Contractual Perspective Research Articles

The contractual and value relevance of reported earnings in a dividend-focused environment

This study investigates the relevance of reported earnings in the context of an institutional environment, i.e., Switzerland, in which investors focus on dividends. In conjunction with a dividend focus, the financial reporting environment faced by Swiss firms provides their managers with more accounting discretion than managers of Anglo-Saxon firms typically have. From a contractual perspective, dividendbased earnings management is expected since Swiss corporate law explicitly states that dividends, which must be voted on by stockholders, are to be based upon a firm's reported earnings. From a value perspective, thin trading conditions and a long-term investment horizon are expected to increase the importance of dividend payments and to influence the informativeness of reported earnings. Results indicate that Swiss managers do engage in dividend-based earnings management, that earnings quality signals are used by managers to voluntarily constrain their accounting choices and that the value relevance of earnings is conditional upon dividend payments.

Capabilities and the Theory of the Firm

The recent decade has witnessed a strong expansion of work on the firm, both from a capabilities perspective and from a contractual perspective. These two bodies of theories are often thought to be fundamentally different, because their domains of applications are different (knowledge-accumulation vs contracts and incentives). However, we need to integrate propositions from capabilities perspectives with ideas about economic organization (markets, hybrids, firms). This is because only a more unified theory will allow us to understand such issues as the dynamics of the modern corporation, and, more topically, the costs and benefits of outsourcing. I discuss the relations between these two bodies of theories. It is possible to argue in favor of a relation of complementarity between the two and pursue a research strategy on this basis. However, it is also possible two claim that they are rivals. Along this line, it is argued that the capabilities perspective contains propositions about economic organization that are not to be found within the modern Coasian approach to economic organization, and thus may be seen as a distinct emerging perspective on economic organization.

Capabilities and the Theory of the Firm

The recent decade has witnessed a strong expansion of work on the firm, both from a capabilities perspective and from a contractual perspective. These two bodies of theories are often thought to be fundamentally different, because their domains of applications are different (knowledge-accumulation vs contracts and incentives). However, we need to integrate propositions from both perspectives, because only a more unified theory will allow us to understand such issues as the dynamics of the modern corporation. I discuss the relations between these two bodies of theories. It is possible to argue in favor of a relation of complementarity between the two. However, it is also possible two daim that they are rivals. The capabilities perspective contains propositions that are not to be found within the modern Coasian approach and may be seen as a distinct emerging perspective on economic organization.

The Firm as an Institution: Recent Evolution in the Contractual Perspective

SummaryThe aim of this paper is to clarify the connection between types of firms and types of assumptions about the information structure. Building on the role of information structure, notions of the firm as an organisation have been put forward which suggest that the firm can assume an alternative (to the market) coordinating role in conditions of contractual incompleteness. A comparison (and opposition) between two recent approaches to the theory of the firm as an organisation seems to suggest that different notions of incomplete contracts imply substantial differences in terms of the meaning of a Pareto-efficiency improvement, of the role to assign to vertical integration, and of the determinants of the dimension of the firm.

Theories of the firm: contractual and competence perspectives

The article compares alternative approaches to the theory of the firm. The two main approaches confronted are the contractual (Coasian) perspective and the competence (evolutionary) perspective. Whereas the firm as a repository of tacit knowledge is neglected in the contractual perspectives, it occupies center stage in the competence perspective. It is argued that the competence perspective is not only applicable an understanding of the sources of firms' competitive advantage, but may also be applied to the issues of the existence and the boundaries of the firm. This means that a distinct theory of the firm can be constructed on the basis of evolutionary theory.

Corporate Stakeholders: A Contractual Perspective

Corporate Stakeholders: A Contractual Perspective

Competitive Monies and the Suffolk Bank System: A Contractual Perspective

In recent years, a number of monetary economists have begun to focus research on an old topic: economics of private money or free banking. Much of this literature is motivated by a sense that competitive markets may well prove superior to government regulation in coping with problems inherent in a laissez-faire monetary system. Noting this, Robert King, in his recent survey paper, suggests that: The central focus of future research in this area must be types of monetary institutions that private will [10,123]. By monetary institutions, King presumably means contractual mechanisms utilized in production and exchange relationships involving private money. This paper examines one mechanism-the so-called Suffolk Bank System-which the market did deliver in New England from around 1820 to just before Civil War. While most historians have looked favorably on Suffolk mechanism', almost all have mischaracterized underlying rationale for system. In particular, most analysts have interpreted establishment of Suffolk Bank's note redemption program as a response to Gresham's Law (Bad money drives out good money). However, conditions of 19th century banking in New England (and elsewhere as well) prior to establishment of Suffolk system rule out any application of Gresham's Law. Prior studies have also neglected importance of evolutionary changes in Suffolk Bank system. Over first five years of its existence, what we will label Suffolk I was largely unsuccessful both in terms of its profitability and its capacity to control behavior of banks participating in system. Several contract adaptations introduced in 1824 accounted for a sharp reversal in fortunes of Suffolk Bank system; it is Suffolk II which has gained accolades of bank historians. Ironically, Suffolk II increased prospects for a Gresham's Law kind of outcome (of sort emphasized by Akerlof [1]). However, contract structure of Suffolk II involved properties sufficient to allow that Suffolk

The New Economics of Organization

Over the last ten years or so, an important approach to the study of organizations has emerged within economics. It is perhaps best characterized by three elements: a contractual perspective on organizational relationships, a theoretical focus on hierarchical control, and formal analysis via principal-agent models. This paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy. So far, positive political theory has not contributed much to our understanding of public bureaucracy. In part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration. The other side of the coin, however, is that positive theorists have not made much of an effort to develop theories of bureaucracy. Their concerns have centered around two basic mechanisms of social choice, voting and markets, and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions. This third and relatively unexplored mechanism is hierarchy. Movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature, while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy, indeed of all organizations. In fact, significant steps toward a positive theory of hierarchies have very recently been taken-but by economists, not political scientists. In small numbers, of course, economists made contributions to the study of public bureaucracy some time ago with the pioneering works of Downs (1967), Tullock (1965), and Niskanen (1971). But this wave of theoretical work is different. It is already a large, complex body of literature that is the focus of innovation and excitement among a growing number of economists, and it reflects an unusual degree of theoretical coherence and cumulative effort. Work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations, an approach perhaps best characterized by three elements: a contractual perspective on organizational relationships, a focus on hierarchical control, and formal analysis via principal-agent models. This approach has emerged from recent attempts to move beyond the neoclassical theory of the firm, which assumes away all organizational considerations, to a theory of economic organizations that can explain why firms, corporations, and other enterprises behave as they do. Propo