Cultural Diversity in the United States and Its Impact on Human Development

Previous studies have yielded mixed results on the impact of cultural diversity on economic performance. We find a positive relationship in the United States between cultural diversity and a comprehensive measure of human development that incorporates health, education, and income. We also disaggregate cultural diversity into three components including ethnicity, language, and religion. We find a positive relationship between human development and both religious and language diversity, and a negative relationship with ethnic diversity. These relationships are robust, using several alternative mathematical measures of diversity. Our results are consistent with diversity generating benefits from exposure to a variety of experiences, ideas, and skills while introducing costs due to difficulty in communication, difference in preferences, and conflict between polarized groups. We conclude that strong institutions are essential to maximize the benefits of diversity while mitigating the associated costs

Diversity in the Heartland of America: The Impact on Human Development in Indiana

This article is the third in a series of studies measuring the impact of cultural diversity on human development. We disaggregate cultural diversity into three components: ethnicity, language, and religion. The first study examined the impact of diversity internationally. We found that countries are worse off with greater diversity, especially religious diversity; however, we found that more-prosperous countries with strong institutions benefited from increased diversity. We concluded that strong institutions are essential to maximize the benefits of diversity while mitigating the associated costs. The second study examined the impact of diversity within the United States, where institutional strength was assumed to be relatively great and similar between states. We found an overall negative impact from diversity. Ethnic diversity was negatively associated with human development, while religious and language diversity had a positive impact. We concluded that in the United States, there is more tolerance for religious and language differences compared to ethnic differences. In this third study, we examine the impact of diversity within the state of Indiana. As with our national results, we find a generally negative relationship between human development and diversity. Ethnic diversity has a negative impact, while religious and language diversity are generally positive influences. Strong political and legal institutions may not be sufficient to extract net benefits from diversity if social attitudes that guide behavior are not supportive. The results suggest that net benefits from diversity in Indiana may depend on improvement of social attitudes and in commitment to social services that support historically disadvantaged minority groups

The source and value of voting rights and related dividend promises

This paper examines the relative share pricing of 98 firms with two classes of common stock trading in the United States from 1984 to 1999. The firms feature common stock classes with differential voting rights and, in some cases, differential rights to dividends. The observed voting premiums are higher than those reported in previous studies of U.S. firms and are dependent on the form of dividend promise to the low-vote shareholder. The voting premium is higher in the presence of a control threat, when insiders do not hold controlling voting power, and during periods of poor firm performance

A Case For Teaching Business Ethics In A Cost-Benefits Framework: Are Business Students More Discriminating In Their Decision Making?

Based on a survey questionnaire of 299 university students, we find that business majors act more ethically than other majors in some cases and less ethically in others. Business students appear more likely to adopt the consequentialist framework to evaluate ethical dilemmas. Our results are consistent with business students being more discriminating based on the perceived costs and benefits of each case. We find differences in behavior based on active versus passive unethical behavior and based on the identity of the potentially harmed party. This evidence suggests that business school curricula that focus on acting ethically because it is the right thing to do may be ineffective. Our results indicate it may be important to openly discuss unethical behavior in a framework that considers the long-term consequences to all affected stakeholders. As a result, business students and future professionals may conclude that ethical behavior is supported by careful cost-benefit analysis

The Role of Insider Influence in Mutual-to-Stock Conversions

Using a sample of 347 demutualizing thrifts from 1991 to 2004, we show that the level of inside participation is not a traditional signal of firm performance. We conclude that unanticipated inside participation reflects the incentives of insiders to reduce the size of the offer to influence the level of expected IPO returns. We find unanticipated inside participation is related to lower offer size and higher initial returns, but we do not find a relationship between inside participation and post-IPO performance

Mutual Holding Companies: Evidence of Conflicts of Interest through Disparate Dividends

The mutual holding company (MHC) structure establishes a dual-class stock that creates a unique opportunity to transfer wealth from thrift depositor-owners to new minority shareholders through the disparate payment of dividends. We show that MHCs are priced higher than comparable non-MHCs and dividend policy is a significant component of this valuation. We also show that MHC thrifts pay significantly higher dividends than non-MHC thrifts and that an Office of Thrift Supervision (OTS) ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends. These results have policy implications of special significance given that the OTS reversed its position in 2000 and because of the current controversy over the use of the MHC structure in the financial service industry

Demutualization: Determinants and consequences of the mutual holding company choice

We investigate the determinants and consequences of the mutual holding company (MHC) structure that allows mutual thrifts to issue stock to outside shareholders while maintaining the mutual form. Capital constrained firms with greater profit opportunities are more likely to choose a full demutualization; demonstrating that the MHC choice can be used to control for over- and under-investment costs. During periods of greater regulatory constraints, MHC firms have lower offer-day returns than full demutualizations. MHC firms are also less likely to be acquired as the MHC structure provides protection from the market for corporate control. Demonstrating a clear preference by minority shareholders for the elimination of the MHC structure, the announcement of a second-stage conversion generates a 12 percent return