Prior research has examined target setting in market‐driven companies but has not examined target setting in state‐run companies that also have social and political objectives. I examine how Chinese state‐owned enterprises (SOEs) set and revise performance targets to motivate a balanced effort allocation. Using data on financial performance (sales) targets set by SOEs and non‐SOEs during the period 2006–2016, I predict and find that the financial targets of SOEs are easier to achieve than those of non‐SOEs, and that SOEs with easier financial targets perform better regarding corporate social responsibility. I also predict and find that SOEs ratchet financial targets upward less than non‐SOEs to keep them easy to achieve and, as a consequence, SOE managers are less likely to game performance to avoid future target increases. The results are robust to alternative measures of state influence and alternative measures of financial targets. These findings suggest that firms balance their multiple objectives through strategically setting and revising financial targets. In doing so, this study provides a better understanding of target‐setting practices in organizations pursuing multiple, sometimes conflicting, objectives.

The governance reforms of 2003 require corporate boards to establish various committees. This paper studies how these committees are structured and the corresponding impacts. I find that independent directors with long tenures and multiple board seats tend to multitask and sit on more committees. The firms that multitask their independent directors are associated with comparatively low CEO compensation and high ROA. In particular, the benefits of multitasking independent directors are more pronounced in firms with long-tenured CEOs. I contribute to the literature by showing that board performance depends not only on the directors' identities, but also on their task assignments.

A survey of 255 papers that rely on the instrumental variable (IV) approach for identifying causal effects published in the “Big Three” finance journals reveals that IV estimates are larger than their corresponding uninstrumented estimates in about 80% of the studies, regardless of whether the potential endogeneity is expected to create a positive or negative bias based on economic reasoning. The magnitude of the IV estimates is, on average, nine times of that of the uninstrumented estimates even when economic insights do not suggest a downward bias of the latter. This study provides several explanations to the “implausibly large” IV estimates in finance research, and proposes best practices for identification-conscientious researchers. Received January 20, 2017; editorial decision April 7, 2017 by Editor Gregor Matvos

In this article, the author responds to comments by some accounting experts on his general decision model for CVP analysis. The author says that he would like to respond briefly to optimization function first, and then to point out a few implications of his model formulation for the stochastic break-even analysis as a final wrap-up of my two Replies. The author wishes to point out that the model formulation developed in his paper could be extended and applied to the break-even analysis under uncertainty in which the production quantity would play a significant role. The value of the term Q, quantity, of course, can be decided in a variety of ways depending on the goals and objectives of the top management. It is clear that the production quantity Q now enters the stochastic break-even analysis as a factor in the determination of the lower bound of the mean demand. This is a significant departure from the traditional break-even analysis, and thus may be viewed as a potential for future research.

The article presents the reply of the author to the article by D.R. Finley, assistant professor of accounting and Woody M. Liao, associate professor of accounting, published in the April 1981 issue of the journal "The Accounting Review," on author's general decision model. According to the author, the decision criteria developed by Finley and Liao for determining a product's marketability under normally distributed demand is a valid and smooth integration of equations derived in author's paper. Their decision criterion calls for a positive expected profit as a precondition for marketing a product. Such an approach to the break-even analysis under uncertainty has several major limitations. The first major limitation is that their decision criterion failed to take into account the decision maker's attitude toward risk-taking. The second major limitation of the choice criterion proposed by Finley and Liao is that it is a very pessimistic and highly inflexible approach. Such a negative and rigid view of uncertainty, will certainly be detrimental to the expansion and development of any business endeavors.

This paper presents a general decision model for cost-volume-profit (C-V-P) analysis which takes into account the crucial elements of random demand and level of production in the determination of actual sales and resulting pro purpose of the model construction offered here is to invest C-V-P analysis with realism, and to remove a basic deficiency from the traditional C-V-P model. The general model enables the management to choose the pest among alternative products, and to determine, concurrently, optimal production levels in the light of a firm's goals and objectives. Various measures of uncertainty with regard to the behavior of the profit are developed, and their applications are illustrated in numerical examples. Two FORTRAN programs are also supplied to facilitate computation.

This paper studies the effect of corruption on foreign direct investment. The sample covers bilateral investment from twelve source countries to 45 host countries. There are two central findings. First, a rise in either the tax rate on multinational firms or the corruption level in a host country reduces inward foreign direct investment (FDI). In a benchmark estimation, an increase in the corruption level from that of Singapore to that of Mexico would have the same negative effect on inward FDI as raising the tax rate by fifty percentage points. Second, American investors are averse to corruption in host countries, but not necessarily more so than average OECD investors, in spite of the U.S. Foreign Corrupt Practices Act of 1977.