The Information Content of Mandatory Disclosures

The information quality of mandatory financial reporting depends on two factors: (1) Are standards appropriate to produce financial statements that provide investors with sufficient information? (2) Is compliance to standards enforced by appropriate institutions? This paper addresses the question if firms should be able to create hidden reserves as an example for the effect of standards on information quality. The analysis shows that rational investors are able to correctly decipher financial statements – independent of the standards in use. The question of sufficient enforcement proves to have a deeper impact on the quality of information.

Parasites and Raven Mothers: A German-Japanese Comparison on (Lone) Motherhood

Having a child out of wedlock used to be associated with shame and scorn. This is mostly not the case anymore in the western world. Therefore, freed from social sanctions, single motherhood has become an additional family-choice alternative for women, along with marriage and childlessness. Yet, the institutions that infl uence women’s decisions diff er across countries. We compare the institutional frame, in particular labor-market characteristics and family law, in Germany and Japan and, in addition, the interaction between culture and institutions. Both countries had a very traditional (one-earner) family system until the second half of the 20th century. Now we can observe that social changes that happened in Germany decades ago are happening only now in Japan. We analyze if and how the consequences in terms of family structures and fertility rates that resulted in Germany can be transfered to Japan.Out-of-wedlock childbearing; fertility; family law; Germany; Japan

Hermaphroditism: What’s not to Like?

Male and female social roles are largely predicated on the fact that male and female reproductive functions are separated in different individuals. This paper asks why gonochorism rather than hermaphroditism, is the rule among vertebrates. We argue that hermaphroditism may be unstable in the face of heterogeneity. Building on the Bateman principle – access to eggs, not sperm, limits reproductive success – and in line with Trivers-Willard, we show that low quality individuals will prefer to be all female. Moreover, without secondary sexual differentiation (SSD), males cannot exist in equilibrium. With sufficient SSD, however, males may outcompete hermaphrodites. As a result, while hermaphrodites may coexist with males and females, they mate among themselves only. The lack of interbreeding between hermaphrodites and gonochorists may form the basis for further speciation. Furthermore, while hermaphrodites strive to mate their male function and preserve their female function, equilibrium hermaphroditic mating is reciprocal. Reciprocal mating, in turn, makes hermaphrodites vulnerable to male-to-male violence, a form of SSD that may have contributed to the rarity of hermaphroditism.

Parasites and Raven Mothers: A German-Japanese comparison on (lone) motherhood

Having a child out of wedlock used to be associated with shame and scorn. This is mostly not the case any more in the western world. Therefore, freed from social sanctions, single motherhood has become an additional family-choice alternative for women, along with marriage and childlessness. Yet, the institutions that influence women’s decisions differ across countries. We compare the institutional frame, in particular labor-market characteristics and family law, in Germany and Japan and, in addition, the interaction between culture and institutions. Both countries had a very traditional (one-earner) family system until the second half of the 20th century. Now we can observe that social changes that happened in Germany decades ago are happening only now in Japan. We analyze if and how the consequences in terms of family structures and fertility rates that resulted in Germany can be transfered to Japan.

Contracting still matters! Or: How to design a letter of intent

Any cooperation that profits from relation-specific investments suffers from the well-known hold-up problem. If investments are not enforceable by an outside authority, the gains fall prey to individual opportunism caused by a free-rider problem. If, in addition, individual investments exhibit positive cross effects, Che and Hausch (1999) provide a negative result and show that contracts cannot overcome the hold up due to a lack of verifiable commitment. This paper develops a mechanism that provides such a commitment device: (1) It introduces an acknowledgement game that procures reliable. (2) It embeds the original contracting problem into two institutional designs - a market based one and a private design - that support enforcement. These two devices reestablish efficient investments as enforceable results of a contract.

How and When Can Economic Skills Enhance Cooperation?

Conventional wisdom has it that economic training and education tends to produce less cooperative people – where cooperation means following group-oriented goals. This issue has attracted particular attention in discussions of the current economic crisis where it was asked if increasing marketization of societies has created an environment encouraging amoral selfish behavior of financial intermediaries and other economic agents. We provide some evidence against this claim with the help of an experiment, using an investment game with a public-goods character. Modest guidance of strategic abilities increases the degree of cooperation if the institutional setting permits reputation building. We thus conclude that economic practice can enhance cooperation in a socially stable environment

The role of sports physicians in doping: a note on incentives

How to ban the fraudulent use of performance-enhancing drugs is an issue in all professional – and increasingly in amateur – sports. The main effort in enforcing a “clean sport” has concentrated on proving an abuse of performance-enhancing drugs and on imposing sanctions on teams and athletes. An investigation started by Freiburg university hospital against two of its employees who had been working as physicians for a professional cycling team has drawn attention to another group of actors: physicians. It reveals a multi-layered contractual relations between sports teams, physicians, hospitals, and sports associations that provided string incentives for the two doctors to support the use performance-enhancing drugs. This paper argues that these misled incentives are not singular but a structural part of modern sports caused by cross effects between the labor market for sports medicine specialists (especially if they are researchers) and for professional athletes

Contracting still matters! Or: How to design a letter of intent

Any cooperation that profits from relation-specific investments suf- fers from the well-known hold-up problem. If investments are not enforceable by an outside authority, the gains fall prey to individual opportunism caused by a free-rider problem. If, in addition, individ- ual investments exhibit positive cross effects, Che and Hausch (1999) provide a negative result and show that contracts cannot overcome the hold up due to a lack of verifiable commitment. This paper develops a mechanism that provides such a commitment device: (1) It introduces an acknowledgement game that procures reliable. (2) It embeds the original contracting problem into two institutional designs - a market based one and a private design - that support enforcement. These two devices reestablish efficient investments as enforceable results of a contract

Social Coordination, Self-Image, and Cooperation in Investment Games

Why do people cooperate in social groups? This paper provides experimental evidence that the fear of losing the self-image as a norm-compliant player might be one explaining factor. To that end an investment game with a public-goods character is played in different institutional setups that vary in the possibility to build reputation as well as in the communication of potential social norms. In addition, it provides a model that explains participants' decisions based on an extension of the neoclassical model. It covers a trade-off between pure wealth maximization and the minimization of damage to the self-image of being compliant. Experimental results show that this tradeoff is important in those treatments that allow for reputation building. We conclude that the wish to “do the right thing” can enhance cooperation in a socially stable environment