Relatively few studies have examined the audit committee oversight process--the activities that link audit committee inputs and financial reporting outcomes. To study this process, we conducted extensive interviews with 42 U.S. public company audit committee members. We explore six audit committee process areas, offer insights into the state of audit committee processes in the post-Sarbanes-Oxley Act (SOX) environment, and consider our results in light of agency theory and institutional theory; We find that many audit committee members strive to provide effective monitoring of financial reporting and seek to avoid serving on ceremonial audit committees, but within each of the six process areas we find evidence of both substantive monitoring and ceremonial action, such that neither agency theory nor institutional theory fully explains our results. We also find that many responses vary with personal and company characteristics, with particularly notable differences related to audit committee members' accounting expertise and time of appointment to the audit committee (pre-SOX versus post-SOX). We discuss implications and directions for future research and theory development.

Food choice decisions are not the same as intake volume decisions. The former determine what we eat (soup or salad); the latter determine how much we eat (half of the bowl or all of it). Large amounts of money, time, and intelligence have been invested in understanding the physiological mechanisms that influence food choice (James O. Hill, forthcoming). Much less has been invested in understanding how and why our environment influences food consumption volume. Yet environmental factors (such as package size, plate shape, lighting, variety, or the presence of others) affect our food consumption volume far more than we realize (Wansink 2006). Whereas people can acknowledge that environmental factors influence others, they wrongly believe they are unaffected. Perhaps they are influenced at a basic level of which they are not aware. A better understanding of these drivers of consumption volume will have immediate implications for research, policy, and personal interventions. There are three objectives of this paper: (1) explain why environmental factors may unknowingly influence food consumption; (2) identify resulting myths that may lead to is specified models or misguided policy recommendations; and (3) offer clear direction for future research, policy, and personal dietary efforts.

This paper exploits biological fertility shocks as instrumental variables to estimate the effect of motherhood delay on the cognitive ability of the next generation. Using detailed panel data on women in the NLSY79 and their first-born children aged 5 to 14, we find a year of delay leads to significant increases in math and reading scores: a 7 year delay produces gains on par with the black-white score difference. These results reveal a potential weakness of pro-natalist policies promoting early motherhood. While such policies may increase total period fertility rates, they will be less effective at increasing total human capital.

This paper reports the first laboratory study of the swing voter's curse and provides insights on the larger theoretical and empirical literature on “pivotal voter” models. Our experiment controls for different information levels of voters, as well as the size of the electorate, the distribution of preferences and other theoretically relevant parameters. The design varies the share of partisan voters and the prior belief about a payoff relevant state of the world. Our results support the equilibrium predictions of the Feddersen-Pesendorfer model. The voters act as if they are aware of the swing voter's curse and adjust their behaviour to compensate. While the compensation is not complete and there is some heterogeneity in individual behaviour, we find that aggregate outcomes, such as efficiency, turnout and margin of victory, closely track the theoretical predictions.

We find that the sign of the correlation between institutional ownership and volatility depends on the firm’s dividend policy: institutional ownership is negatively (positively) related to volatility among non-dividend (dividend) paying stocks. The empirical results are consistent with an interaction between institutional preference for low volatility and the tendency of higher levels of institutional ownership to increase volatility through their trading behavior. This result is robust to many control variables and possible endogeneity concerns. Supporting our conjecture that institutions herd on dividend signals we find that the correlation between turnover and institutional ownership is higher for dividend paying stocks, and that the positive correlation between turnover and institutional ownership is higher on dividend declaration days. Finally, we also find that the level of institutional ownership drops following an increase in volatility for both dividend payers and non-payers, and that volatility rises following increased institutional ownership for dividend paying stocks.

We investigate the determinants and consequences of the mutual holding company (MHC) structure that allows mutual thrifts to issue stock to outside shareholders while maintaining the mutual form. Capital constrained firms with greater profit opportunities are more likely to choose a full demutualization; demonstrating that the MHC choice can be used to control for over- and under-investment costs. During periods of greater regulatory constraints, MHC firms have lower offer-day returns than full demutualizations. MHC firms are also less likely to be acquired, as the MHC structure provides protection from the market for corporate control. Demonstrating a clear preference by minority shareholders for the elimination of the MHC structure, the announcement of a second-stage conversion generates a 12% return.

Using a comprehensive sample of switches to and from the largest auditors (i.e., the Big N), we examine empirically whether the sensitivity of Big N auditor switches to client risk and misalignment changed between the pre- and post-Enron periods. Although we find an increase in the sensitivity to client misalignment, the sensitivity to client risk generally decreases. The results are consistent with Big N auditors rebalancing their audit client portfolios in response to post-Enron capacity constraints arising from the supply of former Arthur Andersen clients and the audit demands imposed by Sarbanes-Oxley rather than increasing their sensitivity to client risk. Additional evidence indicates that the Sarbanes-Oxley demand shock did not affect Big N auditor switching behavior incremental to the initial Andersen supply shock.

We investigate simultaneously the impact of promotion-based tournament incentives for VPs and equity-based (alignment) incentives for VPs and the chief executive officer (CEO) on firm performance. We find that tournament incentives, as measured by the pay differential between the CEO and VPs, relate positively to firm performance. The relation is more positive when the CEO nears retirement and less positive when the firm has a new CEO, and weakens further when the new CEO is an outsider. Our analysis is robust to corrections for endogeneity of all our incentive measures and to several alternative measures of tournament incentives and firm performance.

Suppose that the nominal money supply could be cut literally overnight. What would happen to prices, wages, and output? Such an experiment was carried out three times in France in 1724, resulting in a cumulative 45 percent cut. Prices adjusted instantaneously and fully on the foreign exchange market. Prices of commodities and of manufactured goods and industrial wages fell slowly, over many months, and not by the full amount of the nominal reduction. The industrial sector experienced a contraction of 30 percent. When the government changed course and increased the nominal money supply overnight by 20 percent, prices responded more, and industry rebounded.