How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria

We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine di¤erential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the 'border regions'are de...ned narrowly, within a band of less than 50 kilometers, we can identify statistically signi...cant liberalization e¤ects on both employment and wages. While wages responded earlier than employment, the employment e¤ect over the entire adjustment period is estimated to be around three times as large as the wage e¤ect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.

Effective corporate governance : experimental evidence on international auditors'judgments and the contribution of financial accounting education

1 Summary This dissertation deals with two major aspects of corporate governance that grew in importance during the last years: the internal audit function and financial accounting education. In three essays, I contribute to research on these topics which are embedded in the broader corporate governance literature. The first two essays consist of experimental investigations of internal auditors' judgments. They deal with two research issues for which accounting research lacks evidence: The effectiveness of internal controls and the potentially conflicting role of the internal audit function between management and the audit committee. The findings of the first two essays contribute to the literature on internal auditors' judgment and the role of the internal audit function as a major cornerstone of corporate governance. The third essay theoretically examines a broader issue but also relates to the overall research question of this dissertation: What contributes to effective corporate governance? This last essay takes the perspective that the root for quality corporate governance is appropriate financial accounting education. r develop a public interest approach to accounting education that contributes to the literature on adequate accounting education with respect to corporate governance and accounting harmonization. The increasing importance of both the internal audit function and accounting education for corporate governance can be explained by the same recent fundamental changes that still affect accounting research and practice. First, the Sarbanes-Oxley Act of 2002 (SOX, 2002) and the 8th EU Directive (EU, 2006) have led to a bigger role for the internal audit function in corporate governance. Their implications regarding the implementation of audit committees and their oversight over internal controls are extensive. As a consequence, the internal audit function has become increasingly important for corporate governance and serves a new master (i.e. the audit committee) within the company in addition to management. Second, the SOX (2002) and the 8th EU Directive introduced additional internal control mechanisms that are expected to contribute to the reliability of financial information. As a consequence, the internal audit function is expected to contribute to a greater extent to the reliability of financial statements. Therefore, effective internal control mechanisms that strengthen objective judgments and independence become important. This is especially true when external- auditors rely on the work of internal auditors in the context of the International Standard on Auditing (ISA) 610 and the equivalent US Statement on Auditing Standards (SAS) 65 (see IFAC, 2009 and AICPA, 1990). Third, the harmonization of international reporting standards is increasingly promoted by means of a principles-based approach. It is the leading approach since a study of the SEC (2003) that was required by the SOX (2002) in section 108(d) was in favor of this approach. As a result, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) commit themselves to the development of compatible accounting standards based on a principles-based approach. Moreover, since the Norwalk Agreement of 2002, the two standard setters have developed exposure drafts for a common conceptual framework that will be the basis for accounting harmonization. The new .framework will be in favor of fair value measurement and accounting for real-world economic phenomena. These changes in terms of standard setting lead to a trend towards more professional judgment in the accounting process. They affect internal and external auditors, accountants, and managers in general. As a consequence, a new competency set for preparers and users of financial statements is required. The basil for this new competency set is adequate accounting education (Schipper, 2003). These three issues which affect corporate governance are the initial point of this dissertation and constitute its motivation. Two broad questions motivated a scientific examination in three essays: 1) What are major aspects to be examined regarding the new role of the internal audit function? 2) How should major changes in standard setting affect financial accounting education? The first question became apparent due to two published literature reviews by Gramling et al. (2004) and Cohen, Krishnamoorthy & Wright (2004). These studies raise various questions for future research that are still relevant and which motivate the first two essays of my dissertation. In the first essay, I focus on the role of the internal audit function as one cornerstone of corporate governance and its potentially conflicting role of serving both management and the audit committee (IIA, 2003). In an experimental study, I provide evidence on the challenges for internal auditors in their role as servant for two masters -the audit committee and management -and how this influences internal auditors' judgment (Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004). I ask if there is an expectation gap between what internal auditors should provide for corporate governance in theory compared to what internal auditors are able to provide in practice. In particular, I focus on the effect of serving two masters on the internal auditor's independence. I argue that independence is hardly achievable if the internal audit function serves two masters with conflicting priorities. The second essay provides evidence on the effectiveness of accountability as an internal control mechanism. In general, internal control mechanisms based on accountability were enforced by the SOX (2002) and the 8th EU Directive. Subsequently, many companies introduced sub-certification processes that should contribute to an objective judgment process. Thus, these mechanisms are important to strengthen the reliability of financial statements. Based on a need for evidence on the effectiveness of internal control mechanisms (Brennan & Solomon, 2008; Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004; Solomon & Trotman, 2003), I designed an experiment to examine the joint effect of accountability and obedience pressure in an internal audit setting. I argue that obedience pressure potentially can lead to a negative influence on accountants' objectivity (e.g. DeZoort & Lord, 1997) whereas accountability can mitigate this negative effect. My second main research question - How should major changes in standard setting affect financial accounting education? - is investigated in the third essay. It is motivated by the observation during my PhD that many conferences deal with the topic of accounting education but very little is published about what needs to be done. Moreover, the Endings in the first two essays of this thesis and their literature review suggest that financial accounting education can contribute significantly to quality corporate governance as argued elsewhere (Schipper, 2003; Boyce, 2004; Ghoshal, 2005). In the third essay of this thesis, I therefore focus on approaches to financial accounting education that account for the changes in standard setting and also contribute to corporate governance and accounting harmonization. I argue that the competency set that is required in practice changes due to major changes in standard setting. As the major contribution of the third article, I develop a public interest approach for financial accounting education. The major findings of this dissertation can be summarized as follows. The first essay provides evidence to an important research question raised by Gramling et al. (2004, p. 240): "If the audit committee and management have different visions for the corporate governance role of the IAF, which vision will dominate?" According to the results of the first essay, internal auditors do follow the priorities of either management or the audit committee based on the guidance provided by the Chief Audit executive. The study's results question whether the independence of the internal audit function is actually achievable. My findings contribute to research on internal auditors' judgment and the internal audit function's independence in the broader frame of corporate governance. The results are also important for practice because independence is a major justification for a positive contribution of the internal audit function to corporate governance. The major findings of the second essay indicate that the duty to sign work results - a means of holding people accountable -mitigates the negative effect of obedience pressure on reliability. Hence, I found evidence that control .mechanisms relying on certifications may enhance the reliability of financial information. These findings contribute to the literature on the effectiveness of internal control mechanisms. They are also important in the light of sub-certification processes that resulted from the Sarbanes-Oxley Act and the 8th EU Directive. The third essay contributes to the literature by developing a measurement framework that accounts for the consequences of major trends in standard setting. Moreovér, it shows how these trends affect the required .competency set of people dealing with accounting issues. Based on this work, my main contribution is the development of a public interest approach for the design of adequate financial accounting curricula. 2 Serving two masters: Experimental evidence on the independence of internal auditors Abstract Twenty nine internal auditors participated in a study that examines the independence of internal auditors in their potentially competing roles of serving two masters: the audit committee and management. Our main hypothesis suggests that internal auditors' independence is not achievable in an institutional setting in which internal auditors are accountable to two different parties with potentially differing priorities. We test our hypothesis in an experiment in which the treatment consisted of two different instructions of the Chief audit executive; one stressing the priority of management (cost reduction) and one stressing the priority of the audit committee (effectiveness). Internal auditors had to evaluate internal controls and their inherent costs of different processes which varied in their degree of task complexity. Our main results indicate that internal auditors' evaluation of the processes is significantly different when task complexity is high. Our findings suggest that internal auditors do follow the priorities of either management or the audit committee depending on the instructions of a superior internal auditor. The study's results question whether the independence of the internal audit function is actually achievable. With our findings, we contribute to research on internal auditors' judgment and the internal audit function's independence in the frame of corporate governance.

Comparative advantage in demand: Experimental evidence of preferences for genetically modified food in the United States and European Union

The United States (US) exports more than US$6 billion in agricultural commodities to the European Union (EU) each year, but one issue carries the potential to diminish this trade: use of biotechnology in food production. The EU has adopted more stringent policies towards biotechnology than the US. Understanding differences in European and American policies towards genetically modified (GM) foods requires a greater understanding of consumers' attitudes and preferences. This paper reports results from the first large-scale, cross-Atlantic study to analyse consumer demand for genetically modified food in a non-hypothetical market environment. We strongly reject the frequent if convenient assumption in trade theory that consumer preferences are identical across countries: the median level of compensation demanded by English and French consumers to consume a GM food is found to be more than twice that in any of the US locations. Results have important implications for trade theory, which typically focusses on differences in specialization, comparative advantage and factor endowments across countries, and for on-going trade disputes at the World Trade Organization.

Experimental evidence for a partially dissociated water bilayer on Ru{0001}

Core-level photoelectron spectra, in excellent agreement with ab initio calculations, confirm that the stable wetting layer of water on Ru{0001} contains O-H and H2O in roughly 3:5 proportion, for OHx coverages between 0.25 and 0.7 ML, and T<170 K. Proton disorder explains why the wetting structure looks to low energy electron diffraction (LEED) to be an ordered p(root3xroot3)R30degrees adlayer, even though approximate to3/8 of its molecules are dissociated. Complete dissociation to atomic oxygen starts near 190 K. Low photon flux in the synchrotron experiments ensured that the diagnosis of the nature of the wetting structure quantified by LEED is free of beam-induced damage.

A dramatic isotope effect in the reaction of ClSiH with trimethylsilane-1-d: experimental evidence for intermediate complexes in silylene Si-H(D) insertion reactions

A kinetic isotope effect (kD/kH) of 7.4 has been found for the reaction of chlorosilylene with trimethysilane (Me3SiD vs Me3SiH). Such a value can be accounted for by theoretical modelling, but only if an internal rearrangement of the initially form complex is included in the mechanism. This provides the first concrete evidence for such complexes.

Direct experimental evidence that early-life farm environment influences regulation of immune responses

Background: In mammals, early-life environmental variations appear to affect microbial colonization and therefore competent immune development, and exposure to farm environments in infants has been inversely correlated with allergy development. Modelling these effects using manipulation of neonatal rodents is difficult due to their dependency on the mother, but the relatively independent piglet is increasingly identified as a valuable translational model for humans. This study was designed to correlate immune regulation in piglets with early-life environment. Methods: Piglets were nursed by their mother on a commercial farm, while isolatorreared siblings were formula fed. Fluorescence immunohistology was used to quantify T-reg and effector T-cell populations in the intestinal lamina propria and the systemic response to food proteins was quantified by capture ELISA. Results: There was more CD4+ and CD4+CD25+ effector T-cell staining in the intestinal mucosa of the isolator-reared piglets compared with their farm-reared counterparts. In contrast, these isolator-reared piglets had a significantly reduced CD4+CD25+Foxp3+ regulatory T-cell population compared to farm-reared littermates, resulting in a significantly higher T-reg-to-effector ratio in the farm animals. Consistent with these findings, isolator-reared piglets had an increased serum IgG anti-soya response to novel dietary soya protein relative to farm-reared piglets. Conclusion: Here, we provide the first direct evidence, derived from intervention, that components of the early-life environment present on farms profoundly affects both local development of regulatory components of the mucosal immune system and immune responses to food proteins at weaning. We propose that neonatal piglets provide a tractable model which allows maternal and treatment effects to be statistically separated.

Pro-competitive price beating guarantees: experimental evidence

We report experimental results on duopoly pricing with and without price beating guarantees (PBG). In two control treatments, price beating is either imposed as an industry-wide rule or offered as a business strategy. Our major finding is that when price beating guarantees are imposed as a rule or offered as an option, effective prices are equal to or lower than those in a baseline treatment in which price beating is forbidden. Also, when price beating is treated as a business strategy, less than 50% of subjects adopted the guarantee, suggesting that, subjects realize the pro-competitive effects of the guarantee.

Experimental evidence for proposed transformation pathway from the inverse hexagonal to inverse diamond cubic phase from oriented lipid samples

A macroscopically oriented inverse hexagonal phase (HII) of the lipid phytantriol in water is converted to an oriented inverse double diamond bicontinuous cubic phase (QIID). The initial HII phase is uniaxially oriented about the long axis of a capillary with the cylinders parallel to the capillary axis. The HII phase is converted by cooling to a QII D phase which is also highly oriented, where the cylindrical axis of the former phase has been converted to a ⟨110⟩ axis in the latter, as demonstrated by small-angle X-ray scattering. This epitaxial relationship allows us to discriminate between two competing proposed geometric pathways to convert HII to QIID. Our findings also suggest a new route to highly oriented cubic phase coatings, with applications as nanomaterial templates.

Risk taking of executives under different incentive contracts: experimental evidence

Classic financial agency theory recommends compensation through stock options rather than shares to counteract excessive risk aversion in agents. In a setting where any kind of risk taking is suboptimal for shareholders, we show that excessive risk taking may occur for one of two reasons: risk preferences or incentives. Even when compensated through restricted company stock, experimental CEOs take large amounts of excessive risk. This contradicts classical financial theory, but can be explained through risk preferences that are not uniform over the probability and outcome spaces, and in particular, risk seeking for small probability gains and large probability losses. Compensation through options further increases risk taking as expected. We show that this effect is driven mainly by the personal asset position of the experimental CEO, thus having deleterious effects on company performance.

Experimental evidence of the spin-glass transition in the diluted magnetic semiconductor Zn(1-x)Mn(x)In(2)Se(4)

This work reports on magnetic measurements of the quasi-two-dimensional (quasi-2D) system Zn(1-x)Mn(x)In(2)Se(4), with 0.01 <= x <= 1.00. For x > 0.67, the quasi-2D system seems to develop a spin-glass behaviour. Evidence of a true phase transition phenomenon is provided by the steep increase of the nonlinear susceptibility chi(nl) when approaching T(C) from above. The static scaling of chi(nl) data yields critical exponents delta = 4.0 +/- 0.2, phi = 4.37 +/- 0.17 and TC = 3.4 +/- 0.1 K for the sample with x = 1.00 and similar values for the sample with x = 0.87. These critical exponents are in good agreement with values reported for other spin-glass systems with short-range interactions.

Experimental evidence and model explanation for cell population characteristics modification when applying sequential photodynamic therapy

We present experimental evidence of the existence of cell variability in terms of threshold light dose for Hep G2 (liver cancer cells) cultured. Using a theoretical model to describe the effects caused by successive photodynamic therapy (PDT) sessions, and based on the consequences of a partial response we introduce the threshold dose distribution concept within a tumor. The experimental model consists in a stack of flasks, and simulates subsequent layers of a tissue exposed to PDT application. The result indicates that cells from the same culture could respond in different ways to similar PDT induced-damages. Moreover, the consequence is a partial killing of the cells submitted to PDT, and the death fraction decreased at each in vitro PDT session. To demonstrate the occurrence of cell population modification as a response to PDT, we constructed a simple theoretical model and assumed that the threshold dose distribution for a cell population of a tumor is represented by a modified Gaussian distribution.

Experimental Evidence of the Occurrence of Intramolecular Electron Transfer in Catalyzed 1,2-Dioxetane Decomposition

The activation parameters for the thermal decomposition of 13 acridinium-substituted 1,2-dioxetanes, bearing an aromatic moiety, were determined and their chemiluminescence emission quantum yields estimated, utilizing in situ photosensitized 1,2-dioxetane generation and observation of its thermal decomposition kinetics, without isolation of these highly unstable cyclic peroxides. Decomposition rate constants show linear free-energy correlation for electron-withdrawing substituents, with a Hammett reaction constant of rho = 1.3 +/- 0.1, indicating the occurrence of an intramolecular electron transfer from the acridinium moiety to the 1,2-dioxetane ring, as postulated by the intramolecular chemically initiated electron exchange luminescence (CIEEL) mechanism. Emission quantum yield behavior can also be rationalized on the basis of the intramolecular CIEEL mechanism, additionally evidencing its occurrence in this transformation. Both relations constitute the first experimental evidence for the occurrence of the postulated intramolecular electron transfer in the catalyzed and induced decomposition of properly substituted 1,2-dioxetanes.

Hybrid Auctions II: Experimental Evidence

In this paper we report the results of an experiment designed to examine the properties of a hybrid auction - a Dutch-Vickrey auction, that combines a sealed bid …rst-price auction with a sealed bid second-price auction. This auction mechanism shares some important features with that used in the sale of the companies constituted through the partial division of the Telebras System - the government-owned Telecom holding in Brazil. We designed an experiment where individuals participate in a sequence of independent …rst-price auctions followed by a sequence of hybrid auctions. Several conclusions emerged from this experimental study. First, ex-post e¢ciency was achieved overwhelmingly by the hybrid auctions. Secondly, although overbidding (with respect to the risk-neutral Bayesian Nash equilibrium) was a regular feature of participants’ bidding behavior in the …rst-price auctions — as it is commonly reported in most experimental studies of …rst-price auctions, it was less frequent in the hybrid auctions. By calibrating the results to allow for risk-averse behavior we were able to account for a signi…cant part of the overbidding. Finally, we compared the revenue generated by the hybrid auction with that generated by a standard …rst-price sealed bid auction and the results were ambiguous.

Bias and size effects of price-comparison search engines : theory and experimental evidence

We analyze the impact on consumer prices of the size and bias of price comparison search engines. In the context of a model related to Burdett and Judd (1983) and Varian (1980), we develop and test experimentally several theoretical predictions. The experimental results confirm the model’s predictions regarding the impact of the number of firms, and the type of bias of the search engine, but reject the model’s predictions regarding changes in the size of the index. The explanatory power of an econometric model for the price distributions is significantly improved when variables accounting for risk attitudes are introduced.