Tone at the Bottom: Measuring Corporate Misconduct Risk from the Text of Employee Reviews

This paper examines whether information extracted via text-based statistical methods applied to employee reviews left on the website Glassdoor.com can be used to develop indicators of corporate misconduct risk. We argue that inside information on the incidence of misconduct as well as the control environments and broader organizational cultures that contribute to its occurrence are likely to be widespread among employees and to be reflected in the text of these reviews. Our results show that information extracted from such text can be used to develop measures with useful properties for measuring misconduct risk. Specifically, the measures we develop clearly discriminate between high- and low-misconduct-risk firms and improve out-of-sample predictions of realized misconduct risk above and beyond other readily observable characteristics, such as Glassdoor firm ratings, firm size, performance, industry risk, violation history, and press coverage. We provide further evidence on the efficacy of our text-based measures of misconduct risk by showing that they are associated with future employee whistleblower complaints even after controlling for these same observable characteristics. This paper was accepted by Brian Bushee, accounting.

Insider trading in the European Union and in Brazil: a comparison of the essential elements of its definition

Purpose The purpose of this study is a comparison of anti-insider trading regulations in the European Union (EU) and in Brazil. Design/methodology/approach The subject of the comparison are three key elements that define the shape of the protection against insider trading, namely, the definition of inside information, the definition of insiders and the kinds of behaviours that are forbidden. Findings There are both differences and similarities between EU and Brazilian legislations on insider trading. The main discrepancies found in the three foci of the analysis seem to relate strongly to the different rationales for the prohibition of insider trading adopted in the two legal systems. In the EU, market egalitarianism and thus the parity of information, are the central concepts, whereas fiduciary duties originally constituted the point of reference in Brazil, although it has been losing importance over time owing to subsequent changes in the legislation. In sum, while anti-insider trading regulations in the EU have a well-defined identity, in Brazil their policy basis seems to be in the process of redefinition. Originality/value As of the time of submission of this study no published academic works dedicated substantially to a comparison of the anti-insider trading legislation of the EU and Brazil could be found.

Information Inequality With Insider Trading Practices in The Indonesian Capital Market

This paper focus on discussing the issue of insider trading pratices in the Indonesian capital market. Bearing Act 8 of 1995 concerning the Capital Market does not provide a clear definition of insider trading. Insider trading is a practice carried out by people in the corporation who in carrying out trading activities make use of information exclusively through insiders. Insider trading is one of the crimes in the capital market which has a very detrimental impact on many parties. The existence of inside information that is not yet available to the public is misused to trade shares on that information. The practice of insider trading is a capital market crime which in terms of proof is very difficult to prove. The practice of insider trading is a violation of the principle of transparency, even though the objective of implementing the principle of openness is to ensure transparency in capital market activities.

Searching for a Tide Table for Business:

The article investigates the methods and conceptions of statistical inference used in business forecasting in the United States and in Europe in the 1920s. After presenting the methods and arguments used by the members of the Harvard Committee on Economic Research in the first years after its establishment in 1919, the article explores the far-reaching changes in method and conviction from 1922 on. The members’ realization that the future evolved differently than predicted prompted them to give up their hope for mechanical means of forecasting and to revoke their calls for the employment of the mathematical theory of probability in economics. Instead, they established an extensive correspondence with economic and political decision-makers that allowed them to base their forecasts on “inside information.” Subsequently, the article traces European attempts to adopt the Harvard Index of General Business Conditions in the early 1920s. Impressed by the seemingly mechanical working of the Harvard index, European economists and statisticians sought to establish similar indices for their countries. However, numerous revisions of the Harvard index in the mid-1920s cast doubt on the universality of the index and the existence of stable patterns and led European researchers to pursue different paths of investigation. The article complicates the larger history of statistical inference in economics in two meaningful ways. First, it argues that statistical inference with probability was not the long-sought solution for the problem of objectivity but a long-contested, and repeatedly discarded, approach. Second, it shows that these contestations were often triggered by deviations between forecasts and the conditions actually observed and by this means argues for the importance of the historical context in the history of economics.

Monitoring or payroll maximization? What happens when workers enter the boardroom?

We examine whether worker representation on corporate boards results in improved monitoring or payroll maximization. Several economic theories predict that worker representatives would use control and voting rights in the boardroom to transform firm assets into private benefits and increased wages, but labor contract models suggest that workers’ inside information should permit improved monitoring. To investigate this conflict, we use mandatory worker representation on corporate boards in Germany. Using hand-collected data, our results suggest that the worker representatives’ payroll maximization incentives dominate their monitoring duties. Specifically, worker representatives reduce real earnings management when it results in wage cuts or job losses but not when it increases payroll or job security. Similarly, worker representatives are generally associated with improved monitoring of tax planning activities. However, when the risk of offshoring jobs is high, worker representatives do not promote tax planning for low-aggression firms and instead block aggressive tax planning for high-aggression firms. This evidence helps policymakers and researchers better understand the role of workers in corporate governance systems and contributes to the ongoing public debate about introducing worker representation in the United States and the United Kingdom.

The criminal and administrative type of front running practice and damage to the securities market

The purpose of this article is to clarify non-equitable market practices and crimes against the securities market, especially the practice of front running, in addition to point cases in which individuals acted illegally and indicate the damages to the market that this practice has caused. It also explains the possible criminal and administrative sanctions applied to the practice of front running presently in Brazilian law and whether using HTFs is considered a way of front running. The conclusion is that the practice of front running affects the proper functioning of the securities market. It damages the liquidity of assets and the parity of information principle through the inappropriate use of inside information. In addition, there is an appeal for hardening custodial sentences on crimes against the securities market, as it has greater coercive power than regular fines.

Inside Information: Systematic within-node connectivity changes observed across tasks or groups

Mapping the human connectome and understanding its relationship to brain function holds tremendous clinical potential. The connectome has two fundamental components: the nodes and the connections between them. While much attention has been given to deriving atlases and measuring the connections between nodes, there have been no studies examining the networks within nodes. Here we demonstrate that each node contains significant connectivity information, that varies systematically across task-induced states and subjects, such that measures based on these variations can be used to classify tasks and identify subjects. The results are not specific for any particular atlas but hold across different atlas resolutions. To date, studies examining changes in connectivity have focused on edge changes and assumed there is no useful information within nodes. Our findings illustrate that for typical atlases, within-node changes can be significant and may account for a substantial fraction of the variance currently attributed to edge changes.

A. V. Nikitenko’s Diary as a Source of Information on Jurors in Post-reform Russia

Впервые в научной литературе «Дневник» известного российского филолога А. В. Никитенко рассматривается в качестве источника изучения суда присяжных в Российской империи во второй половине XIX века в контексте источниковедческой парадигмы методологии истории. В статье отмечаются некоторые специфические особенности дневника как разновидности источников личного происхождения. В результате проведенного исследования делаются выводы, что «Дневнику» А. В. Никитенко свойственны характеристики, присущие дневнику как жанру исторического источника; хронологически «Дневник» является первым документом личного происхождения, в котором содержится информация о суде присяжных, исходящая от лица, лично исполнявшего соответствующие обязанности; в фактографическом плане по проблемам российского суда присяжных «Дневник» мало информативен, не содержит каких-либо значимых сведений; в плане оценочных суждений по материалам лично увиденного в суде присяжных в сочетании с информацией, полученной из других источников, «Дневник» представляет научный интерес, так как отражает позицию его автора, а также определенных общественных кругов по отношению к суду присяжных, к преобразованиям Александра II в целом и к борьбе консервативных представителей администрации за возврат к прошлому и попыткам нивелирования нововведений. The article presents the first attempt to investigate a renowned Russian philologist A. V. Nikitenko’s Diary as a source of information for jurors in the Russian Empire in the second half of the 19th century in the context of source studies and historical methodology. The article underlines some specific peculiarities of a diary as a variety of personal information source. The researcher maintains that A. V. Nikitenko’s Diary has characteristics typical of a historical source. Chronologically, the Diary is the first personal document which contains inside information about a juror trial, for it is written by a person serving on a jury. The Diary fails to provide facts and details related to the problems associated with Russian juror trials, however it contains first-hand assessments and information collected from other sources. The significance of the Diary as a source of research information is accounted for by the fact that it presents social opinions and personal views on Alexander II’s reforms and describes conservatives’ attempts to mitigate the impact of reforms and to defy innovations.

The Inside Information Regime of the MAR andthe Rise of the ESG Era

The rise in ESG investing has been characterized as an “investor revolution” and a manifestation of “social change”. The current coronavirus pandemic will arguably intensify the impact of such social change, with the “S” and “G” components of ESG, in particular, having been brought into sharper focus during the crisis. The issue of the extent to which ESG factors are (currently) of considerable importance – and, in particular, are likely to become even more so in the future – for the performance of share prices remains a highly controversial one in financial economics. However, where an empirically substantiated impact of ESG-related information on the prices of financial instruments can be shown, the question of whether such information is also of relevance to the inside information regime of the Market Abuse Regulation (“MAR”) arises and must be answered. This article explores the potential impact of ESG-related information and an increase in ESG-compliant investments on the prohibition on insider dealing and the obligation to publicly disclose inside information. We believe that the ESG preferences of a critical mass of real-life investors and, as a corollary, ESG-related information, are and will continue to be of great importance to the inside information regime. However, the intense debate regarding the precise depiction of the ‘reasonable investor’ within the meaning of Art. 7 MAR indicates that the relevance of ESG-related information to the inside information regime of the MAR is by no means clear. In light of these uncertainties, and given its efforts to promote sustainable finance, the EU legislature would be well advised to further specify the concept of inside information with a particular focus on ESG-related information.