noncognitive skills—or what they conceptualize as character—as an explanation of educational achievement and other important outcomes in life. They do so while exposing the myth of the GED, arguing that the GED harms its intended beneficiaries by failing to instill the character skills that predict adult success. Childhood interventions to build personal character, especially self-control, are emphasized. The Myth of Achievement Tests is a major contribution, but I integrate relevant research on crime and social control across the life course that motivates a more dynamic conceptualization of character. I also review evidence on the environment as a source of both cognitive and noncognitive skills, including exposure to concentrated deprivation, violence, and lead toxicity. Moreover, I review evidence suggesting that social reactions to character shape life chances in ways not reducible to individual propensities, such as changes in criminal-justice policy that created large cohort differentials in incarceration for the same underlying behaviors. Social context and the character of American society itself are thus central to fostering individual character—not just skills but the desire to conform. It follows that self-control and social control need to be better unified theoretically and in designing interventions.

We study approximately 5.0 million stock picks submitted by individual users to the “CAPS” website run by the Motley Fool company (www.caps.fool.com). These picks prove to be surprisingly informative about future stock prices. Shorting stocks with a disproportionate number of negative picks and buying stocks with a disproportionate number of positive picks yields a return of over 12% per annum over the sample period. Negative picks mostly drive these results; they strongly predict future stock price declines. Returns to positive picks are statistically indistinguishable from the market. A Fama–French decomposition suggests that stock-picking rather than style factors largely produced these results.