We propose a novel human capital model that decomposes aggregate income risk into highand low-income risk. We find that high-income risk is priced, while low-income risk is insignificant. The high-income factor alone explains 77% of the cross-sectional variation in the twenty-five size and book-to-market portfolios, earns a risk premium of about 7% per year, and its pricing power extends to the full cross-section of individual stocks. It is also related to the value factor, suggesting that the value premium might be compensation for income risk. Overall, our evidence indicates that high-income risk is an important macroeconomic risk factor.

We examine the distinct effects of generalist–specialist versus insider–outsider attributes on Chief Executive Officer (CEO) compensation patterns. Our cross-sectional results show that each attribute has a significant impact on both the level and structure of CEO compensation. CEOs with a high generalist–outsider combination receive the highest total compensation, followed by generalist–insiders, specialist–outsiders, and finally specialist–insiders. Our time-series results show that the generalist–specialist effect remains constant through time while the insider–outsider effect diminishes over time. These findings suggest that the generalist premium is the result of a fundamental shift in the need for generalist skills to manage increasingly-complex enterprises. In contrast, the outsider premium is more likely caused by a temporary increase in bargaining power during contract negotiations. Overall, our study disentangles generalist–specialist attributes from insider–outsider attributes and then identifies the specific channels through which each attribute affects executive compensation.

This study examines the implicit incentive effects of horizontal monitoring and team member dependence for individuals working in teams but facing explicit incentives based solely on measures of individual performance. We combine proprietary performance data with survey data for 133 internal auditors. We show that the social influences of relatively high levels of both horizontal monitoring and team member dependence provide implicit incentives that motivate individual performance, making the provision of team rewards unnecessary to ensure individual and team productivity. We conclude that horizontal monitoring and team member dependence are complementary control mechanisms whose effectiveness helps explain the observed practice of organizing work into teams without explicit team‐based rewards.

Securitization enhances liquidity of debt contracts. However, its structural deficiency at origination has led to the freezing of its secondary market and failure of institutions holding the collateral. This paper builds on key cultural (i.e., Islamic) rulings to rectify flaws entrenched in securitized debt stemming from asymmetric information and agency issues. These injunctions help in the efficient underwriting of debt contracts across the globe to: (i) redeem its ‘toxicity’; (ii) guarantee liquidity; (iii) alleviate fragility of the financial system; and (iv) promote economic growth. Finally, this study promotes a rethink of the current ‘Islamic’ financial system from a narrow literalist juridical perspective to one that is grounded in financial economics.

In this paper, we investigate the influence of CEO political orientation on corporate lobbying efforts. Specifically, we study whether CEO political ideology, in terms of manager-level campaign donations, determines the choice and amount of firm lobbying involvement and the impact of lobbying on firm value. We find a generous engagement in lobbying efforts by firms with Republican leaning-managers, which lobby a larger number of bills and have higher lobbying expenditures. However, the cost of lobbying offsets the benefit for firms with Republican CEOs. We report higher agency costs of free cash flow, lower Tobin's Q, and smaller increases in buy and hold abnormal returns following lobbying activities for firms with Republican managers, compared to Democratic and Apolitical rivals. Overall, our results suggest that the effects of lobbying on firm performance vary across firms with different managerial political orientations.

Our research firstly tests the difference in investment efficiency between state-owned enterprises (SOEs) and private firms and secondly evaluates the effect of privatisation and equitisation policies on the investment efficiency of former state owned enterprises (SOEs). We use a novel dataset from Viet Nam which covers large and non-listed SMEs across construction, manufacturing, and service sectors. Our methodology uses a structural model to test the relationship between Tobin's Q and capital spending. While evident differences in investment efficiency are found across heterogeneous groups of private firms (size, industry, financially constrained and location), we find no evidence of investment spending being linked to marginal returns by SOEs across all sectors and size classes. However, former SOEs that have been privatised and equitized with a minority state shareholding display positive links between Q and investment. In fact, the link is stronger for these firms than for private firms. Differences are also evident across size and sector highlighting that the method of divestment chosen by government shareholders has a differential impact on efficiency across groups of firms and industries.

This study reports on an experiment conducted to assess the influence of different affective mood states on auditors’ ability to resist obedience pressure to commit or overlook unethical acts in six audit contexts. Obedience pressure from superiors to comply with unethical directives is of particular concern in public accounting, given the hierarchical structure of audit teams and the power imbalance in superior–subordinate relationships. One hundred and seventy audit seniors from two large international public accounting firms participated in an experiment. Three different moods were induced in participants through work‐related trigger events: one positive active mood state (arousal) and two negative passive mood states (fear and insignificance). These mood states were anticipated to influence auditors’ expressed willingness to comply with their superiors’ unethical directives as set forth in our ethical scenarios. Our results indicate that low levels of arousal and high levels of fear and insignificance influenced compliance intentions. Our results also indicate overall high levels of expressed willingness to comply with superiors’ unethical directives. Implications of our findings for understanding the antecedents of unethical conduct within the accounting profession and for future research are discussed.

This paper challenges the commonly held belief that the Great Depression was transmitted from the United States to the rest of the world. The well-known argument by Milton Friedman and Anna Schwartz (1963) is used as the reference point. I argue that their description, although intuitively plausible, does not correspond well with the data. During the depression years and afterwards there was an extensive analysis of the international financial situation. A comprehensive analysis was provided by Ragnar Nurkse (1944). Earlier writings do not in particular indict the United States, but rather also blame France and several other countries for the financial crisis.' Recent literature that deemphasize the role of the United States include Peter Temin (1976) and Knut Borchardt (1982). Friedman and Schwartz do not get into any lengthy international analysis, yet draw far-reaching conclusions about the United States and the rest of the world. This paper does not attempt to estimate the relative roles of French gold accumulations, the illiquidity of loans to Germany, the Austrian banking crisis, the British devaluation, etc. Rather the analysis is confined to evaluating whether the United States transmitted the depression to the rest of the world through the channels discussed by Friedman and Schwartz. I. The Friedman-Schwartz Argument, and How It Can Be Evaluated

Business history is terra incognita to most economists. They may have encountered the works of Alfred Chandler, most notably his magisterial Visible Hand. But they may well have taken away from its massive bulk little more than a sense of the inevitable coming of giant, divisionalized enterprise with a corporate planning staff devoted to measurement and planning. This is a vision congenial to the way we teach undergraduates about how firms work. But it is far from the most nourishing food for thought that Chandler's book offers, and it does not reveal much about method. More likely, and certainly worse, economists may have encountered company histories -traditional business histories in airport bookstores or used book shops. This genre will probably have been positively off-putting. The typical example contains much admiring prose, not much analysis, very little comparison, and practically no explicit theorizing. The best works provide provocative food for thought; but most will suggest to economists that business history is a subject better suited to the Department of Public Relations than to the Department of Economics. Much more fruitful encounters are possible. Businesses are basic units in the markets economists study. The internal organization of firms has a history, and actual competition between firms has a history that is at least as complex and rich. In both of these and in related areas, the history of business has a great deal of stimulus to offer economists and even economic historians. One approach to such encounters involves addressing the archival materials worked by historians but with economist questions. The categories and principles that organize such collections are very far from the ones graduate training in economics suggests, and there are considerable gains from trade to be had simply by raising questions. A number of interesting (and eminently teachable) examples of this approach can be found in the NBER economic business history conference volumes (Peter Temin [ed.], 1991; Naomi R. Lamoreaux and Raff [eds.], 1995; Naomi R. Lamoreaux et al. [eds.], 1998). In terms of the title of this session, this type of work represents finding the microeconomics we know to be useful in the history of business. A second and different approach, to be sketched in this paper, involves addressing more conventional economist data with questions raised by archival and other contemporary sources. This approach has several virtues: it is less of an intellectual stretch for working economists; it can often be carried out with materials that can be found in university libraries; and it actually offers the promise of extracting useful microeconomics and empirical research programs from business history, rather than simply reading microeconomics, textbook version or otherwise, into the history. t Discussants: Bengt Holmstrom, Massachusetts Institute of Technology; Sidney Winter, University of Pennsylvania.

This paper investigates the impact of intimate partner violence on poor women's repayment behavior in microcredit. In a laboratory-based field experiment, we extended collateral-free small loans to 485 currently married women in rural Bangladesh and observed their repayment decisions over multiple loan cycles. In a post-experiment survey, we asked subjects about their experience of spousal violence. We find that women who experienced physical or sexual violence in the last 12 months are more likely to strategically default on their loans relative to those who did not experience such violence. We conducted several robustness tests, and the results suggest that the negative correlation between victimization and loan repayment rates is unlikely to be explained by selection into victimization, non-random underreporting of violence, or the subjects’ attitude toward risk.