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In this paper we investigate the reputational penalties to managers of firms announcing earnings restatements. More specifically, we examine management turn-over and the subsequent employment of displaced managers at firms announcing earnings restatements during 1997 or 1998. In contrast to prior research (Beneish 1999; Agrawal et al. 1999), which does not find increased turnover following GAAP violations or revelation of corporate fraud, we find that 60 percent of restating firms experience a turnover of at least one top manager within 24 months of the restatement compared to 35 percent among age-, size-, and industry-matched firms. Moreover, the subsequent employment prospects of the displaced managers of restatement firms are poorer than those of the displaced managers of control firms. Our results hold after controlling for firm performance, bankruptcy, and other determinants of management turnover, and suggest that both corporate boards and the external labor market impose significant penalties on managers for violating GAAP. Also, in light of resource constraints at the SEC, our findings are encouraging as they suggest that private penalties for GAAP violations are severe and may serve as partial substitutes for public enforcement of GAAP violations.

We investigate corporate governance experts' claim that it is detrimental to a firm to reappoint former CEOs as directors after they step down as CEOs. We find that more successful and more powerful former CEOs are more likely to be reappointed to the board multiple times after they step down as CEOs. Firms benefit, on average, from the presence of former CEOs on their boards. Firms with former CEO directors have better accounting performance, have higher relative turnover-performance sensitivity of the successor CEO, and can rehire their former CEO directors as CEOs after extremely poor firm performance under the successor CEOs.

Many first-year teachers get laid off at the end of the school year due to budget reductions. How prepared are you for this curve in your teaching career path?

Credit rating agencies have an incentive to maintain a public reputation for credibility among investors but also have an incentive to develop a second, private reputation for leniency among issuers. We show that in markets with few issuers, such as markets for structured assets, these incentives may lead rating agencies to inflate ratings as a strategic tool to form a \"double reputation.\" The model extends the existing literature on \"cheap-talk\" reputation to the case of two audiences. Our results can explain why rating inflation occurred specifically in markets for MBSs and CDOs during the recent financial crisis. Policy implications are discussed.

Terrorist groups repeatedly include operatives of varying commitment and often rely on a common set of security-reducing bureaucratic tools to manage these individuals. This is puzzling in that covert organizations are commonly thought to screen their operatives very carefully and pay a particularly heavy price for record keeping. The authors use terrorist memoirs and the internal correspondence of one particularly prominent group to highlight the organizational challenges terrorist groups face and use a game-theoretic model of moral hazard in a finitely sized organization to explain why record keeping and bureaucracy emerge in these groups. The model provides two novel results. First, in small heterogeneous organizations longer institutional memory can enhance organizational efficiency. Second, such organizations will use worse agents in equilibrium under certain conditions. The core logic is that in small organizations the punishment strategies that allow leaders to extract greater effort are credible only when operatives can identify and react to deviations from the leaders' equilibrium strategy. This dynamic creates incentives for record keeping and means that small organizations will periodically use problematic agents in equilibrium as part of a strategy that optimally motivates their best operatives.

We find that the likelihood of forced turnover in the CEO and CFO positions is significantly higher for firms in the aftermath of option backdating than in propensityscore matched control firms. Forced turnover occurs in about 36 percent of the accused firms. The forced turnover rates for CEOs and CFOs are similar and several times higher than normal. The displaced managers are further punished by the managerial labor market, as they are much less likely than control firm managers to be rehired at comparable positions. We also find that backdating firms restructure CEO compensation to rely less on stock options. Finally, we learn the higher turnover extends to the General Counsel. While boards are often viewed as unresponsive to criticisms involving executive compensation, they did respond quite decisively to option backdating allegations and the accompanying adverse publicity.

This article provides evidence that involuntary unemployment, and the segmentation of labour markets into firms offering \"good\" and \"bad\" jobs, may both arise as a consequence of contractual incompleteness. We provide a simple model that illustrates how unemployment and market segmentation may jointly emerge as part of a market equilibrium in environments where work effort is not third-party verifiable. Using experimental labour markets that differ only in the verifiability of effort, we demonstrate empirically that contractual incompleteness can cause unemployment and segmentation. Our data are also consistent with the key channels through which the model explains the emergence of both phenomena.

Consistent with the empirical evidence, this article analyzes a labor market in which separations are not permanent and reactivated firms prefer to rehire former employees instead of seek new ones. Workers engage in job search due to the uncertain prospects of rehiring. If firms can commit to wages contingent on rehiring, they backload wages to provide incentives for workers to reduce their unobservable search effort. Under risk aversion and incomplete markets, if productivity at reactivation is sufficiently high, the tension between wage backloading and consumption smoothing leads to excessive search in equilibrium.

Japanese society faces serious problems due to population ageing. Both the number and percentage of people aged 65 years old and over are increasing. The ratio of those aged 65+ was 17.3 per cent in 2000, but the estimate of the National Institute of Population and Social Security Research is that the ratio will become 28.7 per cent in 2025 and will reach 40 per cent in 2050. This article consists of four sections. In the first the characteristics of issues associated with population ageing in Japan are discussed. The actual situations of employment and lives of older workers are introduced. The second section analyses government policies to address the ageing of the population. The Japanese government is trying to address the issue through encouraging older people to work longer. The promotion of efforts to extend longer working lives is discussed. In the third section a rehiring system and two cases of Japanese firms are described. Those enterprises are effectively employing older workers. Their experiences would be interesting for those planning to hire older workers. The last section discusses how to resolve challenges associated with population ageing. It is shown that continuous training is one of the most important ways of keeping older people productive.