D iscussions of rules vs. discretion have occupied a central place in the analysis of macroeconomic policies in dynamic models. Costas Azariadis and Vincenzo Galasso have presented a new model that shows how a discretionary policy regime can lead to a more volatile fiscal policy than one pursued under a constitutional rule. They set up a simple fiscal policy story and examine the potential for ...

E agree about the goals of price stability, low unemployment and stable economic growth, but they disagree about the policies to achieve these goals. The disagreement is particularly heated over discretionary countercyclical Keynesian fiscal policy. After the poor macroeconomic performance of the 1970s and critical policy evaluations of the Keynesian approach— ranging from Robert E. Lucas and T...

This study analyzes the effect of managerial style on firm value by partitioning general and administrative (G&A) expenses in the REIT industry into a nondiscretionary “structural” component associated with the costs of asset and liability management and a discretionary or “style” component. The discretionary component is significantly related to at least one measure of stylespecifically, the p...

During the year prior to management buyout (MBOs) announcements, some target firms exhibit abnormally high discretionary expenses in selling, general and administration, abnormally low discretionary accruals, and realize losses from asset sales. Higher discretionary expenses and losses from asset sales are associated with lower pre-MBO abnormal stock returns, especially for firms with higher in...

We investigate whether firms “lean against the wind”, i.e., manage earnings upward to offset aggregate (market wide) undervaluation, by examining how firm-specific measures of earnings management correlate with aggregate market conditions. Leaning against the wind has been proposed by prior research as a behavioral explanation for a negative contemporaneous relation and a positive predictive re...

We model the determination of management compensation through the strategic interaction among outside shareholders, managers, and corporate boards. The board sets both regular incentive compensation and discretionary special compensation unrelated to performance. We show that shareholder value maximising compensation plans may feature incentive compensation that is not monotone in performance a...

Relational contracts typically combine explicit terms that are third-party enforceable with implicit components that can be adjusted at the parties’ discretion. While discretionary ex post adjustments lies at the heart of relational contracting, previous empirical research has been primarily motivated by the repeat purchase mechanism (RPM) of Klein and Leffler (1981), which is a relational cont...

This study examines the role of pre-IPO discretionary accruals in the valuation and first day initial returns of IPOs. We find that IPO offer price is unaffected whereas market closing price is positively associated with the levels of pre-IPO discretionary accruals for issuers with aggressively reported earnings. We also find that this relative over-valuation of managed earnings by the markets ...

BACKGROUND Dietary sodium, the major source being salt, is associated with hypertension. Australian adults consume more than the recommended amount of salt and approximately 15% of dietary sodium comes from salt added at the table and during cooking. OBJECTIVE To determine the frequency of and the demographic characteristics associated with discretionary salt use. DESIGN A cross sectional s...

Amidst a struggling economy, organizations are ruled by the survival of the fittest paradigm but it is the employees who tend to pay the price, with increased demands which, oftentimes, fall outside their job scope. In the present paper, we examined whether pressuring people to engage in such organizational citizenship behaviors (OCB) might in fact backfire and lead to increased Counterproducti...