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Articles 1 - 27 of 27
Full-Text Articles in Social and Behavioral Sciences
An Analysis Of Dynamic Price Discrimination In Airlines, Diego Escobari, Nicholas G. Rupp, Joseph Meskey
An Analysis Of Dynamic Price Discrimination In Airlines, Diego Escobari, Nicholas G. Rupp, Joseph Meskey
Economics and Finance Faculty Publications and Presentations
Prices for the same flight change substantially depending on the time of purchase. This article uses a unique data set with round‐the‐clock posted fares to document significant within‐day price variation. Labeling time‐variation as discriminatory is difficult because the cost of an unsold airline seat changes with inventory, days before departure, and aggregate demand expectations. After controlling for these factors and aggregating hourly fares to have a framework with two consumer types, we are able to identify a component that is largely consistent with dynamic price discrimination. We find higher prices during office hours (when business travelers are likely to buy) …
Corporate Political Strategies And Return Predictability, Chansog Kim, Incheol Kim, Christos Pantzalis, Jung Chul Park
Corporate Political Strategies And Return Predictability, Chansog Kim, Incheol Kim, Christos Pantzalis, Jung Chul Park
Economics and Finance Faculty Publications and Presentations
We assess whether observable corporate political strategies can serve as channels of value relevant political information flow into stock prices and form the basis for profitable return predictability strategies. We document that returns of politically connected firms’ stocks lead those of their non-connected peers, suggesting that information shocks associated with new policies and other political developments become evident first in the stock prices of firms that pursue political strategies and then, with delay, in those of similar non-connected firms.
The Impact Of Crime And Other Economic Forces On Mexico's Foreign Direct Investment Inflows, Rene Cabral, Andre V. Mollick, Eduardo Saucedo
The Impact Of Crime And Other Economic Forces On Mexico's Foreign Direct Investment Inflows, Rene Cabral, Andre V. Mollick, Eduardo Saucedo
Economics and Finance Faculty Publications and Presentations
This paper examines the effect of different crimes on Foreign Direct Investment (FDI) inflows into the 32 Mexican states. Using a state-quarter panel data for the period 2005 to 2015, we estimate alternative models of FDI, with fixed effects throughout a flexible lag-lengths methodology and System Generalized Method of Moments (SGMM) models in order to identify the determinants of FDI inflows into the country. The dependent variable in our model is the annual inflow of FDI and the independent variables are state level indicators (real wages and electricity consumption), and macroeconomic forces (the real exchange rate and interest rate). We …
Government Size And Openness: Evidence From The Commodity Boom In Latin America, Andre Vianna, Andre V. Mollick
Government Size And Openness: Evidence From The Commodity Boom In Latin America, Andre Vianna, Andre V. Mollick
Economics and Finance Faculty Publications and Presentations
Does government size increase to compensate for the volatility that arises from openness? We evaluate this compensation hypothesis by focusing on Latin America, whose economic growth in the 2000s has been often attributed to the commodity boom. Panel data regressions show that during the 2003-2010 commodity boom terms of trade volatility has positive effects on government size compared to the earlier 1990-2002 period. This key finding supports the compensation hypothesis, a result robust to dynamic panels allowing for reverse causation from government size to the real economy. Policy implications include diversification of the production structure and strengthening of regulatory framework.
Price Discrimination And Focal Points For Tacit Collusion: Evidence From The Airline Industry, Diego Escobari, Nicholas G. Rupp, Joseph Meskey
Price Discrimination And Focal Points For Tacit Collusion: Evidence From The Airline Industry, Diego Escobari, Nicholas G. Rupp, Joseph Meskey
Economics and Finance Faculty Publications and Presentations
We use unique data sets with round-the-clock posted fares and a regression discontinuity design to identify price discrimination in advance-purchase discounts. Price discrimination increases fares by 7.6% at 14 days to departure, and by 14% at 7 days to departure. While competition reduces price discrimination, it is unaffected by product variety for a multiproduct monopolist. The results show that the arbitrary thresholds of 7 and 14 days-in-advance serve as focal points for tacit collusion and to implement price discrimination in competitive markets. For round-trip tickets price discrimination depends on the days-in-advance for both the outbound and inbound flights.
Separating Between Unobserved Consumer Types: Evidence From Airlines, Diego Escobari, Manuel A. Hernandez
Separating Between Unobserved Consumer Types: Evidence From Airlines, Diego Escobari, Manuel A. Hernandez
Economics and Finance Faculty Publications and Presentations
We propose an alternative approach to identify unobserved consumer types and assess whether firms price discriminate. Unlike other screening schemes that rely on quantity discounts or product differentiation, in our finite mixture structure individuals have unit demands and the product is homogeneous. We implement the model using an original U.S. airlines data set. The results support the existence of two demand types. The high-type “business” traveler is less price sensitive, has a higher valuation, and pays a higher price than the low type “tourist.” The proportion of high types also increases as the departure date nears. (JEL C23, L93, …
Natural Disaster Risk And Corporate Leverage, Ahmed Elnahas, Dongnyoung Kim, Incheol Kim
Natural Disaster Risk And Corporate Leverage, Ahmed Elnahas, Dongnyoung Kim, Incheol Kim
Economics and Finance Faculty Publications and Presentations
Firms located in more disaster-prone counties adopt more conservative leverage policies than those in less disaster-prone counties. Compared to peers in the least disastrous areas, firms in the most disastrous areas are less levered by 3.6 percentage points, equivalent of foregoing $13.47 million. We argue that this systematic difference in leverage is attributed to elevated operating disruption, increased cost of capital, and tightened financial flexibility. Our findings indicate that firms incorporate natural disaster risk in financing decision, which is consistent with the trade-off theory of capital structure.
Debt Market Illiquidity And Correlated Default Risk, Siamak Javadi, Mohsen Mollagholamali
Debt Market Illiquidity And Correlated Default Risk, Siamak Javadi, Mohsen Mollagholamali
Economics and Finance Faculty Publications and Presentations
We empirically test the theoretical prediction of the impact of debt market liquidity on correlated default risk. Confirming the theory, our results indicate that the lower debt market liquidity, leads to an economically significant increase in the correlated default risk. Also consistent with theory, we show that this effect is more pronounced for short-term debt.
A Non-Parametric Approach To Testing The Axioms Of The Shapley Value With Limited Data, Victor H. Aguiar, Roland Pongou, Jean-Baptiste Tondji
A Non-Parametric Approach To Testing The Axioms Of The Shapley Value With Limited Data, Victor H. Aguiar, Roland Pongou, Jean-Baptiste Tondji
Economics and Finance Faculty Publications and Presentations
The unique properties of the Shapley value–efficiency, equal treatment of identical input factors, and marginality–have made it an appealing solution concept in various classes of problems. It is however recognized that the pay schemes utilized in many real-life situations generally depart from this value. We propose a non-parametric approach to testing the empirical content of this concept with limited datasets. We introduce the Shapley distance, which, for a fixed monotone transferable-utility game, measures the distance of an arbitrary pay profile to the Shapley pay profile, and show that it is additively decomposable into the violations of the classical …
Labor Law And Innovation Revisited, Bill B. Francis, Incheol Kim, Bin Wang, Zhengyi Zhang
Labor Law And Innovation Revisited, Bill B. Francis, Incheol Kim, Bin Wang, Zhengyi Zhang
Economics and Finance Faculty Publications and Presentations
This paper examines the impact of changes in job security on corporate innovation in 20 non-U.S. OECD countries. Using a difference-in-differences approach, we provide firm-level evidence that the enhancement of labor protection has a negative impact on innovation. We then discuss possible channels and find that employee-friendly labor reforms induce inventor shirking and a distortion in labor flow. Further investigation reveals that the negative relation is more pronounced in 1) firms that heavily rely on external financing, 2) firms that have high R&D intensity, 3) manufacturing industries, and 4) civil-law countries. Our micro-level evidence indicates that enhanced employment protection impedes …
Changes In Sentiment On Reit Industry Excess Returns And Volatility, Daniel Huerta-Sanchez, Diego Escobari
Changes In Sentiment On Reit Industry Excess Returns And Volatility, Daniel Huerta-Sanchez, Diego Escobari
Economics and Finance Faculty Publications and Presentations
REIT characteristics pose unique risks and benefits to investors who seek liquid diversification and hedging vehicles to complement their portfolios. This paper tests for the asymmetric effect of individual and institutional investor sentiment on REIT industry returns and conditional volatility. We simultaneously model the impact of two markedly different groups of investors on the return generating process of the REIT industry. Our findings suggest that noise trading imposes significant systemic risk on the realization of REIT industry returns. Interestingly, corrections in institutional investor expectations have a larger effect on REIT industry returns and volatility than changes in individual investor expectations. …
Disentangling The Impacts Of Industrial And Global Diversification On Firm Risk, Mohammad Jafarinejad, Thanh Ngo, Diego Escobari
Disentangling The Impacts Of Industrial And Global Diversification On Firm Risk, Mohammad Jafarinejad, Thanh Ngo, Diego Escobari
Economics and Finance Faculty Publications and Presentations
We examine the impact of corporate diversification on firm risk exposure from 1998 to 2016. We find that both global and industrial diversification mitigate idiosyncratic and world market risk while having a negligible impact on U.S. market risk, but the effects vary before, during, and after the financial crisis of 2007–2009. Before the crisis, only global diversification mitigates idiosyncratic risk, but it increases firms' exposure to world market risk. During the crisis, industrial diversification increases idiosyncratic risk, but both types of diversification increase exposure to U.S. market risk. After the crisis, both types of diversification increase firms' exposure to U.S. …
Local Investors’ Preferences And Capital Structure, Binay K. Adhikari, David C. Cicero, Johan Sulaeman
Local Investors’ Preferences And Capital Structure, Binay K. Adhikari, David C. Cicero, Johan Sulaeman
Economics and Finance Faculty Publications and Presentations
We provide evidence that publicly listed firms respond to capital supply conditions shaped by local investing preferences. The local supply of credit is higher and more stable in areas where demographics suggest that local investors prefer safer portfolios. We find that firms headquartered in these areas use more debt financing. The demographics-leverage relation is more pronounced for non-investment-grade and unrated firms that cannot easily tap public markets (about two-thirds of U.S. public companies). Analyses of firms’ financing activities around exogenous shocks to credit supplies – including interstate banking deregulation and the 2008-2009 financial crisis – support the capital supply effect. …
Institutional Development And Foreign Banks In Chile, Brian Du, Alejandro Serrano, Andre Vianna
Institutional Development And Foreign Banks In Chile, Brian Du, Alejandro Serrano, Andre Vianna
Economics and Finance Faculty Publications and Presentations
This paper analyzes the effects of foreign banks on developing countries’ bank performance. We study this relationship from a different perspective by focusing on Chile, an emerging market with strong institutions. The results from dynamic panel regressions on hand-collected financial statement data from 2005 to 2014 indicate that foreign banks improve banking sector competitiveness, reduce the volatility of returns, and increase commercial and consumption loans. The overall evidence suggests that, in the presence of solid institutions, foreign banks improve the banking sector in developing countries. Therefore, public policies on foreign banks should be more effective when accompanied by advances in …
Ideological Positions Of Hispanic College Students In The Rio Grande Valley: Using A Two-Dimensional Model To Account For Domestic Policy Preference, William Greene, Mi-Son Kim
Ideological Positions Of Hispanic College Students In The Rio Grande Valley: Using A Two-Dimensional Model To Account For Domestic Policy Preference, William Greene, Mi-Son Kim
Economics and Finance Faculty Publications and Presentations
While a good amount of research has been conducted regarding the voting behavior of Hispanics in the United States, there is a dearth of analysis of the underlying ideologies of members of this ethnic group, especially in contrast to their partisan self-identifications. This is especially true of one particular sub-category: Hispanics along the Rio Grande Valley of south Texas, of whom a majority consistently vote Democrat, but whose personal values would seem to make them a natural constituency for issue positions associated with the Republican Party (Garrett, 2010). The goal of this study is to analyze the ideological positions of …
Estimation Of Cost Efficiency Without Cost Data, Levent Kutlu, Ran Wang
Estimation Of Cost Efficiency Without Cost Data, Levent Kutlu, Ran Wang
Economics and Finance Faculty Publications and Presentations
One of the advantages of conduct parameter games is that they enable estimation of market power without total cost data. In line with this, we develop a conduct parameter based model to estimate the firm specific “marginal cost efficiency” and conduct without using total cost data. The marginal cost efficiency is an alternative measure of efficiency that is based on deadweight loss. We illustrate our methodology by estimating firm-route-quarter specific conducts and marginal cost efficiencies of U.S. airlines for Chicago based routes without using route-level total cost data.
What Do Outside Directors Really Do? Evidence From Their Voting Activities, Wonseok Choi, Monika K. Rabarison
What Do Outside Directors Really Do? Evidence From Their Voting Activities, Wonseok Choi, Monika K. Rabarison
Economics and Finance Faculty Publications and Presentations
Prior studies on the monitoring role of outside directors tend to be based on the assumption of interest differences between agents and principals and adhere to arbitrary definitions of board independence or quality. Using a unique dataset of individual outside directors’ voting activities on items proposed by managers of Korean public firms between FY2010 and FY2014, we investigate whether outside directors play an effective role in mitigating agency problems, without such assumption and arbitrary definitions. We find that outside directors can provide effective monitoring by expressing strong dissension, such as disagreeing, withdrawing their votes, or holding their votes on managers’ …
Managerial Incentives And Changes In Corporate Investments Following The Inception Of Credit Default Swap Trade, Hyun A. Hong, Ji Woo Ryou, Anup Srivastava
Managerial Incentives And Changes In Corporate Investments Following The Inception Of Credit Default Swap Trade, Hyun A. Hong, Ji Woo Ryou, Anup Srivastava
Economics and Finance Faculty Publications and Presentations
A credit default swap (CDS) enables a lender to hedge its risk exposure on a loan given to reference client. The lender then reduces the monitoring of the client’s activities as well as aiding the distressed client. Two contrasting predictions can be made about how the borrower would respond to the altered lender-borrower relationship. (1) The borrower reduces risky investments to lower its vulnerability to financial distress. (2) The borrower pursues volatility-enhancing projects to increase the value of call options built into its shareholder investments. We find that a borrower shifts to a more conservative policy when its managers have …
Empirical Evidence On The Relationship Between Audit Probability And Internal Revenue Service Budget Levels, Akinloye Akindayomi, Gideon T. Akileye, Adeduro A. Ogunmakin
Empirical Evidence On The Relationship Between Audit Probability And Internal Revenue Service Budget Levels, Akinloye Akindayomi, Gideon T. Akileye, Adeduro A. Ogunmakin
Economics and Finance Faculty Publications and Presentations
Despite a large literature on tax avoidance strategies by individuals and the IRS ability to curb them, how the agency’s audit/examination activities respond to tax expenditures within the individual taxation context is not well understood. We hypothesize that IRS audit probability of individual tax returns will positively respond to the magnitude of different tax expenditure drivers if the agency has a shot at curtailing them. We find that while the probability of IRS audit increases as the agency’s budget on enforcement activities increases, tax expenditures do not appear to prompt IRS enforcement activities in many of the tax expenditures drivers.
Institutions: Key Variable For Economic Development In Latin America, Andre Vianna, Andre V. Mollick
Institutions: Key Variable For Economic Development In Latin America, Andre Vianna, Andre V. Mollick
Economics and Finance Faculty Publications and Presentations
This article examines economic development from 1996 to 2015 for 192 countries and specifically Latin America. Evidence shows that each 0.1-point increase in institutions impacts a 3.9% improvement in Latin American per capita output versus a 2.6% effect on world development. This new evidence from Latin America shows a missing opportunity to develop at higher annual pace than the 2.14% average, mainly due to the deterioration in rule of law. We conjecture the efficiency of monetary/fiscal policies will improve if policymakers emphasize projects that foster improvements to institutional quality, such as transparency, public spending quality and fiscal responsibility.
The Plough, Gender Roles, And Corruption, Gautam Hazarika
The Plough, Gender Roles, And Corruption, Gautam Hazarika
Economics and Finance Faculty Publications and Presentations
Cross-country empirical studies of corruption using ordinary least squares commonly find that nations in which women play a greater role in economic and public life suffer less corruption. This has been a controversial finding since measures of women’s participation in the economy and politics are likely endogenous. This study uses an aspect of national ancestral geography as a novel instrumental variable in the estimation of the true causal effects of gender upon corruption. It thereby finds that ordinary least squares estimates of the effects of gender upon corruption are biased. This conclusion is upheld in time-series fixed-effects estimation.
Estimating Efficiency In A Spatial Autoregressive Stochastic Frontier Model, Levent Kutlu
Estimating Efficiency In A Spatial Autoregressive Stochastic Frontier Model, Levent Kutlu
Economics and Finance Faculty Publications and Presentations
The spatial autoregressive stochastic frontier model of Glass et al.(2016) is based on distributional assumptions on two-sided and one-sided error terms. After estimating the model parameters, the efficiency estimates need to be corrected due to the presence of spatial autoregressive term in their model. Glass et al.(2016) estimate the corrected efficiencies by employing ideas from a distribution-free method on the efficiency estimation, which may be sensitive to outliers. We propose an alternative way to correct efficiency estimates that is in line with the distribution-based methods.
A Distribution-Free Stochastic Frontier Model With Endogenous Regressors, Levent Kutlu
A Distribution-Free Stochastic Frontier Model With Endogenous Regressors, Levent Kutlu
Economics and Finance Faculty Publications and Presentations
We provide a guideline for estimating a distribution-free panel data stochastic frontier model in the presence of endogenous variables. In particular, we consider variations of the within estimator of Cornwell et al. (1990) to allow endogenous regressors.
Peer Influence On Payout Policies, Binay K. Adhikari, Anup Agrawal
Peer Influence On Payout Policies, Binay K. Adhikari, Anup Agrawal
Economics and Finance Faculty Publications and Presentations
Using a large sample of US public companies, we find robust evidence that firms’ payout policies, i.e., dividends and share repurchases, are significantly influenced by the policies of their industry peers. To overcome endogeneity problems, we employ instrumental variable techniques based on peers’ stock price shocks. Peer influence on payouts is more pronounced among firms that face greater product market competition and operate in better information environments. With regards to dividends, firms, especially smaller and younger firms, are more sensitive to industry peers that are similar to them in size and age. However, mimicking repurchases is concentrated among large and …
Bank Net Interest Margins, The Yield Curve, And The 2007–2009 Financial Crisis, Peter V. Egly, David W. Johnk, Andre V. Mollick
Bank Net Interest Margins, The Yield Curve, And The 2007–2009 Financial Crisis, Peter V. Egly, David W. Johnk, Andre V. Mollick
Economics and Finance Faculty Publications and Presentations
Using quarterly call report data from 2000 to 2016, we reexamine the relationship between net interest margins (NIM) and the yield curve for more than 5,500 U.S. commercial banks. In the full sample, yield curve and RGDP growth have positive effects on NIM, while inflation and deposit‐to‐loan ratios (D/L) have negative effects. Splitting the sample around the 2007–2009 crisis, we show the impact of yield curve and RGDP growth on NIM increasing during the “recovery” (2009Q3 to 2016Q4), and inflation and D/L changing signs. Positive effects of yield curve on profits vary with bank size and change over time.
Identifying Price Bubble Periods In The Energy Sector, Shahil Sharma, Diego Escobari
Identifying Price Bubble Periods In The Energy Sector, Shahil Sharma, Diego Escobari
Economics and Finance Faculty Publications and Presentations
In this paper we test for the existence of single and multiple episodes of explosive behavior in three energy sector indices (crude oil, heating oil, and natural gas) and five energy sector spot prices (West Texas Intermediate (WTI), Brent, heating oil, natural gas, and jet fuel). The results from the Supremum Augmented Dickey-Fuller (SADF) and the Generalized SADF tests provide strong statistical evidence of explosive behavior in all of our energy series. A simple theoretical framework of commodity pricing allows us to understand the assumptions to interpret explosive behavior as bubbles. By constructing implied convenience yields using futures prices we …
Deconstructing The Corporate Psychopath: An Examination Of Deceptive Behavior, Corey A. Shank
Deconstructing The Corporate Psychopath: An Examination Of Deceptive Behavior, Corey A. Shank
Economics and Finance Faculty Publications and Presentations
This paper examines whether business students deceive others more often than non-business students. A cheap talk experiment and an ethics questionnaire are employed to examine the subject’s behavior. Fundamental differences, such as psychopathic personality, are used to examine their role in deceptive and unethical behavior. The results show that business students deceive others for personal gain more often than non-business students when there is the most to gain; however, business students find deception committed by others as unethical. Business students exhibit more psychopathic tendencies compared to non-business students, including being more likely to fit the prototypical psychopath profile. This fundamental …