Citation
Trust on fire

Material Information

Title:
Trust on fire exploring the importance of trust in urgent moments
Creator:
Wild, Eric
Publication Date:
Language:
English
Physical Description:
v, 69 leaves : ill. ; 29 cm.

Subjects

Subjects / Keywords:
Benevolence ( jstor )
Cognitive psychology ( jstor )
Firefighting ( jstor )
Industrial and organizational psychology ( jstor )
Job performance ( jstor )
Personnel evaluation ( jstor )
Psychological assessment ( jstor )
Psychology ( jstor )
Social psychology ( jstor )
Trust ( jstor )
Dissertations, Academic -- Management -- UF ( lcsh )
Management thesis, Ph. D ( lcsh )

Notes

Thesis:
Thesis (Ph. D.)--University of Florida, 2004.
Bibliography:
Includes bibliographical references.
General Note:
Printout.
General Note:
Vita.
Statement of Responsibility:
by Eric Wild.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
Copyright [name of dissertation author]. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
003163658 ( ALEPH )
759209705 ( OCLC )

Downloads

This item has the following downloads:


Full Text










TRUST ON FIRE:
EXPLORING THE IMPORTANCE OF TRUST IN URGENT MOMENTS















By

ERIC WILD


A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT

















TABLE OF CONTENTS




ABSTRA CT ...... ... ..... .......... .. .. .. .. .. iv

CHAPTER


1 INTRODUCTION


. .. .. .... .. .. .. 1


2 HYPOTHESES ............... ............... .... .. ... .. .10


Differentiating Urgent and Routine Trust ...
Urgent and Routine Trust: Effects on Outcomes
Job Performance ...... .


Commitment and Withdrawal ....
Moderating Effect of Risk Events ..
Trust Antecedents: Trustworthiness
Propensity to Trust .... .....


. .. .. .. .. .. .. 10
. .f f . 15
.* .a . a a 17


* a a a a a a a a a a a a a a a a ft a a a a 23
. .a . . .. 24


. . 2 7


. . . 3 1


3 M ETH O D ....... .. .......... .. .. .. ....... .. .. ... ...... 34


Sample ..... .
Time 1 Procedure
Time 2 Procedure
Time 3 Procedure


. .. .. .. 34


. .a.a a. .a a. .a a. .a..a. .a a. a a


S.. 35
... 37


S* 39


4 RESULTS


Descriptive Statistics


Hypothesis 1
Hypothesis 2
Hypothesis 3
Hypothesis 4
Hypothesis 5
Hypothesis 6


. .a a a


. a a a a. .. a. .. .. .a. 4 3
. . .1 3


45
46











. .. .* .51


DISCUSSION Relationship with Commitment and Withdrawal

Routine Trust's Relationship with Commitment and Withdrawal


Routine Trust's Relationship with Job Perform
Negative Effects of Urgent Trust ........
Citizenship and Counterproductive Behaviors
Trustworthiness ......... .
Propensity to Trust . .
Practical Implications...................
Study Limitations .
Suggestions for Future Research ..........


REFERENCES


. .. 52


ance .. .. .. 53
...54
. . 54
...55
...57
...57
58
...59
. C . C 59


. C . . .6 2


BIOGRAPHICAL SKETCH


. ....... ...... .... ... .... ... 69














Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy

TRUST ON FIRE:
EXPLORING THE IMPORTANCE OF TRUST IN URGENT MOMENTS

By

Eric Wild


December 2004


Chair:


Jason Colquitt


Major Department:


Management


Many jobs possess an inherent duality: everyday, traditional actions, with

punctuated instances of emergencies or crises. The purpose of my study was to examine

how this duality affects trust at work. My study explicated two new constructs: routine

trust and urgent trust. I examined the nomological network of these trust variables using a

sample of firefighters. These two forms of trust are hypothesized to be differentially

related to a set of organizationally relevant independent and dependent variables. Risk

was posited to moderate the relationship between trust and the outcome variables of this

study.

Some evidence was found that the two forms of trust are distinct, yet related

constructs. Most of the hypotheses were not supported, possibly due to a lack of








sample. Practitioners should be aware that these two forms of trust exist and that

distinguishing between them may help them achieve organizationally relevant goals.














CHAPTER 1
INTRODUCTION

Trust is an important psychological variable related to key organizational

outcomes. Kramer (1999) noted that "trust is moving from a bit player to center stage in

contemporary organizational theory and research" (p. 238). The changing nature of work

accentuates the importance of this construct. Popular press has called attention to a

plethora of recent situations wherein large corporations have violated the trust of

stockholders and also employees. The names Enron and Worldcom will forever be

synonymous with tricky accounting, abject dishonesty, and vulgar deceit. These trust

"violations" also occur in the opposite direction, as employees today feel less loyalty to

their employers and may therefore be more willing to exploit the vulnerability of the

companies for which they work. Employees steal time and effort by shirking and, in

many cases, actually stealing money in both a literal sense and by pilfering merchandise


and/or supplies.


Whatever the reasons for these deeds, their prevalence does not make for


an environment conducive to the fostering of trust.

Caudron (1996) provided the following examples of how trust breaks down

within an organization: "Management touts open-book communication, for example, but

employees hear about layoffs on the radio. The board talks about the need to cut costs

while handing the CEO a multi-million dollar bonus. Managers promote long-term focus,






2

In each of these examples, dissonance between what management says and does leaves

employees with little basis for trusting their employers.

Additionally, the physical characteristics of today's work environment highlight

the increased relevance of trust to organizations. For example, the demographic

distribution of employees has become quite diverse, even in careers typically dominated

by one gender or race. Further, self-managed teams have become a popular work unit.

Management has little control over these teams and must therefore trust that they are

functioning effectively. If in fact a team is shirking as a collective for example,

management may not be privy to this fact until it is too late and a project has failed.

Finally, the actual distribution of work within many firms has expanded to include not

only different cities or states but, in some cases, different regions of the world.

Obviously, in these cases, interdependent workers must often substitute trust for

monitoring because of simple geographic differences that make face-to-face observation

difficult to impossible.

In my study, trust is defined as a psychological state comprising the intention to

accept vulnerability based on positive expectations of the intentions or behavior of

another. This definition, put forth by Rousseau, Sitkin, Burt, and Camerer in the 1998

special issue on trust in the Academy of Management Review (AMR), has three key

components. First is the idea that trust is an intention, not an act. Second is the idea of


vulnerability.


Without some sort of vulnerability, trust is unnecessary. There is little or


no need to trust someone whose actions have no impact on the trustor. Third is the idea of






3

urgent they are. Some behaviors are mundane in nature and involve everyday, normal

actions performed at work. Other behaviors are far more urgent in nature and may

include rarer actions, such as behavior in emergency situations. For example, a

convenience store clerk engages in a different psychological event when he trusts the

clerk working the next shift to show up on time, than when he trusts his coworker to

behave properly in the event of an armed robbery. In a related manner, a person who

works in assembly trusting a coworker in engineering to design a product that can in fact

be assembled might be a psychological event quite distinct from that same person

trusting that engineer to point out an critical design flaw that makes the product unsafe

even after the product has gone to market.

In other words, this definition leaves two important questions unanswered: First,

willingness to be vulnerable during what kind of behavior and second, positive

expectations that the person will engage in what type of behavior. These two questions

are important because many jobs possess an inherent duality: everyday, traditional

actions, with punctuated instances of emergencies or crises. Given this distinction, it

seems that trust may take on different forms in these different situations. This form of

trust may be urgent when emergencies occur, but has received very little research

attention. Most research on trust has been conducted in samples (e.g., secretaries, public

utility office employees, sales managers) where these emergency situations simply do not

arise (Butler, 1983; Nicholson & Goh, 1983; Nooteboom, Berger, & Noorderhaven,

1997). As a consequence of this sampling, trust often is not studied in jobs where life or






4

work must trust their coworkers in an everyday sense as well. These jobs involve

situations distinct from those that occur in normal jobs.

Other jobs possess this duality as well, though perhaps not in a life or death sense.

That is, most jobs have every day, traditional actions with punctuated urgent situations.

For example, few jobs are as routinized as those performed by assembly-line workers. In

these situations, each worker on the line must trust the preceding coworkers to do their

jobs correctly in order for the product to be produced. These instances of trust are

psychologically distinct from instances involving these same workers trusting each other

to pull one another to safety should someone become entangled in the moving-parts

assembly line machinery. Given this discussion of the inherent duality of trust, the

purpose of my study was to reconceptualize trust as it is experienced in jobs that possess

this important duality. More specifically, two types of trust were examined: urgent trust

and routine trust.

The construct of trust has been of interest to researchers in a variety of


disciplines.


While disciplines differ in their views of trust, general agreement exists


within different disciplines. Personality researchers see trust as an individual difference.


Economists


see trust as an institutional phenomenon. Sociologists see trust as embedded


in relationships among people. Social psychologists see trust as an expectation of another

party in a transaction (Bigley & Pearce, 1998).

Although trust appeared as a variable in the management literature as early as

1946, no work focused specifically on trust until the work of Mellinger (1959). Mellinger








communicator distrusts the recipient of that communication, the communicator will

conceal his real feelings about the subject of the communication.


More influential than Mellinger's


work was that of Deutsch (1958). Deutsch


examined different motivational orientations (cooperative, individualistic, and

competitive) as causes of trusting and trustworthy behavior on the part of participants in

a two-person nonzero-sum game. Later, Deutsch (1960) defined trust as follows:

An individual may be said to have trust in the occurrence of an event if he expects
its occurrence and his expectation leads to behavior which he perceives to have
greater negative motivational consequences if the expectation is not confirmed


than positive motivational consequences if it is


confirmed. (p. 124)


Implicit in this definition is the idea that a person has more to lose than to gain by

trusting another.

Research on trust then slowed more or less to a standstill until Rotter (1967)

developed a scale to measure interpersonal trust. Rotter defined interpersonal trust as an

expectancy held by an individual or group that the word, promise, or verbal or written

statement of another individual or group can be relied on. In later research, Rotter

showed that people higher in interpersonal trust were less likely to lie, cheat, or steal.

Further, people higher in interpersonal trust were less likely to be unhappy or

maladjusted, and more likely to be well-liked and sought out as a friend, than individuals

low in interpersonal trust (Rotter, 1980).

While the early work of Rotter served as a springboard for research on trust in the

literatures of personality and psychology, the work of Roberts and O'Reilly (1974) was
* 1_.l_ t' -I-* 1 ,1 rr, 1 1 m It*








1974 identified trust in superiors as a factor influencing upward communication within

organizations.

Mayer, Davis, and Schoorman (1995) presented an integrative model of

organizational trust. These authors justified the need for an integrated model by citing a

host of problems in the literature on trust. Examples included definitional problems;

uncertainty concerning the relationship between risk and trust; confusion concerning the

referent of trust; and confusion between trust, its antecedents, and its outcomes. Their


model showed that the perception of another's


ability, benevolence, and integrity as well


a person's general trusting propensity influenced how much trust a person extended to

another. This trust determined how much risk the trustor was willing to take in the

relationship. Their work was especially important because it distinguished between

antecedents of trust internal to the trustor (i.e., propensity to trust) and those internal to

the person being trusted (i.e., ability, benevolence, and integrity).

Hosmer (1995) conducted a cross-disciplinary review of the trust literature in an

attempt to find a unifying definition of trust. Hosmer identified several basic conclusions

that are accepted across the multiple disciplines examined. First, he found that trust was,

for the most part, expressed as an optimistic expectation concerning the outcome of an

event or the behavior of a person. Second, trust tended to occur under conditions of

vulnerability. Third, trust was associated with uncoerced cooperation and was difficult to

enforce. Finally, trust was usually extended with an implicit assumption of an accepted

duty to protect the rights and interests of others. Given these conclusions, Hosmer








rights and interests of all others engaged in a joint endeavor or economic
exchange. (p. 392)

As discussed earlier, trust possesses an inherent duality. For the purposes of my

study, I refer to these two types of trust as urgent trust and routine trust.


* Routine trust is the intention to accept vulnerability based on positive
expectations of the intentions or behavior of another in situations that have
established rules, procedures, or precedents governing actions. This is not to say
that these situations are unimportant-merely that they are more frequently
encountered and have well-established histories.

* Urgent trust is the intention to accept vulnerability based on positive expectations
of the intentions or behavior of another in situations that are novel or less
common and pose more serious threats to collective interests.

An example may help illustrate this distinction. Police officers must have routine

trust in their fellow officers. A precinct would not function effectively if officers could

not trust one another to engage in routine behaviors such as showing up for work,

following the appropriate chain of command, and completing paperwork in a timely

fashion. These are all examples of behaviors that are frequently encountered and, as such,

are driven by rules and precedents. Interestingly, these are the same behaviors that

coworkers trust one another to exhibit in almost any organization.


The urgent form of trust is also prevalent in a police officer's


career. In fact,


routine events are often punctuated with novel, more serious situations in which one


officer'


life is literally in the hands of another. This punctuation often occurs without


warning and can be quite precarious. For example, two patrolling officers might pull over

a vehicle for having an expired tag. This type of occurrence is certainly routine for a

not rr/ 1 1 t nCC oar T .+ tn+ an r. n* kLt nn: na1 1. CC nn .*------ -- ---- t _- -11 -






8

brandishes a weapon, the officers must trust one another to diffuse the emergency, disarm

the driver, and protect each other's lives. The type of trust needed changes rapidly in a


situation such as this.


What began as a commonplace event where routine trust was key is


now a dangerous and uncertain situation wherein urgent trust has moved to center stage.

In this example, both forms of trust must be present; and it would be difficult to argue

that one is more important than the other.

My intention is not to suggest that urgent trust is only present in life-or-death

situations. In fact, urgent trust is necessary in many situations that are uncommon and

pose serious threats to collective interests. Take the example of burglary suspects and

their lawyers. In these situations, the accused must trust their lawyers in different ways.

At a very basic level, the defendants trust their lawyers to follow proper protocol in terms

of filing all necessary paperwork in a timely fashion, familiarizing themselves with the

facts of the case, and examining case histories to further their understanding of

precedents related to the cases. The defendants thus engage in routine trusting.

Additionally, however, the defendants must trust their lawyers in other fashions. For

example, the suspects must trust their attorneys to act appropriately in novel situations

such as the discovery of surprising and damaging evidence against the accused. In the

face of such situations, the defendants must engage in urgent forms of trust and believe

that their attorneys will handle appropriately these unexpected and serious occurrences.

As before, both forms of trust must be present and are likely equally important.

In the case of firefighters, the type of trust acting at the moment also can change








changes. For example, in the event of an unexpected equipment failure (e.g., a ladder

breaking), firefighters may quickly become dependent on the actions of others to save

their lives. In this way, urgent trust becomes key.

These examples and the preceding discussion generated several interesting

questions that became the guiding research questions for my study. First and most


obvious is the question,


That is,


"Are urgent and routine trust truly distinct from one another?"


"Are the two types of trust simply different levels of some greater construct of


trust or are they psychologically distinct concepts?" Assuming they are, in fact, distinct


constructs, do both urgent and routine trust guide key attitudes and behaviors?


In other


words, do both forms of trust act as important independent variables driving important

outcomes?

Further research questions arise from the inherent presence of risk in most

discussions of trust. According to most of the literature in this domain, trust need not be

present in situations where there is no risk. Given this, are the two forms of trust

differentially moderated by the level of risk present in a situation? Assuming again that

the two forms of trust are distinct from one another, are they differentially predicted by

various dimensions of trustworthiness? For example, do perceptions of ability have a

stronger impact on urgent or routine trust? Similarly, are the two forms of trust

differentially predicted by the propensity to trust?

I argue that urgent and routine trust are psychologically distinct constructs that

are differentially affected by independent variables (such as trustworthiness and


















CHAPTER


HYPOTHESES


My study tested the model shown in Figure 1. Urgent and routine trust were


predicted to be distinct constructs that have unique, independent effects on a set of


outcome variables. Those effects also were predicted to vary according to the risk level


experienced by the individuals. Moreover, urgent and routine trust were predicted to have


different antecedents in terms of relevant trustworthiness facets and individuals'


propensity to trust. This chapter presents a link-by-link discussion of this model and


presents explicit hypotheses.


t Urgent
--' Trust
,, *s11


Figure 1.


Model of hypothesized relationships


Differentiating Urgent and Routine Trust


Propensity
to Trust


Risk


Perceptions of
Coworkers'
Ability


Perceptions of
Coworkers'
Benevolence


Perceptions of
Coworkers'
Integrity


OUTCOMES
- Task Performance
- Citizenship Behavior
- Counterproductive Behavior
- Organizational Commitment
- Withdrawal


Routine
.* Trust
,








trust that person to do


?" or "To what extent do I trust that person to do


?" Like any


evaluation, trust evaluations must be created. To describe the process by which trust

evaluations are created, it is helpful to examine the literature on creating of

performance-appraisal evaluations. DeNisi, Cafferty, and Meglino (1984) defined

performance appraisal as the process by which an observer (such as a peer or supervisor)

rates the job performance of an employee. Performance ratings formed by this process

play an important role in enhancing organizational effectiveness. As a result, a large

volume of literature has been produced wherein the intricacies of this cognitive process

are analyzed and theory is put forth (Cooper, 1981; DeNisi et al., 1984; Ilgen & Feldman,

1983).

DeNisi et al. (1984) theorized that the performance-appraisal process is the

product of a set of cognitive operations including the acquisition, organization, storage,

retrieval, and integration of information. Their model is laid out as follows. First, the

rater observes behavior. Next, the rater formulates some cognitive representation of that

behavior and stores it in memory. Later this stored information is retrieved, reconsidered,

and integrated with other available information. Finally, the rater uses this information to

assign a formal evaluation to the ratee.

Supervisors often evaluate two separate types of performance either explicitly or

incidentally. These two types are maximum performance and typical performance.

Borman (1991) referred to maximum performance as the "can do" aspects of

performance. Maximum performance is determined by the technical proficiency and/or








performance represents the typical behavior of the job-holder over time and is best

predicted by that job incumbent's level of motivation. Each of these types of

performance is important. and each is predicted by distinct independent variables

I hypothesized that evaluations of trust operate in much the same manner as


evaluations of performance.


When an individual is deciding whether to trust someone


else, the individual must enact cognitive processes similar to those enacted by individuals

appraising performance. As with performance evaluation, trust evaluation requires the

acquisition, organization, storage, retrieval, and integration of information. First, an

individual evaluating the trustworthiness of another must acquire information about that


person


's behavior through some form of direct observation or by listening to others. A


cognitive representation of this behavior must be organized and stored. That is, the

evaluator must decide which behaviors are relevant to an evaluation of trust, and which

are not. At the moment when one individual decides whether to trust another, this

previously stored, relevant information must be retrieved and integrated with other

information. Upon this integration, the individual must ultimately decide whether to trust

the other.

Additionally, trust evaluations, like performance evaluations, may involve

evaluating distinct forms of the same dependent variable. The focus of the evaluation

may be routine trust, urgent trust, or both. As with maximum and typical performance,

evaluations of routine and urgent trust may be driven by different factors. I hypothesize

that routine trust evaluations are driven by typical, repetitive, everyday observed






13

As in the example of performance evaluation, a person evaluating trust acts as a

human information processor. Given this, trust evaluations can be difficult to make

because, as an information processor, humans have limited cognitive capacity for

acquiring, encoding, and storing sensory information (Newell & Simon, 1972). Even

given this limitation, people must process vast amounts of information in order to

evaluate trust and also to function effectively in their social environments. In other

words, this wealth of information must be processed somehow, but perhaps in a manner

less cognitively complex than that described above. One popular explanation of how

humans overcome this cognitive limitation is that they use cognitive shortcuts to deal

with the onslaught of information for which they are responsible (Abelson, 1976; Hastie,

1981; Tesser, 1978).

This use of cognitive shortcuts is what further distinguishes the process by which

individuals evaluate routine trust from the process by which individuals evaluate urgent

trust. To clarify this distinction, the concept of category prototypes must first be

discussed. A category is a cognitive structure that represents knowledge about a

particular stimulus, including its features and the relationships among those features.

These categories allow individuals to efficiently process information about familiar

objects, persons, situations, and behaviors. If a stimulus is similar enough to an existing

category, this stimulus is treated as a category member, and relationships in that category

are assumed to hold true for that particular stimulus. For example, rude behavior may be


a category for an individual.


Within this mental category is a multitude of examples of






14

any other behavior falling into this category. Routine stimuli are often treated in this way

to conserve cognitive energy.

In the case of routine trust evaluations, common observed behaviors tend to

activate either the "trustworthy behavior" category or "untrustworthy behavior" category.

This is possible because the same or similar behaviors are repeatedly observed and do not

need to be deeply processed repeatedly. In fact, these routine behaviors are what allow

the creations of categories because the knowledge about a stimulus, including its features

and relationships among those features, is based on repeated encounters with that

stimulus. This is why routine trustworthy behaviors are important; they allow the creation

of these prototypes used in routine trust evaluations.

The evaluation of urgent trust operates somewhat differently. Like any evaluation,

the urgent trust evaluation is the product of a set of cognitive operations including the


acquisition, organization, storage, retrieval, and integration of information.


What


distinguishes this urgent trust evaluation from routine trust evaluation is that category

prototypes cannot be used for urgent trust evaluations. An urgent event is uncommon or

novel; thus categorization is either impossible or inaccurate. The literature on cognitive

shortcuts further supports this contention. Hastie and Kumar (1979) suggested that the

more distinct a stimulus from previous mental representations, the more deeply it is

cognitively processed. Other researchers have found that recognition and recall memory

are better for atypical than typical actions (Graesser, Gordon, & Sawyer, 1979; Graesser,

Woll, Kowlski, & Smith, 1980). Further, Lord (1985) argued that while typical stimuli






15

The preceding discussion shows how routine trust and urgent trust may be

psychologically distinct constructs. Additionally, these two types of trust are predicted by

different independent variables and are evaluated by distinct psychological processes. As

additional support that these two concepts are distinct from one another, I argue that they

explain separate variance in a variety of important organizational and psychological

outcomes. These outcomes include job satisfaction, task performance, citizenship, and

counterproductive behavior. I suggest that each of these outcomes is a reaction to routine

and urgent trust evaluations.

Urgent and Routine Trust: Effects on Outcomes

In addition to distinguishing the two forms of trust, my study also intended to

examine how these types of trust relate to important organizational outcomes. One such

outcome is job performance, a broad concept that typically includes multiple dimensions.

In 2002, Rotundo and Sackett conducted an extensive review of the relative importance

of task performance, citizenship behavior, and counterproductive behavior on

job-performance ratings. The authors suggested that task, citizenship, and

counterproductive performances are all underlying dimensions of the overall construct of

job performance. They defined job performance as those actions and behaviors under an

individual's control that contribute to the goals of the organization. Given the breadth of

this definition, it is not surprising that it subsumes all three types of behaviors as job

performance.

Some discussion is warranted at this point about the specific facets of








provision of a service. Clearly, it is not sufficient to study only task-related behaviors

given all of the other actions an employee may take that could help or hinder the

organization that are not obviously task-related. On the more positive end, employees

may engage in behaviors such as demonstrating effort, altruism, spreading goodwill, or

endorsing, supporting, and defending organizational objectives (Borman & Motowidlo,


1993; Campbell, 1990; George & Brief, 1992; Organ, 1997).


Each of these more specific


behaviors belongs to a group of behaviors referred to as citizenship performance. By

definition, citizenship performance is behavior that contributes to the social and

psychological environment of the organization and thus helps the organization achieve its

goals (Rotundo & Sackett, 2002). By the very nature of the fact that these behaviors

contribute to organizational success, they should be included in the domain of job

performance.

Somewhat paradoxically, behaviors that detract from organizational goals also

belong in the domain of job performance. Examples of these behaviors include substance

abuse, having poor self-discipline, destroying company property, harming coworkers,

and not following rules (Borman & Motowidlo, 1993; Campbell, 1990; Robinson &

Bennett, 1995). For the purposes of this study, counterproductive performance is defined

as any voluntary behavior that harms the organization. Together, these three forms of

behavior form the basis of job performance.

Of course, organizations value more than just high levels of job performance. It is

also important to keep and retain those employees who are fulfilling their role








are strongly committed to their organization value that membership to a strong degree,

making it less likely that they will explore alternative employment opportunities.

Moreover, high levels of organizational commitment are associated with better job

performance, as meta-analytic reviews have linked commitment to beneficial task and

citizenship behaviors (Mathieu & Zajac, 1990; Meyer, Stanley, Herscovitch, &

Topolnytsky, 2002).

An individual's attachment to his or her organization can also be inferred from


the converse of commitment: employee withdrawal.


Withdrawal is defined as a set of


intentions and behaviors that signal a psychological and physical separation from an

organization, usually to avoid some source of dissatisfaction (Hulin, 1991). Examples of

withdrawal range from minor acts like daydreaming, chatting about nonwork topics, or

tardiness, to more major acts, such as absenteeism and intentions to search for alternative


employment.


While withdrawal appears in some taxonomies of counterproductive


behavior (Sackett & DeVore, 2001),


it is a much more passive response to dissatisfaction


relative to acts like theft and verbal or physical abuse.

Job Performance

Work examining the relationship between intragroup trust and job performance

was being conducted as early as 1970 (Friedlander, 1970). This study was based on the

notion that the formation of trust, the reduction of fear, and the subsequent growth of

confidence are all interrelated factors which facilitate individual and group development.

Given that accepting self and others facilitates growth, an individual must learn to trust






18

12 workgroups of varied sizes. Based on correlational analysis, the author concluded that

intragroup trust was, in fact, a strong predictor of later group performance.

A similar rationale prompted a study by Klimoski and Karol (1976). According to

the authors, defensiveness among group members hampered problem-solving

effectiveness. Trust acted to mitigate defensiveness, and, through this mechanism,


enhanced problem-solving effectiveness.


To test this notion, Klimoski and Karol


conducted a laboratory study on a sample of 116 females divided into 29 groups wherein

trust was manipulated through feedback given to group members concerning how they

were evaluated by other members of their group. The belief was that participants seeing

favorable evaluations would have more trust in their group members than members

seeing negative evaluations. The manipulation worked. Those in the high trust and

control conditions outperformed groups in the low trust condition.

Several other studies have examined the relationship between intragroup trust and

some measure of group effectiveness (Dooley & Fryxell, 1999; Jehn & Mannix, 2001;

Zand, 1972). Dooley and Fryxell found a moderate correlation between strategic

decision-making team trust and that teams decision quality in a sample of hospital


CEO'


Jehn and Mannix found similar results in a sample of full-time employed,


part-time MBA students working in three-person teams. Again, a moderate correlation

was found between intragroup trust and group performance. Zand manipulated trust

before a task in groups of business executives. As in the Dooley and Fryxell study,

shared trust within the group was a significant determinant of managerial problem








different NCAA basketball teams'


trust in their coaches affected their subsequent


winning percentages. Not surprisingly, trust was a strong predictor of team performance

even after controlling for team talent, experience, and coach record. In fact, subsequent

analyses revealed that group trust acted as a mediator between past and future team

performance.

These results ran counter to previous work by Dirks wherein trust in leader was

not significantly related to performance. Deeper inspection of the results revealed that a

lack of statistical power was the likely culprit behind this null result given that the sample

was made up of only 41 people (Dirks, 1999). Several other works also yielded a null

result concerning the relationship between trust in management and job performance

(Konovsky & Cropanzano, 1991; Korsgaard, Roberson, & Rymph, 1998). As in the Dirks

study, low statistical power (i.e., a sample size of 41) likely explained the findings of

Korsgaard, Roberson, and Rymph.

Thus, while some studies demonstrated a nonsignificant relationship between

some form of trust in leaders) and performance, the bulk of the research shows trust to

be, in fact, moderately to strongly related to performance (Dirks, 2000; Earley, 1986;

Jung & Avolio, 2000; Korsgaard, Schweiger, & Sapienza, 1995; Pettit, Goris, & Vaught,


1997


Zaheer, McEvily, & Perrone, 1998.) Still other studies have yielded only weak


relationships between trust and performance (Conger, Kanungo, & Menon, 2000;

Kirkpatrick & Locke, 1996). Given these widely varying results, further exploration of

this relationship seemed necessary in this study.






20

has been done has lead to contradictory results. In fact, negative, positive, and null

relationships have emerged between trust and citizenship.

The bulk of this research treats trust as a mediator (Konovsky & Pugh, 1994;

MacKenzie, Podsakoff, & Rich, 2001; Pillia, Schriesheim, & Williams, 1999;

Podsazkoff, MacKenzie, Moorman, & Fetter, 1990; Rich 1997.) In an attempt to shed

light on the relationship between fairness and trust, Konovsky and Pugh conducted a

survey-based study in a sample of 475 hospital employees. The authors suggest that one

source of trust in an employee-employer relationship is procedural fairness. Using fair


procedures is said to demonstrate the supervisor's


respect for the rights and dignity of the


employee. This respect and consideration is suggested to foster an environment

conducive of trust development and, ultimately, citizenship. Trust was also posited as a

mediator between fairness perceptions and citizenship in a study by Pillai et al. As in the

previous study, trust was indeed found to partially mediate the relationship between

fairness and citizenship.

Research conducted by Podsakoff and colleagues showed trust in leader to act as

an intervening mechanism between leader behavior and citizenship (MacKenzie et al.,


2001; Podsakoff et al., 1990).


The crux of their argument was that transformational or


charismatic behaviors exhibited by supervisors caused followers to respect and trust their

supervisors. This trust and respect, in turn, motivated employees to do more than they

were expected to do (i.e., engage in citizenship behaviors). In this way, the authors

suggested that effective leaders transformed the basic attitudes, beliefs, and values of






21

Their earlier research was conducted in a field setting using a sample of

petrochemical workers (Podsakoff et al., 1990). The sample was predominately male and

split almost equally between managerial and nonmanagerial job titles. Using

confirmatory factory analysis, the authors found that trust played an important mediating

role in their model. In fact, the aggregate effects of leader behaviors on citizenship were


indirect and mediated almost completely by follower's


trust in their leaders. The latter of


the two previously mentioned studies followed a similar logic but was conducted using a

sample of 477 insurance salespeople (MacKenzie et al., 2001). This study tested a more

complicated model than the former, but trust in manager was again posited to mediate the

relationship between transformational leader behaviors and extra-role performance.

Again, factor analysis results suggested that trust did in fact act as a mediator.

Cumulatively, these results offer strong support for the notion that trust is related to

citizenship.

Other studies have not focused on the relationship between trust and citizenship

specifically, but have offered correlations between the two. Chattopadhyay (1999) found

a moderate positive relationship between the trust employees have in coworkers and their

willingness to engage in citizenship behaviors. Similarly, Thomas (1999) reported a

strong, positive relationship between trust in team and organizational citizenship.


Contrarily, Puffer (1987),


in a sample of 141 retail salespersons, found a nonsignificant


correlation between the faith an employee had in his or her coworkers and their prosocial

behavior. Overall, the research indicates that trust and citizenship are positively related.






22
(Mellinger, 1959). In this study, Mellinger posited that the way two people feel about one

another should significantly impact how they communicate with each other. Specifically,

he suggested that a person who is not trusted will be regarded as threatening and,

therefore, will make the other person anxious. As a result, the primary goal of

communication with this distrusted individual would be to reduce one's own anxiety

rather than accurately transmitting ideas. In other words, he who is not trusted will not be

communicated with as openly as he who is trusted. The findings of this study lent support

to the theory that if B distrusts but must still communicate with A, then B will

communicate in such a way as to conceal from A information about B's own attitudes

toward an issue, X. Certainly, offering incomplete information to a coworker represents a

form of counterproductive behavior.

Several other studies reported relationships between trust and other forms of

counterproductive behavior. For example, Bies and Tyler (1993) conducted a field study

wherein they examined the relationship between litigation consideration and trust was

examined. In this example, trust referred to the belief that the motives of managers are

sincere and reflect the best interests of the employees. According to their logic, if

employees feel their managers motives are sincere, even if these managers must make

unfavorable decisions, these employees will not feel the need to litigate on the basis of

this decision. In another study, Simons and Peterson (2000) reported a positive

relationship between intragroup trust and a unique counterproductive behavior, loudness.

This variable was measured by the following single item "We raise our voices at one






23

relationship to overcome this strain. Of all of the research reviewed, this is the only study

to suggest a positive relationship between trust and counterproductive behavior.

Commitment and Withdrawal

One of the most commonly examined consequences of trust is organizational

commitment. It seems intuitive that employees who hold confident, positive expectations

about their colleagues and are willing to be vulnerable to them will develop a deeper

psychological attachment to the organization. Support for this linkage has been

confirmed in number of field studies across several industries. For example, Aryee,

Budhwar, and Chen (2002) conducted a field study of employees in a public sector coal

mining firm, with employees ranging from miners to engineers to marketing and sales

professionals. Their results revealed strong correlations between trust in organization,

trust in supervisor, and organizational commitment. Similar findings have been yielded

by a number of other studies (Armstrong-Stassen, 2002; Brockner, Siegel, Daly, Tyler, &


Martin, 1997


Konovsky & Cropanzano, 1991


Pillai et al., 1999).


With respect to employee withdrawal, intention to quit has been the focus of


several studies wherein trust was also measured (Christiansen,


Villanova, & Mikulay,


1997; Cunningham & MacGregor, 2000; Farh, Tsui, Xin, & Cheng, 1998; Konovsky &

Cropanzano, 1991). In each of these instances, trust in superiors was negatively related to

intention to quit, but to varying degrees. For example, Fahr et al. found a weak negative

relationship between trust in supervisor and intention to quit in a sample of Taiwanese

insurance salespeople. In their study, Christiansen et al. looked at the same relationship






24

field study of 195 employees. Thus, while the strength of the relationship varies between

studies, all support the contention that trust should be negatively related to intentions to

quit. Trust has also been linked to objective measures of actual absenteeism and turnover

(Ball, Trevino, & Sims, 1993; Cunningham & MacGregor, 2000; Robinson & Rousseau,

1994).


Hypothesis


Hypothesis 3.


Routine trust will be positively related to (a) task performance, (b)
citizenship, (c) counterproductive behavior, (d) organizational
commitment, and (e) withdrawal, independent of urgent trust.


Urgent trust will be positively related to (a) task performance, (b)
citizenship, (c) counterproductive behavior, (d) organizational


commitment, and (e) withdrawal, independent of routine trust.

Moderating Effect of Risk Events

In a recent review of the trust literature, Rousseau et al. (1998) compared the


manner in which various disciplines conceptualize trust.


Within this discussion, the


authors pointed out that there was some agreement across disciplines, particularly with

regard to the conditions necessary for trust to arise. One such condition was the presence

of risk, which is a key ingredient in psychological, sociological, and economic

conceptualizations of trust (Bhattacharya, DeVinney, & Pillutla, 1998; Bradach & Eccles,


1989; Coleman, 1990; Rotter, 1967


Williamson, 1993). In fact, Lewis and Weigert


(1985) argued that if action could be taken without risk or uncertainty, trust would be

unnecessary. Similarly, Kee and Knox (1970) argued that trust need only be present in

situations where one party has something meaningful at stake and is aware of the

potential of betrayal and harm from the other. Further supporting this contention,






25

Further strengthening the tie between risk and trust is the reciprocal nature of the

relationship between the two. Put simply, a trustee is only able to demonstrate their

trustworthiness if a trustor takes some initial risk. If the trustor is not disappointed by the

result of this assumption of risk (i.e., the person being trusted behaves as expected), then

the level of trust grows stronger (Rempel, Holmes, & Zanna, 1985). This increased level

of trust, in turn, allows further assumption of risk. Risk and trust enhance one another in

a positively reinforcing spiral.

Given that some level of risk is necessarily present in any trusting situation, it

logically follows that the presence of different levels of risk may make trust more or less

important. In fact, risk may moderate the relationship between trusting behavior and

important outcomes. A previously discussed example may help illustrate this idea. Police

officers must trust one another in a variety of ways. Much like any situation where

coworkers must trust one another; the more a police officer can trust his fellow officers,

the more job satisfaction he is likely to have. This relationship between trust and job

satisfaction may vary in strength depending on the level of risk present in the specific

trusting situations.

For example, when an officer trusts his partner to show up for work on time and


that partner does indeed show up on time, the trusting officer's


job satisfaction is


enhanced but probably only to a small degree, as little risk is associated with his partner

being late for work. In fact, the only real risk assumed is that both officers may get in


trouble or not be able to respond to a call on time.


However, a more serious situation in








of the officer, the officer's


satisfaction is likely to be enhanced to a greater degree than in


the example where his partner simply shows up to work on time. The trusting officer, as a

result, can feel a sense of calm and security that makes work life more pleasant, as

opposed to being constantly worried about the next dangerous event. In this way, the

level of risk present moderates the relationship between trust and an important

organizational outcomes.

Given the presence of this moderator effect, it seems logical that different types

of trust (i.e., routine trust and urgent trust) may be more or less important when more risk

is present in a situation. Routine trust was defined earlier as the intention to accept

vulnerability based on positive expectations of the intentions or behavior of another in

situations that have established rules, procedures, or precedents governing actions.

Urgent trust was defined earlier as the intention to accept vulnerability based on positive

expectations of the intentions or behavior of another in situations that are novel or less

common and pose more serious threats to collective interests. Situations that are less

common and pose more serious threats, by their very nature, involve a greater level of

risk. As such, urgent trust is likely more important than routine trust in situations where

risk is high.

By their nature, situations that have established rules and procedures are not

saturated with risk and uncertainty. On the other hand, novel situations that pose more

serious threats involve a heightened level of risk. Given this distinction, when risk is

high, routine trust is not likely to be important or even activated at all. Similarly, when








Hypothesis 4.


Hypothesis


The relationship between urgent trust (independent of routine trust) and
(a) task performance, (b) citizenship, (c) counterproductive behavior, (d)
organizational commitment, and (e) withdrawal will be moderated by risk,
such that the relationship will be stronger when risk is higher.


The relationship between routine trust (independent of urgent trust) and


(a) task performance, (b) citizenship, (c) counterproductive behavior, (d)
organizational commitment, and (e) withdrawal will be moderated by risk,
such that the relationship will be weaker when risk is higher.

Trust Antecedents: Trustworthiness

Discussion to this point has focused primarily on distinguishing between the two

forms of trust and how these forms of trust differentially drive important organizational

outcomes. Logically, these distinct forms of trust may also have distinct antecedents.


Sheppard and Sherman (1998) stated,


"Trust is partially the product of one's capacity to


assess the trustworthiness of one's potential partner"


(p. 426). Put simply, the


trustworthiness of an individual drives the extent to which others will trust them. This is

somewhat of an understatement, however. Complications arise because trustworthiness,

much like trust, is a multidimensional construct. Several authors have argued this idea,

but there is some disagreement about what the exact dimensions of trustworthiness are

(Butler, 1991; Lieberman, 1981).

In an attempt to simplify this aforementioned literature, Mayer et al. (1995)

reviewed the different conceptualizations of trustworthiness and were able to collapse

most previous conceptualizations into three primary dimensions, ability, benevolence,

and integrity. According to these authors, these three dimensions provide a parsimonious

yet complete foundation for the study of trust in another party.






28

that exact term, as a dimension of trustworthiness (Cook & Wall, 1980, Deutsch, 1960;

Sitkin & Roth, 1993). Other authors have identified terms synonymous with ability as

dimensions of trustworthiness. For example, Butler (1991) and Lieberman (1981)

identified the dimension of competence. This construct is similar to the same as the

ability dimension of Mayer et al. Giffin (1967) as another example, identified the

expertness of an individual as a factor contributing to how much they are trusted.

Whatever term is used, the idea is the same; trust is extended to an individual based

somewhat on their skills within some specific domain.

Benevolence has also been identified as a key dimension of trustworthiness. For

the purposes of this paper, the definition by Mayer et al. will be utilized and is as follows:

"Benevolence is the perception of a positive orientation of the trustee toward the trustor"

(p. 719). In other words, a benevolent trustee has good intentions regarding the trustor

and is not merely motivated by what profit they can gain by being trusted. As was the

case with ability, several authors have identified dimensions highly similar to

benevolence, but have assigned different names to this construct. For example, Butler

and Cantrell (1984) proffered loyalty as a determinant of dyadic trust. Frost, Stimpson,

and Maughan, 1978 identified altruism as an antecedent condition to trust. In both of

these examples, the idea of good intentions and motives toward the trustor underlies the

construct of interest. As such, each of these conceptualizations reflects, to some extent,

the construct of benevolence.

The final trustworthiness dimension of interest is integrity. In order for a trustor






29

well as that individual's actions being consistent with his or her words. Several previous

authors have used integrity as a dimension of trustworthiness (Butler, 1991; Butler &

Cantrell, 1984; Lieberman, 1981) Other authors have identified characteristics highly

similar to the construct of integrity as determinants of trust (Hart, Capps, Cangemi, &

Caillouet, 1986; Sitkin & Roth, 1993). For example, Gabarro, 1978, discussed character

as an important dimension of trustworthiness. As a whole, the dimensions of ability,

benevolence, and integrity have appeared repeatedly in discussions of antecedents of

trust, albeit using slightly different jargon or definitions. Mayer et al. (1995) argue that

together, these dimensions efficiently explain the within-trustor variation in trust for

others. As such, these three factors will operate as the antecedents to trust in the model.

However, their model further distinguishes these dimensions of trustworthiness.

The relevancy of these distinct dimensions may differ depending on the situation.

Sheppard and Sherman (1998) spoke of four types of trust. In their view, trust is not a

singular construct but takes one of four distinct forms based on the nature and depth of

the interdependence in a given relationship. Trust takes on different forms in different

relationships, and so does the nature of the relevant trustworthiness traits. In fact, in their

discussion, these authors present a table wherein the different forms of dependence, the

risks associated with each form, and the qualities of trustworthiness that are important

given each from are presented.

With regard to the form of dependence most closely linked with urgent trust, the

risk that another will not perform proficiently is cited as key. One dimension of






30

On the other hand, with regard to the form of dependence most closely associated

with routine trust, there are two central risks: the risk of cheating and the risk of neglect.

The integrity dimension of trustworthiness is most closely tied to the risk of cheating. An

individual's actions being consistent with his or her words partially defines the integrity

dimension and is diametrically opposed to the definition of cheating. That is to say

cheating suggests that some violation of previous promises has taken place, and

individuals high in integrity are likely to follow their word. The risk of neglect is most

closely tied to the benevolence dimension of trustworthiness. An individual who is

benevolent towards someone trusting them is motivated to help that trustor regardless of

personal gain. Neglect is often the result of a lack of vested interest in an outcome.

Because a benevolent person takes on the interests of the trustor as their own, they

maintain motivation to see things through and not neglect their responsibilities, even

when they do not profit directly from this motivation.

An example involving emergency personnel may help clarify how the relevancy

of each of the previously discussed dimensions of trustworthiness may differ depending

on the situation. First, imagine a situation where two firefighters must enter a burning

building to save civilian lives. In this situation, not only are the lives of the civilians in

the hands of the firefighters, but the firefighters must trust each other with their lives.

This is an example of a urgent situation where the greatest risk to each firefighter is that

the other will not behave in a proficient, correct manner. In order for the firefighters to






31
integrity or benevolence are not likely present in this type of situation, while concerns

about the other's competence are central.

However, in a less severe, more routine situation, the importance of these

dimensions of trustworthiness is likely to be reversed. Take, for example, a situation in

which two firefighters are severally liable for filing an incident report following an

emergency call. Given that only one incident report must be filed, but two firefighters are

responsible, it is likely that only one person (Firefighter A) will actually fill out the

report. The firefighter not filling out the report (Firefighter B) must trust that the other

will, in fact, fill out the report and turn it in. In order to decide whether or not to trust

Firefighter A to fill out the report and not neglect his responsibilities, Firefighter B will


likely focus on Firefighter A'


benevolence as opposed to his integrity or ability.


Further, Firefighter A likely believes that, next time, Firefighter B will assume the


responsibility of filling out the incident report to keep things equitable.


This belief is


likely to be based more on an evaluation of firefighter B's integrity than on his ability or

benevolence. In each of these examples given above, the relevant trustworthiness

dimension varies depending on the situation. This differential relevance is likely to be

present in any situation; not just those described above.


Hypothesis 6.

Hypothesis 7.


Hypothesis 8.


Ability will be a stronger predictor of urgent trust than routine trust.

Benevolence will be a stronger predictor of routine trust than urgent
trust.


Integrity will be a stronger predictor of routine trust than urgent trust.






32

drives the trust evaluation? One suggestion is that characteristics of the trustor influence

the decision to trust. Specifically, each person has some propensity to trust. This trait is

viewed as a general willingness to trust others and is believed to be a stable within-party

factor (Mayer et al., 1995). The propensity of an individual to trust others has a stronger

effect on trusting behavior in earlier encounters with potential trustees. Basically, when

there is little data about the trustworthiness of a potential trustee, the trustor tends to


default to their own propensity when making decision whether or not to trust.


With the


passage of time and acquisition of information about the trustworthiness of the trustee,

the propensity of the trustor to trust becomes less meaningful. This is likely the case

because even if an individual is a "trusting person," they will not tend to trust others who

they know for certain and through experience are untrustworthy.

Given that the importance of propensity to trust is situationally and temporally

specific, it logically flows that propensity will be differentially important with regards to

urgent and routine trust. One distinction between urgent and routine trust is time and

frequency. Specifically, routine trust involves typical, repetitive, everyday observed

behaviors. Given that these behaviors are frequent and repetitive, a potential trustee has

ample information about how trustworthy the observed individual is. In a situation such

as this, direct observation is likely to drive trust evaluations to a much greater degree


than an individual'


propensity to trust is.


On the other hand, urgent trust involves novel, less common, and more serious


observed behaviors.


While these observed behaviors are more serious in nature, they are









evaluation is more likely to be influenced by their own level of trusting propensity in

urgent as opposed to routine trust evaluation instances.


Hypothesis 9.


Propensity to trust will be a stronger predictor of urgent trust than


routine trust.














CHAPTER 3
METHOD

Sample

Data were obtained on 126 employees of a North-Central Florida city fire

department. The sample consisted of 29 lieutenants, 33 drivers/apparatus operators, and

64 firefighters. Each of these participants belongs to one of 7 different stations within the

city with an average of 18 firefighters per station working in one of three different shifts.

Each firefighter works a full 24-hour shift and then is off for 48 hours.

Everyone included in this sample began his or her career with the fire department

as a firefighter. The work of a firefighter includes combating, extinguishing, and

preventing fires as well as maintaining fire department equipment and quarters.

Additionally, firefighters are required to render first aid when necessary, respond to

hazardous materials incidents, attend company drills and training, maintain required

certifications (e.g., CPR), and prepare written and computerized reports after fire and

emergency medical incidents. The work itself requires physical strength and agility and

may have to be performed in and around heavy traffic, in proximity with hazardous and

noxious chemicals, and under a wide range of climatic conditions.

Becoming a fire driver-operator necessitates a promotion from firefighter. The

work of a driver-operator involves the specialized task of driving and operating heavy






35

and crew to and from emergency incidents, operating pumps, raising ladders and booms,

laying hose line, and making necessary pumper hook-ups to hydrants. Additionally,

driver operators may be required to perform fire fighting, rescue, and other emergency

duties as needed. Essentially, when conditions necessitate, driver-operators may be

required to perform the functions of a firefighter. Given that the driver operators are

performing their jobs in the same situations as a firefighter, their work also requires

physical strength and agility and may have to be performed in and around heavy traffic,

in proximity with hazardous ands noxious chemicals, and under a wide range of climactic

conditions.

To become a fire lieutenant, one must be promoted from driver-operator. The

work of a fire lieutenant involves inspection and supervisory work promoting fire safety

as well as performing skilled fire fighting and providing emergency medical treatment.

Essentially, the lieutenant is involved in all the duties listed in the brief job descriptions

above, but his or her role is a supervisory one. Additionally, a fire lieutenant participates

in training activities and leads company drills. At the actual scene of an emergency, it is

the lieutenant who acts as the primary decision-maker. Given that the fire lieutenants are

performing their jobs in the same situations as firefighters and driver-operators, their

work also requires physical strength and agility and may have to be performed in and

around heavy traffic, in proximity with hazardous ands noxious chemicals, and under a

wide range of climactic conditions.

Time 1 Procedure






36

ability, benevolence, integrity, and propensity to trust measures were administered.

Discussion of each measure follows.

Trustworthiness (Ability, Benevolence, and Integrity)

Given the argued differential importance of the three dimensions of

trustworthiness, the Mayer and Davis (1999) measure of trustworthiness was used. This

measure includes distinct items for each dimension and asks participants to rate the

extent to which they agree with the items using a 5-point likert-type scale with anchors of


= agree and


= disagree. The items for ability are as follows:


My coworkers are very capable of performing their jobs.
My coworkers are known to be successful at the things they try to do.
My coworkers have much knowledge about the work that needs done.
I feel very confident about my coworkers' skills.


My coworkers have specialized capabilities


that can increase our performance.


* My coworkers are well qualified.

The items for benevolence are as follows:

* My coworkers are very concerned about my welfare.
* My needs and desires are very important to my coworkers.
* My coworkers would not knowingly do anything to hurt me.
* My coworkers really look out for what is important to me.
* My coworkers will go out of their way to help me.

Finally, the items for integrity are as follows:

* My coworkers have a strong sense of justice.
* I never have to wonder whether my coworkers will stick to their word.
* My coworkers try hard to be fair in dealing with others.
* My coworkers actions and behaviors are not very consistent.
* I like my coworkers' values.


Sound principles seem to guide my coworkers'


behaviors.


Propensity to Trust








I believe that most people are basically well-intentioned.
I believe that most people will take advantage of you if you let them.
I think most of the people I deal with are honest and trustworthy.
I'm suspicious when someone does something nice for me.
My first reaction is to trust people.
I tend to assume the best about people. 8. I have a good deal of faith in human
nature.


Time 2 Procedure


Approximately 6 weeks after the collection of the Time 1 data, Time


2 data were


collected via self-report survey administered to each shift separately at each station.

Again, all firefighters and driver-operators were surveyed. At Time 2, our firefighter

specific measures of urgent and routine trust, and a measure of perceived risk

encountered on the job, were administered. Discussion of each measure follows:

Urgent and Routine Trust

An ad hoc measure specific to firefighters was designed for the purposes of this

study. The first step in designing the measure consisted of meeting with the fire chief to


conduct a job analysis of the firefighter's


job duties. This analysis resulted in the


identification of five major job dimensions for firefighters: responding to fire calls,

responding to auto accidents, training drills, continuing education, and maintaining

physical fitness. The fire chief also identified specific tasks within each of those broad

dimensions, informally rating those tasks on three criteria: importance, danger, and

unpredictability. The chief's ratings illustrated that all of the major dimensions were


important, with each being labeled an important part of a firefighter's


job. The


dimensions of danger and unpredictability seemed to be a better source of separation for








To provide additional evidence in support of the chief


ratings of importance,


danger, and unpredictability, the Time 1 survey also asked the respondents to rate the

five job dimensions on those three criteria on a 5-point scale. The ratings for responding

to fire calls supported the urgent nature of those tasks, with ratings of 4.67 for

importance, 4.54 for danger, and 4.56 for unpredictability. The ratings for responding to

auto accidents also supported categorizing that as an urgent dimension, with ratings of

4.18 for importance, 3.14 for danger, and 3.60 for unpredictability. In contrast, the

ratings for training drills, continuing education, and maintaining physical fitness revealed

patterns that suggested a routine classification. The ratings were as follows: (a) 4.30 for

importance, 2.82 for danger, and 2.85 for unpredictability for training drills; (b) 4.20 for


importance, 1.62 for danger, and


for unpredictability for education; and (c) 4.07 for


importance, 2.08 for danger, and 2.12 for unpredictability for physical fitness. These

latter three dimensions were about as important as responding to fire calls and auto

accidents, but were significantly less dangerous and unpredictable.

Having established some empirical foundation for the separation of urgent and

routine trust, I developed specific scale items for the tasks within those five job

dimensions. Participants were asked to rate how comfortable they were trusting their

coworkers to complete certain tasks, on a 7-point likert-type scale with anchors of "I


always feel comfortable trusting my coworkers to complete this task.


" and "I never feel


comfortable trusting my coworkers to complete this task." The physical fitness items

included: "Lifting weights to improve and maintain strength," "Performing stretching









drills" and "Increasing proficiency in pumping evolutions drills."


included "Collect medical data at accident scenes,"


The auto accident items


"Feel for injuries on accident


victims,


"Administer medical treatment to accident victims,"


and "Survey accident


scene for safety considerations.

entering a burning building," "(


The fire call items included "Size up the situation before


Conduct a primary search for people trapped in a burning


building,


" "Protect and rescue civilians in and around fire location,"


"Protect and rescue


fellow firefighters in and around fire location," "Use tools and procedures to extinguish


the fire,


""Performing property salvage during and after the fire,


" and "Conduct overhaul


procedures to look for other fires in building."

Perceived Risk

After an extensive review of the risk literature, it was determined that an ad hoc

measure of perceived risk would be most appropriate for this study. Participants were

asked to rate their extent of agreement with each of the following items:

* The past couple months have been more dangerous than normal.
* These past two months have been anything but routine.
* The calls we have had lately have been quite risky.
* Things have been uneventful at work lately.
* There hasn't been a dangerous situation at work in quite a while.
* In general, these last couple months have been more safe than normal.

Time 3 Procedure


Approximately 6 weeks after the collection of the Time


data, Time 3 data were


collected via self-report survey administered to each shift separately at each station.


Again, all firefighters and driver-operators were surveyed.


At Time 3, only a measure of


job satisfaction was administered. However, at Time 3, supervisors also were surveyed







40

Task Performance

To measure task performance, Williams and Anderson's 1991 measure of in-role

behavior was used. This referent of this particular measure is an employee and the rater is

intended to be a superior. The items for this measure are as follows:

* Adequately completes assigned duties.
* Fulfills responsibilities specified in job description.
* Performs tasks that are expected of him/her.
* Meets formal requirements of the job.
* Engages in activities that will directly affect his/her performance.
* Neglects aspects of the job he/she is obligated to perform(R).
* Fails to perform essential duties (R).

Organizational Citizenship Behavior

The Lee and Allen (2002) measure was used to measure organizational

citizenship behavior. Again, the referent is an employee and the rater is intended to be a

supervisor. This measure captures not only those citizenship behaviors aimed at helping

the organization, but also those citizenship behaviors aimed at helping specific

individuals within the organization. The rater is asked to rate how frequently the target

person engaged in these behaviors using anchor points of 1 = never and 7 = always.

The first eight items of the scale refer to citizenship behaviors intended to help

individuals within the organization and are as follows:

* Help others who have been absent.
* Willingly give your time to help others who have work-related problems.
* Adjust your work schedule to accommodate other employees' requests for time
off.
* Go out of the way to make newer employees feel welcome in the work group.
* Show genuine concern and courtesy toward coworkers, even under the most
trying business or personal situations.
4-' 4 -






41

The remaining eight items refer to citizenship behaviors aimed at helping the

organization as a whole rather than a specific individual within the organization and are

as follows:

* Attend functions that are not required by that help the organizational image.
* Keep up with the developments of the organization.
* Defend the organization when other employees criticize it.
* Show pride when representing the organization in public.
* Offer ideas to improve the functioning of the organization.
* Express loyalty toward the organization.
* Take action to protect the organization from potential problems.
* Demonstrate concern about the image of the organization.

Counterproductive Behavior

A measure developed by Bennett and Robinson (2000) was used to measure

counterproductive behavior. This measure was also self-report and asked participants to

rate how often they had engaged in certain behaviors in the past 12 months. Participants

used the following anchors for the scale: 1 = never, 2 = once a year, 3 = twice a year, 4 =

several times a year, 5 = monthly, 6 = weekly, and 7 = daily. The items are as follows:

* Made fun of someone at work.
* Said something hurtful to someone at work.
* Cursed at someone at work.
* Played a mean prank on someone at work.
* Acted rudely toward someone at work.
* Publicly embarrassed someone at work.
* Taken property from work without permission.
* Spent too much time fantasizing or daydreaming instead of working.
* Taken an additional or longer break than is acceptable at your workplace.
* Come in late to work without permission.
* Littered your work environment.
* Neglected to follow your boss's instructions.
* Intentionally worked slower than you could have worked.
* Discussed confidential company information with an unauthorized person.
f^-^l&A nI .4 4 i






42

Organizational Commitment

The revised version of Meyer and Allen's (1997) affective commitment scale was

used to measure organizational commitment. This scale assesses an emotional (as

opposed to economic-based) attachment to an organization. The scale for rating each

item was a 5-point likert-type scale with anchors of 1 = strongly agree and 5 = strongly

disagree. The items are as follows:

* I would be very happy to spend the rest of my career with this organization.
* I really feel as if this organization's problems are my own.
* I do not feel like "part of the family" at my organization. (R)
* I do not feel "emotionally attached" to this organization. (R)
* This organization has a great deal of personal meaning for me.
* I do not feel a strong sense of belonging to my organization. (R).

Withdrawal

Withdrawal was assessed using the 12-item instrument developed by Lehman and

Simpson (1992). Participants were asked to indicate how often they performed the

actions in each statement. The scale for rating each item was a 5-point likert-type scale

with anchors of 1 = almost never and 5 = very often. The actions included:

* Thought of being absent.
* Chatted with coworkers about nonwork topics.
* Left work situation for unnecessary reasons.
* Daydreamed.
* Spent work time on personal matters.
* Put less effort into the job than should have.
* Thought of leaving current job.
* Let others do your work.
* Left work early without permission.
* Taken longer lunch or rest breaks than allowed.














CHAPTER 4
RESULTS

Descriptive Statistics

The means, standard deviations, reliabilities, and zero-order correlations among

all the study variables are shown in Table 1. Most notable is the .61 correlation between

urgent and routine trust, suggesting that the two are highly correlated yet still empirically

distinguishable. The correlations among the trust antecedents were all moderate to strong

and consistent with past work by Mayer and Davis (1999). The three facets of job

performance were also strongly related, supporting the notion that they are multiple

dimensions of the same performance construct (Rotundo & Sackett, 2002). Similarly,

organizational commitment and employee withdrawal were strongly negatively

correlated, as expected. These correlations, together with the coefficient alphas on the

diagonal, provide some support for the construct validity of the measures used to test my

hypotheses.

Hypothesis 1

I first conducted a factor analysis to verify the a priori separation of urgent and

routine trust. I subjected the 17 trust items to a principal components analysis with

varimax rotation. The scree plot supported a two-factor solution. The first factor, which

corresponded to urgent trust, explained 60% of the variance in the 17 items. The items










Table 1.


Means, standard deviations, coefficient alphas, and zero-order intercorrelations for study variables


M SD 1 2 3 4 5 6 7 8 9
1. Ability 4.32 .64 .92
2. Benevolence 4.09 .67 .62** .88
3. Integrity 3.89 .61 .63** .66** .81
4. Propensity to Trust 3.62 .54 .27** .34** .48** .78
5. Urgent Trust 6.02 1.02 .18 .17 .29** .12 .97
6. Routine Trust 4.88 1.11 .33** .39** .44** .19* .61** .93
7. Task Performance 4.30 .63 .11 .40** .08 -.06 -.09 .19 .87
8. Citizenship Behavior 4.11 .57 .14 .24* .05 .21 -.07 .06 .57** .94
9. Counterproductive Behavior 1.48 .49 .02 -.27* .00 -.23* .08 -.05 -.49** -.52** .9
10. Organizational Commitment 3.57 .84 .16 .24* .21* .29** .17 .41** .19 .32** -.1
11. Withdrawal 2.20 .60 -.09 -.07 -.11 -.27** -.17 -.39** -.08 -.10 .0


Note.


= 104.


Coefficient alphas are presented in boldface along the diagonal.









explained an incremental 14% of the variance in the 17 items. The items pertaining to


fitness, education, and training all loaded on this routine trust factor.


The average loading


across those 7 items was .78, with no significant cross loadings on the other factor.


Further, the zero-order correlation between urgent and routine trust was .60.


While this


correlation is strong enough to suggest that these two concepts are related, the magnitude

of this relationship is not great enough to suggest that they should be considered one

concept.Taken together, these results provide some support for the distinction between

the urgent and routine trust categories.

Hypothesis 2

Hypotheses 2a-c stated that routine trust would be significantly related to task

performance, citizenship, and counterproductive behavior, independent of urgent trust.


The results of the regression analyses are shown in Table


Hypothesis 2a was


supported, as routine trust was significantly related to task performance in the predicted


direction (Ip


.43, significant at p


.01). However, routine trust did not explain


significant variance in citizenship behavior or counterproductive behavior, failing to

support Hypotheses lb-c.


Table


Regression results


Task


Step:


1. Urgent Trust
2. Routine Trust


performance
p R2
-.35** .12


Citizenship
behavior
3 R2


Counterproductive
behavior
(3 R2


Note.


N=104.


***p< .01


Hypotheses 2d-e predicted that routine trust would be significantly related to


43***









(p13 = .45, significant at p

(p = -.42, significant at p


: .01, supporting Hypothesis Id) and lower levels of withdrawal

< .01, supporting Hypothesis le).


Regression results


- 1' '> 1 -t


Organizational
Commitment


Step:
1. Urgent Trust
2. Routine Trust


w Imnarawal


1 R3
-.11 .15
.45***


-.42***


Note.


** p < .05.


*** p


< .01


Hypothesis 3

Hypotheses 3a-c stated that urgent trust would be significantly related to task

performance, citizenship, and counterproductive behavior, independent of routine trust.


The results of the regression analyses are shown in Table


None of these hypotheses


were supported. Contrary to predictions, higher levels of urgent trust were associated


with lower levels of task performance (P = -


significant at p


< .05). There were no


other significant unique effects.

Hypotheses 3d-e predicted that urgent trust would be significantly related to

organizational commitment and withdrawal, independent of routine trust. The results of

the regression analyses are shown in Table 3. Urgent trust did not explain significant

variance in either of these two outcome variables. Therefore, neither hypothesis was

supported.

Hypothesis 4

Hypotheses 4a-c predicted that the relationships between urgent trust

(independent of routine trust) and (a) task performance, (b) citizenship, and
... C C C


Table 3.


- R






47

regressed on urgent trust and routine trust in the first step of the regression. In step two,

the direct effects of risk were assessed. Step three entered both the urgent trust x risk

interaction as well as the routine trust x risk interaction. The results of these regressions

can be found in Table 4. The interaction of urgent trust and risk was not significant for

any of the three outcomes, failing to support these predictions.

Hypotheses 4d-e predicted that the relationships between urgent trust

(independent of routine trust) and (d) organizational commitment, and (e) withdrawal

would be moderated by risk, such that the relationships would be stronger when risk was


higher. The results of these moderated regressions can be found in Table


interaction of urgent trust and risk was not significant for either of the outcomes, failing

to support these predictions.

Hypothesis 5

Hypotheses 5a-c predicted that the relationships between routine trust

(independent of urgent trust) and (a) task performance, (b) citizenship, and

(c) counterproductive behavior would be moderated by risk, such that the relationship

would be weaker when risk was higher. The results of these moderated regressions can

be found in Table 4. The interaction of routine trust and risk was not significant for any

of the three outcomes, failing to support these predictions.

Hypotheses 5d-e stated that the relationships between routine trust (independent

of urgent trust) and (d) organizational commitment, and (e) withdrawal would be

moderated by risk, such that the relationship would be weaker when risk was higher. The











Table 4.


Moderated regression results


Task
Performance
1 AR2 R2


Step:


Citizenship
Behavior
P AR2 R2


Counter:
Beh
13 A


.12***


. Urgent Trust (UT)
Routine Trust (RT)


Risk


-1.05


x Risk
x Risk


-2.07


Note.


<.10 **p


< .05.


***


-.35**
.43***


12**


13**








Table


Moderated regression results


Organizational
Commitment
13 AR2 R2


Step:


Withdrawal


1 AR2 R2


Urgent Trust (UT)
Routine Trust (RT)
Risk


UT x Risk


-0.11


.14***


5***


.15***
.18**


.15***
.16**


-0.01
-1.20


x Risk


Note.


N= 104.


<.10 **p


Hypothesis 6

Hypothesis 6 predicted that ability would be a stronger predictor of urgent trust


than routine trust. Ability was significantly related to both urgent trust (r =


significant at p < .10) and routine trust (r


.33, significant atp < .01). The correlations


suggest that, contrary to predictions, ability is more strongly associated with routine trust

than urgent trust. However, the two correlations were not found to be significantly


different (p =


.21). Therefore, this hypothesis was not supported.


Hypothesis 7

Hypotheses 7 predicted that benevolence would be a stronger predictor of routine


trust than urgent trust. Benevolence was significantly related to both urgent trust (r


significant atp < .10) and routine trust (r


.39, significant at p


< .01). Additionally, these


correlations were significantly different at a .10 level (p = .08). The correlations suggest

that benevolence is more strongly associated with routine trust than urgent trust, as

predicted. Therefore, this hypothesis was supported.

Hypothesis 8


*** p .01


.15***


-.42***








suggest that integrity is more strongly associated with routine trust than urgent trust.


However, the two correlations were not found to be significantly different (p


Therefore, this hypothesis was not supported.

Hypothesis 9

Hypothesis 9 stated that propensity to trust would be a stronger predictor of

urgent trust than routine trust. Propensity to trust was not significantly related to urgent


trust (r =


.12). However, propensity to trust was significantly related to routine trust.


.19., significant at p


<.10). The correlations suggest that, contrary to predictions,


propensity to trust is more strongly associated with routine trust than urgent trust.

However, the two correlations were not found to be significantly different (p = .61).

Therefore, this hypothesis was not supported.














CHAPTER


DISCUSSION

Kramer (1999) said "trust is moving from a bit player to center stage in


contemporary organizational theory and research" (p. 594).


Reasons for the increased


importance of trust include the changing nature of work, increased use of teams, and

more geographic dispersion of employees working together. The purpose of this paper


was not to discuss the importance of trust per


se, but rather to delineate two important


types of trust, urgent trust and routine trust.

For the purposes of this study, the definition of trust put forth by Roussseau,

Sitkin, Burt, and Camerer in the 1998 special issue on trust in the Academy of


Management Review was used.


They define trust as a psychological state comprising the


intention to accept vulnerability based on positive expectations of the intentions or

behavior of another.


Unfortunately, definition leaves two important questions unanswered:


First,


willingness to be vulnerable during what kind of behavior and second, positive

expectations that the person will engage in what type of behavior. These two questions

are important because many jobs possess an inherent duality: everyday, traditional

actions, with punctuated instances of emergencies or crises. It seems likely that trust may

take on different forms in these different situations. Given this possibility, the purpose of






52

important duality. More specifically, this study examined two types of trust: urgent trust

and routine trust.

Routine Trust's Relationship with Commitment and Withdrawal

While the study predicted that organizational commitment and withdrawal would

be driven by both urgent and routine trust, independent of one another, this was not the

case. Routine trust had a significant impact on both outcomes controlling for urgent trust.

The same was not true in the opposite direction. This result suggests that an individual's

desire to engage in behaviors such as shirking, absenteeism, or even leaving the

organization is driven by reactions to the behavior of one's coworkers in situations that

have established rules, procedures, or precedence governing actions.

Perhaps trust concerning everyday behaviors of coworkers was more important

because of the sample used in this particular study. Firefighter training is difficult,

extensive, and ongoing throughout a firefighter's career. Further, the nature of this

training focuses specifically on the urgent, critical nature of the job. As such, training

simulations often accentuate expecting the unexpected and reacting to it well. Because of

the nature of firefighter training and education, perhaps there is a restriction in range

concerning those specific abilities most strongly related to urgent trust.

The descriptive statistics of this study suggest that this explanation may have

credence. On a 7-point scale, the average score for urgent trust was 6, suggesting that


these firefighters, on average,


"almost always" trusted their coworkers concerning


behaviors associated with urgent trust. For example, given that each and every firefighter






53

Given the likely relative stability of urgent trust across fire departments, it seems

likely that what would drive firefighters to be more or less committed to their particular

fire department, or want to leave their particular fire department, would be the day to day

nuances of life in these departments. In fact, the items used to measure commitment and

withdrawal are all organization specific, not career specific. Thus, each measure

attempted to capture feelings concerning the particular department for which these

firefighters work.

Individuals are not likely to physically or emotionally withdraw from their

organization when they can trust their coworkers to do their share as related to the typical

tasks for the day's work, especially if these same coworkers can be generally trusted in

novel situations that pose serious threats to collective interests. On the other hand, if

urgent trust can be assumed across all organizations in the field, individuals may be

particularly sensitive to not being able to trust their coworkers to complete the more

monotonous and routine tasks of the job. This certainly may lead them to withdraw

themselves from their work.

Organizational commitment works in a similar fashion, but perhaps the logic is

even simpler. If those factors related to the formation of urgent trust are stable within the

career a person has been extensively trained for, then the desire to leave a particular

organization would certainly be driven by the extent to which an individual is able to

trust their coworkers to complete the more common tasks of the job.

Routine Trust's Relationship with Job Performance






54

established rules, procedures, or precedence governing actions. Behaviors related to

evaluations of routine trust involve situations that also have established rules, procedures,

or precedence governing actions.

This result suggests a possible, positively reinforcing, cycle of routine trust and

job performance. To illustrate, assume a particular individual trusts their closest

coworkers to complete the most common, routine tasks of a job. To reciprocate, this

individual performs his or her job well, with respect to their assigned duties. Other


employees


see this trustable, solid job performance, and trust this individual. They, in


turn, fulfill their responsibilities of their job description and the cycle perpetuates.

Negative Effects of Urgent Trust

Study findings concerning urgent trust differed not only from routine trust, but

also from expectations. Urgent trust was, in fact, found to be negatively related to task


performance, controlling for routine trust.


While this result was probably specific to this


study and not likely to be replicated, some explanation is necessary. Perhaps those who

perform the worst in a general sense have to trust others in urgent situations because they

do not possess enough competencies themselves. For example, if a firefighter knows that

they cannot check a person's vital sign correctly under pressure, they would likely have to

trust their coworkers to pick up the slack.

Citizenship and Counterproductive Behaviors

Somewhat surprisingly, neither routine nor urgent trust were related to citizenship

or counterproductive behaviors. Again, the sample of this particular study may be






55

hours on these days with their coworkers. In fact, the stations are called firehouses. This

is because they function much like a household. For example, there are chores to be done,

decisions to be made about the living environment, and a social environment that must be

maintained.

As such, the firefighters of a specific shift often function like a family. Each task

is done as much out of concern and respect for others as it is by necessity. For an

individual to engage in counterproductive behavior in a work environment such as this is

comparable to an obvious and motivated attack on the "family" that is that particular shift

at that particular station. Similarly, not engaging in citizenship behavior such as showing

concern and courtesy towards one's coworkers may also be seen as apparent and

deliberate disregard for the working unit. In other words, for a firefighter to engage in

counterproductive behaviors and not engage in citizenship behaviors is a much bigger

deal than for a normal employee at a typical job to do the same. In other words, there are

powerful norms in this sample concerning these behaviors that may trump the effects of

trust.

Trustworthiness

To assess trustworthiness, this study used the model presented by Mayer et al.,

1995, which identifies ability, benevolence, and integrity as the key dimensions of

trustworthiness. To the key dimensions of trustworthiness. To begin, these authors define

ability as a domain specific group of skills or competencies that an individual possesses.

While the correlations suggested that ability is more strongly associated with routine trust






56

task. As such, the notion that some sort of ability is required to perform any task on the

trust measures may be constant across both forms of trust evaluations. In other words,

perhaps ability of the trustee is a necessary but insufficient condition for any type of

trusting behavior to occur.

By definition, a benevolent individual has good intentions regarding the trustor.

In this study, it seems logical that these good intentions would drive everyday, repetitive

tasks as these tasks often benefit the entire station. Consequences of not engaging in

these behaviors are existent, but probably not severe. It is in fact, the severity of

consequences of not engaging in urgent behaviors that overrides the impact of

benevolence.

For example if a firefighter does not lift weights, few short-term effects are likely.

Contrarily, this same firefighter failing to survey an accident for safety concerns can

immediately lead to severe consequences including injury or death. In other words,

behaviors related to urgent trust evaluations usually occur in strong situations where

feelings of benevolence may not be able to manifest themselves.

With regard to integrity, an individual is seen as having integrity if they adhere to

a set of moral principles that a trustor sees as acceptable. Put simply, integrity involves


moral character.


While integrity had a stronger relationship with routine trust than with


urgent trust, the correlations were not significantly different. This suggests that

evaluations of an individual's moral character do not drive subsequent feelings of urgent

and routine trust to a different degree.

Interestingly, part of what determines integrity is consistency of action over time






57

situations, be they urgent or routine. As such, their integrity will effect trust evaluations

of both types to an approximately equal degree.

Propensity to Trust

In another contrary finding, propensity to trust was significantly related to routine

trust, but not urgent trust. Closer analysis, however, revealed that propensity was not

found to be related to urgent and routine trust to a different degree. This suggests that an

individual's general willingness to trust others in fact generalizes across types of trust.

Given the non-specific nature of propensity to trust, it is not altogether surprising that the

strength of its relationship with trust was not specific to a certain from of trust.

Practical Implications

The results of this study suggest that routine trust had significant effects on both

commitment and withdrawal. Specifically, higher levels of routine trust were associated

with higher levels of commitment and lower levels of withdrawal. Both of these

outcomes are important to the fire service. To begin, firefighter training is not only time

intensive but also expensive. For this reason, it is important that those firefighters who

complete this training do not intend to leave the organization. Further, given the

sporadically dangerous nature of the job, it is critical that firefighters are not mentally

withdrawn from their work, as this could lead to injuries or even death.

Fortunately, there are actions that the fire department can take to foster the

development of routine trust. In order to do so, the department can conduct more frequent

assessments of routine task performance and/or conduct more training on routine tasks.






58

possess high levels of integrity and benevolence, the two dimensions of trustworthiness

most closely associated with routine trust.

Study Limitations

Perhaps the greatest limitation of this study was its small sample size and

resulting lack of statistical power. This lack of power did not affect the strength of

relationships between study variables, but rather the statistical significance of these

relationships. In other words, though some effect sizes were of reasonable strength, the

small sample size of the study made them non-significant. This affected not only the

relationship of independent and dependent variables, but also the statistical significance

of the difference between correlations between the two types of trust with respect to other

study variables.

Another weakness of this study was that scores on most of the variables were

collected via self-report. In other words, study participants decided their own scores on

most measures. To partially mitigate the negative effects of a self-report design, data

were collected over three time periods separated by the passage of at least 6 weeks. This

delay is a necessary but insufficient condition for assessing causality. That is, the

independent variables were measured prior to the intervening trust variables and the

dependent variables.

One limitation of this study will be particularly difficult to overcome in future

research, family type samples. Because of the living environment in the jobs most

enriched with urgent trust situations, a strong group identification results. Because of the






59

to that described above. For example, military personnel are often stationed together and

share the bulk of not only their work hours, but also their leisure time with other military

personnel. A similar identification amongst workers seems likely with police officers as

well. This sweeping camaraderie likely acts to restrict range on negative outcome

variables.

These aforementioned jobs where urgent trust related behaviors are most

prevalent also create another potential problem, restriction in range in those behaviors

related to urgent trust. Police, firefighters, and military personnel all receive extensive

training involving how to handle emergency situations. If members of these

organizations cannot pass this training, they are generally replaced. As such, in these

types of jobs, at least the competency component of trusting others may be assumed.

Suggestions for Future Research

First and foremost, future research should examine the same research questions

addressed in this paper using other relevant, larger samples. Perhaps a police or military

sample might have more participants and therefore more statistical power to more closely

examined the relationships of interest in this study. Also, these samples will likely yield

different and interesting results specific to these professions.

Further, urgent and routine trust should be examined in more traditional jobs, to

see if this distinction exists in more commonplace work environments. The argument was

made earlier in this paper that this duality of tasks (urgent and routine) is present in

nearly all jobs to some degree. Some careers where this distinction may be more readily






60

In other careers, this distinction may not be immediately recognizable, but still

present. Certainly, teachers, mechanics, lawyers, realtors, contractors and other

professionals frequently encounter situations that are novel and pose serious threats to

collective interests, even if not in a life or death sense. It would be interesting to see if

urgent and routine trust behave differently in these types of jobs.

Future research should also look at urgent and routine trust in a more extensive

nomological network. Many other independent variables than those included in this study

likely drive the formations of trust evaluations. For example, an individual's tenure with

an organization may effect how much they differentially trust their coworkers. Also, as

alluded to earlier, a person's career choice itself may be related to the manner in which

they trust. It could be that those who are most willing to trust others, especially with

regard to urgent trust, self- select themselves into jobs where emergency situations are

more likely.


It also seems likely that an individual's personality (in a big


sense) may impact


that individual's level of trust in others. Specifically, trustworthiness is a subfactor of the

personality dimension of agreeableness. It would be valuable to see if a person's own

trustworthiness is related to their trust in others. Also, it seems logical that more

conscientious people may trust others less because they are used to doing more than their


fair share. Additionally, affect is liable to effect trust reactions.


Whether or not a person


is in a positive mood will certainly affect their opinions of others.

Finally, given the recent proliferation of justice research, future research should






61

trust these individuals. On the other hand, not being able to trust one's coworkers may

lead to feelings of injustice at the workplace. In other words, a person might feel that it is

unfair that they should have to work with untrustworthy people.














REFERENCES

Abelson, R. P. (1976). Script processing in attitude formation and decision making. In J.


Carrol & J.


Payne (Eds.), Cognition and social behavior. Hillsdale, NJ:


Erlbaum.


Armstrong-Stassen, M. (2002).


Designated redundant but escaping lay-off: A special


group of layoff survivors. Journal of Occupational and Organizational Psychology,
75: 1-13.


Aryee,


Budhwar, P.


& Chen,


(2002). Trust as a mediator of the relationship


between organizational justice and work outcomes: Test of a social exchange model.
Journal of Organizational Behavior, 23, 267-285.


Ball.


G. A., Trevino, L. K., & Sims, H. P., Jr. (1993). Justice and organizational
punishment: Attitudinal outcomes of disciplinary events. Social Justice Research, 6,


39-67.

Bartlett, F. C. (1932). Remembering. Cambridge, MA: Cambridge University Press.


Bennett, R. J.,


& Robinson,


L. (2000). Development of a measure of workplace


deviance. Journal of Applied Psychology,


349-360.


Bhattacharya, R., Devinney, T. M.,


Pillutla, M. M. (1998).


A formal model of trust


based on outcomes. Academy of Management Review,


459-472.


Bies, R. J., & Tyler, T


.R. (1993).


The litigation mentality in organizations: A test of


alternative psychological explanations. Organization Science,


352-3


Bigley, G., & Pearce, J. (1998). Straining for shared meaning in organization science:


Problems of trust and distrust. Academy of Management Review,


Borman,


405-421.


. C. (1991). The role of theory in industrial and organizational psychology. In


M. D. Dunnette & L. M. Hough (Eds.), Handbook of industrial and organizational
psychology (Vol. 2, pp. 271-326). Palo Alto, CA: Consulting Psychologists Press.








Bradach, J., & Eccles, R. (1989). Price, authority, and trust: From ideal types to plural
forms. Annual Review of Sociology, 15, 97-118.


Brockner, J., Siegel, P.


Daly, J. P., Tyler, T.,


& Martin, C. (1997).


When trust


matters: The moderating effect of outcome favorability. Administrative Science


Quarterly,


558-583.


Butler, J. K. (1983). Reciprocity of trust between professional and their secretaries.


Psychological Reports,


Butler, J. K. (1991).
of a conditions (


Butler, J. K., & Cant


411-416.


Toward understanding and measuring conditions of trust: Evolution
)f trust inventory. Journal of Management, 17, 643-663.

rell, R. S. (1984). A behavioral decision theory approach to


modeling dyadic trust in superiors and subordinates. Psychological Reports, 55, 19
28.

Campbell, J. P. (1990). Modeling the performance prediction problem in industrial and


organizational psychology. In M. D. Dunnette &
industrial and organizational psychology (Vol. 1
Consulting Psychologists Press.


L. M. Hough (Eds.), Handbook of
, pp. 687-732). Palo Alto, CA:


Caudron,


(1996).


Rebuilding employee trust. Training & Development,


18-21.


Chattopadhyay, P. (1999). Beyond direct and symmetrical effects: The influence of
demographic dissimilarity on organizational citizenship behavior. Academy of


Management,


Chri


273-2


stiansen, N., Villanova, P., & Mikulay, S. (1997). Political influence compatibility:
fitting the person to the climate. Journal of Organizational Behavior, 18, 709-730.


Coleman, J.


(1990). Foundations of social theory. Cambridge, MA: Belknap Press.


Conger, J. A.,


Kanungo, R. N.


& Menon,


T. (2000). Charismatic leadership and


follower effects. Journal of Organizational Behavior, 21,


747-767


Cook, J., & Wall, T. (1980). New work attitude measures of trust, organizational
commitment, and personal need non-fulfillment. Journal of Occupational


Psychology,


Cooper,


39-52.


. H., (1981). Ubiquitous halo. Psychological Bulletin, 90, 218-244.


-_ -- -Id-








Cunningham, J. B., & MacGregor, J. (2000). Trust and the design of work:
Complementary constructs in satisfaction and performance. Human Relations, 53,
1575-1591.


DeNisi, A.


Cafferty, T. P., & Meglino, B. M. (1984). A cognitive review of the


performance appraisal process: A model and research propositions. Organizational
Behavior and Human Performance, 33, 360-396.


Deutsch, M. (1958).


Trust and Suspicion. Conflict Resolution,


265-279.


Deutsch, M.


(1960). The effects of motivational orientation upon trust and suspicion.


Human relations, 13,


123-140.


Dirks, K. T. (1999). The effects of interpersonal trust on workgroup performance.


Journal ofApplied Psychology, 84,


Dirks, K. T. (2000).


445-455.


Trust in leadership and team performance: Evidence from NCAA


basketball. Journal of Applied Psychology,


1004-1012.


Dooley, R.


& Fryxell, G. E. (1999).


Attaining decision quality and commitment from


dissent: The moderating effects of loyalty and competence in strategic decision-


making teams. Academy of Management Journal,


389-402.


Earley, P. C. (1986). Trust, perceived importance of praise and criticism, and work
performance: An examination of feedback in the United States and England. Journal


of Management, 12,


Farh, J., Tsui, A.


454-473.


Xin, K., & Cheng, B. (1998). The influence of relational


demography and guanxi: The Chinese case. Organization Science, 9, 471-488.

Friedlander, F. (1970). The primacy of trust as a facilitator of further group
accomplishment. Journal of Applied behavioral Science, 6, 387-400.


Frost, T


., Stimpson, D.


., & Maughan, M. R. C. (1978). Some correlates of trust.


Journal of Psychology,


99, 103-108.


Gabarro, J. (1978). The development of trust, influence, and expectations. In A. G. Athos
& J. Gabarro (Eds.), Interpersonal behavior: Communication and understanding in
relationships (pp. 290-303). Englewood Cliffs, NJ: Prentice Hall.

George, J. M., & Brief, A. P. (1992). Feeling good-Doing good: A conceptual analysis









Hart, K. M., Capps, H. R., Cangemi, J. P., and Caillouet, L. M. (1986). Exploring
organizational trust and its multiple dimensions: A case study of General Motors.


Organizational Development Journal,


4, 31-39.


Hastie, R. (1981). Schematic principles in human memory. In E. Higgins, C. Herman, &
M. Zanna (Eds.), Social cognition: The Ontario symposium. Hillsdale, NJ: Erlbaum.

Hosmer, L. T. 1995. Trust: The connecting link between organizational theory and
philosophical ethics. Academy of Management Review, 20, 379-403.


Hulin, C. L. (1991). Adaptation, persistence, and commitment in organizations. In M. D.


Dunnette & L.
psychology (V(


M. Hough (Eds.), Handbook of industrial and organizational


ol.


pp. 445-506). Palo-Alto, CA: Consulting Psychologists Press.


Ilgen, D. R., & Feldman, J. M. (1983). Performance appraisal: A process focus. In B. M.


Staw & L. Cummings (Eds.), Research in organizational behavior (Vol.
64). Greenwich, CT: JAI.


Jehn, K. A., & Mannix, E. A. (2001).


pp. 26-


The dynamic nature of conflict: A longitudinal


study of intragroup conflict and group performance. Academy of Management
Journal, 44, 238-251.

Jung, D. I., & Avolio, B. J. (2000). Opening the black box: An experimental investigation
of the mediating effects of trust and value congruence on transformational and
transactional leadership. Journal of Organizational Behavior, 21, 949-964.


Kee, H.


., & Knox, R. E. (1970). Conceptual and methodological considerations in the


study of trust and suspicion. Journal of Conflict Resolution, 14, 357-366.


Kirkpatrick,


A., & Locke, E. A. (1996). Direct and indirect effects of three core


charismatic leadership components on performance and attitudes. Journal of Applied
Psychology, 81, 36-51.

Klimoski, R. J., & Karol, B. L. (1976). The impact of trust on creative problem solving


groups. Journal ofApplied Psychology,


61, 630-633.


Konovsky, M. A., & Cropanzano, R. (1991). Perceived fairness of employee drug testing
as a predictor of employee attitudes and job performance. Journal of Applied
Psychology, 76, 698-707.


Konovsky, M. A., & Pugh,


D. (1994). Citizenship behavior and social exchange.


J- I r V .1 r r rr n


I_








Korsgaard, M.


Schweiger, D. M.,


Sapienza, H. J. (1995). Building commitment,


attachment, and trust, in strategic decision-making teams: The role of procedural
justice. Academy of Management Journal, 38, 60-84.


Kramer, R. M. (1999). Trust and distrust in organizations: Emerging perspectives,
enduring questions. Annual Review of Psychology, 50, 569-589.


Lehman,


behavior


E. K., & Simpson, D. D. (1992). Employee substance abuse and on-the-job
5s. Journal of Applied Psychology, 77, 309-321.


Lewis, J. D., & Weigert, A. (1985). Trust as a social reality. Social Forces,

Lieberman, J. K. (1981). The litigious society. New York: Basic Books.


Lord, R. G. (
on raters


198


967-985.


). Accuracy in behavioral measurement: An alternative definition based


' cognitive schema and signal detection theory. Journal of Applied


Psychology, 70, 66-71.


MacKenzie,


B., Podsakoff, P. M.,


Rich, G.


A. (2001).


Transformational and


transactional leadership and salesperson performance. Journal of the Academy of


Marketing


Science,


115-134.


Mathieu, J. E., & Zajac, D. M. (1990). A review and meta-analysis of the antecedents,
correlates, and consequences of organizational commitment. Psychological Bulletin,
108, 171-194.


Mayer, R. C., & Davis, J. H. (1999). The effect of the performance appraisal system on
trust for management: A field-quasi experiment. Journal of Applied Psychology, 6
123-136.


Mayer, R. C.,


Davis, J. H.,


organizational trust. Acac


Schoorman, F. D. (1995). An integrative model of
lemy of Management Review, 20, 709-734.


Mellinger, G. D. (1959). Interpersonal trust as a factor in communication. Journal of


Abnormal and Social Psychology,


304-309.


Meyer, J. P., & Allen, N. J. (1997). Commitment in the workplace: Theory, research, and


application.


Thousand Oaks, C


Sage.


Meyer, J. P., Stanley, D. J., Herscovitch, L., & Topolnytsky, L. (2002). Affective,
continuance, and normative commitment to the organization: A meta-analysis of
-4i-- l --_-- _- I ** t1 T r Y w* *. T A








Newell,


Simon, H.


(1972). Human problem solving. Englewodd Cliffs, NJ:


Prentice-Hall.


Nicholson, P. J., & Goh,


C. (198


The relationship of organization structure and


interpersonal attitudes role conflict and different work environments. Academy of


Management Journal,


148-155.


Nooteboom, B.,


Berger, H.,


Noorderhaven, N.


G. (1997).


Effects of trust and


governance on relational risk. Academy of Management Journal,


40, 308-338.


Organ, D.


997).


Organizational citizenship behavior: It'


construct clean-up time.


Human Performance, 10, 85-97.


Pettit, J.


, Goris, J


., & Vaught, B.


(1997). An examination of organizational


communication


as a moderator of the relationship between job performance and job


performance. The Journal of Business Communication, 34, 81-98.


Pillai


, Schriesheim, C. A.,


& Williams, E.


S. (1999). Fairness perceptions and trust


mediators for transformational and transactional leadership: A two-sample study.


Journal of Management,


897-933.


Podsakoff, P.


., MacKenzie,


., Moorman, R. H.,


& Fetter, R. (


990).


Transformational leader behaviors and their effects on followers trust in


eader,


satisfaction, and organizational citizenship behaviors. Leadership Quarterly, 1,
142.


Puffer,


(1987).


Prosocial behavior, noncompliant behavior, and work performance


among commission salespeople. Journal of Applied Psychology,


Rempel,


, Holmes, J.


Zanna, M.


P. (1985). Trust in close relationships.


Journal of Personality and Social Psychology, 49, 95-112.


Rich, G. A.


(1997). The sales manager as a role model: Effects on trust, job satisfaction,


and performance of salespeople. Journal of the Academy of Marketing
319-328.


Roberts, K. H


& O'Reilly, C.


974).


Measuring organizational communication.


Journal ofApplied Psychology,


59, 321-326.


Robinson,


., & Bennett, R. J.


(1995).


typology of deviant workplace behaviors: A


multidimensional scaling study


Academy of Management Journal, 38,


555-572.








Rotundo, M., & Sackett, P. R. (2002). The relative importance of task, citizenship, and
counterproductive performance to global ratings of job performance: A policy-


capturing approach. Journal ofApplied Psychology, 87,


66-80.


Rousseau, D. M., Sitkin,


B., Burt, R.


& Camerer, C. (1998). Not so different after


all: A cross-discipline view of trust. Academy of Management Review,


393-404.


Sheppard, B. H., & Sherman, D. M. (1998). The grammars of trust: A model and general
implications. Academy of Management Review, 23, 422-437.


Simons, T


L., & Peterson, R.


(2000). Task conflict and relationship conflict in top


management teams: The pivotal role of intragroup trust. Journal of Applied
Psychology, 85, 102-111.


Sitkin,


"reme


B., & Roth, N. L. (1993). Explaining the limited effectiveness of legalistic
dies" for trust/distrust. Organization Science, 4, 367-392.


Tesser, A. (1978). Self-generated attitude change. In L. Berkowitz (Ed.),


Advances in


11, pp. 290-338). New York: Academic Press.


Thomas, D. C. (1999). Cultural diversity and work group effectiveness. Journal of Cross-
Cultural Psychology, 30, 242-263.


Williams, L. J., & Anderson,


(1991). Job satisfaction and organizational


commitment as predictors of organizational citizenship behaviors. Journal of


Management, 17,


601-617.


Williamson, O. E. (1993).


Calculativenesss, trust, and economic organization. Journal of


Law and Economics, 30, 131-145.


Zaheer,


McEvily, B., & Perrone,


(1998). Does trust matter? Exploring the effects


of interorganizational and interpersonal trust on performance. Organization Science,
9, 141-159.

Zand, D. E. (1972). Trust and managerial problem solving. Administrative Science
Quarterly, 17, 229-239.


experimental social psychology (Vol.













BIOGRAPHICAL SKETCH

I was born in Mobile, Alabama, and moved to Florida at the age of 2. I attended

grade school and high school in Pensacola, Florida. In 1996, I graduated from Booker T.

Washington High School. I obtained a Bachelor of Science degree in business

administration from the University of Florida in August 1999. Immediately after

graduation, I began working toward my Ph.D., also at the University of Florida.

Upon graduation, I intend to continue to work for my current employer, Alligator

Properties. I currently work as both a property manager and a realtor for this

organization. I hope to eventually return to a University setting in a teaching position, but

probably only part time.








I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy.


Jason A. Colquitt, Chair
Associate Professor of Management

I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy. /


J.4rey'. LPme
Associate Professor of Management


I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy.


Amir Erez
Associate Professor of Management

I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophyr-) A .N


Stuart E. Sjhwartz
Professor of Education


This dissertation was submitted to
Management in the College of Bus
was accepted as partial fulfillment
Philosophy.


the Graduate Faculty of the Department of
iness Administration and to the Graduate School and
of the requirements for the degree Doctor of


December, 2004


Dean, Graduate School














A)4


UNIVERSITY OF FLORIDA
11111 11111Il IIIIlIIl l IIll 11111 i il llllllllli I




Full Text
xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID EEKG59570_IFAW5E INGEST_TIME 2011-08-29T15:43:43Z PACKAGE AA00002039_00001
AGREEMENT_INFO ACCOUNT UF PROJECT UFDC
FILES



PAGE 1

75867 21 ),5( (;3/25,1* 7+( ,03257$1&( 2) 75867 ,1 85*(17 020(176 %\ (5,& :,/' $ ',66(57$7,21 35(6(17(' 72 7+( *5$'8$7( 6&+22/ 2) 7+( 81,9(56,7< 2) )/25,'$ ,1 3$57,$/ )8/),//0(17 2) 7+( 5(48,5(0(176 )25 7+( '(*5(( 2) '2&725 2) 3+,/2623+< 81,9(56,7< 2) )/25,'$

PAGE 2

7$%/( 2) &217(176 $%675$&7 &+$37(5 ,1752'8&7,21 +<327+(6(6 'LIIHUHQWLDWLQJ 8UJHQW DQG 5RXWLQH 7UXVW 8UJHQW DQG 5RXWLQH 7UXVW (IIHFWV RQ 2XWFRPHV -RE 3HUIRUPDQFH &RPPLWPHQW DQG :LWKGUDZDO 0RGHUDWLQJ (IIHFW RI 5LVN (YHQWV 7UXVW $QWHFHGHQWV 7UXVWZRUWKLQHVV 3URSHQVLW\ WR 7UXVW 0(7+2' 6DPSOH 7LPH 3URFHGXUH 7LPH 3URFHGXUH 7LPH 3URFHGXUH 5(68/76 'HVFULSWLYH 6WDWLVWLFV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV +\SRWKHVLV OL

PAGE 3

',6&866,21 5RXWLQH 7UXVWnV 5HODWLRQVKLS ZLWK &RPPLWPHQW DQG :LWKGUDZDO 5RXWLQH 7UXVWnV 5HODWLRQVKLS ZLWK -RE 3HUIRUPDQFH 1HJDWLYH (IIHFWV RI 8UJHQW 7UXVW &LWL]HQVKLS DQG &RXQWHUSURGXFWLYH %HKDYLRUV 7UXVWZRUWKLQHVV 3URSHQVLW\ WR 7UXVW 3UDFWLFDO ,PSOLFDWLRQV 6WXG\ /LPLWDWLRQV 6XJJHVWLRQV IRU )XWXUH 5HVHDUFK 5()(5(1&(6 %,2*5$3+,&$/ 6.(7&+ LQ

PAGE 4

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

PAGE 5

VDPSOH 3UDFWLWLRQHUV VKRXOG EH DZDUH WKDW WKHVH WZR IRUPV RI WUXVW H[LVW DQG WKDW GLVWLQJXLVKLQJ EHWZHHQ WKHP PD\ KHOS WKHP DFKLHYH RUJDQL]DWLRQDOO\ UHOHYDQW JRDOV Y

PAGE 6

&+$37(5 ,1752'8&7,21 7UXVW LV DQ LPSRUWDQW SV\FKRORJLFDO YDULDEOH UHODWHG WR NH\ RUJDQL]DWLRQDO RXWFRPHV .UDPHU f QRWHG WKDW fWUXVW LV PRYLQJ IURP D ELW SOD\HU WR FHQWHU VWDJH LQ FRQWHPSRUDU\ RUJDQL]DWLRQDO WKHRU\ DQG UHVHDUFKf S f 7KH FKDQJLQJ QDWXUH RI ZRUN DFFHQWXDWHV WKH LPSRUWDQFH RI WKLV FRQVWUXFW 3RSXODU SUHVV KDV FDOOHG DWWHQWLRQ WR D SOHWKRUD RI UHFHQW VLWXDWLRQV ZKHUHLQ ODUJH FRUSRUDWLRQV KDYH YLRODWHG WKH WUXVW RI VWRFNKROGHUV DQG DOVR HPSOR\HHV 7KH QDPHV (QURQ DQG :RUOG&RP ZLOO IRUHYHU EH V\QRQ\PRXV ZLWK WULFN\ DFFRXQWLQJ DEMHFW GLVKRQHVW\ DQG YXOJDU GHFHLW 7KHVH WUXVW fYLRODWLRQVf DOVR RFFXU LQ WKH RSSRVLWH GLUHFWLRQ DV HPSOR\HHV WRGD\ IHHO OHVV OR\DOW\ WR WKHLU HPSOR\HUV DQG PD\ WKHUHIRUH EH PRUH ZLOOLQJ WR H[SORLW WKH YXOQHUDELOLW\ RI WKH FRPSDQLHV IRU ZKLFK WKH\ ZRUN (PSOR\HHV VWHDO WLPH DQG HIIRUW E\ VKLUNLQJ DQG LQ PDQ\ FDVHV DFWXDOO\ VWHDOLQJ PRQH\ LQ ERWK D OLWHUDO VHQVH DQG E\ SLOIHULQJ PHUFKDQGLVH DQGRU VXSSOLHV :KDWHYHU WKH UHDVRQV IRU WKHVH GHHGV WKHLU SUHYDOHQFH GRHV QRW PDNH IRU DQ HQYLURQPHQW FRQGXFLYH WR WKH IRVWHULQJ RI WUXVW &DXGURQ f SURYLGHG WKH IROORZLQJ H[DPSOHV RI KRZ WUXVW EUHDNV GRZQ ZLWKLQ DQ RUJDQL]DWLRQ f0DQDJHPHQW WRXWV RSHQERRN FRPPXQLFDWLRQ IRU H[DPSOH EXW HPSOR\HHV KHDU DERXW OD\RIIV RQ WKH UDGLR 7KH ERDUG WDONV DERXW WKH QHHG WR FXW FRVWV ZKLOH KDQGLQJ WKH &(2 D PXOWLPLOOLRQ GROODU ERQXV 0DQDJHUV SURPRWH ORQJWHUP IRFXV EXW PHDVXUH VKRUWWHUP JRDOV 7HDPV DUH DGYRFDWHG EXW LQGLYLGXDOV DUH UHZDUGHGf S f

PAGE 7

,Q HDFK RI WKHVH H[DPSOHV GLVVRQDQFH EHWZHHQ ZKDW PDQDJHPHQW VD\V DQG GRHV OHDYHV HPSOR\HHV ZLWK OLWWOH EDVLV IRU WUXVWLQJ WKHLU HPSOR\HUV $GGLWLRQDOO\ WKH SK\VLFDO FKDUDFWHULVWLFV RI WRGD\f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f KDV WKUHH NH\ FRPSRQHQWV )LUVW LV WKH LGHD WKDW WUXVW LV DQ LQWHQWLRQ QRW DQ DFW 6HFRQG LV WKH LGHD RI YXOQHUDELOLW\ :LWKRXW VRPH VRUW RI YXOQHUDELOLW\ WUXVW LV XQQHFHVVDU\ 7KHUH LV OLWWOH RU QR QHHG WR WUXVW VRPHRQH ZKRVH DFWLRQV KDYH QR LPSDFW RQ WKH WUXVWRU 7KLUG LV WKH LGHD RI fSRVLWLYH H[SHFWDWLRQVf IRU WKH EHKDYLRU RU LQWHQWLRQV RI DQRWKHU ,Q GLVFXVVLQJ WKHVH EHKDYLRUV WKLV GHILQLWLRQ EHFRPHV GHILFLHQW %HKDYLRUV DUH PXOWLGLPHQVLRQDO FRQVWUXFWV WKHPVHOYHV 2QH GLPHQVLRQ RQ ZKLFK WKH\ YDU\ LV KRZ

PAGE 8

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f ZKHUH WKHVH HPHUJHQF\ VLWXDWLRQV VLPSO\ GR QRW DULVH %XWOHU 1LFKROVRQ t *RK 1RRWHERRP %HUJHU t 1RRUGHUKDYHQ f $V D FRQVHTXHQFH RI WKLV VDPSOLQJ WUXVW RIWHQ LV QRW VWXGLHG LQ MREV ZKHUH OLIH RU GHDWK VLWXDWLRQV DUH VRPHWLPHV D UHDOLW\ RI WKH ZRUNGD\ :RUNHUV IDFHG ZLWK WKHVH VLWXDWLRQV LQFOXGH PLOLWDU\ SHUVRQQHO SROLFH DQG ILUHILJKWHUV (PSOR\HHV LQ WKHVH OLQHV RI

PAGE 9

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t 3HDUFH f $OWKRXJK WUXVW DSSHDUHG DV D YDULDEOH LQ WKH PDQDJHPHQW OLWHUDWXUH DV HDUO\ DV QR ZRUN IRFXVHG VSHFLILFDOO\ RQ WUXVW XQWLO WKH ZRUN RI 0HOOLQJHU f 0HOOLQJHU GHILQHG GLVWUXVW DV WKH IHHOLQJ WKDW DQRWKHUfV LQWHQWLRQV DQG PRWLYHV DUH QRW DOZD\V ZKDW KH VD\V WKH\ DUH WKDW KH LV LQVLQFHUH RU KDV XOWHULRU PRWLYHV 0LOOLQJHU IRXQG GLVWUXVW WR LQIOXHQFH FRPPXQLFDWLRQ DPRQJ VWXG\ SDUWLFLSDQWV LQ WKH IROORZLQJ ZD\ :KHQ D

PAGE 10

FRPPXQLFDWRU GLVWUXVWV WKH UHFLSLHQW RI WKDW FRPPXQLFDWLRQ WKH FRPPXQLFDWRU ZLOO FRQFHDO KLV UHDO IHHOLQJV DERXW WKH VXEMHFW RI WKH FRPPXQLFDWLRQ 0RUH LQIOXHQWLDO WKDQ 0HOOLQJHUfV ZRUN ZDV WKDW RI 'HXWVFK f 'HXWVFK H[DPLQHG GLIIHUHQW PRWLYDWLRQDO RULHQWDWLRQV FRRSHUDWLYH LQGLYLGXDOLVWLF DQG FRPSHWLWLYHf DV FDXVHV RI WUXVWLQJ DQG WUXVWZRUWK\ EHKDYLRU RQ WKH SDUW RI SDUWLFLSDQWV LQ D WZRSHUVRQ QRQ]HURVXP JDPH /DWHU 'HXWVFK f GHILQHG WUXVW DV IROORZV $Q LQGLYLGXDO PD\ EH VDLG WR KDYH WUXVW LQ WKH RFFXUUHQFH RI DQ HYHQW LI KH H[SHFWV LWV RFFXUUHQFH DQG KLV H[SHFWDWLRQ OHDGV WR EHKDYLRU ZKLFK KH SHUFHLYHV WR KDYH JUHDWHU QHJDWLYH PRWLYDWLRQDO FRQVHTXHQFHV LI WKH H[SHFWDWLRQ LV QRW FRQILUPHG WKDQ SRVLWLYH PRWLYDWLRQDO FRQVHTXHQFHV LI LW LV FRQILUPHG S f ,PSOLFLW LQ WKLV GHILQLWLRQ LV WKH LGHD WKDW D SHUVRQ KDV PRUH WR ORVH WKDQ WR JDLQ E\ WUXVWLQJ DQRWKHU 5HVHDUFK RQ WUXVW WKHQ VORZHG PRUH RU OHVV WR D VWDQGVWLOO XQWLO 5RWWHU f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f :KLOH WKH HDUO\ ZRUN RI 5RWWHU VHUYHG DV D VSULQJERDUG IRU UHVHDUFK RQ WUXVW LQ WKH OLWHUDWXUHV RI SHUVRQDOLW\ DQG SV\FKRORJ\ WKH ZRUN RI 5REHUWV DQG 2f5HLOO\ f ZDV VLPLODUO\ LQIOXHQWLDO RQ UHVHDUFK RQ WUXVW LQ WKH PDQDJHPHQW OLWHUDWXUH 7KH IRFDO YDULDEOH RI WKHVH UHVHDUFKHUV ZDV WUXVW LQ VXSHULRUV 6SHFLILFDOO\ WZR DUWLFOHV E\ WKHVH DXWKRUV LQ

PAGE 11

LGHQWLILHG WUXVW LQ VXSHULRUV DV D IDFWRU LQIOXHQFLQJ XSZDUG FRPPXQLFDWLRQ ZLWKLQ RUJDQL]DWLRQV 0D\HU 'DYLV DQG 6FKRRUPDQ f SUHVHQWHG DQ LQWHJUDWLYH PRGHO RI RUJDQL]DWLRQDO WUXVW 7KHVH DXWKRUV MXVWLILHG WKH QHHG IRU DQ LQWHJUDWHG PRGHO E\ FLWLQJ D KRVW RI SUREOHPV LQ WKH OLWHUDWXUH RQ WUXVW ([DPSOHV LQFOXGHG GHILQLWLRQDO SUREOHPV XQFHUWDLQW\ FRQFHUQLQJ WKH UHODWLRQVKLS EHWZHHQ ULVN DQG WUXVW FRQIXVLRQ FRQFHUQLQJ WKH UHIHUHQW RI WUXVW DQG FRQIXVLRQ EHWZHHQ WUXVW LWV DQWHFHGHQWV DQG LWV RXWFRPHV 7KHLU PRGHO VKRZHG WKDW WKH SHUFHSWLRQ RI DQRWKHUfV DELOLW\ EHQHYROHQFH DQG LQWHJULW\ DV ZHOO D SHUVRQfV JHQHUDO WUXVWLQJ SURSHQVLW\n LQIOXHQFHG KRZ PXFK WUXVW D SHUVRQ H[WHQGHG WR DQRWKHU 7KLV WUXVW GHWHUPLQHG KRZ PXFK ULVN WKH WUXVWRU ZDV ZLOOLQJ WR WDNH LQ WKH UHODWLRQVKLS 7KHLU ZRUN ZDV HVSHFLDOO\ LPSRUWDQW EHFDXVH LW GLVWLQJXLVKHG EHWZHHQ DQWHFHGHQWV RI WUXVW LQWHUQDO WR WKH WUXVWRU LH SURSHQVLW\ WR WUXVWf DQG WKRVH LQWHUQDO WR WKH SHUVRQ EHLQJ WUXVWHG LH DELOLW\ EHQHYROHQFH DQG LQWHJULW\f +RVPHU f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

PAGE 12

ULJKWV DQG LQWHUHVWV RI DOO RWKHUV HQJDJHG LQ D MRLQW HQGHDYRU RU HFRQRPLF H[FKDQJH S f $V GLVFXVVHG HDUOLHU WUXVW SRVVHVVHV DQ LQKHUHQW GXDOLW\ )RU WKH SXUSRVHV RI P\ VWXG\ UHIHU WR WKHVH WZR W\SHV RI WUXVW DV XUJHQW WUXVW DQG URXWLQH WUXVW f 5RXWLQH WUXVW LV WKH LQWHQWLRQ WR DFFHSW YXOQHUDELOLW\ EDVHG RQ SRVLWLYH H[SHFWDWLRQV RI WKH LQWHQWLRQV RU EHKDYLRU RI DQRWKHU LQ VLWXDWLRQV WKDW KDYH HVWDEOLVKHG UXOHV SURFHGXUHV RU SUHFHGHQWV JRYHUQLQJ DFWLRQV 7KLV LV QRW WR VD\ WKDW WKHVH VLWXDWLRQV DUH XQLPSRUWDQWf§PHUHO\ WKDW WKH\ DUH PRUH IUHTXHQWO\ HQFRXQWHUHG DQG KDYH ZHOOHVWDEOLVKHG KLVWRULHV f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fV FDUHHU ,Q IDFW URXWLQH HYHQWV DUH RIWHQ SXQFWXDWHG ZLWK QRYHO PRUH VHULRXV VLWXDWLRQV LQ ZKLFK RQH RIILFHUfV OLIH LV OLWHUDOO\ LQ WKH KDQGV RI DQRWKHU 7KLV SXQFWXDWLRQ RIWHQ RFFXUV ZLWKRXW ZDUQLQJ DQG FDQ EH TXLWH SUHFDULRXV )RU H[DPSOH WZR SDWUROOLQJ RIILFHUV PLJKW SXOO RYHU D YHKLFOH IRU KDYLQJ DQ H[SLUHG WDJ 7KLV W\SH RI RFFXUUHQFH LV FHUWDLQO\ URXWLQH IRU D SDWUROOLQJ RIILFHU ,Q VLWXDWLRQV VXFK DV WKHVH WKH RIILFHUV WUXVW RQH DQRWKHU WR KDQGOH WKH VWRS DSSURSULDWHO\ LQ WHUPV RI IROORZLQJ SURWRFRO FDOOLQJ LQ WKH WDJ ZDWFKLQJ HDFK RWKHUfV EDFN HWFf +RZHYHU LI GXULQJ WKH FRXUVH RI WKH VWRS WKH GULYHU RI WKH YHKLFOH

PAGE 13

EUDQGLVKHV D ZHDSRQ WKH RIILFHUV PXVW WUXVW RQH DQRWKHU WR GLIIXVH WKH HPHUJHQF\ GLVDUP WKH GULYHU DQG SURWHFW HDFK RWKHUf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

PAGE 14

FKDQJHV )RU H[DPSOH LQ WKH HYHQW RI DQ XQH[SHFWHG HTXLSPHQW IDLOXUH HJ D ODGGHU EUHDNLQJf ILUHILJKWHUV PD\ TXLFNO\ EHFRPH GHSHQGHQW RQ WKH DFWLRQV RI RWKHUV WR VDYH WKHLU OLYHV ,Q WKLV ZD\ XUJHQW WUXVW EHFRPHV NH\ 7KHVH H[DPSOHV DQG WKH SUHFHGLQJ GLVFXVVLRQ JHQHUDWHG VHYHUDO LQWHUHVWLQJ TXHVWLRQV WKDW EHFDPH WKH JXLGLQJ UHVHDUFK TXHVWLRQV IRU P\ VWXG\ )LUVW DQG PRVW REYLRXV LV WKH TXHVWLRQ f$UH XUJHQW DQG URXWLQH WUXVW WUXO\ GLVWLQFW IURP RQH DQRWKHU"f 7KDW LV f$UH WKH WZR W\SHV RI WUXVW VLPSO\ GLIIHUHQW OHYHOV RI VRPH JUHDWHU FRQVWUXFW RI WUXVW RU DUH WKH\ SV\FKRORJLFDOO\ GLVWLQFW FRQFHSWV"f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f WKDW H[SODLQ VHSDUDWH YDULDQFH LQ NH\ DWWLWXGHV DQG EHKDYLRUV ZKLOH EHLQJ GLIIHUHQWLDOO\ PRGHUDWHG E\ WKH OHYHO RI SUHVHQW ULVN 7KH VSHFLILFV RI WKHVH SUHGLFWLRQV DUH SUHVHQWHG LQ &KDSWHU

PAGE 15

&+$37(5 +<327+(6(6 0\ VWXG\ WHVWHG WKH PRGHO VKRZQ LQ )LJXUH 8UJHQW DQG URXWLQH WUXVW ZHUH SUHGLFWHG WR EH GLVWLQFW FRQVWUXFWV WKDW KDYH XQLTXH LQGHSHQGHQW HIIHFWV RQ D VHW RI RXWFRPH YDULDEOHV 7KRVH HIIHFWV DOVR ZHUH SUHGLFWHG WR YDU\ DFFRUGLQJ WR WKH ULVN OHYHO H[SHULHQFHG E\ WKH LQGLYLGXDOV 0RUHRYHU XUJHQW DQG URXWLQH WUXVW ZHUH SUHGLFWHG WR KDYH GLIIHUHQW DQWHFHGHQWV LQ WHUPV RI UHOHYDQW WUXVWZRUWKLQHVV IDFHWV DQG LQGLYLGXDOVf SURSHQVLW\ WR WUXVW 7KLV FKDSWHU SUHVHQWV D OLQNE\OLQN GLVFXVVLRQ RI WKLV PRGHO DQG SUHVHQWV H[SOLFLW K\SRWKHVHV )LJXUH 0RGHO RI K\SRWKHVL]HG UHODWLRQVKLSV 'LIIHUHQWLDWLQJ 8UJHQW DQG 5RXWLQH 7UXVW +\SRWKHVLV 5RXWLQH WUXVW DQG XUJHQW WUXVW DUH GLVWLQFW FRQFHSWV 7UXVW LV DQ LQKHUHQWO\ HYDOXDWLYH FRQVWUXFW 7UXVW GRHV QRW H[LVW LQ D SK\VLFDO PDQQHU EXW UDWKHU LV LWVHOI DQ HYDOXDWLRQ :KHQ SHRSOH HYDOXDWH WUXVW WKH\ WKLQN f'R

PAGE 16

WUXVW WKDW SHUVRQ WR GR "f RU f7R ZKDW H[WHQW GR WUXVW WKDW SHUVRQ WR GR "f /LNH DQ\ HYDOXDWLRQ WUXVW HYDOXDWLRQV PXVW EH FUHDWHG 7R GHVFULEH WKH SURFHVV E\ ZKLFK WUXVW HYDOXDWLRQV DUH FUHDWHG LW LV KHOSIXO WR H[DPLQH WKH OLWHUDWXUH RQ FUHDWLQJ RI SHUIRUPDQFHDSSUDLVDO HYDOXDWLRQV 'H1LVL &DIIHUW\ DQG 0HJOLQR f GHILQHG SHUIRUPDQFH DSSUDLVDO DV WKH SURFHVV E\ ZKLFK DQ REVHUYHU VXFK DV D SHHU RU VXSHUYLVRUf UDWHV WKH MRE SHUIRUPDQFH RI DQ HPSOR\HH 3HUIRUPDQFH UDWLQJV IRUPHG E\ WKLV SURFHVV SOD\ DQ LPSRUWDQW UROH LQ HQKDQFLQJ RUJDQL]DWLRQDO HIIHFWLYHQHVV $V D UHVXOW D ODUJH YROXPH RI OLWHUDWXUH KDV EHHQ SURGXFHG ZKHUHLQ WKH LQWULFDFLHV RI WKLV FRJQLWLYH SURFHVV DUH DQDO\]HG DQG WKHRU\ LV SXW IRUWK &RRSHU 'H1LVL HW DO ,OJHQ t )HOGPDQ f 'H1LVL HW DO f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f UHIHUUHG WR PD[LPXP SHUIRUPDQFH DV WKH fFDQ GRf DVSHFWV RI SHUIRUPDQFH 0D[LPXP SHUIRUPDQFH LV GHWHUPLQHG E\ WKH WHFKQLFDO SURILFLHQF\ DQGRU FRJQLWLYH DELOLW\ RI MREKROGHUV ZKLFK LQ WXUQ GHWHUPLQHV WKH KLJKHVW OHYHO RI SHUIRUPDQFH WKH\ DUH FDSDEOH RI DFKLHYLQJ 7\SLFDO SHUIRUPDQFH RQ WKH RWKHU KDQG UHIHUV WR ZKDW %RUPDQ FDOOHG WKH fZLOO GRf DVSHFWV RI SHUIRUPDQFH 7KLV GRPDLQ RI

PAGE 17

SHUIRUPDQFH UHSUHVHQWV WKH W\SLFDO EHKDYLRU RI WKH MREKROGHU RYHU WLPH DQG LV EHVW SUHGLFWHG E\ WKDW MRE LQFXPEHQWf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f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

PAGE 18

$V LQ WKH H[DPSOH RI SHUIRUPDQFH HYDOXDWLRQ D SHUVRQ HYDOXDWLQJ WUXVW DFWV DV D KXPDQ LQIRUPDWLRQ SURFHVVRU *LYHQ WKLV WUXVW HYDOXDWLRQV FDQ EH GLIILFXOW WR PDNH EHFDXVH DV DQ LQIRUPDWLRQ SURFHVVRU KXPDQV KDYH OLPLWHG FRJQLWLYH FDSDFLW\ IRU DFTXLULQJ HQFRGLQJ DQG VWRULQJ VHQVRU\ LQIRUPDWLRQ 1HZHOO t 6LPRQ f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f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fUXGH EHKDYLRUf FDWHJRU\ ZLOO OLNHO\ EH HQDFWHG 7KLV LQGLYLGXDO ZLOO FRQVLGHU WKLV EHKDYLRU UXGH DQG ZLOO UHDFW PXFK DV KH ZRXOG UHDFW WR

PAGE 19

DQ\ RWKHU EHKDYLRU IDOOLQJ LQWR WKLV FDWHJRU\ 5RXWLQH VWLPXOL DUH RIWHQ WUHDWHG LQ WKLV ZD\ WR FRQVHUYH FRJQLWLYH HQHUJ\ ,Q WKH FDVH RI URXWLQH WUXVW HYDOXDWLRQV FRPPRQ REVHUYHG EHKDYLRUV WHQG WR DFWLYDWH HLWKHU WKH fWUXVWZRUWK\ EHKDYLRUf FDWHJRU\ RU fXQWUXVWZRUWK\ EHKDYLRUf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f VXJJHVWHG WKDW WKH PRUH GLVWLQFW D VWLPXOXV IURP SUHYLRXV PHQWDO UHSUHVHQWDWLRQV WKH PRUH GHHSO\ LW LV FRJQLWLYHO\ SURFHVVHG 2WKHU UHVHDUFKHUV KDYH IRXQG WKDW UHFRJQLWLRQ DQG UHFDOO PHPRU\ DUH EHWWHU IRU DW\SLFDO WKDQ W\SLFDO DFWLRQV *UDHVVHU *RUGRQ t 6DZ\HU *UDHVVHU :ROO .RZOVNL t 6PLWK f )XUWKHU /RUG f DUJXHG WKDW ZKLOH W\SLFDO VWLPXOL DUH HQFRGHG JHQHULFDOO\ XVLQJ H[LVWLQJ FRJQLWLYH FDWHJRULHV DW\SLFDO VWLPXOL FDQQRW EH HTXDWHG ZLWK H[LVWLQJ FDWHJRULHV DQG WKXV WKH\ PXVW EH HQFRGHG E\ XVLQJ D XQLTXH V\PEROLF UHSUHVHQWDWLRQ

PAGE 20

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fV FRQWURO WKDW FRQWULEXWH WR WKH JRDOV RI WKH RUJDQL]DWLRQ *LYHQ WKH EUHDGWK RI WKLV GHILQLWLRQ LW LV QRW VXUSULVLQJ WKDW LW VXEVXPHV DOO WKUHH W\SHV RI EHKDYLRUV DV MRE SHUIRUPDQFH 6RPH GLVFXVVLRQ LV ZDUUDQWHG DW WKLV SRLQW DERXW WKH VSHFLILF IDFHWV RI SHUIRUPDQFH LQFOXGHG LQ WKLV VWXG\ ,Q H[SOLFDWLQJ WKH GHSHQGHQW YDULDEOHV RI LQWHUHVW KHUH GHILQLWLRQV ZLOO EH ERUURZHG IURP WKH 5RWXQGR DQG 6DFNHWW f UHYLHZ )LUVW WDVN SHUIRUPDQFH LQFOXGHV DQ\ EHKDYLRU WKDW FRQWULEXWHV WR SURGXFWLRQ RI D JRRG RU

PAGE 21

SURYLVLRQ RI D VHUYLFH &OHDUO\ LW LV QRW VXIILFLHQW WR VWXG\ RQO\ WDVNUHODWHG EHKDYLRUV JLYHQ DOO RI WKH RWKHU DFWLRQV DQ HPSOR\HH PD\ WDNH WKDW FRXOG KHOS RU KLQGHU WKH RUJDQL]DWLRQ WKDW DUH QRW REYLRXVO\ WDVNUHODWHG 2Q WKH PRUH SRVLWLYH HQG HPSOR\HHV PD\ HQJDJH LQ EHKDYLRUV VXFK DV GHPRQVWUDWLQJ HIIRUW DOWUXLVP VSUHDGLQJ JRRGZLOO RU HQGRUVLQJ VXSSRUWLQJ DQG GHIHQGLQJ RUJDQL]DWLRQDO REMHFWLYHV %RUPDQ t 0RWRZLGOR &DPSEHOO *HRUJH t %ULHI 2UJDQ f (DFK RI WKHVH PRUH VSHFLILF EHKDYLRUV EHORQJV WR D JURXS RI EHKDYLRUV UHIHUUHG WR DV FLWL]HQVKLS SHUIRUPDQFH %\ GHILQLWLRQ FLWL]HQVKLS SHUIRUPDQFH LV EHKDYLRU WKDW FRQWULEXWHV WR WKH VRFLDO DQG SV\FKRORJLFDO HQYLURQPHQW RI WKH RUJDQL]DWLRQ DQG WKXV KHOSV WKH RUJDQL]DWLRQ DFKLHYH LWV JRDOV 5RWXQGR t 6DFNHWW f %\ WKH YHU\ QDWXUH RI WKH IDFW WKDW WKHVH EHKDYLRUV FRQWULEXWH WR RUJDQL]DWLRQDO VXFFHVV WKH\ VKRXOG EH LQFOXGHG LQ WKH GRPDLQ RI MRE SHUIRUPDQFH 6RPHZKDW SDUDGR[LFDOO\ EHKDYLRUV WKDW GHWUDFW IURP RUJDQL]DWLRQDO JRDOV DOVR EHORQJ LQ WKH GRPDLQ RI MRE SHUIRUPDQFH ([DPSOHV RI WKHVH EHKDYLRUV LQFOXGH VXEVWDQFH DEXVH KDYLQJ SRRU VHOIGLVFLSOLQH GHVWUR\LQJ FRPSDQ\ SURSHUW\ KDUPLQJ FRZRUNHUV DQG QRW IROORZLQJ UXOHV %RUPDQ t 0RWRZLGOR &DPSEHOO 5RELQVRQ t %HQQHWW f )RU WKH SXUSRVHV RI WKLV VWXG\ FRXQWHUSURGXFWLYH SHUIRUPDQFH LV GHILQHG DV DQ\ YROXQWDU\ EHKDYLRU WKDW KDUPV WKH RUJDQL]DWLRQ 7RJHWKHU WKHVH WKUHH IRUPV RI EHKDYLRU IRUP WKH EDVLV RI MRE SHUIRUPDQFH 2I FRXUVH RUJDQL]DWLRQV YDOXH PRUH WKDQ MXVW KLJK OHYHOV RI MRE SHUIRUPDQFH ,W LV DOVR LPSRUWDQW WR NHHS DQG UHWDLQ WKRVH HPSOR\HHV ZKR DUH IXOILOOLQJ WKHLU UROH UHTXLUHPHQWV :LWK WKDW LQ PLQG RUJDQL]DWLRQDO FRPPLWPHQW GHILQHG DV DQ HPSOR\HHfV SV\FKRORJLFDO DWWDFKPHQW WR KLV RU KHU RUJDQL]DWLRQ ZDV FKRVHQ DV D GHSHQGHQW YDULDEOH LQ WKLV VWXG\ 0H\HU t $OOHQ 0RZGD\ 6WHHUV t 3RUWHU f (PSOR\HHV ZKR

PAGE 22

DUH VWURQJO\ FRPPLWWHG WR WKHLU RUJDQL]DWLRQ YDOXH WKDW PHPEHUVKLS WR D VWURQJ GHJUHH PDNLQJ LW OHVV OLNHO\ WKDW WKH\ ZLOO H[SORUH DOWHUQDWLYH HPSOR\PHQW RSSRUWXQLWLHV 0RUHRYHU KLJK OHYHOV RI RUJDQL]DWLRQDO FRPPLWPHQW DUH DVVRFLDWHG ZLWK EHWWHU MRE SHUIRUPDQFH DV PHWDDQDO\WLF UHYLHZV KDYH OLQNHG FRPPLWPHQW WR EHQHILFLDO WDVN DQG FLWL]HQVKLS EHKDYLRUV 0DWKLHX t =DMDF 0H\HU 6WDQOH\ +HUVFRYLWFK t 7RSROQ\WVN\ f $Q LQGLYLGXDOfV DWWDFKPHQW WR KLV RU KHU RUJDQL]DWLRQ FDQ DOVR EH LQIHUUHG IURP WKH FRQYHUVH RI FRPPLWPHQW HPSOR\HH ZLWKGUDZDO :LWKGUDZDO LV GHILQHG DV D VHW RI LQWHQWLRQV DQG EHKDYLRUV WKDW VLJQDO D SV\FKRORJLFDO DQG SK\VLFDO VHSDUDWLRQ IURP DQ RUJDQL]DWLRQ XVXDOO\ WR DYRLG VRPH VRXUFH RI GLVVDWLVIDFWLRQ +XOLQ f ([DPSOHV RI ZLWKGUDZDO UDQJH IURP PLQRU DFWV OLNH GD\GUHDPLQJ FKDWWLQJ DERXW QRQZRUN WRSLFV RU WDUGLQHVV WR PRUH PDMRU DFWV VXFK DV DEVHQWHHLVP DQG LQWHQWLRQV WR VHDUFK IRU DOWHUQDWLYH HPSOR\PHQW :KLOH ZLWKGUDZDO DSSHDUV LQ VRPH WD[RQRPLHV RI FRXQWHUSURGXFWLYH EHKDYLRU 6DFNHWW t 'H9RUH f LW LV D PXFK PRUH SDVVLYH UHVSRQVH WR GLVVDWLVIDFWLRQ UHODWLYH WR DFWV OLNH WKHIW DQG YHUEDO RU SK\VLFDO DEXVH -RE 3HUIRUPDQFH :RUN H[DPLQLQJ WKH UHODWLRQVKLS EHWZHHQ LQWUDJURXS WUXVW DQG MRE SHUIRUPDQFH ZDV EHLQJ FRQGXFWHG DV HDUO\ DV )ULHGODQGHU f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

PAGE 23

ZRUNJURXSV RI YDULHG VL]HV %DVHG RQ FRUUHODWLRQDO DQDO\VLV WKH DXWKRU FRQFOXGHG WKDW LQWUDJURXS WUXVW ZDV LQ IDFW D VWURQJ SUHGLFWRU RI ODWHU JURXS SHUIRUPDQFH $ VLPLODU UDWLRQDOH SURPSWHG D VWXG\ E\ .OLPRVNL DQG .DURO f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t )U\[HOO -HKQ t 0DQQL[ =DQG f 'RROH\ DQG )U\[HOO IRXQG D PRGHUDWH FRUUHODWLRQ EHWZHHQ VWUDWHJLF GHFLVLRQPDNLQJ WHDP WUXVW DQG WKDW WHDPV GHFLVLRQ TXDOLW\ LQ D VDPSOH RI KRVSLWDO &(2f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f H[DPLQHG WKH HIIHFW

PAGE 24

GLIIHUHQW 1&$$ EDVNHWEDOO WHDPVf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f 6HYHUDO RWKHU ZRUNV DOVR \LHOGHG D QXOO UHVXOW FRQFHUQLQJ WKH UHODWLRQVKLS EHWZHHQ WUXVW LQ PDQDJHPHQW DQG MRE SHUIRUPDQFH .RQRYVN\ t &URSDQ]DQR .RUVJDDUG 5REHUVRQ t 5\PSK f $V LQ WKH 'LUNV VWXG\ ORZ VWDWLVWLFDO SRZHU LH D VDPSOH VL]H RI f OLNHO\ H[SODLQHG WKH ILQGLQJV RI .RUVJDDUG 5REHUVRQ DQG 5\PSK 7KXV ZKLOH VRPH VWXGLHV GHPRQVWUDWHG D QRQVLJQLILFDQW UHODWLRQVKLS EHWZHHQ VRPH IRUP RI WUXVW LQ OHDGHUVf DQG SHUIRUPDQFH WKH EXON RI WKH UHVHDUFK VKRZV WUXVW WR EH LQ IDFW PRGHUDWHO\ WR VWURQJO\ UHODWHG WR SHUIRUPDQFH 'LUNV (DUOH\ -XQJ t $YROLR .RUVJDDUG 6FKZHLJHU t 6DSLHQ]D 3HWWLW *RULV t 9DXJKW =DKHHU 0F(YLO\ t 3HUURQH f 6WLOO RWKHU VWXGLHV KDYH \LHOGHG RQO\ ZHDN UHODWLRQVKLSV EHWZHHQ WUXVW DQG SHUIRUPDQFH &RQJHU .DQXQJR t 0HQRQ .LUNSDWULFN t /RFNH f *LYHQ WKHVH ZLGHO\ YDU\LQJ UHVXOWV IXUWKHU H[SORUDWLRQ RI WKLV UHODWLRQVKLS VHHPHG QHFHVVDU\ LQ WKLV VWXG\ 6WXGLHV H[DPLQLQJ WKH HIIHFWV RI WUXVW RQ FLWL]HQVKLS EHKDYLRU DUH PRUH VFDUFH )XUWKHUPRUH WKH PDQQHU LQ ZKLFK WUXVW LV SODFHG LQ WKH YDULRXV PRGHOV LV YDULHG 6RPH VWXGLHV YLHZ WUXVW DV D PHGLDWRU RWKHUV DV D FRUUHODWH $GGLWLRQDOO\ WKH OLWWOH UHVHDUFK WKDW

PAGE 25

KDV EHHQ GRQH KDV OHDG WR FRQWUDGLFWRU\ UHVXOWV ,Q IDFW QHJDWLYH SRVLWLYH DQG QXOO UHODWLRQVKLSV KDYH HPHUJHG EHWZHHQ WUXVW DQG FLWL]HQVKLS 7KH EXON RI WKLV UHVHDUFK WUHDWV WUXVW DV D PHGLDWRU .RQRYVN\ t 3XJK 0DF.HQ]LH 3RGVDNRII t 5LFK 3LOOLD 6FKULHVKHLP t :LOOLDPV 3RGVD]NRII 0DF.HQ]LH 0RRUPDQ t )HWWHU 5LFK f ,Q DQ DWWHPSW WR VKHG OLJKW RQ WKH UHODWLRQVKLS EHWZHHQ IDLUQHVV DQG WUXVW .RQRYVN\ DQG 3XJK FRQGXFWHG D VXUYH\EDVHG VWXG\ LQ D VDPSOH RI KRVSLWDO HPSOR\HHV 7KH DXWKRUV VXJJHVW WKDW RQH VRXUFH RI WUXVW LQ DQ HPSOR\HHHPSOR\HU UHODWLRQVKLS LV SURFHGXUDO IDLUQHVV 8VLQJ IDLU SURFHGXUHV LV VDLG WR GHPRQVWUDWH WKH VXSHUYLVRUf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f 7KH FUX[ RI WKHLU DUJXPHQW ZDV WKDW WUDQVIRUPDWLRQDO RU FKDULVPDWLF EHKDYLRUV H[KLELWHG E\ VXSHUYLVRUV FDXVHG IROORZHUV WR UHVSHFW DQG WUXVW WKHLU VXSHUYLVRUV 7KLV WUXVW DQG UHVSHFW LQ WXUQ PRWLYDWHG HPSOR\HHV WR GR PRUH WKDQ WKH\ ZHUH H[SHFWHG WR GR LH HQJDJH LQ FLWL]HQVKLS EHKDYLRUVf ,Q WKLV ZD\ WKH DXWKRUV VXJJHVWHG WKDW HIIHFWLYH OHDGHUV WUDQVIRUPHG WKH EDVLF DWWLWXGHV EHOLHIV DQG YDOXHV RI WKHLU IROORZHUV VXFK WKDW WKHVH IROORZHUV ZHUH WKHQ ZLOOLQJ WR SHUIRUP EH\RQG WKH PLQLPXP DFFHSWDEOH OHYHOV VSHFLILHG E\ WKH RUJDQL]DWLRQ

PAGE 26

7KHLU HDUOLHU UHVHDUFK ZDV FRQGXFWHG LQ D ILHOG VHWWLQJ XVLQJ D VDPSOH RI SHWURFKHPLFDO ZRUNHUV 3RGVDNRII HW DO f 7KH VDPSOH ZDV SUHGRPLQDWHO\ PDOH DQG VSOLW DOPRVW HTXDOO\ EHWZHHQ PDQDJHULDO DQG QRQPDQDJHULDO MRE WLWOHV 8VLQJ FRQILUPDWRU\ IDFWRU\ DQDO\VLV WKH DXWKRUV IRXQG WKDW WUXVW SOD\HG DQ LPSRUWDQW PHGLDWLQJ UROH LQ WKHLU PRGHO ,Q IDFW WKH DJJUHJDWH HIIHFWV RI OHDGHU EHKDYLRUV RQ FLWL]HQVKLS ZHUH LQGLUHFW DQG PHGLDWHG DOPRVW FRPSOHWHO\ E\ IROORZHUfV WUXVW LQ WKHLU OHDGHUV 7KH ODWWHU RI WKH WZR SUHYLRXVO\ PHQWLRQHG VWXGLHV IROORZHG D VLPLODU ORJLF EXW ZDV FRQGXFWHG XVLQJ D VDPSOH RI LQVXUDQFH VDOHVSHRSOH 0DF.HQ]LH HW DO f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f IRXQG D PRGHUDWH SRVLWLYH UHODWLRQVKLS EHWZHHQ WKH WUXVW HPSOR\HHV KDYH LQ FRZRUNHUV DQG WKHLU ZLOOLQJQHVV WR HQJDJH LQ FLWL]HQVKLS EHKDYLRUV 6LPLODUO\ 7KRPDV f UHSRUWHG D VWURQJ SRVLWLYH UHODWLRQVKLS EHWZHHQ WUXVW LQ WHDP DQG RUJDQL]DWLRQDO FLWL]HQVKLS &RQWUDULO\ 3XIIHU f LQ D VDPSOH RI UHWDLO VDOHVSHUVRQV IRXQG D QRQVLJQLILFDQW FRUUHODWLRQ EHWZHHQ WKH IDLWK DQ HPSOR\HH KDG LQ KLV RU KHU FRZRUNHUV DQG WKHLU SURVRFLDO EHKDYLRU 2YHUDOO WKH UHVHDUFK LQGLFDWHV WKDW WUXVW DQG FLWL]HQVKLS DUH SRVLWLYHO\ UHODWHG ,I WKH UHVHDUFK VXJJHVWV WKDW WUXVW VKRXOG EH SRVLWLYHO\ UHODWHG WR FLWL]HQVKLS EHKDYLRU LW VHHPV ORJLFDO WKDW WUXVW VKRXOG EH QHJDWLYHO\ UHODWHG WR FRXQWHUSURGXFWLYH EHKDYLRUV 7HVWLQJ RI WKLV QRWLRQ EHJDQ WR DSSHDU LQ WKH OLWHUDWXUH DV HDUO\ DV

PAGE 27

0HOOLQJHU f ,Q WKLV VWXG\ 0HOOLQJHU SRVLWHG WKDW WKH ZD\ WZR SHRSOH IHHO DERXW RQH DQRWKHU VKRXOG VLJQLILFDQWO\ LPSDFW KRZ WKH\ FRPPXQLFDWH ZLWK HDFK RWKHU 6SHFLILFDOO\ KH VXJJHVWHG WKDW D SHUVRQ ZKR LV QRW WUXVWHG ZLOO EH UHJDUGHG DV WKUHDWHQLQJ DQG WKHUHIRUH ZLOO PDNH WKH RWKHU SHUVRQ DQ[LRXV $V D UHVXOW WKH SULPDU\ JRDO RI FRPPXQLFDWLRQ ZLWK WKLV GLVWUXVWHG LQGLYLGXDO ZRXOG EH WR UHGXFH RQHfV RZQ DQ[LHW\ UDWKHU WKDQ DFFXUDWHO\ WUDQVPLWWLQJ LGHDV ,Q RWKHU ZRUGV KH ZKR LV QRW WUXVWHG ZLOO QRW EH FRPPXQLFDWHG ZLWK DV RSHQO\ DV KH ZKR LV WUXVWHG 7KH ILQGLQJV RI WKLV VWXG\ OHQW VXSSRUW WR WKH WKHRU\ WKDW LI % GLVWUXVWV EXW PXVW VWLOO FRPPXQLFDWH ZLWK $ WKHQ % ZLOO FRPPXQLFDWH LQ VXFK D ZD\ DV WR FRQFHDO IURP $ LQIRUPDWLRQ DERXW %fV RZQ DWWLWXGHV WRZDUG DQ LVVXH ; &HUWDLQO\ RIIHULQJ LQFRPSOHWH LQIRUPDWLRQ WR D FRZRUNHU UHSUHVHQWV D IRUP RI FRXQWHUSURGXFWLYH EHKDYLRU 6HYHUDO RWKHU VWXGLHV UHSRUWHG UHODWLRQVKLSV EHWZHHQ WUXVW DQG RWKHU IRUPV RI FRXQWHUSURGXFWLYH EHKDYLRU )RU H[DPSOH %LHV DQG 7\OHU f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f UHSRUWHG D SRVLWLYH UHODWLRQVKLS EHWZHHQ LQWUDJURXS WUXVW DQG D XQLTXH FRXQWHUSURGXFWLYH EHKDYLRU ORXGQHVV 7KLV YDULDEOH ZDV PHDVXUHG E\ WKH IROORZLQJ VLQJOH LWHP f:H UDLVH RXU YRLFHV DW RQH DQRWKHUf $ SRVLWLYH UHODWLRQVKLS EHWZHHQ LQWUDJURXS WUXVW DQG ORXGQHVV VXJJHVWV WKDW JURXS PHPEHUV ZKR WUXVW RQH DQRWKHU PD\ DOVR EH PRUH ZLOOLQJ WR VWUDLQ WKDW UHODWLRQVKLS WKURXJK FRXQWHUSURGXFWLYH EHKDYLRUV EHFDXVH WKH\ EHOLHYH WKHUH LV HQRXJK WUXVW LQ WKHLU

PAGE 28

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f FRQGXFWHG D ILHOG VWXG\ RI HPSOR\HHV LQ D SXEOLF VHFWRU FRDO PLQLQJ ILUP ZLWK HPSOR\HHV UDQJLQJ IURP PLQHUV WR HQJLQHHUV WR PDUNHWLQJ DQG VDOHV SURIHVVLRQDOV 7KHLU UHVXOWV UHYHDOHG VWURQJ FRUUHODWLRQV EHWZHHQ WUXVW LQ RUJDQL]DWLRQ WUXVW LQ VXSHUYLVRU DQG RUJDQL]DWLRQDO FRPPLWPHQW 6LPLODU ILQGLQJV KDYH EHHQ \LHOGHG E\ D QXPEHU RI RWKHU VWXGLHV $UPVWURQJ6WDVVHQ %URFNQHU 6LHJHO 'DO\ 7\OHU t 0DUWLQ .RQRYVN\ t &URSDQ]DQR 3LOODL HW DO f :LWK UHVSHFW WR HPSOR\HH ZLWKGUDZDO LQWHQWLRQ WR TXLW KDV EHHQ WKH IRFXV RI VHYHUDO VWXGLHV ZKHUHLQ WUXVW ZDV DOVR PHDVXUHG &KULVWLDQVHQ 9LOODQRYD t 0LNXOD\ &XQQLQJKDP t 0DF*UHJRU )DUK 7VXL ;LQ t &KHQJ .RQRYVN\ t &URSDQ]DQR f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

PAGE 29

ILHOG VWXG\ RI HPSOR\HHV 7KXV ZKLOH WKH VWUHQJWK RI WKH UHODWLRQVKLS YDULHV EHWZHHQ VWXGLHV DOO VXSSRUW WKH FRQWHQWLRQ WKDW WUXVW VKRXOG EH QHJDWLYHO\ UHODWHG WR LQWHQWLRQV WR TXLW 7UXVW KDV DOVR EHHQ OLQNHG WR REMHFWLYH PHDVXUHV RI DFWXDO DEVHQWHHLVP DQG WXUQRYHU %DOO 7UHYLQR t 6LPV &XQQLQJKDP t 0DF*UHJRU 5RELQVRQ t 5RXVVHDX f +\SRWKHVLV 5RXWLQH WUXVW ZLOO EH SRVLWLYHO\ UHODWHG WR Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS Ff FRXQWHUSURGXFWLYH EHKDYLRU Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO LQGHSHQGHQW RI XUJHQW WUXVW +\SRWKHVLV 8UJHQW WUXVW ZLOO EH SRVLWLYHO\ UHODWHG WR Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS Ff FRXQWHUSURGXFWLYH EHKDYLRU Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO LQGHSHQGHQW RI URXWLQH WUXVW 0RGHUDWLQJ (IIHFW RI 5LVN (YHQWV ,Q D UHFHQW UHYLHZ RI WKH WUXVW OLWHUDWXUH 5RXVVHDX HW DO f FRPSDUHG WKH PDQQHU LQ ZKLFK YDULRXV GLVFLSOLQHV FRQFHSWXDOL]H WUXVW :LWKLQ WKLV GLVFXVVLRQ WKH DXWKRUV SRLQWHG RXW WKDW WKHUH ZDV VRPH DJUHHPHQW DFURVV GLVFLSOLQHV SDUWLFXODUO\ ZLWK UHJDUG WR WKH FRQGLWLRQV QHFHVVDU\ IRU WUXVW WR DULVH 2QH VXFK FRQGLWLRQ ZDV WKH SUHVHQFH RI ULVN ZKLFK LV D NH\ LQJUHGLHQW LQ SV\FKRORJLFDO VRFLRORJLFDO DQG HFRQRPLF FRQFHSWXDOL]DWLRQV RI WUXVW %KDWWDFKDU\D 'H9LQQH\ t 3LOOXGD %UDGDFK t (FFOHV &ROHPDQ 5RWWHU :LOOLDPVRQ f ,Q IDFW /HZLV DQG :HLJHUW f DUJXHG WKDW LI DFWLRQ FRXOG EH WDNHQ ZLWKRXW ULVN RU XQFHUWDLQW\ WUXVW ZRXOG EH XQQHFHVVDU\ 6LPLODUO\ .HH DQG .QR[ f DUJXHG WKDW WUXVW QHHG RQO\ EH SUHVHQW LQ VLWXDWLRQV ZKHUH RQH SDUW\ KDV VRPHWKLQJ PHDQLQJIXO DW VWDNH DQG LV DZDUH RI WKH SRWHQWLDO RI EHWUD\DO DQG KDUP IURP WKH RWKHU )XUWKHU VXSSRUWLQJ WKLV FRQWHQWLRQ &ROHPDQ GHILQHG WUXVW VLWXDWLRQV DV WKRVH LQ ZKLFK WKH ULVN WDNHQ E\ RQH GHSHQGV RQ WKH SHUIRUPDQFH RI DQRWKHU ,Q HDFK RI WKH SUHFHGLQJ GLVFXVVLRQV ULVN ZDV SRVLWHG DV D QHFHVVDU\ FRQGLWLRQ IRU WUXVW

PAGE 30

)XUWKHU VWUHQJWKHQLQJ WKH WLH EHWZHHQ ULVN DQG WUXVW LV WKH UHFLSURFDO QDWXUH RI WKH UHODWLRQVKLS EHWZHHQ WKH WZR 3XW VLPSO\ D WUXVWHH LV RQO\ DEOH WR GHPRQVWUDWH WKHLU WUXVWZRUWKLQHVV LI D WUXVWRU WDNHV VRPH LQLWLDO ULVN ,I WKH WUXVWRU LV QRW GLVDSSRLQWHG E\ WKH UHVXOW RI WKLV DVVXPSWLRQ RI ULVN LH WKH SHUVRQ EHLQJ WUXVWHG EHKDYHV DV H[SHFWHGf WKHQ WKH OHYHO RI WUXVW JURZV VWURQJHU 5HPSHO +ROPHV t =DQQD f 7KLV LQFUHDVHG OHYHO RI WUXVW LQ WXUQ DOORZV IXUWKHU DVVXPSWLRQ RI ULVN 5LVN DQG WUXVW HQKDQFH RQH DQRWKHU LQ D SRVLWLYHO\ UHLQIRUFLQJ VSLUDO *LYHQ WKDW VRPH OHYHO RI ULVN LV QHFHVVDULO\ SUHVHQW LQ DQ\ WUXVWLQJ VLWXDWLRQ LW ORJLFDOO\ IROORZV WKDW WKH SUHVHQFH RI GLIIHUHQW OHYHOV RI ULVN PD\ PDNH WUXVW PRUH RU OHVV LPSRUWDQW ,Q IDFW ULVN PD\ PRGHUDWH WKH UHODWLRQVKLS EHWZHHQ WUXVWLQJ EHKDYLRU DQG LPSRUWDQW RXWFRPHV $ SUHYLRXVO\ GLVFXVVHG H[DPSOH PD\ KHOS LOOXVWUDWH WKLV LGHD 3ROLFH RIILFHUV PXVW WUXVW RQH DQRWKHU LQ D YDULHW\ RI ZD\V 0XFK OLNH DQ\ VLWXDWLRQ ZKHUH FRZRUNHUV PXVW WUXVW RQH DQRWKHU WKH PRUH D SROLFH RIILFHU FDQ WUXVW KLV IHOORZ RIILFHUV WKH PRUH MRE VDWLVIDFWLRQ KH LV OLNHO\ WR KDYH 7KLV UHODWLRQVKLS EHWZHHQ WUXVW DQG MRE VDWLVIDFWLRQ PD\ YDU\ LQ VWUHQJWK GHSHQGLQJ RQ WKH OHYHO RI ULVN SUHVHQW LQ WKH VSHFLILF WUXVWLQJ VLWXDWLRQV )RU H[DPSOH ZKHQ DQ RIILFHU WUXVWV KLV SDUWQHU WR VKRZ XS IRU ZRUN RQ WLPH DQG WKDW SDUWQHU GRHV LQGHHG VKRZ XS RQ WLPH WKH WUXVWLQJ RIILFHUfV MRE VDWLVIDFWLRQ LV HQKDQFHG EXW SUREDEO\ RQO\ WR D VPDOO GHJUHH DV OLWWOH ULVN LV DVVRFLDWHG ZLWK KLV SDUWQHU EHLQJ ODWH IRU ZRUN ,Q IDFW WKH RQO\ UHDO ULVN DVVXPHG LV WKDW ERWK RIILFHUV PD\ JHW LQ WURXEOH RU QRW EH DEOH WR UHVSRQG WR D FDOO RQ WLPH +RZHYHU D PRUH VHULRXV VLWXDWLRQ LQ ZKLFK WKH RIILFHUfV OLIH LV OLWHUDOO\ LQ WKH KDQGV RI KLV SDUWQHU PD\ DULVH DW DQ\ PRPHQW ,Q WKLV FDVH WKH RIILFHU WUXVWV WKH RWKHU ZLWK KLV OLIH 7KHUH LV REYLRXVO\ PRUH DW ULVN LQ WKLV VFHQDULR WKDQ WKH IRUPHU $V VXFK LI WKH SDUWQHU EHKDYHV LQ D PDQQHU WKDW SURWHFWV WKH OLIH

PAGE 31

RI WKH RIILFHU WKH RIILFHUf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f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

PAGE 32

+\SRWKHVLV 7KH UHODWLRQVKLS EHWZHHQ XUJHQW WUXVW LQGHSHQGHQW RI URXWLQH WUXVWf DQG Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS Ff FRXQWHUSURGXFWLYH EHKDYLRU Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO ZLOO EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLS ZLOO EH VWURQJHU ZKHQ ULVN LV KLJKHU +\SRWKHVLV 7KH UHODWLRQVKLS EHWZHHQ URXWLQH WUXVW LQGHSHQGHQW RI XUJHQW WUXVWf DQG Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS Ff FRXQWHUSURGXFWLYH EHKDYLRU Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO ZLOO EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLS ZLOO EH ZHDNHU ZKHQ ULVN LV KLJKHU 7UXVW $QWHFHGHQWV 7UXVWZRUWKLQHVV 'LVFXVVLRQ WR WKLV SRLQW KDV IRFXVHG SULPDULO\ RQ GLVWLQJXLVKLQJ EHWZHHQ WKH WZR IRUPV RI WUXVW DQG KRZ WKHVH IRUPV RI WUXVW GLIIHUHQWLDOO\ GULYH LPSRUWDQW RUJDQL]DWLRQDO RXWFRPHV /RJLFDOO\ WKHVH GLVWLQFW IRUPV RI WUXVW PD\ DOVR KDYH GLVWLQFW DQWHFHGHQWV 6KHSSDUG DQG 6KHUPDQ f VWDWHG f7UXVW LV SDUWLDOO\ WKH SURGXFW RI RQHfV FDSDFLW\ WR DVVHVV WKH WUXVWZRUWKLQHVV RI RQHfV SRWHQWLDO SDUWQHUf S f 3XW VLPSO\ WKH WUXVWZRUWKLQHVV RI DQ LQGLYLGXDO GULYHV WKH H[WHQW WR ZKLFK RWKHUV ZLOO WUXVW WKHP 7KLV LV VRPHZKDW RI DQ XQGHUVWDWHPHQW KRZHYHU &RPSOLFDWLRQV DULVH EHFDXVH WUXVWZRUWKLQHVV PXFK OLNH WUXVW LV D PXOWLGLPHQVLRQDO FRQVWUXFW 6HYHUDO DXWKRUV KDYH DUJXHG WKLV LGHD EXW WKHUH LV VRPH GLVDJUHHPHQW DERXW ZKDW WKH H[DFW GLPHQVLRQV RI WUXVWZRUWKLQHVV DUH %XWOHU /LHEHUPDQ f ,Q DQ DWWHPSW WR VLPSOLI\ WKLV DIRUHPHQWLRQHG OLWHUDWXUH 0D\HU HW DO f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

PAGE 33

WKDW H[DFW WHUP DV D GLPHQVLRQ RI WUXVWZRUWKLQHVV &RRN t :DOO 'HXWVFK 6LWNLQ t 5RWK f 2WKHU DXWKRUV KDYH LGHQWLILHG WHUPV V\QRQ\PRXV ZLWK DELOLW\ DV GLPHQVLRQV RI WUXVWZRUWKLQHVV )RU H[DPSOH %XWOHU f DQG /LHEHUPDQ f LGHQWLILHG WKH GLPHQVLRQ RI FRPSHWHQFH 7KLV FRQVWUXFW LV VLPLODU WR WKH VDPH DV WKH DELOLW\ GLPHQVLRQ RI 0D\HU HW DO *LIILQ f DV DQRWKHU H[DPSOH LGHQWLILHG WKH H[SHUWQHVV RI DQ LQGLYLGXDO DV D IDFWRU FRQWULEXWLQJ WR KRZ PXFK WKH\ DUH WUXVWHG :KDWHYHU WHUP LV XVHG WKH LGHD LV WKH VDPH WUXVW LV H[WHQGHG WR DQ LQGLYLGXDO EDVHG VRPHZKDW RQ WKHLU VNLOOV ZLWKLQ VRPH VSHFLILF GRPDLQ %HQHYROHQFH KDV DOVR EHHQ LGHQWLILHG DV D NH\ GLPHQVLRQ RI WUXVWZRUWKLQHVV )RU WKH SXUSRVHV RI WKLV SDSHU WKH GHILQLWLRQ E\ 0D\HU HW DO ZLOO EH XWLOL]HG DQG LV DV IROORZV f%HQHYROHQFH LV WKH SHUFHSWLRQ RI D SRVLWLYH RULHQWDWLRQ RI WKH WUXVWHH WRZDUG WKH WUXVWRUf S f ,Q RWKHU ZRUGV D EHQHYROHQW WUXVWHH KDV JRRG LQWHQWLRQV UHJDUGLQJ WKH WUXVWRU DQG LV QRW PHUHO\ PRWLYDWHG E\ ZKDW SURILW WKH\ FDQ JDLQ E\ EHLQJ WUXVWHG $V ZDV WKH FDVH ZLWK DELOLW\ VHYHUDO DXWKRUV KDYH LGHQWLILHG GLPHQVLRQV KLJKO\ VLPLODU WR EHQHYROHQFH EXW KDYH DVVLJQHG GLIIHUHQW QDPHV WR WKLV FRQVWUXFW )RU H[DPSOH %XWOHU DQG &DQWUHOO f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fV SDVW DFWLRQV DV

PAGE 34

ZHOO DV WKDW LQGLYLGXDOfV DFWLRQV EHLQJ FRQVLVWHQW ZLWK KLV RU KHU ZRUGV 6HYHUDO SUHYLRXV DXWKRUV KDYH XVHG LQWHJULW\ DV D GLPHQVLRQ RI WUXVWZRUWKLQHVV %XWOHU %XWOHU t &DQWUHOO /LHEHUPDQ f 2WKHU DXWKRUV KDYH LGHQWLILHG FKDUDFWHULVWLFV KLJKO\ VLPLODU WR WKH FRQVWUXFW RI LQWHJULW\ DV GHWHUPLQDQWV RI WUXVW +DUW &DSSV &DQJHPL t &DLOORXHW 6LWNLQ t 5RWK f )RU H[DPSOH *DEDUUR GLVFXVVHG FKDUDFWHU DV DQ LPSRUWDQW GLPHQVLRQ RI WUXVWZRUWKLQHVV $V D ZKROH WKH GLPHQVLRQV RI DELOLW\ EHQHYROHQFH DQG LQWHJULW\ KDYH DSSHDUHG UHSHDWHGO\ LQ GLVFXVVLRQV RI DQWHFHGHQWV RI WUXVW DOEHLW XVLQJ VOLJKWO\ GLIIHUHQW MDUJRQ RU GHILQLWLRQV 0D\HU HW DO f DUJXH WKDW WRJHWKHU WKHVH GLPHQVLRQV HIILFLHQWO\ H[SODLQ WKH ZLWKLQWUXVWRU YDULDWLRQ LQ WUXVW IRU RWKHUV $V VXFK WKHVH WKUHH IDFWRUV ZLOO RSHUDWH DV WKH DQWHFHGHQWV WR WUXVW LQ WKH PRGHO +RZHYHU WKHLU PRGHO IXUWKHU GLVWLQJXLVKHV WKHVH GLPHQVLRQV RI WUXVWZRUWKLQHVV 7KH UHOHYDQF\ RI WKHVH GLVWLQFW GLPHQVLRQV PD\ GLIIHU GHSHQGLQJ RQ WKH VLWXDWLRQ 6KHSSDUG DQG 6KHUPDQ f VSRNH RI IRXU W\SHV RI WUXVW ,Q WKHLU YLHZ WUXVW LV QRW D VLQJXODU FRQVWUXFW EXW WDNHV RQH RI IRXU GLVWLQFW IRUPV EDVHG RQ WKH QDWXUH DQG GHSWK RI WKH LQWHUGHSHQGHQFH LQ D JLYHQ UHODWLRQVKLS 7UXVW WDNHV RQ GLIIHUHQW IRUPV LQ GLIIHUHQW UHODWLRQVKLSV DQG VR GRHV WKH QDWXUH RI WKH UHOHYDQW WUXVWZRUWKLQHVV WUDLWV ,Q IDFW LQ WKHLU GLVFXVVLRQ WKHVH DXWKRUV SUHVHQW D WDEOH ZKHUHLQ WKH GLIIHUHQW IRUPV RI GHSHQGHQFH WKH ULVNV DVVRFLDWHG ZLWK HDFK IRUP DQG WKH TXDOLWLHV RI WUXVWZRUWKLQHVV WKDW DUH LPSRUWDQW JLYHQ HDFK IURP DUH SUHVHQWHG :LWK UHJDUG WR WKH IRUP RI GHSHQGHQFH PRVW FORVHO\ OLQNHG ZLWK XUJHQW WUXVW WKH ULVN WKDW DQRWKHU ZLOO QRW SHUIRUP SURILFLHQWO\ LV FLWHG DV NH\ 2QH GLPHQVLRQ RI WUXVWZRUWKLQHVV VXJJHVWHG WR PLWLJDWH WKLV ULVN LV DELOLW\ 7KXV 6KHSSDUG DQG 6KHUPDQ f VXJJHVW WKDW WKH DELOLW\ GLPHQVLRQ RI WUXVWZRUWKLQHVV LV PRUH LPSRUWDQW LQ VLWXDWLRQV ZKHUH WKH ULVN RI LQGLYLGXDOV QRW EHKDYLQJ FRPSHWHQWO\ LV FHQWUDO

PAGE 35

2Q WKH RWKHU KDQG ZLWK UHJDUG WR WKH IRUP RI GHSHQGHQFH PRVW FORVHO\ DVVRFLDWHG ZLWK URXWLQH WUXVW WKHUH DUH WZR FHQWUDO ULVNV WKH ULVN RI FKHDWLQJ DQG WKH ULVN RI QHJOHFW 7KH LQWHJULW\ GLPHQVLRQ RI WUXVWZRUWKLQHVV LV PRVW FORVHO\ WLHG WR WKH ULVN RI FKHDWLQJ $Q LQGLYLGXDOf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

PAGE 36

LQWHJULW\ RU EHQHYROHQFH DUH QRW OLNHO\ SUHVHQW LQ WKLV W\SH RI VLWXDWLRQ ZKLOH FRQFHUQV DERXW WKH RWKHUfV FRPSHWHQFH DUH FHQWUDO +RZHYHU LQ D OHVV VHYHUH PRUH URXWLQH VLWXDWLRQ WKH LPSRUWDQFH RI WKHVH GLPHQVLRQV RI WUXVWZRUWKLQHVV LV OLNHO\ WR EH UHYHUVHG 7DNH IRU H[DPSOH D VLWXDWLRQ LQ ZKLFK WZR ILUHILJKWHUV DUH VHYHUDOO\ OLDEOH IRU ILOLQJ DQ LQFLGHQW UHSRUW IROORZLQJ DQ HPHUJHQF\ FDOO *LYHQ WKDW RQO\ RQH LQFLGHQW UHSRUW PXVW EH ILOHG EXW WZR ILUHILJKWHUV DUH UHVSRQVLEOH LW LV OLNHO\ WKDW RQO\ RQH SHUVRQ )LUHILJKWHU $f ZLOO DFWXDOO\ ILOO RXW WKH UHSRUW 7KH ILUHILJKWHU QRW ILOOLQJ RXW WKH UHSRUW )LUHILJKWHU %f PXVW WUXVW WKDW WKH RWKHU ZLOO LQ IDFW ILOO RXW WKH UHSRUW DQG WXUQ LW LQ ,Q RUGHU WR GHFLGH ZKHWKHU RU QRW WR WUXVW )LUHILJKWHU $ WR ILOO RXW WKH UHSRUW DQG QRW QHJOHFW KLV UHVSRQVLELOLWLHV )LUHILJKWHU % ZLOO OLNHO\ IRFXV RQ )LUHILJKWHU $fV EHQHYROHQFH DV RSSRVHG WR KLV LQWHJULW\ RU DELOLW\ )XUWKHU )LUHILJKWHU $ OLNHO\ EHOLHYHV WKDW QH[W WLPH )LUHILJKWHU % ZLOO DVVXPH WKH UHVSRQVLELOLW\ RI ILOOLQJ RXW WKH LQFLGHQW UHSRUW WR NHHS WKLQJV HTXLWDEOH 7KLV EHOLHI LV OLNHO\ WR EH EDVHG PRUH RQ DQ HYDOXDWLRQ RI ILUHILJKWHU %f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f VWDWH f7UXVW LV SDUWLDOO\ WKH SURGXFW RI RQHfV FDSDFLW\ WR DVVHVV WKH WUXVWZRUWKLQHVV RI RQHfV SRWHQWLDO SDUWQHUf S f :KDW HOVH

PAGE 37

GULYHV WKH WUXVW HYDOXDWLRQ" 2QH VXJJHVWLRQ LV WKDW FKDUDFWHULVWLFV RI WKH WUXVWRU LQIOXHQFH WKH GHFLVLRQ WR WUXVW 6SHFLILFDOO\ HDFK SHUVRQ KDV VRPH SURSHQVLW\ WR WUXVW 7KLV WUDLW LV YLHZHG DV D JHQHUDO ZLOOLQJQHVV WR WUXVW RWKHUV DQG LV EHOLHYHG WR EH D VWDEOH ZLWKLQSDUW\ IDFWRU 0D\HU HW DO f 7KH SURSHQVLW\ RI DQ LQGLYLGXDO WR WUXVW RWKHUV KDV D VWURQJHU HIIHFW RQ WUXVWLQJ EHKDYLRU LQ HDUOLHU HQFRXQWHUV ZLWK SRWHQWLDO WUXVWHHV %DVLFDOO\ ZKHQ WKHUH LV OLWWOH GDWD DERXW WKH WUXVWZRUWKLQHVV RI D SRWHQWLDO WUXVWHH WKH WUXVWRU WHQGV WR GHIDXOW WR WKHLU RZQ SURSHQVLW\ ZKHQ PDNLQJ GHFLVLRQ ZKHWKHU RU QRW WR WUXVW :LWK WKH SDVVDJH RI WLPH DQG DFTXLVLWLRQ RI LQIRUPDWLRQ DERXW WKH WUXVWZRUWKLQHVV RI WKH WUXVWHH WKH SURSHQVLW\ RI WKH WUXVWRU WR WUXVW EHFRPHV OHVV PHDQLQJIXO 7KLV LV OLNHO\ WKH FDVH EHFDXVH HYHQ LI DQ LQGLYLGXDO LV D fWUXVWLQJ SHUVRQff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fV SURSHQVLW\ WR WUXVW LV 2Q WKH RWKHU KDQG XUJHQW WUXVW LQYROYHV QRYHO OHVV FRPPRQ DQG PRUH VHULRXV REVHUYHG EHKDYLRUV :KLOH WKHVH REVHUYHG EHKDYLRUV DUH PRUH VHULRXV LQ QDWXUH WKH\ DUH DOVR E\ GHILQLWLRQ QRW IUHTXHQW $V VXFK LQGLYLGXDOV PDNLQJ XUJHQW WUXVW HYDOXDWLRQV KDYH OHVV H[SHULHQFH ZLWK WKHVH EHKDYLRUV WR GUDZ RQ DQG DUH WKHUHIRUH PRUH OLNHO\ WR GHIHU WR WKHLU RYHUDOO SURSHQVLW\ WR WUXVW 6XPPDULO\ DQ LQGLYLGXDO PDNLQJ D WUXVW

PAGE 38

HYDOXDWLRQ LV PRUH OLNHO\ WR EH LQIOXHQFHG E\ WKHLU RZQ OHYHO RI WUXVWLQJ SURSHQVLW\ LQ XUJHQW DV RSSRVHG WR URXWLQH WUXVW HYDOXDWLRQ LQVWDQFHV +\SRWKHVLV 3URSHQVLW\ WR WUXVW ZLOO EH D VWURQJHU SUHGLFWRU RI XUJHQW WUXVW WKDQ URXWLQH WUXVW

PAGE 39

&+$37(5 0(7+2' 6DPSOH 'DWD ZHUH REWDLQHG RQ HPSOR\HHV RI D 1RUWK&HQWUDO )ORULGD FLW\ ILUH GHSDUWPHQW 7KH VDPSOH FRQVLVWHG RI OLHXWHQDQWV GULYHUVDSSDUDWXV RSHUDWRUV DQG ILUHILJKWHUV (DFK RI WKHVH SDUWLFLSDQWV EHORQJV WR RQH RI GLIIHUHQW VWDWLRQV ZLWKLQ WKH FLW\ ZLWK DQ DYHUDJH RI ILUHILJKWHUV SHU VWDWLRQ ZRUNLQJ LQ RQH RI WKUHH GLIIHUHQW VKLIWV (DFK ILUHILJKWHU ZRUNV D IXOO KRXU VKLIW DQG WKHQ LV RII IRU KRXUV (YHU\RQH LQFOXGHG LQ WKLV VDPSOH EHJDQ KLV RU KHU FDUHHU ZLWK WKH ILUH GHSDUWPHQW DV D ILUHILJKWHU 7KH ZRUN RI D ILUHILJKWHU LQFOXGHV FRPEDWLQJ H[WLQJXLVKLQJ DQG SUHYHQWLQJ ILUHV DV ZHOO DV PDLQWDLQLQJ ILUH GHSDUWPHQW HTXLSPHQW DQG TXDUWHUV $GGLWLRQDOO\ ILUHILJKWHUV DUH UHTXLUHG WR UHQGHU ILUVW DLG ZKHQ QHFHVVDU\ UHVSRQG WR KD]DUGRXV PDWHULDOV LQFLGHQWV DWWHQG FRPSDQ\ GULOOV DQG WUDLQLQJ PDLQWDLQ UHTXLUHG FHUWLILFDWLRQV HJ &35f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

PAGE 40

DQG FUHZ WR DQG IURP HPHUJHQF\ LQFLGHQWV RSHUDWLQJ SXPSV UDLVLQJ ODGGHUV DQG ERRPV OD\LQJ KRVH OLQH DQG PDNLQJ QHFHVVDU\ SXPSHU KRRNXSV WR K\GUDQWV $GGLWLRQDOO\ GULYHU RSHUDWRUV PD\ EH UHTXLUHG WR SHUIRUP ILUH ILJKWLQJ UHVFXH DQG RWKHU HPHUJHQF\ GXWLHV DV QHHGHG (VVHQWLDOO\ ZKHQ FRQGLWLRQV QHFHVVLWDWH GULYHURSHUDWRUV PD\ EH UHTXLUHG WR SHUIRUP WKH IXQFWLRQV RI D ILUHILJKWHU *LYHQ WKDW WKH GULYHU RSHUDWRUV DUH SHUIRUPLQJ WKHLU MREV LQ WKH VDPH VLWXDWLRQV DV D ILUHILJKWHU WKHLU ZRUN DOVR UHTXLUHV SK\VLFDO VWUHQJWK DQG DJLOLW\ DQG PD\ KDYH WR EH SHUIRUPHG LQ DQG DURXQG KHDY\ WUDIILF LQ SUR[LPLW\ ZLWK KD]DUGRXV DQGV QR[LRXV FKHPLFDOV DQG XQGHU D ZLGH UDQJH RI FOLPDFWLF FRQGLWLRQV 7R EHFRPH D ILUH OLHXWHQDQW RQH PXVW EH SURPRWHG IURP GULYHURSHUDWRU 7KH ZRUN RI D ILUH OLHXWHQDQW LQYROYHV LQVSHFWLRQ DQG VXSHUYLVRU\ ZRUN SURPRWLQJ ILUH VDIHW\ DV ZHOO DV SHUIRUPLQJ VNLOOHG ILUH ILJKWLQJ DQG SURYLGLQJ HPHUJHQF\ PHGLFDO WUHDWPHQW (VVHQWLDOO\ WKH OLHXWHQDQW LV LQYROYHG LQ DOO WKH GXWLHV OLVWHG LQ WKH EULHI MRE GHVFULSWLRQV DERYH EXW KLV RU KHU UROH LV D VXSHUYLVRU\ RQH $GGLWLRQDOO\ D ILUH OLHXWHQDQW SDUWLFLSDWHV LQ WUDLQLQJ DFWLYLWLHV DQG OHDGV FRPSDQ\ GULOOV $W WKH DFWXDO VFHQH RI DQ HPHUJHQF\ LW LV WKH OLHXWHQDQW ZKR DFWV DV WKH SULPDU\ GHFLVLRQPDNHU *LYHQ WKDW WKH ILUH OLHXWHQDQWV DUH SHUIRUPLQJ WKHLU MREV LQ WKH VDPH VLWXDWLRQV DV ILUHILJKWHUV DQG GULYHURSHUDWRUV WKHLU ZRUN DOVR UHTXLUHV SK\VLFDO VWUHQJWK DQG DJLOLW\ DQG PD\ KDYH WR EH SHUIRUPHG LQ DQG DURXQG KHDY\ WUDIILF LQ SUR[LPLW\ ZLWK KD]DUGRXV DQGV QR[LRXV FKHPLFDOV DQG XQGHU D ZLGH UDQJH RI FOLPDFWLF FRQGLWLRQV 7LPH 3URFHGXUH 7LPH GDWD ZHUH FROOHFWHG YLD VHOIUHSRUW VXUYH\ DGPLQLVWHUHG WR HDFK VKLIW VHSDUDWHO\ DW HDFK VWDWLRQ $OO ILUHILJKWHUV DQG GULYHURSHUDWRUV ZHUH VXUYH\HG $W 7LPH

PAGE 41

DELOLW\ EHQHYROHQFH LQWHJULW\ DQG SURSHQVLW\ WR WUXVW PHDVXUHV ZHUH DGPLQLVWHUHG b 'LVFXVVLRQ RI HDFK PHDVXUH IROORZV 7UXVWZRUWKLQHVV $ELOLW\ %HQHYROHQFH DQG ,QWHJULW\f *LYHQ WKH DUJXHG GLIIHUHQWLDO LPSRUWDQFH RI WKH WKUHH GLPHQVLRQV RI WUXVWZRUWKLQHVV WKH 0D\HU DQG 'DYLV f PHDVXUH RI WUXVWZRUWKLQHVV ZDV XVHG 7KLV PHDVXUH LQFOXGHV GLVWLQFW LWHPV IRU HDFK GLPHQVLRQ DQG DVNV SDUWLFLSDQWV WR UDWH WKH H[WHQW WR ZKLFK WKH\ DJUHH ZLWK WKH LWHPV XVLQJ D SRLQW OLNHUWW\SH VFDOH ZLWK DQFKRUV RI DJUHH DQG GLVDJUHH 7KH LWHPV IRU DELOLW\ DUH DV IROORZV f 0\ FRZRUNHUV DUH YHU\ FDSDEOH RI SHUIRUPLQJ WKHLU MREV f 0\ FRZRUNHUV DUH NQRZQ WR EH VXFFHVVIXO DW WKH WKLQJV WKH\ WU\ WR GR f 0\ FRZRUNHUV KDYH PXFK NQRZOHGJH DERXW WKH ZRUN WKDW QHHGV GRQH f IHHO YHU\ FRQILGHQW DERXW P\ FRZRUNHUVf VNLOOV f 0\ FRZRUNHUV KDYH VSHFLDOL]HG FDSDELOLWLHV WKDW FDQ LQFUHDVH RXU SHUIRUPDQFH f 0\ FRZRUNHUV DUH ZHOO TXDOLILHG 7KH LWHPV IRU EHQHYROHQFH DUH DV IROORZV f 0\ FRZRUNHUV DUH YHU\ FRQFHUQHG DERXW P\ ZHOIDUH f 0\ QHHGV DQG GHVLUHV DUH YHU\ LPSRUWDQW WR P\ FRZRUNHUV f 0\ FRZRUNHUV ZRXOG QRW NQRZLQJO\ GR DQ\WKLQJ WR KXUW PH f 0\ FRZRUNHUV UHDOO\ ORRN RXW IRU ZKDW LV LPSRUWDQW WR PH f 0\ FRZRUNHUV ZLOO JR RXW RI WKHLU ZD\ WR KHOS PH )LQDOO\ WKH LWHPV IRU LQWHJULW\ DUH DV IROORZV f 0\ FRZRUNHUV KDYH D VWURQJ VHQVH RI MXVWLFH f QHYHU KDYH WR ZRQGHU ZKHWKHU P\ FRZRUNHUV ZLOO VWLFN WR WKHLU ZRUG f 0\ FRZRUNHUV WU\ KDUG WR EH IDLU LQ GHDOLQJ ZLWK RWKHUV f 0\ FRZRUNHUV DFWLRQV DQG EHKDYLRUV DUH QRW YHU\ FRQVLVWHQW f OLNH P\ FRZRUNHUVf YDOXHV f 6RXQG SULQFLSOHV VHHP WR JXLGH P\ FRZRUNHUVf EHKDYLRUV 3URSHQVLW\ WR 7UXVW ,Q RUGHU WR PHDVXUH SURSHQVLW\ WR WUXVW XVHG WKH WUXVW VXEVFDOH RI DJUHHDEOHQHVV IURP WKH 1(23, 5f &RVWD t 0F&UHD f 7KH LWHPV DUH DV IROORZV f WHQG WR EH F\QLFDO DQG VNHSWLFDO RI RWKHUVf LQWHQWLRQV

PAGE 42

f EHOLHYH WKDW PRVW SHRSOH DUH EDVLFDOO\ ZHOOLQWHQWLRQHG f EHOLHYH WKDW PRVW SHRSOH ZLOO WDNH DGYDQWDJH RI \RX LI \RX OHW WKHP f WKLQN PRVW RI WKH SHRSOH GHDO ZLWK DUH KRQHVW DQG WUXVWZRUWK\ f ,fP VXVSLFLRXV ZKHQ VRPHRQH GRHV VRPHWKLQJ QLFH IRU PH f 0\ ILUVW UHDFWLRQ LV WR WUXVW SHRSOH f WHQG WR DVVXPH WKH EHVW DERXW SHRSOH KDYH D JRRG GHDO RI IDLWK LQ KXPDQ QDWXUH 7LPH 3URFHGXUH $SSUR[LPDWHO\ ZHHNV DIWHU WKH FROOHFWLRQ RI WKH 7LPH GDWD 7LPH GDWD ZHUH FROOHFWHG YLD VHOIUHSRUW VXUYH\ DGPLQLVWHUHG WR HDFK VKLIW VHSDUDWHO\ DW HDFK VWDWLRQ $JDLQ DOO ILUHILJKWHUV DQG GULYHURSHUDWRUV ZHUH VXUYH\HG $W 7LPH RXU ILUHILJKWHU VSHFLILF PHDVXUHV RI XUJHQW DQG URXWLQH WUXVW DQG D PHDVXUH RI SHUFHLYHG ULVN HQFRXQWHUHG RQ WKH MRE ZHUH DGPLQLVWHUHG 'LVFXVVLRQ RI HDFK PHDVXUH IROORZV 8UJHQW DQG 5RXWLQH 7UXVW $Q DG KRF PHDVXUH VSHFLILF WR ILUHILJKWHUV ZDV GHVLJQHG IRU WKH SXUSRVHV RI WKLV VWXG\ 7KH ILUVW VWHS LQ GHVLJQLQJ WKH PHDVXUH FRQVLVWHG RI PHHWLQJ ZLWK WKH ILUH FKLHI WR FRQGXFW D MRE DQDO\VLV RI WKH ILUHILJKWHUf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fV MRE 7KH GLPHQVLRQV RI GDQJHU DQG XQSUHGLFWDELOLW\ VHHPHG WR EH D EHWWHU VRXUFH RI VHSDUDWLRQ IRU XUJHQW DQG URXWLQH WUXVW 5HVSRQGLQJ WR ILUH GULOOV DQG DXWR DFFLGHQWV ZHUH GHHPHG WR EH ERWK PRUH GDQJHURXV DQG PRUH XQSUHGLFWDEOH UHODWLYH WR WUDLQLQJ GULOOV FRQWLQXLQJ HGXFDWLRQ DQG PDLQWDLQLQJ SK\VLFDO ILWQHVV

PAGE 43

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f IRU LPSRUWDQFH IRU GDQJHU DQG IRU XQSUHGLFWDELOLW\ IRU WUDLQLQJ GULOOV Ef IRU LPSRUWDQFH IRU GDQJHU DQG IRU XQSUHGLFWDELOLW\ IRU HGXFDWLRQ DQG Ff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f, DOZD\V IHHO FRPIRUWDEOH WUXVWLQJ P\ FRZRUNHUV WR FRPSOHWH WKLV WDVNf DQG f, QHYHU IHHO FRPIRUWDEOH WUXVWLQJ P\ FRZRUNHUV WR FRPSOHWH WKLV WDVNf 7KH SK\VLFDO ILWQHVV LWHPV LQFOXGHG f/LIWLQJ ZHLJKWV WR LPSURYH DQG PDLQWDLQ VWUHQJWKf f3HUIRUPLQJ VWUHWFKLQJ H[HUFLVHV WR EXLOG IOH[LELOLW\f DQG f([HUFLVLQJ WR EXLOG FDUGLRYDVFXODU HQGXUDQFHf 7KH HGXFDWLRQ LWHPV LQFOXGHG f/HDUQLQJ DERXW ILUH SURWHFWLRQ V\VWHPVf DQG f6WXG\LQJ PDSV RI WKH ORFDO WHUULWRU\f 7KH WUDLQLQJ LWHPV LQFOXGHG f$GHTXDWHO\ SUHSDULQJ IRU DHULDO

PAGE 44

GULOOVf DQG f,QFUHDVLQJ SURILFLHQF\ LQ SXPSLQJ HYROXWLRQV GULOOVf 7KH DXWR DFFLGHQW LWHPV LQFOXGHG f&ROOHFW PHGLFDO GDWD DW DFFLGHQW VFHQHVf f)HHO IRU LQMXULHV RQ DFFLGHQW YLFWLPVf f$GPLQLVWHU PHGLFDO WUHDWPHQW WR DFFLGHQW YLFWLPVf DQG f6XUYH\ DFFLGHQW VFHQH IRU VDIHW\ FRQVLGHUDWLRQVf 7KH ILUH FDOO LWHPV LQFOXGHG f6L]H XS WKH VLWXDWLRQ EHIRUH HQWHULQJ D EXUQLQJ EXLOGLQJf f&RQGXFW D SULPDU\ VHDUFK IRU SHRSOH WUDSSHG LQ D EXUQLQJ EXLOGLQJf f3URWHFW DQG UHVFXH FLYLOLDQV LQ DQG DURXQG ILUH ORFDWLRQf f3URWHFW DQG UHVFXH IHOORZ ILUHILJKWHUV LQ DQG DURXQG ILUH ORFDWLRQf f8VH WRROV DQG SURFHGXUHV WR H[WLQJXLVK WKH ILUHf f3HUIRUPLQJ SURSHUW\ VDOYDJH GXULQJ DQG DIWHU WKH ILUHf DQG f&RQGXFW RYHUKDXO SURFHGXUHV WR ORRN IRU RWKHU ILUHV LQ EXLOGLQJf 3HUFHLYHG 5LVN $IWHU DQ H[WHQVLYH UHYLHZ RI WKH ULVN OLWHUDWXUH LW ZDV GHWHUPLQHG WKDW DQ DG KRF PHDVXUH RI SHUFHLYHG ULVN ZRXOG EH PRVW DSSURSULDWH IRU WKLV VWXG\ 3DUWLFLSDQWV ZHUH DVNHG WR UDWH WKHLU H[WHQW RI DJUHHPHQW ZLWK HDFK RI WKH IROORZLQJ LWHPV f 7KH SDVW FRXSOH PRQWKV KDYH EHHQ PRUH GDQJHURXV WKDQ QRUPDO f 7KHVH SDVW WZR PRQWKV KDYH EHHQ DQ\WKLQJ EXW URXWLQH f 7KH FDOOV ZH KDYH KDG ODWHO\ KDYH EHHQ TXLWH ULVN\ f 7KLQJV KDYH EHHQ XQHYHQWIXO DW ZRUN ODWHO\ f 7KHUH KDVQfW EHHQ D GDQJHURXV VLWXDWLRQ DW ZRUN LQ TXLWH D ZKLOH f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

PAGE 45

7DVN 3HUIRUPDQFH 7R PHDVXUH WDVN SHUIRUPDQFH :LOOLDPV DQG $QGHUVRQfV PHDVXUH RI LQUROH EHKDYLRU ZDV XVHG 7KLV UHIHUHQW RI WKLV SDUWLFXODU PHDVXUH LV DQ HPSOR\HH DQG WKH UDWHU LV LQWHQGHG WR EH D VXSHULRU 7KH LWHPV IRU WKLV PHDVXUH DUH DV IROORZV f $GHTXDWHO\ FRPSOHWHV DVVLJQHG GXWLHV f )XOILOOV UHVSRQVLELOLWLHV VSHFLILHG LQ MRE GHVFULSWLRQ f 3HUIRUPV WDVNV WKDW DUH H[SHFWHG RI KLPKHU f 0HHWV IRUPDO UHTXLUHPHQWV RI WKH MRE f (QJDJHV LQ DFWLYLWLHV WKDW ZLOO GLUHFWO\ DIIHFW KLVKHU SHUIRUPDQFH f 1HJOHFWV DVSHFWV RI WKH MRE KHVKH LV REOLJDWHG WR SHUIRUP5f f )DLOV WR SHUIRUP HVVHQWLDO GXWLHV 5f 2UJDQL]DWLRQDO &LWL]HQVKLS %HKDYLRU 7KH /HH DQG $OOHQ f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f +HOS RWKHUV ZKR KDYH EHHQ DEVHQW f :LOOLQJO\ JLYH \RXU WLPH WR KHOS RWKHUV ZKR KDYH ZRUNUHODWHG SUREOHPV f $GMXVW \RXU ZRUN VFKHGXOH WR DFFRPPRGDWH RWKHU HPSOR\HHVf UHTXHVWV IRU WLPH RII f *R RXW RI WKH ZD\ WR PDNH QHZHU HPSOR\HHV IHHO ZHOFRPH LQ WKH ZRUN JURXS f 6KRZ JHQXLQH FRQFHUQ DQG FRXUWHV\ WRZDUG FRZRUNHUV HYHQ XQGHU WKH PRVW WU\LQJ EXVLQHVV RU SHUVRQDO VLWXDWLRQV f *LYH XS WLPH WR KHOS RWKHUV ZKR KDYH ZRUN RU QRQZRUN SUREOHPV $VVLVW RWKHUV ZLWK WKHLU GXWLHV f 6KDUH SHUVRQDO SURSHUW\ ZLWK RWKHUV WR KHOS WKHP ZRUN

PAGE 46

7KH UHPDLQLQJ HLJKW LWHPV UHIHU WR FLWL]HQVKLS EHKDYLRUV DLPHG DW KHOSLQJ WKH RUJDQL]DWLRQ DV D ZKROH UDWKHU WKDQ D VSHFLILF LQGLYLGXDO ZLWKLQ WKH RUJDQL]DWLRQ DQG DUH DV IROORZV f $WWHQG IXQFWLRQV WKDW DUH QRW UHTXLUHG E\ WKDW KHOS WKH RUJDQL]DWLRQDO LPDJH f .HHS XS ZLWK WKH GHYHORSPHQWV RI WKH RUJDQL]DWLRQ f 'HIHQG WKH RUJDQL]DWLRQ ZKHQ RWKHU HPSOR\HHV FULWLFL]H LW f 6KRZ SULGH ZKHQ UHSUHVHQWLQJ WKH RUJDQL]DWLRQ LQ SXEOLF f 2IIHU LGHDV WR LPSURYH WKH IXQFWLRQLQJ RI WKH RUJDQL]DWLRQ f ([SUHVV OR\DOW\ WRZDUG WKH RUJDQL]DWLRQ f 7DNH DFWLRQ WR SURWHFW WKH RUJDQL]DWLRQ IURP SRWHQWLDO SUREOHPV f 'HPRQVWUDWH FRQFHUQ DERXW WKH LPDJH RI WKH RUJDQL]DWLRQ &RXQWHUSURGXFWLYH %HKDYLRU $ PHDVXUH GHYHORSHG E\ %HQQHWW DQG 5RELQVRQ f ZDV XVHG WR PHDVXUH FRXQWHUSURGXFWLYH EHKDYLRU 7KLV PHDVXUH ZDV DOVR VHOIUHSRUW DQG DVNHG SDUWLFLSDQWV WR UDWH KRZ RIWHQ WKH\ KDG HQJDJHG LQ FHUWDLQ EHKDYLRUV LQ WKH SDVW PRQWKV 3DUWLFLSDQWV XVHG WKH IROORZLQJ DQFKRUV IRU WKH VFDOH QHYHU RQFH D \HDU WZLFH D \HDU VHYHUDO WLPHV D \HDU PRQWKO\ ZHHNO\ DQG GDLO\ 7KH LWHPV DUH DV IROORZV f 0DGH IXQ RI VRPHRQH DW ZRUN f 6DLG VRPHWKLQJ KXUWIXO WR VRPHRQH DW ZRUN f &XUVHG DW VRPHRQH DW ZRUN f 3OD\HG D PHDQ SUDQN RQ VRPHRQH DW ZRUN f $FWHG UXGHO\ WRZDUG VRPHRQH DW ZRUN f 3XEOLFO\ HPEDUUDVVHG VRPHRQH DW ZRUN f 7DNHQ SURSHUW\ IURP ZRUN ZLWKRXW SHUPLVVLRQ f 6SHQW WRR PXFK WLPH IDQWDVL]LQJ RU GD\GUHDPLQJ LQVWHDG RI ZRUNLQJ f 7DNHQ DQ DGGLWLRQDO RU ORQJHU EUHDN WKDQ LV DFFHSWDEOH DW \RXU ZRUNSODFH f &RPH LQ ODWH WR ZRUN ZLWKRXW SHUPLVVLRQ f /LWWHUHG \RXU ZRUN HQYLURQPHQW f 1HJOHFWHG WR IROORZ \RXU ERVVfV LQVWUXFWLRQV f ,QWHQWLRQDOO\ ZRUNHG VORZHU WKDQ \RX FRXOG KDYH ZRUNHG f 'LVFXVVHG FRQILGHQWLDO FRPSDQ\ LQIRUPDWLRQ ZLWK DQ XQDXWKRUL]HG SHUVRQ f 3XW OLWWOH HIIRUW LQWR \RXU ZRUN f 'UDJJHG RXW ZRUN LQ RUGHU WR JHW RYHUWLPH

PAGE 47

2UJDQL]DWLRQDO &RPPLWPHQW 7KH UHYLVHG YHUVLRQ RI 0H\HU DQG $OOHQfV f DIIHFWLYH FRPPLWPHQW VFDOH ZDV XVHG WR PHDVXUH RUJDQL]DWLRQDO FRPPLWPHQW 7KLV VFDOH DVVHVVHV DQ HPRWLRQDO DV RSSRVHG WR HFRQRPLFEDVHGf DWWDFKPHQW WR DQ RUJDQL]DWLRQ 7KH VFDOH IRU UDWLQJ HDFK LWHP ZDV D SRLQW OLNHUWW\SH VFDOH ZLWK DQFKRUV RI VWURQJO\ DJUHH DQG VWURQJO\ GLVDJUHH 7KH LWHPV DUH DV IROORZV f ZRXOG EH YHU\ KDSS\ WR VSHQG WKH UHVW RI P\ FDUHHU ZLWK WKLV RUJDQL]DWLRQ f UHDOO\ IHHO DV LI WKLV RUJDQL]DWLRQfV SUREOHPV DUH P\ RZQ f GR QRW IHHO OLNH fSDUW RI WKH IDPLO\f DW P\ RUJDQL]DWLRQ 5f f GR QRW IHHO fHPRWLRQDOO\ DWWDFKHGf WR WKLV RUJDQL]DWLRQ 5f f 7KLV RUJDQL]DWLRQ KDV D JUHDW GHDO RI SHUVRQDO PHDQLQJ IRU PH f GR QRW IHHO D VWURQJ VHQVH RI EHORQJLQJ WR P\ RUJDQL]DWLRQ 5f :LWKGUDZDO :LWKGUDZDO ZDV DVVHVVHG XVLQJ WKH LWHP LQVWUXPHQW GHYHORSHG E\ /HKPDQ DQG 6LPSVRQ f 3DUWLFLSDQWV ZHUH DVNHG WR LQGLFDWH KRZ RIWHQ WKH\ SHUIRUPHG WKH DFWLRQV LQ HDFK VWDWHPHQW 7KH VFDOH IRU UDWLQJ HDFK LWHP ZDV D SRLQW OLNHUWW\SH VFDOH ZLWK DQFKRUV RI DOPRVW QHYHU DQG YHU\ RIWHQ 7KH DFWLRQV LQFOXGHG f 7KRXJKW RI EHLQJ DEVHQW f &KDWWHG ZLWK FRZRUNHUV DERXW QRQZRUN WRSLFV f /HIW ZRUN VLWXDWLRQ IRU XQQHFHVVDU\ UHDVRQV f 'D\GUHDPHG b f 6SHQW ZRUN WLPH RQ SHUVRQDO PDWWHUV f 3XW OHVV HIIRUW LQWR WKH MRE WKDQ VKRXOG KDYH f 7KRXJKW RI OHDYLQJ FXUUHQW MRE f /HW RWKHUV GR \RXU ZRUN f /HIW ZRUN HDUO\ ZLWKRXW SHUPLVVLRQ f 7DNHQ ORQJHU OXQFK RU UHVW EUHDNV WKDQ DOORZHG

PAGE 48

&+$37(5 5(68/76 'HVFULSWLYH 6WDWLVWLFV 7KH PHDQV VWDQGDUG GHYLDWLRQV UHOLDELOLWLHV DQG ]HURRUGHU FRUUHODWLRQV DPRQJ DOO WKH VWXG\ YDULDEOHV DUH VKRZQ LQ 7DEOH 0RVW QRWDEOH LV WKH FRUUHODWLRQ EHWZHHQ XUJHQW DQG URXWLQH WUXVW VXJJHVWLQJ WKDW WKH WZR DUH KLJKO\ FRUUHODWHG \HW VWLOO HPSLULFDOO\ GLVWLQJXLVKDEOH 7KH FRUUHODWLRQV DPRQJ WKH WUXVW DQWHFHGHQWV ZHUH DOO PRGHUDWH WR VWURQJ DQG FRQVLVWHQW ZLWK SDVW ZRUN E\ 0D\HU DQG 'DYLV f 7KH WKUHH IDFHWV RI MRE SHUIRUPDQFH ZHUH DOVR VWURQJO\ UHODWHG VXSSRUWLQJ WKH QRWLRQ WKDW WKH\ DUH PXOWLSOH GLPHQVLRQV RI WKH VDPH SHUIRUPDQFH FRQVWUXFW 5RWXQGR t 6DFNHWW f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b RI WKH YDULDQFH LQ WKH LWHPV 7KH LWHPV SHUWDLQLQJ WR UHVSRQGLQJ WR ILUH FDOOV DQG DXWR DFFLGHQWV DOO ORDGHG RQ WKLV XUJHQW WUXVW IDFWRU 7KH DYHUDJH ORDGLQJ DFURVV WKRVH LWHPV ZDV ZLWK QR VLJQLILFDQW FURVV ORDGLQJV RQ WKH RWKHU IDFWRU 7KH VHFRQG IDFWRU ZKLFK FRUUHVSRQGHG WR URXWLQH WUXVW

PAGE 49

7DEOH 0HDQV VWDQGDUG GHYLDWLRQV FRHIILFLHQW DOSKDV DQG ]HURRUGHU LQWHUFRUUHODWLRQV IRU VWXG\ YDULDEOHV 0 6' $ELOLW\ %HQHYROHQFH rr ,QWHJULW\ rr rr 3URSHQVLW\ WR 7UXVW rr rr rr 8UJHQW 7UXVW rr 5RXWLQH 7UXVW rr Arr rr r rr 7DVN 3HUIRUPDQFH rr &LWL]HQVKLS %HKDYLRU r rr &RXQWHUSURGXFWLYH %HKDYLRU r r rr rr 2UJDQL]DWLRQDO &RPPLWPHQW r r rr rr rr :LWKGUDZDO rr rr rr 1RWH 1 r S r S &RHIILFLHQW DOSKDV DUH SUHVHQWHG LQ EROGIDFH DORQJ WKH GLDJRQDO

PAGE 50

H[SODLQHG DQ LQFUHPHQWDO b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f +RZHYHU URXWLQH WUXVW GLG QRW H[SODLQ VLJQLILFDQW YDULDQFH LQ FLWL]HQVKLS EHKDYLRU RU FRXQWHUSURGXFWLYH EHKDYLRU IDLOLQJ WR VXSSRUW +\SRWKHVHV OEF 7DEOH 5HJUHVVLRQ UHVXOWV 7DVN SHUIRUPDQFH &LWL]HQVKLS EHKDYLRU &RXQWHUSURGXFWLYH EHKDYLRU 6WHS S 5 3 5 3 5 8UJHQW 7UXVW rr 5RXWLQH 7UXVW rrr 1RWH 1 rr S rrr S +\SRWKHVHV GH SUHGLFWHG WKDW URXWLQH WUXVW ZRXOG EH VLJQLILFDQWO\ UHODWHG WR RUJDQL]DWLRQDO FRPPLWPHQW DQG ZLWKGUDZDO LQGHSHQGHQW RI XUJHQW WUXVW 7KH UHVXOWV RI WKH UHJUHVVLRQ DQDO\VHV DUH VKRZQ LQ 7DEOH %RWK K\SRWKHVHV ZHUH VXSSRUWHG +LJKHU OHYHOV RI URXWLQH WUXVW ZHUH DVVRFLDWHG ZLWK KLJKHU OHYHOV RI RUJDQL]DWLRQDO FRPPLWPHQW

PAGE 51

3 VLJQLILFDQW DW S VXSSRUWLQJ +\SRWKHVLV ,Gf DQG ORZHU OHYHOV RI ZLWKGUDZDO S VLJQLILFDQW DW S VXSSRUWLQJ +\SRWKHVLV OHf 7DEOH 5HJUHVVLRQ UHVXOWV 2UJDQL]DWLRQDO &RPPLWPHQW :LWKGUDZDO 6WHS S 7 3 5 8UJHQW 7UXVW 5RXWLQH 7UXVW rrr rrr 1RWH 1 rr S rrr S +\SRWKHVLV +\SRWKHVHV DF VWDWHG WKDW XUJHQW WUXVW ZRXOG EH VLJQLILFDQWO\ UHODWHG WR WDVN SHUIRUPDQFH FLWL]HQVKLS DQG FRXQWHUSURGXFWLYH EHKDYLRU LQGHSHQGHQW RI URXWLQH WUXVW 7KH UHVXOWV RI WKH UHJUHVVLRQ DQDO\VHV DUH VKRZQ LQ 7DEOH 1RQH RI WKHVH K\SRWKHVHV ZHUH VXSSRUWHG &RQWUDU\ WR SUHGLFWLRQV KLJKHU OHYHOV RI XUJHQW WUXVW ZHUH DVVRFLDWHG ZLWK ORZHU OHYHOV RI WDVN SHUIRUPDQFH 3 VLJQLILFDQW DW S f 7KHUH ZHUH QR RWKHU VLJQLILFDQW XQLTXH HIIHFWV +\SRWKHVHV GH SUHGLFWHG WKDW XUJHQW WUXVW ZRXOG EH VLJQLILFDQWO\ UHODWHG WR RUJDQL]DWLRQDO FRPPLWPHQW DQG ZLWKGUDZDO LQGHSHQGHQW RI URXWLQH WUXVW 7KH UHVXOWV RI WKH UHJUHVVLRQ DQDO\VHV DUH VKRZQ LQ 7DEOH 8UJHQW WUXVW GLG QRW H[SODLQ VLJQLILFDQW YDULDQFH LQ HLWKHU RI WKHVH WZR RXWFRPH YDULDEOHV 7KHUHIRUH QHLWKHU K\SRWKHVLV ZDV VXSSRUWHG +\SRWKHVLV +\SRWKHVHV DF SUHGLFWHG WKDW WKH UHODWLRQVKLSV EHWZHHQ XUJHQW WUXVW LQGHSHQGHQW RI URXWLQH WUXVWf DQG Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS DQG Ff FRXQWHUSURGXFWLYH EHKDYLRU ZRXOG EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLSV ZRXOG EH VWURQJHU ZKHQ ULVN ZDV KLJKHU 7R WHVW WKHVH LQWHUDFWLRQ K\SRWKHVHV PRGHUDWHG PXOWLSOH UHJUHVVLRQ ZDV XVHG 7R DVVHVV GLUHFW HIIHFWV WKH WKUHH RXWFRPH YDULDEOHV ZHUH

PAGE 52

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f DQG Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO ZRXOG EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLSV ZRXOG EH VWURQJHU ZKHQ ULVN ZDV KLJKHU 7KH UHVXOWV RI WKHVH PRGHUDWHG UHJUHVVLRQV FDQ EH IRXQG LQ 7DEOH 7KH LQWHUDFWLRQ RI XUJHQW WUXVW DQG ULVN ZDV QRW VLJQLILFDQW IRU HLWKHU RI WKH RXWFRPHV IDLOLQJ WR VXSSRUW WKHVH SUHGLFWLRQV +\SRWKHVLV +\SRWKHVHV DF SUHGLFWHG WKDW WKH UHODWLRQVKLSV EHWZHHQ URXWLQH WUXVW LQGHSHQGHQW RI XUJHQW WUXVWf DQG Df WDVN SHUIRUPDQFH Ef FLWL]HQVKLS DQG Ff FRXQWHUSURGXFWLYH EHKDYLRU ZRXOG EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLS ZRXOG EH ZHDNHU ZKHQ ULVN ZDV KLJKHU 7KH UHVXOWV RI WKHVH PRGHUDWHG UHJUHVVLRQV FDQ EH IRXQG LQ 7DEOH 7KH LQWHUDFWLRQ RI URXWLQH WUXVW DQG ULVN ZDV QRW VLJQLILFDQW IRU DQ\ RI WKH WKUHH RXWFRPHV IDLOLQJ WR VXSSRUW WKHVH SUHGLFWLRQV +\SRWKHVHV GH VWDWHG WKDW WKH UHODWLRQVKLSV EHWZHHQ URXWLQH WUXVW LQGHSHQGHQW RI XUJHQW WUXVWf DQG Gf RUJDQL]DWLRQDO FRPPLWPHQW DQG Hf ZLWKGUDZDO ZRXOG EH PRGHUDWHG E\ ULVN VXFK WKDW WKH UHODWLRQVKLS ZRXOG EH ZHDNHU ZKHQ ULVN ZDV KLJKHU 7KH UHVXOWV RI WKHVH PRGHUDWHG UHJUHVVLRQV FDQ EH IRXQG LQ 7DEOH 7KH LQWHUDFWLRQ RI URXWLQH WUXVW DQG ULVN ZDV QRW VLJQLILFDQW IRU HLWKHU RI WKHVH RXWFRPHV IDLOLQJ WR VXSSRUW WKHVH SUHGLFWLRQV

PAGE 53

7DEOH 0RGHUDWHG UHJUHVVLRQ UHVXOWV 7DVN 3HUIRUPDQFH 6WHS $5 8UJHQW 7UXVW 87f rr rrr 5RXWLQH 7UXVW 57f rrr 5LVN 87 [ 5LVN 57 [ 5LVN 1 r S $2 rr S r r r e 1RWH e &LWL]HQVKLS %HKDYLRU $5 5 &RXQWHUSURGXFWLYH %HKDYLRU e $5 5 22 22 22

PAGE 54

7DEOH 0RGHUDWHG UHJUHVVLRQ UHVXOWV 2UJDQL]DWLRQDO :LWKGUDZDO &RPPLWPHQW 6WHS % $5 5 $5 5 8UJHQW 7UXVW 87f rrr r r r 5RXWLQH 7UXVW 57f rrr rrr 5LVN rrr WL rrr 87 [ 5LVN rr rr 57 [ 5LVN 1RWH 1 r S rr S rrr S +\SRWKHVLV +\SRWKHVLV SUHGLFWHG WKDW DELOLW\ ZRXOG EH D VWURQJHU SUHGLFWRU RI XUJHQW WUXVW WKDQ URXWLQH WUXVW $ELOLW\ ZDV VLJQLILFDQWO\ UHODWHG WR ERWK XUJHQW WUXVW U VLJQLILFDQW DW" f DQG URXWLQH WUXVW U VLJQLILFDQW DW" f 7KH FRUUHODWLRQV VXJJHVW WKDW FRQWUDU\ WR SUHGLFWLRQV DELOLW\ LV PRUH VWURQJO\ DVVRFLDWHG ZLWK URXWLQH WUXVW WKDQ XUJHQW WUXVW +RZHYHU WKH WZR FRUUHODWLRQV ZHUH QRW IRXQG WR EH VLJQLILFDQWO\ GLIIHUHQW f 7KHUHIRUH WKLV K\SRWKHVLV ZDV QRW VXSSRUWHG +\SRWKHVLV +\SRWKHVHV SUHGLFWHG WKDW EHQHYROHQFH ZRXOG EH D VWURQJHU SUHGLFWRU RI URXWLQH WUXVW WKDQ XUJHQW WUXVW %HQHYROHQFH ZDV VLJQLILFDQWO\ UHODWHG WR ERWK XUJHQW WUXVW U VLJQLILFDQW DWS f DQG URXWLQH WUXVW U VLJQLILFDQW DW" f $GGLWLRQDOO\ WKHVH FRUUHODWLRQV ZHUH VLJQLILFDQWO\ GLIIHUHQW DW D OHYHO f 7KH FRUUHODWLRQV VXJJHVW WKDW EHQHYROHQFH LV PRUH VWURQJO\ DVVRFLDWHG ZLWK URXWLQH WUXVW WKDQ XUJHQW WUXVW DV SUHGLFWHG 7KHUHIRUH WKLV K\SRWKHVLV ZDV VXSSRUWHG +\SRWKHVLV +\SRWKHVLV SUHGLFWHG WKDW LQWHJULW\ ZRXOG EH D VWURQJHU SUHGLFWRU RI URXWLQH WUXVW WKDQ XUJHQW WUXVW ,QWHJULW\ ZDV VLJQLILFDQWO\ UHODWHG WR ERWK XUJHQW WUXVW U VLJQLILFDQW DW S f DQG URXWLQH WUXVW U VLJQLILFDQW DW S f 7KH FRUUHODWLRQV

PAGE 55

VXJJHVW WKDW LQWHJULW\ LV PRUH VWURQJO\ DVVRFLDWHG ZLWK URXWLQH WUXVW WKDQ XUJHQW WUXVW +RZHYHU WKH WZR FRUUHODWLRQV ZHUH QRW IRXQG WR EH VLJQLILFDQWO\ GLIIHUHQW a f 7KHUHIRUH WKLV K\SRWKHVLV ZDV QRW VXSSRUWHG +\SRWKHVLV +\SRWKHVLV VWDWHG WKDW SURSHQVLW\ WR WUXVW ZRXOG EH D VWURQJHU SUHGLFWRU RI XUJHQW WUXVW WKDQ URXWLQH WUXVW 3URSHQVLW\ WR WUXVW ZDV QRW VLJQLILFDQWO\ UHODWHG WR XUJHQW WUXVW U f +RZHYHU SURSHQVLW\ WR WUXVW ZDV VLJQLILFDQWO\ UHODWHG WR URXWLQH WUXVW U VLJQLILFDQW DW" f 7KH FRUUHODWLRQV VXJJHVW WKDW FRQWUDU\ WR SUHGLFWLRQV SURSHQVLW\ WR WUXVW LV PRUH VWURQJO\ DVVRFLDWHG ZLWK URXWLQH WUXVW WKDQ XUJHQW WUXVW +RZHYHU WKH WZR FRUUHODWLRQV ZHUH QRW IRXQG WR EH VLJQLILFDQWO\ GLIIHUHQW S f 7KHUHIRUH WKLV K\SRWKHVLV ZDV QRW VXSSRUWHG

PAGE 56

&+$37(5 ',6&866,21 .UDPHU f VDLG fWUXVW LV PRYLQJ IURP D ELW SOD\HU WR FHQWHU VWDJH LQ FRQWHPSRUDU\ RUJDQL]DWLRQDO WKHRU\ DQG UHVHDUFKf S f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

PAGE 57

LPSRUWDQW GXDOLW\ 0RUH VSHFLILFDOO\ WKLV VWXG\ H[DPLQHG WZR W\SHV RI WUXVW XUJHQW WUXVW DQG URXWLQH WUXVW 5RXWLQH 7UXVWnV 5HODWLRQVKLS ZLWK &RPPLWPHQW DQG :LWKGUDZDO :KLOH WKH VWXG\ SUHGLFWHG WKDW RUJDQL]DWLRQDO FRPPLWPHQW DQG ZLWKGUDZDO ZRXOG EH GULYHQ E\ ERWK XUJHQW DQG URXWLQH WUXVW LQGHSHQGHQW RI RQH DQRWKHU WKLV ZDV QRW WKH FDVH 5RXWLQH WUXVW KDG D VLJQLILFDQW LPSDFW RQ ERWK RXWFRPHV FRQWUROOLQJ IRU XUJHQW WUXVW 7KH VDPH ZDV QRW WUXH LQ WKH RSSRVLWH GLUHFWLRQ 7KLV UHVXOW VXJJHVWV WKDW DQ LQGLYLGXDOnV GHVLUH WR HQJDJH LQ EHKDYLRUV VXFK DV VKLUNLQJ DEVHQWHHLVP RU HYHQ OHDYLQJ WKH RUJDQL]DWLRQ LV GULYHQ E\ UHDFWLRQV WR WKH EHKDYLRU RI RQHnV FRZRUNHUV LQ VLWXDWLRQV WKDW KDYH HVWDEOLVKHG UXOHV SURFHGXUHV RU SUHFHGHQFH JRYHUQLQJ DFWLRQV 3HUKDSV WUXVW FRQFHUQLQJ HYHU\GD\ EHKDYLRUV RI FRZRUNHUV ZDV PRUH LPSRUWDQW EHFDXVH RI WKH VDPSOH XVHG LQ WKLV SDUWLFXODU VWXG\ )LUHILJKWHU WUDLQLQJ LV GLIILFXOW H[WHQVLYH DQG RQJRLQJ WKURXJKRXW D ILUHILJKWHUn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

PAGE 58

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nV ZRUN HVSHFLDOO\ LI WKHVH VDPH FRZRUNHUV FDQ EH JHQHUDOO\ WUXVWHG LQ QRYHO VLWXDWLRQV WKDW SRVH VHULRXV WKUHDWV WR FROOHFWLYH LQWHUHVWV 2Q WKH RWKHU KDQG LI XUJHQW WUXVW FDQ EH DVVXPHG DFURVV DOO RUJDQL]DWLRQV LQ WKH ILHOG LQGLYLGXDOV PD\ EH SDUWLFXODUO\ VHQVLWLYH WR QRW EHLQJ DEOH WR WUXVW WKHLU FRZRUNHUV WR FRPSOHWH WKH PRUH PRQRWRQRXV DQG URXWLQH WDVNV RI WKH MRE 7KLV FHUWDLQO\ PD\ OHDG WKHP WR ZLWKGUDZ WKHPVHOYHV IURP WKHLU ZRUN 2UJDQL]DWLRQDO FRPPLWPHQW ZRUNV LQ D VLPLODU IDVKLRQ EXW SHUKDSV WKH ORJLF LV HYHQ VLPSOHU ,I WKRVH IDFWRUV UHODWHG WR WKH IRUPDWLRQ RI XUJHQW WUXVW DUH VWDEOH ZLWKLQ WKH FDUHHU D SHUVRQ KDV EHHQ H[WHQVLYHO\ WUDLQHG IRU WKHQ WKH GHVLUH WR OHDYH D SDUWLFXODU RUJDQL]DWLRQ ZRXOG FHUWDLQO\ EH GULYHQ E\ WKH H[WHQW WR ZKLFK DQ LQGLYLGXDO LV DEOH WR WUXVW WKHLU FRZRUNHUV WR FRPSOHWH WKH PRUH FRPPRQ WDVNV RI WKH MRE 5RXWLQH 7UXVWnV 5HODWLRQVKLS ZLWK -RE 3HUIRUPDQFH 5RXWLQH WUXVW ZDV DOVR SRVLWLYHO\ UHODWHG WR WDVN SHUIRUPDQFH LQGHSHQGHQW RI WKH HIIHFWV RI XUJHQW WUXVW 7KH PHDVXUH RI WDVN SHUIRUPDQFH XVHG LQ WKLV GLVVHUWDWLRQ XVHG IRUPDO UHTXLUHPHQWV RI WKH MRE DV WKH UHIHUHQW (VVHQWLDO MRE HOHPHQWV E\ GHILQLWLRQ KDYH

PAGE 59

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n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

PAGE 60

KRXUV RQ WKHVH GD\V ZLWK WKHLU FRZRUNHUV ,Q IDFW WKH VWDWLRQV DUH FDOOHG ILUHKRXVHV 7KLV LV EHFDXVH WKH\ IXQFWLRQ PXFK OLNH D KRXVHKROG )RU H[DPSOH WKHUH DUH FKRUHV WR EH GRQH GHFLVLRQV WR EH PDGH DERXW WKH OLYLQJ HQYLURQPHQW DQG D VRFLDO HQYLURQPHQW WKDW PXVW EH PDLQWDLQHG $V VXFK WKH ILUHILJKWHUV RI D VSHFLILF VKLIW RIWHQ IXQFWLRQ OLNH D IDPLO\ (DFK WDVN LV GRQH DV PXFK RXW RI FRQFHUQ DQG UHVSHFW IRU RWKHUV DV LW LV E\ QHFHVVLW\n )RU DQ LQGLYLGXDO WR HQJDJH LQ FRXQWHUSURGXFWLYH EHKDYLRU LQ D ZRUN HQYLURQPHQW VXFK DV WKLV LV FRPSDUDEOH WR DQ REYLRXV DQG PRWLYDWHG DWWDFN RQ WKH IDPLO\ WKDW LV WKDW SDUWLFXODU VKLIW DW WKDW SDUWLFXODU VWDWLRQ 6LPLODUO\ QRW HQJDJLQJ LQ FLWL]HQVKLS EHKDYLRU VXFK DV VKRZLQJ FRQFHUQ DQG FRXUWHV\ WRZDUGV RQHn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n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

PAGE 61

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nV PRUDO FKDUDFWHU GR QRW GULYH VXEVHTXHQW IHHOLQJV RI XUJHQW DQG URXWLQH WUXVW WR D GLIIHUHQW GHJUHH ,QWHUHVWLQJO\ SDUW RI ZKDW GHWHUPLQHV LQWHJULW\ LV FRQVLVWHQF\ RI DFWLRQ RYHU WLPH DV ZHOO DV FRQVLVWHQF\ EHWZHHQ DFWLRQ DQG ZRUGV 7KLV ZRXOG FHUWDLQO\ VXJJHVW WKDW LI DQ LQGLYLGXDO SRVVHVVHV LQWHJULW\ WKH\ ZRXOG EHKDYH DFFRUGLQJO\ FRQVLVWHQWO\ DFURVV

PAGE 62

VLWXDWLRQV EH WKH\ XUJHQW RU URXWLQH $V VXFK WKHLU LQWHJULW\ ZLOO HIIHFW WUXVW HYDOXDWLRQV RI ERWK W\SHV WR DQ DSSUR[LPDWHO\ HTXDO GHJUHH 3URSHQVLW\ WR 7UXVW ,Q DQRWKHU FRQWUDU\ ILQGLQJ SURSHQVLW\ WR WUXVW ZDV VLJQLILFDQWO\ UHODWHG WR URXWLQH WUXVW EXW QRW XUJHQW WUXVW &ORVHU DQDO\VLV KRZHYHU UHYHDOHG WKDW SURSHQVLW\ ZDV QRW IRXQG WR EH UHODWHG WR XUJHQW DQG URXWLQH WUXVW WR D GLIIHUHQW GHJUHH 7KLV VXJJHVWV WKDW DQ LQGLYLGXDOn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

PAGE 63

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

PAGE 64

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f LV SUHVHQW LQ QHDUO\ DOO MREV WR VRPH GHJUHH 6RPH FDUHHUV ZKHUH WKLV GLVWLQFWLRQ PD\ EH PRUH UHDGLO\ DSSDUHQW LQFOXGH DQ\ MRE LQYROYLQJ WKH XVH RI KHDY\ HTXLSPHQW GDQJHURXV FKHPLFDOV RU KLJK ZDWWDJH SRZHU 6RPH MREV VXFK DV SXEOLF XWLOLW\ ZRUN LQYROYH DOO WKUHH

PAGE 65

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nV WHQXUH ZLWK DQ RUJDQL]DWLRQ PD\ HIIHFW KRZ PXFK WKH\ GLIIHUHQWLDOO\ WUXVW WKHLU FRZRUNHUV $OVR DV DOOXGHG WR HDUOLHU D SHUVRQnV FDUHHU FKRLFH LWVHOI PD\ EH UHODWHG WR WKH PDQQHU LQ ZKLFK WKH\ WUXVW ,W FRXOG EH WKDW WKRVH ZKR DUH PRVW ZLOOLQJ WR WUXVW RWKHUV HVSHFLDOO\ ZLWK UHJDUG WR XUJHQW WUXVW VHOI VHOHFW WKHPVHOYHV LQWR MREV ZKHUH HPHUJHQF\ VLWXDWLRQV DUH PRUH OLNHO\ ,W DOVR VHHPV OLNHO\ WKDW DQ LQGLYLGXDOnV SHUVRQDOLW\ LQ D ELJ VHQVHf PD\ LPSDFW WKDW LQGLYLGXDOnV OHYHO RI WUXVW LQ RWKHUV 6SHFLILFDOO\ WUXVWZRUWKLQHVV LV D VXEIDFWRU RI WKH SHUVRQDOLW\ GLPHQVLRQ RI DJUHHDEOHQHVV ,W ZRXOG EH YDOXDEOH WR VHH LI D SHUVRQn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

PAGE 66

WUXVW WKHVH LQGLYLGXDOV 2Q WKH RWKHU KDQG QRW EHLQJ DEOH WR WUXVW RQHnV FRZRUNHUV PD\ OHDG WR IHHOLQJV RI LQMXVWLFH DW WKH ZRUNSODFH ,Q RWKHU ZRUGV D SHUVRQ PLJKW IHHO WKDW LW LV XQIDLU WKDW WKH\ VKRXOG KDYH WR ZRUN ZLWK XQWUXVWZRUWK\ SHRSOH

PAGE 67

5()(5(1&(6 $EHOVRQ 5 3 f 6FULSW SURFHVVLQJ LQ DWWLWXGH IRUPDWLRQ DQG GHFLVLRQ PDNLQJ ,Q 6 &DUURO t : 3D\QH (GVf &RJQLWLRQ DQG VRFLDO EHKDYLRU +LOOVGDOH 1(UOEDXP $UPVWURQJ6WDVVHQ 0 f 'HVLJQDWHG UHGXQGDQW EXW HVFDSLQJ OD\RII $ VSHFLDO JURXS RI OD\RII VXUYLYRUV -RXUQDO RI 2FFXSDWLRQDO DQG 2UJDQL]DWLRQDO 3V\FKRORJ\ $U\HH 6 %XGKZDU 3 6 t &KHQ = ; f 7UXVW DV D PHGLDWRU RI WKH UHODWLRQVKLS EHWZHHQ RUJDQL]DWLRQDO MXVWLFH DQG ZRUN RXWFRPHV 7HVW RI D VRFLDO H[FKDQJH PRGHO -RXUQDO RI 2UJDQL]DWLRQDO %HKDYLRU %DOO $ 7UHYLQR / t 6LPV + 3 -U f -XVWLFH DQG RUJDQL]DWLRQDO SXQLVKPHQW $WWLWXGLQDO RXWFRPHV RI GLVFLSOLQDU\ HYHQWV 6RFLDO -XVWLFH 5HVHDUFK %DUWOHWW ) & f 5HPHPEHULQJ &DPEULGJH 0$ &DPEULGJH 8QLYHUVLW\ 3UHVV %HQQHWW 5 t 5RELQVRQ 6 / f 'HYHORSPHQW RI D PHDVXUH RI ZRUNSODFH GHYLDQFH -RXUQDO RI $SSOLHG 3V\FKRORJ\ %KDWWDFKDU\D 5 'HYLQQH\ 7 0 t 3LOOXGD 0 0 f $ IRUPDO PRGHO RI WUXVW EDVHG RQ RXWFRPHV $FDGHP\ RI 0DQDJHPHQW 5HYLHZ %LHV 5 t 7\OHU 7 5 f 7KH OLWLJDWLRQ PHQWDOLW\ LQ RUJDQL]DWLRQV $ WHVW RI DOWHUQDWLYH SV\FKRORJLFDO H[SODQDWLRQV 2UJDQL]DWLRQ 6FLHQFH %LJOH\ t 3HDUFH f 6WUDLQLQJ IRU VKDUHG PHDQLQJ LQ RUJDQL]DWLRQ VFLHQFH 3UREOHPV RI WUXVW DQG GLVWUXVW $FDGHP\ RI 0DQDJHPHQW 5HYLHZ %RUPDQ : & f 7KH UROH RI WKHRU\ LQ LQGXVWULDO DQG RUJDQL]DWLRQDO SV\FKRORJ\ ,Q 0 'XQQHWWH t / 0 +RXJK (GVf +DQGERRN RI LQGXVWULDO DQG RUJDQL]DWLRQDO SV\FKRORJ\ 9RO SS f 3DOR $OWR &$ &RQVXOWLQJ 3V\FKRORJLVWV 3UHVV %RUPDQ : & t 0RWRZLGOR 6 f ([SDQGLQJ WKH FULWHULRQ GRPDLQ WR LQFOXGH HOHPHQWV RI FRQWH[WXDO SHUIRUPDQFH ,Q 1 6FKPLWW t : & %RUPDQ (GVf 3HUVRQQHO VHOHFWLRQ LQ RUJDQL]DWLRQV SSf 6DQ )UDQFLVFR -RVVH\%DVV

PAGE 68

%UDGDFK t (FFOHV 5 f 3ULFH DXWKRULW\ DQG WUXVW )URP LGHDO W\SHV WR SOXUDO IRUPV $QQXDO 5HYLHZ RI 6RFLRORJ\ %URFNQHU 6LHJHO 3 $ 'DO\ 3 7\OHU 7 t 0DUWLQ & f :KHQ WUXVW PDWWHUV 7KH PRGHUDWLQJ HIIHFW RI RXWFRPH IDYRUDELOLW\ $GPLQLVWUDWLYH 6FLHQFH 4XDUWHUO\ %XWOHU f 5HFLSURFLW\ RI WUXVW EHWZHHQ SURIHVVLRQDO DQG WKHLU VHFUHWDULHV 3V\FKRORJLFDO 5HSRUWV %XWOHU f 7RZDUG XQGHUVWDQGLQJ DQG PHDVXULQJ FRQGLWLRQV RI WUXVW (YROXWLRQ RI D FRQGLWLRQV RI WUXVW LQYHQWRU\ -RXUQDO RI 0DQDJHPHQW %XWOHU t &DQWUHOO 5 6 f $ EHKDYLRUDO GHFLVLRQ WKHRU\ DSSURDFK WR PRGHOLQJ G\DGLF WUXVW LQ VXSHULRUV DQG VXERUGLQDWHV 3V\FKRORJLFDO 5HSRUWV &DPSEHOO 3 f 0RGHOLQJ WKH SHUIRUPDQFH SUHGLFWLRQ SUREOHP LQ LQGXVWULDO DQG RUJDQL]DWLRQDO SV\FKRORJ\ ,Q 0 'XQQHWWH t / 0 +RXJK (GVf +DQGERRN RI LQGXVWULDO DQG RUJDQL]DWLRQDO SV\FKRORJ\ 9RO SS f 3DOR $OWR &$ &RQVXOWLQJ 3V\FKRORJLVWV 3UHVV &DXGURQ 6 f 5HEXLOGLQJ HPSOR\HH WUXVW 7UDLQLQJ t 'HYHORSPHQW &KDWWRSDGK\D\ 3 f %H\RQG GLUHFW DQG V\PPHWULFDO HIIHFWV 7KH LQIOXHQFH RI GHPRJUDSKLF GLVVLPLODULW\ RQ RUJDQL]DWLRQDO FLWL]HQVKLS EHKDYLRU $FDGHP\ RI 0DQDJHPHQW &KULVWLDQVHQ 1 9LOODQRYD 3 t 0LNXOD\ 6 f 3ROLWLFDO LQIOXHQFH FRPSDWLELOLW\ ILWWLQJ WKH SHUVRQ WR WKH FOLPDWH -RXUQDO RI 2UJDQL]DWLRQDO %HKDYLRU &ROHPDQ 6 f )RXQGDWLRQV RI VRFLDO WKHRU\ &DPEULGJH 0$ %HONQDS 3UHVV &RQJHU $ .DQXQJR 5 1 t 0HQRQ 6 7 f &KDULVPDWLF OHDGHUVKLS DQG IROORZHU HIIHFWV -RXUQDO RI 2UJDQL]DWLRQDO %HKDYLRU &RRN t :DOO 7 f 1HZ ZRUN DWWLWXGH PHDVXUHV RI WUXVW RUJDQL]DWLRQDO FRPPLWPHQW DQG SHUVRQDO QHHG QRQIXOILOOPHQW -RXUQDO RI 2FFXSDWLRQDO 3V\FKRORJ\ &RRSHU : + f 8ELTXLWRXV KDOR 3V\FKRORJLFDO %XOOHWLQ &RVWD 3 7 t 0F&UHD 5 5 f 5HYLVHG 1(2 3HUVRQDOLW\ ,QYHQWRU\ 1(2 3,5f 3URIHVVLRQDO 0DQXDO 2GHVVD )/ 3V\FKRORJLFDO $VVHVVPHQW 5HVRXUFHV

PAGE 69

&XQQLQJKDP %f t 0DF*UHJRU f 7UXVW DQG WKH GHVLJQ RI ZRUN &RPSOHPHQWDU\ FRQVWUXFWV LQ VDWLVIDFWLRQ DQG SHUIRUPDQFH +XPDQ 5HODWLRQV 'H1LVL $ 6 &DIIHUW\ 7 3 t 0HJOLQR % 0 f $ FRJQLWLYH UHYLHZ RI WKH SHUIRUPDQFH DSSUDLVDO SURFHVV $ PRGHO DQG UHVHDUFK SURSRVLWLRQV 2UJDQL]DWLRQDO %HKDYLRU DQG +XPDQ 3HUIRUPDQFH 'HXWVFK 0 f 7UXVW DQG 6XVSLFLRQ &RQIOLFW 5HVROXWLRQ 'HXWVFK 0 f 7KH HIIHFWV RI PRWLYDWLRQDO RULHQWDWLRQ XSRQ WUXVW DQG VXVSLFLRQ +XPDQ UHODWLRQV 'LUNV 7 f 7KH HIIHFWV RI LQWHUSHUVRQDO WUXVW RQ ZRUNJURXS SHUIRUPDQFH -RXUQDO RI $SSOLHG 3V\FKRORJ\ 'LUNV 7 f 7UXVW LQ OHDGHUVKLS DQG WHDP SHUIRUPDQFH (YLGHQFH IURP 1&$$ EDVNHWEDOO -RXUQDO RI $SSOLHG 3V\FKRORJ\ 'RROH\ 5 6 t )U\[HOO ( f $WWDLQLQJ GHFLVLRQ TXDOLW\ DQG FRPPLWPHQW IURP GLVVHQW 7KH PRGHUDWLQJ HIIHFWV RI OR\DOW\ DQG FRPSHWHQFH LQ VWUDWHJLF GHFLVLRQn PDNLQJ WHDPV $FDGHP\ RI 0DQDJHPHQW -RXUQDO (DUOH\ 3 & f 7UXVW SHUFHLYHG LPSRUWDQFH RI SUDLVH DQG FULWLFLVP DQG ZRUN SHUIRUPDQFH $Q H[DPLQDWLRQ RI IHHGEDFN LQ WKH 8QLWHG 6WDWHV DQG (QJODQG -RXUQDO RI 0DQDJHPHQW )DUK 7VXL $ 6 ;LQ t &KHQJ % f 7KH LQIOXHQFH RI UHODWLRQDO GHPRJUDSK\ DQG JXDQ[L 7KH &KLQHVH FDVH 2UJDQL]DWLRQ 6FLHQFH )ULHGODQGHU ) f 7KH SULPDF\ RI WUXVW DV D IDFLOLWDWRU RI IXUWKHU JURXS DFFRPSOLVKPHQW -RXUQDO RI $SSOLHG EHKDYLRUDO 6FLHQFH )URVW 7 6WLPSVRQ 9 t 0DXJKDQ 0 5 & f 6RPH FRUUHODWHV RI WUXVW -RXUQDO RI 3V\FKRORJ\ *DEDUUR f 7KH GHYHORSPHQW RI WUXVW LQIOXHQFH DQG H[SHFWDWLRQV ,Q $ $WKRV t *DEDUUR (GVf ,QWHUSHUVRQDO EHKDYLRU &RPPXQLFDWLRQ DQG XQGHUVWDQGLQJ LQ UHODWLRQVKLSV SS f (QJOHZRRG &OLIIV 13UHQWLFH +DOO *HRUJH 0 t %ULHI $ 3 f )HHOLQJ JRRGf§'RLQJ JRRG $ FRQFHSWXDO DQDO\VLV RI WKH PRRG DW ZRUNRUJDQL]DWLRQDO VSRQWDQHLW\ UHODWLRQVKLS 3V\FKRORJLFDO %XOOHWLQ *LIILQ f 7KH FRQWULEXWLRQ RI VWXGLHV RI VRXUFH FUHGLELOLW\ WR D WKHRU\ RI LQWHUSHUVRQDO WUXVW LQ WKH FRPPXQLFDWLRQ GHSDUWPHQW 3V\FKRORJLFDO %XOOHWLQ

PAGE 70

+DUW 0 &DSSV + 5 &DQJHPL 3 DQG &DLOORXHW / 0 f ([SORULQJ RUJDQL]DWLRQDO WUXVW DQG LWV PXOWLSOH GLPHQVLRQV $ FDVH VWXG\ RI *HQHUDO 0RWRUV 2UJDQL]DWLRQDO 'HYHORSPHQW -RXUQDO +DVWLH 5 f 6FKHPDWLF SULQFLSOHV LQ KXPDQ PHPRU\ ,Q ( +LJJLQV & +HUPDQ t 0 =DQQD (GVf 6RFLDO FRJQLWLRQ 7KH 2QWDULR V\PSRVLXP +LOOVGDOH 1(UOEDXP +RVPHU / 7 7UXVW 7KH FRQQHFWLQJ OLQN EHWZHHQ RUJDQL]DWLRQDO WKHRU\ DQG SKLORVRSKLFDO HWKLFV $FDGHP\ RI 0DQDJHPHQW 5HYLHZ +XOLQ & / f $GDSWDWLRQ SHUVLVWHQFH DQG FRPPLWPHQW LQ RUJDQL]DWLRQV ,Q 0 'XQQHWWH t / 0 +RXJK (GVf +DQGERRN RI LQGXVWULDO DQG RUJDQL]DWLRQDO SV\FKRORJ\ 9RO SS f 3DOR$OWR &$ &RQVXOWLQJ 3V\FKRORJLVWV 3UHVV ,OJHQ 5 t )HOGPDQ 0 f 3HUIRUPDQFH DSSUDLVDO $ SURFHVV IRFXV ,Q % 0 6WDZ t / &XPPLQJV (GVf 5HVHDUFK LQ RUJDQL]DWLRQDO EHKDYLRU 9RO SS f *UHHQZLFK &7 -$, -HKQ $ t 0DQQL[ ( $ f 7KH G\QDPLF QDWXUH RI FRQIOLFW $ ORQJLWXGLQDO VWXG\ RI LQWUDJURXS FRQIOLFW DQG JURXS SHUIRUPDQFH $FDGHP\ RI 0DQDJHPHQW -RXUQDO -XQJ t $YROLR % f 2SHQLQJ WKH EODFN ER[ $Q H[SHULPHQWDO LQYHVWLJDWLRQ RI WKH PHGLDWLQJ HIIHFWV RI WUXVW DQG YDOXH FRQJUXHQFH RQ WUDQVIRUPDWLRQDO DQG WUDQVDFWLRQDO OHDGHUVKLS -RXUQDO RI 2UJDQL]DWLRQDO %HKDYLRU .HH + : t .QR[ 5 ( f &RQFHSWXDO DQG PHWKRGRORJLFDO FRQVLGHUDWLRQV LQ WKH VWXG\ RI WUXVW DQG VXVSLFLRQ -RXUQDO RI &RQIOLFW 5HVROXWLRQ .LUNSDWULFN 6 $ t /RFNH ( $ f 'LUHFW DQG LQGLUHFW HIIHFWV RI WKUHH FRUH FKDULVPDWLF OHDGHUVKLS FRPSRQHQWV RQ SHUIRUPDQFH DQG DWWLWXGHV -RXUQDO RI $SSOLHG 3V\FKRORJ\ .OLPRVNL 5 t .DURO % / f 7KH LPSDFW RI WUXVW RQ FUHDWLYH SUREOHP VROYLQJ JURXSV -RXUQDO RI $SSOLHG 3V\FKRORJ\ .RQRYVN\ 0 $ t &URSDQ]DQR 5 f 3HUFHLYHG IDLUQHVV RI HPSOR\HH GUXJ WHVWLQJ DV D SUHGLFWRU RI HPSOR\HH DWWLWXGHV DQG MRE SHUIRUPDQFH -RXUQDO RI $SSOLHG 3V\FKRORJ\ .RQRYVN\ 0 $ t 3XJK 6 f &LWL]HQVKLS EHKDYLRU DQG VRFLDO H[FKDQJH $FDGHP\ RI 0DQJHPHQW -RXUQDO .RUVJDDUG 0 $ 5REHUVRQ /f t 5\PSK 5 f :KDW PRWLYDWHV IDLUQHVV" 7KH UROH RI VXERUGLQDWH DVVHUWLYH EHKDYLRU RQ PDQDJHUVf LQWHUDFWLRQDO IDLUQHVV -RXUQDO RI $SSOLHG 3V\FKRORJ\

PAGE 71

.RUVJDDUG 0 $ 6FKZHLJHU 0 t 6DSLHQ]D + f %XLOGLQJ FRPPLWPHQW DWWDFKPHQW DQG WUXVW LQ VWUDWHJLF GHFLVLRQPDNLQJ WHDPV 7KH UROH RI SURFHGXUDO MXVWLF T $FDGHP\ RI 0DQDJHPHQW -RXUQDO .UDPHU 5 0 f 7UXVW DQG GLVWUXVW LQ RUJDQL]DWLRQV (PHUJLQJ SHUVSHFWLYHV HQGXULQJ TXHVWLRQV $QQXDO 5HYLHZ RI 3V\FKRORJ\ /HKPDQ : ( t 6LPSVRQ ' f (PSOR\HH VXEVWDQFH DEXVH DQG RQWKHMRE EHKDYLRUV -RXUQDO RI $SSOLHG 3V\FKRORJ\ /HZLV t :HLJHUW $ f 7UXVW DV D VRFLDO UHDOLW\ 6RFLDO )RUFHV /LHEHUPDQ f 7KH OLWLJLRXV VRFLHW\ 1HZ
PAGE 72

1HZHOO $ t 6LPRQ + $ f +XPDQ SUREOHP VROYLQJ (QJOHZRGG &OLIIV 13UHQWLFH+DOO 1LFKROVRQ 3 t *RK 6 & f 7KH UHODWLRQVKLS RI RUJDQL]DWLRQ VWUXFWXUH DQG LQWHUSHUVRQDO DWWLWXGHV UROH FRQIOLFW DQG GLIIHUHQW ZRUN HQYLURQPHQWV $FDGHP\ RI 0DQDJHPHQW -RXUQDO 1RRWHERRP % %HUJHU + t 1RRUGHUKDYHQ 1 f (IIHFWV RI WUXVW DQG JRYHUQDQFH RQ UHODWLRQDO ULVN $FDGHP\ RI 0DQDJHPHQW -RXUQDO 2UJDQ : f 2UJDQL]DWLRQDO FLWL]HQVKLS EHKDYLRU ,WfV FRQVWUXFW FOHDQXS WLPH +XPDQ 3HUIRUPDQFH 3HWWLW *RULV 5 t 9DXJKW % & f $Q H[DPLQDWLRQ RI RUJDQL]DWLRQDO FRPPXQLFDWLRQ DV D PRGHUDWRU RI WKH UHODWLRQVKLS EHWZHHQ MRE SHUIRUPDQFH DQG MRE SHUIRUPDQFH 7KH -RXUQDO RI %XVLQHVV &RPPXQLFDWLRQ 3LOODL 5 6FKULHVKHLP & $ t :LOOLDPV ( 6 f )DLUQHVV SHUFHSWLRQV DQG WUXVW DV PHGLDWRUV IRU WUDQVIRUPDWLRQDO DQG WUDQVDFWLRQDO OHDGHUVKLS $ WZRVDPSOH VWXG\ -RXUQDO RI 0DQDJHPHQW 3RGVDNRII 3 0 0DF.HQ]LH 6 % 0RRUPDQ 5 + t )HWWHU 5 f 7UDQVIRUPDWLRQDO OHDGHU EHKDYLRUV DQG WKHLU HIIHFWV RQ IROORZHUV WUXVW LQ OHDGHU VDWLVIDFWLRQ DQG RUJDQL]DWLRQDO FLWL]HQVKLS EHKDYLRUV /HDGHUVKLS 4XDUWHUO\ 3XIIHU 6 0 f 3URVRFLDO EHKDYLRU QRQFRPSOLDQW EHKDYLRU DQG ZRUN SHUIRUPDQFH DPRQJ FRPPLVVLRQ VDOHVSHRSOH -RXUQDO RI $SSOLHG 3V\FKRORJ\ 5HPSHO +ROPHV t =DQQD 0 3 f 7UXVW LQ FORVH UHODWLRQVKLSV -RXUQDO RI 3HUVRQDOLW\ DQG 6RFLDO 3V\FKRORJ\ 5LFK $ f 7KH VDOHV PDQDJHU DV D UROH PRGHO (IIHFWV RQ WUXVW MRE VDWLVIDFWLRQ DQG SHUIRUPDQFH RI VDOHVSHRSOH -RXUQDO RI WKH $FDGHP\ RI 0DUNHWLQJ 6FLHQFH 5REHUWV + t 2n5HLOO\ & $ f 0HDVXULQJ RUJDQL]DWLRQDO FRPPXQLFDWLRQ -RXUQDO RI $SSOLHG 3V\FKRORJ\ 5RELQVRQ 6 / t %HQQHWW 5 f $ W\SRORJ\ RI GHYLDQW ZRUNSODFH EHKDYLRUV $ PXOWLGLPHQVLRQDO VFDOLQJ VWXG\ $FDGHP\ RI 0DQDJHPHQW -RXUQDO 5RWWHU % f $ QHZ VFDOH IRU WKH PHDVXUHPHQW RI LQWHUSHUVRQDO WUXVW -RXUQDO RI 3HUVRQDOLW\ 5RWWHU % f ,QWHUSHUVRQDO WUXVW WUXVWZRUWKLQHVV DQG JXOOLELOLW\ $PHULFDQ 3V\FKRORJLVW

PAGE 73

5RWXQGR 0 t 6DFNHWW 3 5 f 7KH UHODWLYH LPSRUWDQFH RI WDVN FLWL]HQVKLS DQG FRXQWHUSURGXFWLYH SHUIRUPDQFH WR JOREDO UDWLQJV RI MRE SHUIRUPDQFH $ SROLF\n FDSWXULQJ DSSURDFK -RXUQDO RI $SSOLHG 3V\FKRORJ\ 5RXVVHDX 0 6LWNLQ 6 % %XUW 5 6 t &DPHUHU & f 1RW VR GLIIHUHQW DIWHU DOO $ FURVVGLVFLSOLQH YLHZ RI WUXVW $FDGHP\ RI 0DQDJHPHQW 5HYLHZ 6KHSSDUG % + t 6KHUPDQ 0 f 7KH JUDPPDUV RI WUXVW $ PRGHO DQG JHQHUDO LPSOLFDWLRQV $FDGHP\ RI 0DQDJHPHQW 5HYLHZ 6LPRQV 7 / t 3HWHUVRQ 5 6 f 7DVN FRQIOLFW DQG UHODWLRQVKLS FRQIOLFW LQ WRS PDQDJHPHQW WHDPV 7KH SLYRWDO UROH RI LQWUDJURXS WUXVW -RXUQDO RI $SSOLHG 3V\FKRORJ\ 6LWNLQ 6 % t 5RWK 1 / f ([SODLQLQJ WKH OLPLWHG HIIHFWLYHQHVV RI OHJDOLVWLF fUHPHGLHVf IRU WUXVWGLVWUXVW 2UJDQL]DWLRQ 6FLHQFH 7HVVHU $ f 6HOIJHQHUDWHG DWWLWXGH FKDQJH ,Q / %HUNRZLW] (Gf $GYDQFHV LQ H[SHULPHQWDO VRFLDO SV\FKRORJ\ 9RO SS f 1HZ
PAGE 74

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

PAGE 75

, FHUWLI\ WKDW KDYH UHDG WKLV VWXG\ DQG WKDW LQ P\ RSLQLRQ LW FRQIRUPV WR DFFHSWDEOH VWDQGDUGV RI VFKRODUO\ SUHVHQWDWLRQ DQG LV IXOO\ DGHTXDWH LQ VFRSH DQG TXDOLW\ DV D GLVVHUWDWLRQ IRU WKH GHJUHH RI 'RFWRU RI 3KLORVRSK\ M f n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n 6WXDUW ( KYYDUW] 3URIHVVRU RI (GXFDWLRQ 7KLV GLVVHUWDWLRQ ZDV VXEPLWWHG WR WKH *UDGXDWH )DFXOW\ RI WKH 'HSDUWPHQW RI 0DQDJHPHQW LQ WKH &ROOHJH RI %XVLQHVV $GPLQLVWUDWLRQ DQG WR WKH *UDGXDWH 6FKRRO DQG ZDV DFFHSWHG DV SDUWLDO IXOILOOPHQW RI WKH UHTXLUHPHQWV IRL WKH GHJUHH 'RFWRU RI 3KLORVRSK\ 'HFHPEHU 'HDQ *UDGXDWH 6FKRRO

PAGE 76

81,9(56,7< 2) )/25,'$