Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

Inseparable, incapable, or invisible: Why public organizations award no-bid contracts

No-bid contracting is a highly prevalent practice in public procurement of technology services. Alt-hough no-bid contracting is a substantial problem since it reduces competition and welfare, the litera-ture lacks theoretical explanations and empirical tests for why public organizations award no-bid con-tracts. In this paper, we propose three theoretical explanations for no-bid contracting, drawing on transaction cost economics, organizational learning, and institutional theory. We also present how we test these explanations using a comprehensive sample of public procurement transactions. We expect to contribute theoretical explanations for no-bid contracting and practical implications for policy-makers.

Simple training tool is insufficient for appropriate diagnosis and treatment of malnutrition: A pre-post intervention study in a tertiary center.

OBJECTIVES To improve malnutrition awareness and management in our department of general internal medicine; to assess patients' nutritional risk; and to evaluate whether an online educational program leads to an increase in basic knowledge and more frequent nutritional therapies. METHODS A prospective pre-post intervention study at a university department of general internal medicine was conducted. Nutritional screening using Nutritional Risk Score 2002 (NRS 2002) was performed, and prescriptions of nutritional therapies were assessed. The intervention included an online learning program and a pocket card for all residents, who had to fill in a multiple-choice questions (MCQ) test about basic nutritional knowledge before and after the intervention. RESULTS A total of 342 patients were included in the preintervention phase, and 300 were in the postintervention phase. In the preintervention phase, 54.1% were at nutritional risk (NRS 2002 ≥3) compared with 61.7% in the postintervention phase. There was no increase in the prescription of nutritional therapies (18.7% versus 17.0%). Forty-nine and 41 residents (response rate 58% and 48%) filled in the MCQ test before and after the intervention, respectively. The mean percentage of correct answers was 55.6% and 59.43%, respectively (which was not significant). Fifty of 84 residents completed the online program. The residents who participated in the whole program scored higher on the second MCQ test (63% versus 55% correct answers, P = 0.031). CONCLUSIONS Despite a high ratio of malnourished patients, the nutritional intervention, as assessed by nutritional prescriptions, is insufficient. However, the simple educational program via Internet and usage of NRS 2002 pocket cards did not improve either malnutrition awareness or nutritional treatment. More sophisticated educational systems to fight malnutrition are necessary.

Enhancing Authenticity in Simulation Using Appropriate Techniques of Moulage

Workshop Overview The use of special effects (moulage) is a way to augment the authenticity of a scenario in simulation. This workshop will introduce different techniques of moulage (oil based cream colors, watercolors, transfer tattoos and 3D Prosthetics). The participants will have the opportunity to explore these techniques by applying various moulages. They will compare the techniques and discuss their advantages and disadvantages. Moreover, strategies for standardization and quality assurance will be discussed. Workshop Rationale Moulage supports the sensory perception in an scenario (1). It can provide evaluation clues (2) and help learners (and SPs) to engage in the simulation. However, it is of crucial importance that the simulated physical pathologies are represented accurate and reliable. Accuracy is achieved by using the appropriate technique, which requires knowledge and practice . With information about different moulage techniques, we hope to increases the knowledge of moulage during the workshop. By applying moulages in various techniques we will practice together. As standardization is critical for simulation scenarios in assessment (3, 4) strategies for standardization of moulage will be introduced and discussed. Workshop Objectives During the workshop participants will: - gain knowledge about different techniques of moulages - practice moulages in various techniques - discuss the advantages and disadvantages of moulage techniques - describe strategies for standardization and quality assurance of moulage Planned Format 5 min Introduction 15 min Overview – Background & Theory (presentation) 15 min Application of moulage for ankle sprain in 4 different techniques (oil based cream color, water color, temporary tatoo, 3D prosthetic) in small groups 5 min Comparing the results by interactive viewing of prepared moulages 15 min Application of moulages for burn in different techniques in small groups 5 min Comparing results the results by interactive viewing of prepared moulages 5 min Sharing experiences with different techniques in small groups 20 min Discussion of the techniques including standardization and quality assurance strategies (plenary discussion) 5 min Summary / Take home points

Capital Accumulation in the Presence of Informal Credit Contracts: Does the Incentive Mechanism Work Better than Credit Rationing Under Asymmetric Information?

Credit markets with asymmetric information often prefer credit rationing as a profit maximizing device. This paper asks whether the presence of informal credit markets reduces the cost of credit rationing, that is, whether it can alleviate the impact of asymmetric information based on the available information. We used a dynamic general equilibrium model with heterogenous agents to assess this. Using Indian credit market data our study shows that the presence of informal credit market can reduce the cost of credit rationing by separating high risk firms from the low risk firms in the informal market. But even after this improvement, the steady state capital accumulation is still much lower as compared to incentive based market clearing rates. Through self revelation of each firm's type, based on the incentive mechanism, banks can diversify their risk by achieving a separating equilibrium in the loan market. The incentive mechanism helps banks to increase capital accumulation in the long run by charging lower rates and lending relatively higher amount to the less risky firms. Another important finding of this study is that self-revelation leads to very significant welfare improvement, as measured by consumptiuon equivalence.

Beyond Racial Precedents: Loving v. Virginia as an Appropriate Legal Model and Strategy for Same-Sex Marriage Litigation

This thesis explores how LGBT marriage activists and lawyers have employed a racial interpretation of due process and equal protection in recent same-sex marriage litigation. Special attention is paid to the Supreme Court's opinion in Loving v. Virginia, the landmark case that declared anti-miscegenation laws unconstitutional. By exploring the use of racial precedent in same-sex marriage litigation and its treatment in state court cases, this thesis critiques the racial interpretation of due process and equal protection that became the basis for LGBT marriage briefs and litigation, and attempts to answer the question of whether a racial interpretation of due process and equal protection is an appropriate model for same-sex marriage litigation both constitutionally and strategically. The existing scholarly literature fails to explore how this issue has been treated in case briefs, which are very important elements in any legal proceeding. I will argue that through an analysis of recent state court briefs in Massachusetts and Connecticut, Loving acts as logical precedent for the legalization of same-sex marriage. I also find, more significantly, that although this racial interpretation of due process and equal protection represented by Loving can be seen as an appropriate model for same-sex marriage litigation constitutionally, questions remain about its strategic effectiveness, as LGBT lawyers have moved away from race in some arguments in these briefs. Indeed, a racial interpretation of Due Process and Equal Protection doctrine imposes certain limits on same-sex marriage litigation, of which we are warned by some Critical Race theorists, Latino Critical Legal theorists, and other scholars. In order to fully incorporate a discussion of race into the argument for legalizing same-sex marriage, the dangers posed by the black/white binary of race relations must first be overcome.

Parameterizing a Simple Potential Energy Function Appropriate for Vibrational Frequencies Using Molecular Dynamics

A Maple scheme for quickly parameterizing vibrational potential energy functions is presented. As an example, the potential energy function's parameters for the vibrational motions in H_2O_2 are obtained assuming the simplest potential energy function. This paper was originally written as a research paper, but rejected by the referees. It is therefore being edited into an ``educational'' paper for student usage.

An Appropriate Role for the Leadership: A Quantitative Analysis of the Effects of House Leadership on Open-Seat Races

This paper investigates the effects on open-seat races in the United States House of Representatives. This project focuses on the influence that the House leadership exerts on races. Generally, the leadership influences race through spending by party organizations and leadership visits. During each election cycle, national party organizations spend millions of dollars to get their candidates into office. I have developed a multiple regression model that measures different types of spending from the Democratic Congressional Campaign Committee, the National Republican Congressional Committee, and the Republican National Committee and the effects of these spending types on the election results. Also, the study examines the number of visits by each party’s leadership to each race. I introduced control variables that account for the year, the competitiveness of each race, and the individual candidate fundraising. In terms of statistical significance, the results were mixed showing one type of party spending to be highly influential in the outcome of the race. Competitiveness and individual candidate fundraising also achieved statistical significance. The study also includes a qualitative investigation of leadership visits and individual case studies in order to understand better the way in which the data interact in real campaigns.

Can a Newly Proposed Mechanism for Allocating Contracts in U.S. Electricity Wholesale Markets Lead to Lower Prices? A Game Theoretic Analysis

This study of the wholesale electricity market compares the cost-minimizing performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed replacement. The current mechanism chooses an allocation of contracts that minimizes a fictional cost calculated using pay-as-offer pricing. Then suppliers are paid the market clearing price. The proposed mechanism uses the market clearing price in the allocation phase as well as in the payment phase. In concentrated markets, the proposed mechanism outperforms the current mechanism even when strategic behavior by suppliers is taken into account. The advantage of the proposed mechanism increases with increased price competition.

Cultural competence in an HIV dedicated dental clinic: Application of the National Standards for Culturally and Linguistically Appropriate Services in Health Care (CLAS)

This dissertation investigated perspectives on cultural competence among African-American women patients, staff, and the administrator of a dental clinic serving people living with HIV/AIDS; and evaluated the role of the National Standards for Culturally and Linguistically Appropriate Services in Health Care (CLAS) in advancing the provision of culturally competent care in the clinic. ^ The study was qualitative with data collection via focus groups and individual interviews with a sample of African-American women patients, and individual interviews with a sample of staff and the clinic administrator. Transcripts were coded and themes identified using the software program ATLAS.ti. A cultural audit template was developed and applied to evaluate cultural competency. ^ Among attitudes and behaviors that contributed to the provision of culturally competent care at the clinic were respect and empathic communication. Formal cultural competency was not featured strongly in the methods by which the staff learned to work with diverse populations. Instead cultural competence among the staff was based on thoughtful hiring practices, natural aptitude and a climate that encouraged learning through informal sharing of experiences. The staff and administrator felt that an African-American dentist would be an asset in improving culturally competent care at the clinic. Previous research and national policy also promote the provider-patient racial/ethnic concordance to improve care. In this study, however, the patients were happy with the care provided regardless of the race/ethnicity of the staff, probably reflecting the well developed cultural competence skills of clinic staff overall. ^ The clinic administrator was unaware of the CLAS standards although the clinic was implicitly operated under their mandates. This occurred because the clinic is supported by federal funding and the CLAS standards were incorporated into the requirements. Incorporation into and monitoring of the CLAS standards in federally funded programs therefore appears to be an effective means for ensuring that they are implemented. ^ This study illustrates that cultural competence, though not universally understood, can be systematically investigated to identify what constitutes appropriate care and the factors that support or inhibit it. Among important elements of culturally competent care are respect and empathic communication. ^

Determining appropriate measurement methods for etiological research of computing-related musculoskeletal symptoms and disorders

Two studies among college students were conducted to evaluate appropriate measurement methods for etiological research on computing-related upper extremity musculoskeletal disorders (UEMSDs). ^ A cross-sectional study among 100 graduate students evaluated the utility of symptoms surveys (a VAS scale and 5-point Likert scale) compared with two UEMSD clinical classification systems (Gerr and Moore protocols). The two symptom measures were highly concordant (Lin's rho = 0.54; Spearman's r = 0.72); the two clinical protocols were moderately concordant (Cohen's kappa = 0.50). Sensitivity and specificity, endorsed by Youden's J statistic, did not reveal much agreement between the symptoms surveys and clinical examinations. It cannot be concluded self-report symptoms surveys can be used as surrogate for clinical examinations. ^ A pilot repeated measures study conducted among 30 undergraduate students evaluated computing exposure measurement methods. Key findings are: temporal variations in symptoms, the odds of experiencing symptoms increased with every hour of computer use (adjOR = 1.1, p < .10) and every stretch break taken (adjOR = 1.3, p < .10). When measuring posture using the Computer Use Checklist, a positive association with symptoms was observed (adjOR = 1.3, p < 0.10), while measuring posture using a modified Rapid Upper Limb Assessment produced unexpected and inconsistent associations. The findings were inconclusive in identifying an appropriate posture assessment or superior conceptualization of computer use exposure. ^ A cross-sectional study of 166 graduate students evaluated the comparability of graduate students to College Computing & Health surveys administered to undergraduate students. Fifty-five percent reported computing-related pain and functional limitations. Years of computer use in graduate school and number of years in school where weekly computer use was ≥ 10 hours were associated with pain within an hour of computing in logistic regression analyses. The findings are consistent with current literature on both undergraduate and graduate students. ^