Leadership & Organizational Behavior

The authors demonstrate that in dyadic negotiations, negotiators with a promotion regulatory focus achieve superior outcomes than negotiators with prevention regulatory focus in two ways. First, a promotion focus leads negotiators to claim more resources at the bargaining table. In the first two studies, promotion-focused negotiators paid more attention to their target prices (i.e., their ideal outcomes) and achieved more advantageous distributive outcomes than did prevention-focused negotiators.

This paper examines inventory management from an incentive perspective. We show that when a manager has private information about future attainable revenues, the residual income performance measure based on historical cost can achieve optimal (second-best) incentives with regard to managerial effort as well as production and sales decisions. The LIFO (last-in—first-out) inventory flow rule is shown to be preferable to the FIFO (first-in—first-out) rule for the purpose of aligning incentives.

We show that equity market liberalizations, on average, lead to a one percent increase in annual real economic growth over a five-year period. The effect is robust to alternative definitions of liberalization and does not reflect variation in the world business cycle. The effect also remains intact when liberalization is instrumented with quality of institutions-variables that explain liberalization but not growth and when a growth opportunity measure is included in the regression. Capital account liberalization has a less robust effect on growth than equity market liberalization has.

We propose a measure of capital market integration arising from a conditional regime-switching model. Our measure allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. We find that a number of emerging markets exhibit time-varying integration. Some markets appear more integrated than one might expect based on prior knowledge of investment restrictions. Other markets appear segmented even though foreigners have relatively free access to their capital markets.

We provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991. Econometrica 59(3), 667-686), which imply asymmetric aversion to gains versus losses. Our dynamic formulation nests the standard CRRA asset allocation problem as a special case. Using realistic data generating processes, we find reasonable equity portfolio allocations for disappointment averse investors with utility functions exhibiting low curvature.

Dispersion in investor beliefs and short-selling constraints can lead to stock market bubbles. This paper argues that firms, unlike investors, can exploit such bubbles by issuing new shares at inflated prices. This lowers the cost of capital and increases real investment. Perhaps surprisingly, large bubbles are not eliminated in equilibrium nor do large bubbles necessarily imply large distortions. Using the variance of analysts?

Participants recalled instances when they felt vicariously ashamed or guilty for another's wrongdoing and rated their appraisals of the event and resulting motivations. The study tested aspects of social association that uniquely predict vicarious shame and guilt. Results suggest that the experience of vicarious shame and vicarious guilt are distinguishable. Vicarious guilt was predicted by one's perceived interdependence with the wrongdoer (e.g., high interpersonal interaction), an appraisal of control over the event, and a motivation to repair the other person's wrongdoing.