Essays on Stock Option Compensation and the Role of Incentives and Risk (summary section only)

Managerial pay-for-performance sensitivity has increased rapidly around the world. Early empirical research showed that pay-for-performance sensitivity resulting from stock ownership and stock options appeared to be quite low during the 1970s and early 1980s in the U.S. However, recent empirical research from the U.S. shows an enormous increase in pay-for-performance sensitivity. The global trend has also reached Finland, where stock options have become a major ingredient of executive compensation. The fact that stock options seem to be an appealing form of remuneration from a theoretical point of view combined with the observation that the use of this compensation form has increased significantly during the recent years, implies that research on the dynamics of stock option compensation is highly relevant for the academic community, as well as for practitioners and regulators. The research questions of the thesis are analyzed in four separate essays. The first essay examines whether stock option compensation practices of Finnish firms are consistent with predictions from principal-agent theory. The second essay explores one of the major puzzles in the compensation literature by studying determinants of stock option contract design. In theory, optimal contract design should vary according to firm characteristics. However, in the U.S., variation in contract design seems to be surprisingly low, a phenomenon generally attributed to tax and accounting considerations. In Finland, however, firms are not subject to stringent contracting restrictions, and the variation in contract design tends, in fact, to be quite substantial. The third essay studies the impact of price- and risk incentives arising from stock option compensation on firm investment. In addition, the essay explores one of the most debated questions in the literature, in particular, the relation between incentives and firm performance. Finally, several strands of literature in both economics and corporate finance hypothesize that economic uncertainty is related to corporate decision-making. Previous research has shown that risk tends to slow down firm investment. In the fourth essay, it is hypothesized that firm risk slows down growth from a more universal perspective. Consistent with this view, it is shown that risk not only tends to slow down firm investment, but also employment growth. Moreover, the essay explores whether the nature of firms’ compensation policies, in particular, whether firms make use of stock option compensation, affects the relation between risk and firm growth. In summary, the four essays contribute to the current understanding of stock options as a form of equity incentives, and how incentives and risk affect corporate decision-making. By this, the thesis promotes the knowledge related to the modern theory of the firm.

The Finnish Leadership Style in Transition - A Study of Leadership Criteria in the Insurance Business, 1997-2004 (summary section only)

The aim of the study was to explore the importance of evaluating leadership criteria in Finland at leader/subordinate levels of the insurance industry. The overall purpose of the thesis is tackled and analyzed from two different perspectives: - by examining the importance of the leadership criteria and style of Finnish insurance business leaders and their subordinates - by examining the opinions of insurance business leaders regarding leadership criteria in two culturally different countries: the US and Finland. This thesis consists of three published articles that scrutinise the focal phenomena both theoretically and empirically. The main results of the study do not lend support to the existence of a universal model of leadership criteria in the insurance business. As a matter of fact, the possible model seems to be based more on the special organizational and cultural circumstances of the country in question. The leadership criteria seem to be quite stable irrespective of the comparatively short research time period (3–5 years) and hierarchical level (subordinate/leader). Leaders have major difficulties in changing their leadership style. In fact, in order to bring about an efficient organizational change in the company you have to alternate the leader. The cultural dimensions (cooperation and monitoring) identified by Finnish subordinates were mostly in line with those of their managers, whilst emphasizing more the aspect of monitoring employees, which could be seen from their point of view as another element of managers’ optimizing/efficiency requirements. In Finnish surveys the strong emphasis on cooperation and mutual trust become apparent by both subordinates and managers. The basic problem is still how to emphasize and balance them in real life in such a way that both parties are happy to work together on a common basis. The American surveys suggests hypothetically that in a soft market period (buyer’s market) managers employ a more relationship-oriented leadership style and correspondingly adapt their leadership style to a more task-oriented approach in a hard market phase (seller’s market). In making business better Finnish insurance managers could probably concentrate more on task-oriented items such as reviewing, budgeting, monitoring and goal-orientation. The study also suggests that the social safety net of the European welfare state ideology has so far shielded the culture-specific sense of social responsibility of Finnish managers from the hazards of free competition and globalization.

Unrealized expectations of jumps in volatility: An explanation to the low and time-varying predictive power of implied volatility

The low predictive power of implied volatility in forecasting the subsequently realized volatility is a well-documented empirical puzzle. As suggested by e.g. Feinstein (1989), Jackwerth and Rubinstein (1996), and Bates (1997), we test whether unrealized expectations of jumps in volatility could explain this phenomenon. Our findings show that expectations of infrequently occurring jumps in volatility are indeed priced in implied volatility. This has two important consequences. First, implied volatility is actually expected to exceed realized volatility over long periods of time only to be greatly less than realized volatility during infrequently occurring periods of very high volatility. Second, the slope coefficient in the classic forecasting regression of realized volatility on implied volatility is very sensitive to the discrepancy between ex ante expected and ex post realized jump frequencies. If the in-sample frequency of positive volatility jumps is lower than ex ante assessed by the market, the classic regression test tends to reject the hypothesis of informational efficiency even if markets are informationally effective.

Expression of GC-C, a receptor-guanylate cyclase, and its endogenous ligands uroguanylin and guanylin along the rostrocaudal axis of the intestine

Members of the receptor-guanylate cyclase (rGC) family possess an intracellular catalytic domain that is regulated by an extracellular receptor domain. GC-C, an intestinally expressed rGC, was initially cloned by homology as an orphan receptor. The search for its Ligands has yielded three candidates: STa (a bacterial toxin that causes traveler's diarrhea) and the endogenous peptides uroguanylin and guanylin. Here, by performing Northern and Western blots, and by measuring [I-125]STa binding and STa-dependent elevation of cGMP levels, we investigate whether the distribution of GC-C matches that of its endogenous ligands in the rat intestine. We establish that 1) uroguanylin is essentially restricted to small bowel; 2) guanylin is very low in proximal small bowel, increasing to prominent levels in distal small bowel and throughout colon; 3) GC-C messenger RNA and STa-binding sites are uniformly expressed throughout the intestine; and 4) GC-C-mediated cGMP synthesis peaks at the proximal and distal extremes of the intestine (duodenum and colon), but is nearly absent in the middle (ileum). These observations suggest that GC-C's activity may be posttranslationally regulated, demonstrate that the distribution of GC-C is appropriate to mediate the actions of both uroguanylin and guanylin, and help to refine current hypotheses about the physiological role(s) of these peptides.

Development of Nonsocial Behaviour in the Asiatic Elephant

The elephant calf, a defended follower is completely dependent on adults till the age of 3 months. It begins to explore and attempts to feed at 3 to 6 months, and then becomes partially independent with some feeding on its own. The characteristics of behavior in adults are examined and the development of this pattern in the calf is traced by analyis of duration, transition and clustering of the behavioural elements. Essential activities like suckling, locomotion and lying down for rest appear soon after birth whereas elements of feeding, grooming and play appear only at a later stage. The calf takes the initiative in suckling and its termination, drinking directly by mouth till the age of 6 months. The first element of feeding appears at about a week in attempts to pick up and hold objects in the trunk. Co-ordination of limb, trunk and mouth movement is achieved by about 1 month. The calf is strong enough to pull out plants by 6 months when independent feeding begins. In about a year feeding, drinking and dusting patterns are well developed.

Random matrices: Universality of ESDs and the circular law

Given an n x n complex matrix A, let mu(A)(x, y) := 1/n vertical bar{1 <= i <= n, Re lambda(i) <= x, Im lambda(i) <= y}vertical bar be the empirical spectral distribution (ESD) of its eigenvalues lambda(i) is an element of C, i = l, ... , n. We consider the limiting distribution (both in probability and in the almost sure convergence sense) of the normalized ESD mu(1/root n An) of a random matrix A(n) = (a(ij))(1 <= i, j <= n), where the random variables a(ij) - E(a(ij)) are i.i.d. copies of a fixed random variable x with unit variance. We prove a universality principle for such ensembles, namely, that the limit distribution in question is independent of the actual choice of x. In particular, in order to compute this distribution, one can assume that x is real or complex Gaussian. As a related result, we show how laws for this ESD follow from laws for the singular value distribution of 1/root n A(n) - zI for complex z. As a corollary, we establish the circular law conjecture (both almost surely and in probability), which asserts that mu(1/root n An) converges to the uniform measure on the unit disc when the a(ij) have zero mean.

Conformational analysis of the right-hand twisted antiparallel β-Structure

The conformational analysis of a pair of two-linked peptide units in the anti-parallel arrangement is reported here with a view to study the effect of association of one chain with the other. The pair of two-linked peptide units were fixed in space through the hydrogen bonds between them, in accordance with certain hydrogen bond criteria. Model building was undertaken to ascertain whether the proximity of the side-chains could be used to eliminate any one of the right-hand twisted, left-hand twisted or regular β-structures. Stereochemically, it was found possible with all of them. The preference for a right-hand twisted β-structure, however, was indicated by the classical energy calculations. The relevance of the results thus obtained is discussed in the context of the preferential right-hand twist of the β-pleated sheets present in globular proteins. The agreement between the minimum energy conformations obtained for the pair of two-linked peptide units and the globular protein data is also indicated.

Mechanisms of azole resistance and carcinogenic acetaldehyde production in chronic mucosal candidosis

Autoimmune polyendocrinopathy-candidiasis-ectodermal dystrophy (APECED, APS1) is an autoimmune disease caused by a loss-of function mutation in the autoregulator gene (AIRE). Patients with APECED suffer from chronic mucocutaneous candidosis (CMC) of the oral cavity and oesophagus often since early childhood. The patients are mainly colonized with Candida albicans and decades of exposure to antifungal agents have lead to the development of clinical and microbiological resistance in the treatment of CMC in the APECED patient population in Finland. A high incidence of oral squamous cell carcinoma is associated with oral CMC lesions in the APECED patients over the age of 25. The overall aim of this study was firstly, to investigate the effect of long-term azole exposure on the metabolism of oral C. albicans isolates from APECED patients with CMC and secondly, to analyse the specific molecular mechanisms that are responsible for these changes. The aim of the first study was to examine C. albicans strains from APECED patients and the level of cross-resistance to miconazole, the recommended topical compound for the treatment of oral candidosis. A total of 16% of the strains had decreased susceptibility to miconazole and all of these isolates had decreased susceptibility to fluconazole. Miconazole MICs also correlated with MICs to voriconazole and posaconazole. A significant positive correlation between the years of miconazole exposure and the MICs to azole antifungal agents was also found. These included azoles the patients had not been exposed to. The aim of our second study was to determine if the APECED patients are continuously colonized with the same C. albicans strains despite extensive antifungal treatment and to gain a deeper insight into the genetic changes leading to azole resistance. The strains were typed using MLST and our results confirmed that all patients were persistently colonized with the same or a genetically related strain despite antifungal treatment between isolations. No epidemic strains were found. mRNA expression was analysed by Northern blotting, protein level by western blotting, and TAC1 and ERG11 genes were sequenced. The main molecular mechanisms resulting in azole resistance were gain-of-function mutations in TAC1 leading to over expression of CDR1 and CDR2, genes linked to azole resistance. Several strains had also developed point mutations in ERG11, another gene linked to azole resistance. In the third study we used gas chromatography to test whether the level of carcinogenic acetaldehyde produced by C. albicans strains isolated from APECED patients were different from the levels produced by strains isolated from healthy controls and oral carcinoma patients. Acetaldehyde is a carcinogenic product of alcohol fermentation and metabolism in microbes associated with cancers of the upper digestive tract. In yeast, acetaldehyde is a by-product of the pyruvate bypass that converts pyruvate into acetyl-CoA during fermentation. Our results showed that strains isolated from APECED patients produced mutagenic levels of acetaldehyde in the presence of glucose (100mM, 18g/l) and the levels produced were significantly higher than those from strains isolated from controls and oral carcinoma patients. All strains in the study, however, were found to produce mutagenic levels of acetaldehyde in the presence of ethanol (11mM). The glucose and ethanol levels used in this study are equivalent to those found in food and beverages and our results highlight the role of dietary sugars and ethanol on carcinogenesis. The aims of our fourth study were to research the effect of growth conditions in the levels of acetaldehyde produced by C. albicans and to gain deeper insight into the role of different genes in the pyruvate-bypass in the production of high acetaldehyde levels. Acetaldehyde production in the presence of glucose increased by 17-fold under moderately hypoxic conditions compared to the levels produced under normoxic conditions. Under moderately hypoxic conditions acetaldehyde levels did not correlate with the expression of ADH1 and ADH2, genes catalyzing the oxidation of ethanol to acetaldehyde, or PDC11, the gene catalyzing the oxidation of pyruvate to acetaldehyde but correlated with the expression of down-stream genes ALD6 and ACS1. Our results highlight a problem where indiscriminate use of azoles may influence azole susceptibility and lead to the development of cross-resistance. Despite clinically successful treatment leading to relief of symptoms, colonization by C. albicans strains is persistent within APECED patients. Microevolution and point mutations that occur in strains may lead to the development of azole-resistant isolates and metabolic changes leading to increased production of carcinogenic acetaldehyde.

Criticality of the exponential rate of decay for the largest nearest-neighbor link in random geometric graphs

Let n points be placed independently in d-dimensional space according to the density f(x) = A(d)e(-lambda parallel to x parallel to alpha), lambda, alpha > 0, x is an element of R-d, d >= 2. Let d(n) be the longest edge length of the nearest-neighbor graph on these points. We show that (lambda(-1) log n)(1-1/alpha) d(n) - b(n) converges weakly to the Gumbel distribution, where b(n) similar to ((d - 1)/lambda alpha) log log n. We also prove the following strong law for the normalized nearest-neighbor distance (d) over tilde (n) = (lambda(-1) log n)(1-1/alpha) d(n)/log log n: (d - 1)/alpha lambda <= lim inf(n ->infinity) (d) over tilde (n) <= lim sup(n ->infinity) (d) over tilde (n) <= d/alpha lambda almost surely. Thus, the exponential rate of decay alpha = 1 is critical, in the sense that, for alpha > 1, d(n) -> 0, whereas, for alpha <= 1, d(n) -> infinity almost surely as n -> infinity.

Do wordnets also improve human performance on NLP tasks?

FinnWordNet is a wordnet for Finnish that complies with the format of the Princeton WordNet (PWN) (Fellbaum, 1998). It was built by translating the PrincetonWordNet 3.0 synsets into Finnish by human translators. It is open source and contains 117000 synsets. The Finnish translations were inserted into the PWN structure resulting in a bilingual lexical database. In natural language processing (NLP), wordnets have been used for infusing computers with semantic knowledge assuming that humans already have a sufficient amount of this knowledge. In this paper we present a case study of using wordnets as an electronic dictionary. We tested whether native Finnish speakers benefit from using a wordnet while completing English sentence completion tasks. We found that using either an English wordnet or a bilingual English Finnish wordnet significantly improves performance in the task. This should be taken into account when setting standards and comparing human and computer performance on these tasks.

Dietary habits and obesity: the role of emotional and cognitive factors

In post-industrialised societies, food is more plentiful, accessible and palatable than ever before and technological development has reduced the need for physical activity. Consequently, the prevalence of obesity is increasing, which is problematic as obesity is related to a number of diseases. Various psychological and social factors have an important influence on dietary habits and the development of obesity in the current food-rich and sedentary environments. The present study concentrates on the associations of emotional and cognitive factors with dietary intake and obesity as well as on the role these factors play in socioeconomic disparities in diet. Many people cognitively restrict their food intake to prevent weight gain or to lose weight, but research on whether restrained eating is a useful weight control strategy has produced conflicting findings. With respect to emotional factors, the evidence is accumulating that depressive symptoms are related to less healthy dietary intake and obesity, but the mechanisms explaining these associations remain unclear. Furthermore, it is not fully understood why socioeconomically disadvantaged individuals tend to have unhealthier dietary habits and the motives underlying food choices (e.g., price and health) could be relevant in this respect. The specific aims of the study were to examine 1) whether obesity status and dieting history moderate the associations of restrained eating with overeating tendencies, self-control and obesity indicators; 2) whether the associations of depressive symptoms with unhealthier dietary intake and obesity are attributable to a tendency for emotional eating and a low level of physical activity self-efficacy; and 3) whether the absolute or relative importance of food choice motives (health, pleasure, convenience, price, familiarity and ethicality) contribute to the socioeconomic disparities in dietary habits. The study was based on a large population-based sample of Finnish adults: the participants were men (N=2325) and women (N=2699) aged 25-74 who took part in the DILGOM (Dietary, Lifestyle and Genetic Determinants of Obesity and Metabolic Syndrome) sub-study of the National FINRISK Study 2007. The participants weight, height, waist circumference and body fat percentage were measured in a health examination. Psychological eating styles (the Three-Factor Eating Questionnaire-R18), food choice motives (a shortened version of the Food Choice Questionnaire), depressive symptoms (the Center for Epidemiological Studies Depression Scale) and self-control (the Brief Self-Control Scale) were measured with pre-existing questionnaires. A validated food frequency questionnaire was used to assess the average consumption of sweet and non-sweet energy-dense foods and vegetables/fruit. Self-reported total years of education and gross household income were used as indicators of socioeconomic position. The results indicated that 1) restrained eating was related to a lower body mass index, waist circumference, emotional eating and uncontrolled eating, and to a higher self-control in obese participants and current/past dieters. In contrast, the associations were the opposite in normal weight individuals and those who had never dieted. Thus, restrained eating may be related to better weight control among obese individuals and those with dieting experiences, while among others it may function as an indicator of problems with eating and an attempt to solve them. 2) Emotional eating and depressive symptoms were both related to less healthy dietary intake, and the greater consumption of energy-dense sweet foods among participants with elevated depressive symptoms was attributable to the susceptibility for emotional eating. In addition, emotional eating and physical activity self-efficacy were both important in explaining the positive association between depressive symptoms and obesity. 3) The lower vegetable/fruit intake and higher energy-dense food intake among individuals with a low socioeconomic position were partly explained by the higher priority they placed on price and familiarity and the lower priority they gave to health motives in their daily food choices. In conclusion, although policy interventions to change the obesogenic nature of the current environment are definitely needed, knowledge of the factors that hinder or facilitate people s ability to cope with the food-rich environment is also necessary. This study implies that more emphasis should be placed on various psychological and social factors in weight control programmes and interventions.

Transverse plane wave analysis of short elliptical chamber mufflers: An analytical approach

Short elliptical chamber mufflers are used often in the modern day automotive exhaust systems. The acoustic analysis of such short chamber mufflers is facilitated by considering a transverse plane wave propagation model along the major axis up to the low frequency limit. The one dimensional differential equation governing the transverse plane wave propagation in such short chambers is solved using the segmentation approaches which are inherently numerical schemes, wherein the transfer matrix relating the upstream state variables to the downstream variables is obtained. Analytical solution of the transverse plane wave model used to analyze such short chambers has not been reported in the literature so far. This present work is thus an attempt to fill up this lacuna, whereby Frobenius solution of the differential equation governing the transverse plane wave propagation is obtained. By taking a sufficient number of terms of the infinite series, an approximate analytical solution so obtained shows good convergence up to about 1300 Hz and also covers most of the range of muffler dimensions used in practice. The transmission loss (TL) performance of the muffler configurations computed by this analytical approach agrees excellently with that computed by the Matrizant approach used earlier by the authors, thereby offering a faster and more elegant alternate method to analyze short elliptical muffler configurations. (C) 2010 Elsevier Ltd. All rights reserved.

Effect of mutations on the p53 IRES RNA structure Implications for de-regulation of the synthesis of p53 isoforms

Earlier we have demonstrated the presence of internal ribosome entry site (IRES) within tumor suppressor p53 mRNA. Here we have mapped the putative secondary structure of p53-IRES RNA using information from chemical probing and nuclease mapping experiments. Additionally, the secondary structure of the IRES element of the wild-type RNA was compared with cancer-derived silent mutant p53 RNAs. These mutations might result in the conformational alterations of p53-IRES RNAs. The results also indicate decreased IRES activities of the mutants as compared to wild-type RNA. Further, it was observed that some of the cytoplasmic trans-acting factors, critical for enhancing IRES function, were unable to bind mutant RNAs as efficiently as to wild-type. Our results suggest that hnRNP C1/C2 binds to p53-IRES and siRNA mediated partial silencing of hnRNP C1/C2 showed appreciable decrease in IRES function and consequent decrease in the level of the corresponding p53 isoform. Interestingly mutant p53 IRES showed lesser binding with hnRNP C1/C2 protein. Finally, upon doxorubicin treatment, the mutant RNAs were unable to show enhanced p53 synthesis to similar extent compared to wild type. Taken together, these observations suggest that mutations occurring in the p53 IRES might have profound implications for de-regulation of its expression and activity.

CM defect and Hilbert functions of monomial curves

In this article we consider a semigroup ring R = KGamma] of a numerical semigroup Gamma and study the Cohen- Macaulayness of the associated graded ring G(Gamma) := gr(m), (R) := circle plus(n is an element of N) m(n)/m(n+1) and the behaviour of the Hilbert function H-R of R. We define a certain (finite) subset B(Gamma) subset of F and prove that G(Gamma) is Cohen-Macaulay if and only if B(Gamma) = empty set. Therefore the subset B(Gamma) is called the Cohen-Macaulay defect of G(Gamma). Further, we prove that if the degree sequence of elements of the standard basis of is non-decreasing, then B(F) = empty set and hence G(Gamma) is Cohen-Macaulay. We consider a class of numerical semigroups Gamma = Sigma(3)(i=0) Nm(i) generated by 4 elements m(0), m(1), m(2), m(3) such that m(1) + m(2) = mo m3-so called ``balanced semigroups''. We study the structure of the Cohen-Macaulay defect B(Gamma) of Gamma and particularly we give an estimate on the cardinality |B(Gamma, r)| for every r is an element of N. We use these estimates to prove that the Hilbert function of R is non-decreasing. Further, we prove that every balanced ``unitary'' semigroup Gamma is ``2-good'' and is not ``1-good'', in particular, in this case, c(r) is not Cohen-Macaulay. We consider a certain special subclass of balanced semigroups Gamma. For this subclass we try to determine the Cohen-Macaulay defect B(Gamma) using the explicit description of the standard basis of Gamma; in particular, we prove that these balanced semigroups are 2-good and determine when exactly G(Gamma) is Cohen-Macaulay. (C) 2011 Published by Elsevier B.V.

Expression of the Japanese encephalitis virus NS3 and NS2b proteins as glutathione S-transferase fusions

Flaviviruses generate their structural and nonstructural proteins by proteolytic processing of a single large polyprotein precursor. These proteolytic events are brought about both by host cell signalase and a virally encoded protease. The virally encoded proteolytic activity has been shown to reside within the nonstructural protein 3 (NS3) and requires the product of the nonstructural 2b (NS2b) gene. In order to obtain sufficient quantities of pure NS2b and NS3 proteins for kinetic analysis, we have expressed both these proteins in recombinant systems as fusions to glutathione S-transferase (GST). The fusion constructs were driven by the strong bacteriophage T7 promoter. Transfection of these constructs into the African green monkey kidney cell line CV-1 previously infected with a recombinant vaccinia virus expressing the T7 RNA polymerase resulted in synthesis of the fusion proteins. Both the fusion proteins could be purified to homogeneity in a single step using a glutathione agarose affinity matrix.