To deter financial misstatements, many companies have recently adopted compensation recovery policies—commonly known as ‘‘clawbacks’’—that authorize the board to recoup compensation paid to executives based on misstated financial reports. Clawbacks have been shown to reduce financial misstatements and increase investors’ confidence on earnings information. We show that the benefits come with an unintended consequence of certain firms substituting for accruals management with real transactions management (e.g., reduce research and development [R&D] expenditures), especially firms with strong incentives to achieve short-term earnings targets, such as firms with high growth or high transient institutional ownership. As such, the total amount of earnings management does not decrease subsequent to clawback adoption. We further show that although real transactions management temporarily boosts those clawback adopters’ short-term profitability and stock performance, this trend reverses after three years. In summary, clawbacks may have unexpected effects for a subset of firms whose managers are under greater pressure to meet earnings goals.

In a setting in which corporate headquarters dictates total sales targets, we study how supervisors allocate sales targets to individual stores. Specifically, we analyze whether supervisors strategically use discretion in the target-setting process to address compensation contracting issues. We first examine whether supervisors use discretion to manage compensation risk. The results are consistent with the agency-theoretic prediction that supervisors provide easier targets to stores facing higher levels of store-specific risk. Next, we examine whether discretion is used to mitigate fairness concerns. The results suggest that, consistent with behavioral arguments, supervisors use discretion to deal with fairness issues, even if the area of the supervisor’s discretion is not the source of the fairness concerns. Finally, we analyze whether supervisors use discretion in the target-setting process to reduce their potential confrontation costs. Consistent with research in psychology, we find that supervisors provide easier targets to store managers with relatively higher hierarchical status.

The U.S. economy has been going through a striking structural transformation--the secular reallocation of employment across sectors--over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, due to sectors receiving different shares of startup employment than their employment shares. The rest is mostly due to life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.

Using state-level data from 1980-2010 we examine whether economic freedom, as measured by the Economic Freedom of North America Index, has had any impact in increasing or decreasing the ratio of median income for black households to the median income of white households. To our knowledge, there has been no research on racial income disparities and the role that economic freedom might have in alleviating or exacerbating the problem. We find evidence that economic freedom is associated with an increase in the racial income gap.

We measure job-filling rates and recruiting intensity per vacancy at the national and industry levels from January 2001 to September 2011 using data from the Job Openings and Labor Turnover Survey. Industry-level movements in these variables are at odds with implications of the standard matching function in labor search theory but consistent with a generalized function that incorporates an important role for recruiting intensity. Construction makes up less than five percent of employment but accounts for more than 40 percent of the large swings in the job-filling rate during and after the Great Recession.

Parental Child Care in Single-Parent, Cohabiting, and Married-Couple Families: Time-Diary Evidence from the United Kingdom by Charlene M. Kalenkoski, David C. Ribar and Leslie S. Stratton. Published in volume 95, issue 2, pages 194-198 of American Economic Review, May 2005

We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives that correlate with central banks’ policy choices and outcomes. These findings inform the debate about the political economy of central banking and central bank design.

We document large, longer term, joint regime shifts in asset valuations and the real federal funds rate‐ spread. To interpret these findings, we estimate a novel macrofinance model of monetary transmission and find that the documented regimes coincide with shifts in the parameters of a policy rule, with long‐term consequences for the real interest rate. Estimates imply that two‐thirds of the decline in the real interest rate since the early 1980s is attributable to regime changes in monetary policy. The model explains how infrequent changes in the stance of monetary policy can generate persistent changes in asset valuations and the equity premium.

A single macroeconomic factor based on growth in the capital share of aggregate income exhibits significant explanatory power for expected returns across a range of equity characteristic portfolios and nonequity asset classes, with risk price estimates that are of the same sign and similar in magnitude. Positive exposure to capital share risk earns a positive risk premium, commensurate with recent asset pricing models in which redistributive shocks shift the share of income between the wealthy, who finance consumption primarily out of asset ownership, and workers, who finance consumption primarily out of wages and salaries.

We show that analysts from sell‐side firms generally recommend “glamour” (i.e., positive momentum, high growth, high volume, and relatively expensive) stocks. Naïve adherence to these recommendations can be costly, because the level of the consensus recommendation adds value only among stocks with favorable quantitative characteristics (i.e., value stocks and positive momentum stocks). In fact, among stocks with unfavorable quantitative characteristics, higher consensus recommendations are associated with worse subsequent returns. In contrast, we find that the quarterly change in consensus recommendations is a robust return predictor that appears to contain information orthogonal to a large range of other predictive variables.