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Variability in Jury Awards for Noneconomic Damages in Motor Vehicle Negligence Cases

By Max Cherman  

I analyze the efficiency of jury awards for noneconomic compensatory damages awarded to automobile accident victims suffering nonfatal injuries bringing motor vehicle negligence tort claims. Data from 1002 Jury Verdict Research (JVR) case abstracts was narrowed down to 218 observations of plaintiffs receiving noneconomic damages awards at trials involving motor vehicle negligence from 1988-2019 across the United States. Using age-specific value of life estimations, functional capacity losses associated with plaintiffs’ injuries, and productivity losses, I estimate an ‘expected’ noneconomic damages award that serves as a benchmark against which I compare observed awards. I regress the natural log of the ratio of observed to ‘expected’ awards on injury- severity-level indicator variables and other controls, thus attempting to find whether juries award disproportionately high or low noneconomic damages awards in accordance with plaintiff, defendant, or case-specific factors. I conclude that juries award disproportionate noneconomic damages at the opposite ends of the injury severity spectrum, with plaintiffs suffering severe injuries receiving disproportionately high awards. I also find that juries punish business and government entity plaintiffs. These results serve as evidence that jury decision-making is indeed significantly impacted by hindsight bias in large-value cases and attempts to punish supposedly wealthier defendants, creating inconsistency (variability) in compensatory damages award determinations.

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Advisors: Professor Christopher Timmins, Professor Kent Kimbrough | JEL Codes: K1, K13, Q51

The Impact of Agglomeration Externalities on Product Innovation Output in Chinese Industrial Firms

By Cindy Feng  

Agglomeration externalities is defined as the economic benefits from concentrating firms, housing, and output. This study investigates the impact of agglomeration externalities of industrial firms on product innovation output in China. In the research, I specified the impact of agglomeration into three types: Marshallian or localization externalities, defined as the impact of collocating with same-industry firms; Urbanization economies, defined as the impact of collocating with different-industry firms, and Porter externalities, the impact of competing with same-industry firms as a result of localization. My result suggests endogenous spatial selection of firms account for most of the agglomeration impacts we observe. Despite so, urbanization economies is still impactful in boosting a firm’s innovation performance, and should be taken into account as the government implements policies that boost firm performance.

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Advisors: Professor Charles Becker, Professor Kent Kimbrough | JEL Codes: R3, D24, R50

Comparing the Performance of Active and Passive Mutual Funds in Developing and Developed Countries

By Nalini Gupta  

This paper seeks to test the hypothesis that developing countries or informationally inefficient countries should see higher returns for active mutual funds on average than passive funds and the trend should be reversed in developed nations or informationally efficient economies. This analysis is done using a cross section of eight countries, four developed and four developing. Using a fund universe of 20 active and 20 passive funds per country and controls such as volatility, market return, financial market development and Human Development Index among others, we see that there is no clear systematically dominant strategy between active and passive investment universally. While developing countries are associated with lower returns, we do not find a significant difference between active and passive based on development classification. A key finding is that an increase in liquidity, acting as proxy for informational efficiency, leads to a co-movement of active and passive returns in each country. The paper also lends itself to further analysis regarding confounding factor such as noise trading and movement of foreign capital which impact the effect of increased liquidity on mutual fund returns.

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Advisors: Professor Connel Fullenkamp, Professor Kent Kimbrough | JEL Codes: G1, G11, G14

Investigating the Impact of Chinese Financing on Productivity in the African Continent

By Kedest Mathewos   

Given that productivity is a key component of long-term economic growth and that China has become an important source of external financing in Africa, this study aims to investigate the impact of Chinese foreign direct investment and government-to-government loans on productivity. Using a panel of the top fourteen African recipients of Chinese financing during the period 2003-2017, this study employs a two-stage regression process. The first relies on the use of a revised version of the Solow Model that accounts for human capital, natural resource accumulation and country-specific heterogeneity, to generate values of total factor productivity. The second examines the impact of Chinese financing on this generated measure of productivity. After taking into account significant confounding variables such as institutional quality, trade openness and manufacturing value-added, this study finds that Chinese foreign direct investment (FDI) has a significant negative impact on productivity while Chinese government loans are positively associated with productivity. However, consistent with the literature, the impact of Chinese FDI depends on the country’s absorptive capacity – proxied here by the level of human capital accumulation. Therefore, as African countries seek to boost productivity levels, they should continue to attract Chinese government loans while enhancing their FDI absorptive capacity.

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Advisors: Professor Lori Leachman, Professor Grace Kim, Professor Kent Kimbrough| JEL Codes: O4, O47, F21

An Unequal Dream: The Mortgage Rate Premium Paid by Black Communities

By Michael Nicholson   

This paper analyzes loan pricing discrimination against predominantly black communities in U.S. mortgage markets. Building on previous literature, this paper posits that ceteris paribus predominantly black communities continue to face economically significant discrimination in mortgage pricing. Ultimately, this paper concludes that predominantly black communities face 10-14 basis points of pricing discrimination in mortgage loans which corresponds to 12.6-17.6% higher rate spreads. This estimation comes after accounting for geographic and lender effects, borrower quality, tract-level characteristics, and loan type. These results confirm past findings of pricing discrimination and illustrate yet another financial barrier for black households in this country.

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Advisors: Professor Emma Rasiel, Professor Kent Kimbrough | JEL Codes: R2, J15, G21

“Behind the Scenes:” An Empirical Investigation of Broadway Show Success Factors

By Alexander Sanfilippo   

This paper analyzes the impact of financial and objective factors on Broadway show success. The analysis differs from previous literature through its exclusive focus on Broadway productions that open between June and February, so defined as the “Pre-Season,” as well as its attempts to establish causality through an instrumental variable regression. Two other methods of analysis are also used in accordance with past research: an ordinary least squares regression and relative risks hazard model. The results demonstrate the significant impact of first week attendance on long-term show success and reiterate the essential function of the Tony Awards in Broadway survival. This paper also introduces the positive impact of ticket pricing on show survival. Discussion on the implications surrounding the difficulty of obtaining show-specific budget data concludes the paper, arguing that this should be an area of future focus and collaboration between researchers and Broadway producers.

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Advisors: Professor James Roberts, Professor Brad Rogers, Professor Kent Kimbrough| JEL Codes: C4, C41, C26

Where Did the Money Go? Impact of the ECB’s Corporate Sector Purchase Program on Eurozone Corporate Spending

By Tina Tian   

Slow corporate growth and a lack of corporate investment has plagued European markets for the past decade. As a response, the ECB began the Corporate Sector Purchase Program (CSPP) in 2016 to provide liquidity to corporate debt markets through bond purchases. Four years after the start of the program, this paper assesses its impact by looking at how companies spent this money on a micro level. In particular, it looks at the impact of long-term debt on five expenditures (fixed assets and R&D, cash balances, short-term debt, cash to shareholders, and share buybacks). We test these hypothesized expenditures based on financial statement panel data from a selection of European firms whose bonds were purchased by the ECB. The results show an increase in financial expenditures including cash balances and short-term debt and a decrease in productive investment expenditures such as fixed assets and R&D. This indicates a lack of efficacy of the corporate bond purchase program as excess liquidity provided by the ECB went towards eurozone companies refinancing existing debt rather than investing in growth ventures.

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Advisors: Professor Connel Fullenkamp, Professor Kent Kimbrough | JEL Codes: G3, O16, E58

Female Labor Force Participation in Turkic Countries: A Study of Azerbaijan and Turkey

By Natasha Jo Torrens

Encouraging female labor force participation (FLFP) should be a goal of any country attempting to increase their productive capacity. Understanding the determinants and motivations of labor force participation requires isolating the factors that influence a woman’s decision to enter or leave formal employment. In this thesis, I utilize data from the Demographics and Health Surveys to explain the role of social conservatism in promoting or limiting participation in the labor force. I focus on ever-married women in Azerbaijan and Turkey to provide a lens through which to explain the unexpectedly low FLFP of Turkey. Though most prior research attempts to explain Turkey’s low FLFP rate by comparisons to other OECD countries, my study looks at Turkey through the context of other Turkic cultures to explore cultural factors driving labor force participation for ever-married women. This study finds a negative correlation between conservatism and the likelihood of participating in the labor force for ever married women in Azerbaijan, and a larger, positive relationship in Turkey.

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Advisors: Professor Charles Becker, Professor Didem Havlioğlu, Professor Kent Kimrbough | JEL Codes: C50, J16, N95

Investigating the Costs of Religious Observance: Cross-Country Analysis of Islamic Banking

By Myla Swallow and Richard Vargo

This study regresses key variables that influence the profitability of Conventional and Islamic banks as measured by Return on Average Assets, to determine the impact of Islamicity on the profitability of the banks in a given country. The study compares 36564 banks in 77 countries belonging to both Islamic and non-Islamic countries. We  find that Islamic banks have higher operating costs and overall experience lower return on average assets.

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Advisors: Professor Kent Kimbrough, Professor Michelle Connolly | JEL Codes: F30; G21; Z12

Overreaction in the Financial Times Stock Exchange (FTSE)

By Yusuke Ewan Tanaka Legard

The Overreaction Hypothesis suggests that investors overreact to unexpected news in the financial world, which leads to a mispricing of equities. This paper investigates the presence of overreaction in the Financial Times Stock Exchange (FTSE) between 1995 and 2018. The empirical methodology studies the monthly returns of equities in the FTSE 100. The empirical results are consistent with the overreaction hypothesis and indicate the presence of overreaction within the FTSE. Furthermore, the results highlight whether the information revolution has exacerbated or lessened overreaction. The results suggest that investor overreaction has not altered, for better or worse, since the information revolution.

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Advisors: Professor Emma Rasiel, Professor Kent Kimbrough | JEL Codes: E7; E70; D83

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