This study concerns business ethics. In particular, this study is a critical review of consequentialist ethics, namely, the tragedy of contract, which underlies managerial practices at the workplace and which equates empirical flourishing with behavioural morality, an instance of the naturalistic fallacy. It shows that the application of consequentialist ethics in the corporate world is fundamentally flawed such that empirical consent, a key element of consequentialism, obtains at the expense of the weaker party to an exchange and that consent-based contracting both precludes the autonomy of the subject and paradoxically invites the influence of the third-part expert. The alternative practice is addressed with respect to the tradition of social contract, which places public ordering over private ordering.

Quality management has been regarded as a valuable strategy or activity for the public sector. The purpose of this paper is to examine the relationship between implementation of quality management practices and performance in the public sector. Moreover, it investigates what effect the practices have on performance in the public sector by dividing relevant practices into two types of quality management practices based on the previous literature review. By analyzing data on 130 samples of StateOwned Enterprises and 370 samples of para-government agencies, this study reveals that implementing quality management has a positive effect on both financial performance and the customer satisfaction index. In addition, behavioral quality management practices have an indirect effect on the relationship between technical quality management and performance.

In an international context, we examine firms’ strategic choices in the management of knowledge flow. Multinational firms can manage subsidiary knowledge flows by adjusting the level of “localization” in the top management – by sending expatriates to transfer internal knowledge or hiring local managers to source external knowledge. Drawing on a panel data of Japanese overseas subsidiaries across 18 host countries, we find that subsidiaries localized top management more when firms had less internal knowledge and when external knowledge sources were rich. Greater subsidiary and parent local experience altered these two main effects in opposite directions. These findings highlight nuances in firms’ choices of how to manage knowledge flows in foreign markets.

Most data-driven decision support tools do not include input from people. We study whether and how to incorporate physician input into such tools, in an empirical setting of predicting the surgery duration. Using data from a hospital, we evaluate and compare the performances of three families of models: models with physician forecasts, purely data-based models, and models that combine physician forecasts and data. We find that combined models perform the best, which suggests that physician forecasts have valuable information above and beyond what is captured by data. We also find that applying simple corrections to physician forecasts performs comparably well.

Risk sharing among banks helps them diversify idiosyncratic risks, but their interbank borrowing costs can become more volatile and bring financial fragility. Banks facing liquidity shortages need to pay an extra cost of credit when their lenders have bargaining powers, which depends on the likelihood of fire-sale and the fire-sale price discount. Risk sharing can decrease likelihood of liquidity shortage and lower the borrowing cost. However, the fire-sale discount increases, since joint distress arises and more assets are liquidated simultaneously. Though the interbank borrowing cost decreases with risk sharing, it may become more sensitive to changes in aggregate uncertainty.

Using a non-expected utility function that exhibits constant relative risk aversion (CRRA), Cho (2001) explores a theoretical model of asset pricing under heterogeneous beliefs in the case where only one risky asset is traded. This paper extends his work into the case where agents trade a risky asset and the riskless asset as well, adopting a non-expected utility function that exhibits constant absolute risk aversion (CARA). In a variant of the general equilibrium setting of Lucas (1978), major findings of the paper are as follows: (i) When agents differ only in expectations about future dividends, the question of who is the buyer and who is the seller of each asset depends solely on the degree of optimism. Unlike the case of Cho (2001), there is no role of intertemporal substitution. (ii) Increased dispersion of expectations will raise the risk-free rate and lower the risky asset’s price. This result is consistent with that of Abel (1990). (iii) Although the equity premium goes up as a consequence of result (ii), heterogeneity per se does not help to resolve the puzzle posed by Mehra & Prescott (1985) and Weil (1989). (iv) The trading volume of the risky asset increases proportionately with the cross-sectional variance of expectations, and the same is true for the riskless asset. (iv) An increase in the risk-free interest rate will reduce the trading volume of the riskless asset unless the intertemporal substitution parameter is less than 1/2. In addition to these findings, many more comparative statics results are obtained from closed-form solutions for asset prices and trading volume.

Under the current bank regulatory capital framework, loan loss reserves (LLR) are added back to regulatory capital up to a certain limit (henceforth, ‘add-backs’). This study examines how equity investors value these addbacks. Decomposing LLR into add-backs and other LLR, we find that add-backs have positive value relevance if such add-backs increase total regulatory capital and other LLR has negative value relevance. This positive value relevance of add-backs is driven by banks with low capital levels. Our finding indicates that the market perceives add-backs as capital rather than as an expense.

In this paper, we attempt to describe the relationship between the observation of coworker idiosyncratic deals (i-deals: Rousseau et al., 2006; Rousseau, 2005) and employee turnover intention by incorporating two explanatory mechanisms: workplace flexibility and procedural justice. We hypothesize contrasting implications of coworker flexibility i-deals and developmental i-deals on these two mediating mechanisms. Based on a sample of 176 employees, we find differential implications for the two types of i-deals and mediators. We discuss these findings and the implications of our research.

In this paper, we examine the contribution of labor quantity, labor quality, ICT capital, non-ICT capital, and the productivity of production system to potential output growth for 18 OECD countries from 1990 to 2016. For this, we develop a measure of a country’s potential output growth using a time-series analysis and apply panel data regressions to find empirical evidence. Empirical findings suggest that in developed countries, improvements in productivity and labor quality are major determinants that lead to an increase in economic potential.

Recent studies have provided evidence that the association between earnings and contemporaneous returns is stronger when returns are negative, reflecting accounting conservatism. In this paper, we investigate two important aspects in this asymmetric timeliness of earnings: (1) whether the contemporaneous earnings-return relation is concave and (2) whether earnings show asymmetric timeliness with respect to lagged returns. We show that the relation between earnings and stock returns is more salient for extreme negative returns, implying a concave relationship between earnings and returns. We also find asymmetric timeliness with respect to lagged returns. Moreover, we find similar results using earnings line items such as special items and discontinued items. Overall, our evidence suggests that the Basu-type regression without considering these two aspects biases the extent of conditional conservatism.