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Predicting the Aggregate Economic Impact of Rural Community Events
Dipak Subedi, Economist, U.S. Department of Labor, Bureau of Labor Statistics, Washington D.C.
Dr. Olga I. Murova, Texas
Tech University, Lubbock, TX
ABSTRACT
Rural tourism is an
important source of revenues for rural communities. This study develops a model
that can be used to predict aggregate economic impact of any rural community
event on the local economy. Event characteristics and community characteristics
are used to explain and predict this impact. Developed model explains 63
percent of total variation in aggregate economic impact of any rural event.
Results show that variables event days, number of years of event, community
investment, miles driven to the event, and community population have a positive
and significant impact in explaining aggregate economic impact. Distance from
major city and median family income have a negative and significant economic
impact on a participating community. Several dummies for weather and event type
are used in the model. Findings show that inclement weather adversely affects
travel causing lesser turn out for the event; and among all types of events
nature tourism brings most dollars to the community. Availability of such model
should be helpful in efforts to predict the outcome of a planned rural community
event. Rural economies held up better
during the recent recession than their urban peers (Henderson, 2009). This is
happened due to several reasons: housing crisis was less severe in most rural
areas, rural areas had lesser exposure to investment bank activities, and rural
economies were involved in the activities that did not experienced a great
reduction in demand. One of such activities is rural tourism. According to
Brown (2002) and Lewis (1998) rural tourism has become a popular destination for
tourists because it is less expensive as compared to other popular destinations
and equally fun and relaxing as well. Rural communities are isolated communities
in open country with low population density.
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Does DFI by MNCs Improve Income Distribution for Society in Latin American
Countries?
Steven Blair, Sam Houston
State University, Huntsville, TX
Dr. Balasundram Maniam,
Sam Houston State University, Huntsville, TX
ABSTRACT
Direct Foreign Investment
(hereafter DFI) by multinational corporations (hereafter MNCs) has developed
rapidly in recent times, and unindustrialized countries such as those in Latin
America (hereafter LA), have enticed an increasing share of it. The scale and
especially the scheduling of increases in DFI into LA countries have changed
greatly. The governments of LA countries have been required to revise the policy
situation faced by MNCs within their country to increase both the magnitude and
timing of these investment increases. Latin American governments who would seek
to invite DFI must find ways to reassure MNCs that their funds can grow. MNCs’
investments are sensitive to changes in the comparative prices of factors of
production (labor and capital) and commodities; movements of assets and labor
across borders and within countries; the environment of technological
transformation and technological diffusion; the impact of global expansion on
volatility and susceptibility. Significant differences in these conditions for
MNCs exist in many LA countries. These differences show up most prominently in
the magnitude and price of human capital, the institutional framework, the
quality of authority, as well as the internal dynamics of institutional and
sociopolitical conditions. The quantity and quality of human capital or
workforce probably has the broadest impact on a MNCs investment decision. This
study examines the key effects of globalization and how they impact the LA
economy. This review looks at the impact on income distribution and poverty
levels in several LA countries brought on by globalization through DFI. This
study will reveal that the globalization of several LA countries has created
winners and losers directly within their society, and this has severely affected
vertical and horizontal inequalities within their society.
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From Bankruptcy to the Stock Market
Dr. Gurdeep K. Chawla,
National University, San Diego, CA
ABSTRACT
The recent economic downturn
in the United States since 2008 has created a difficult environment for
organizations. As a result, some companies have been struggling to stay in
business. More specifically, these struggling companies were not able to
operate with the credit crunch and limited consumer demand. Consequently, they
filed for bankruptcy. According to BankruptcyData.com, 207 publicly traded
companies filed for bankruptcy protection in the United States in 2009. In
comparison with previous years, 2009 ranks as the third busiest year for
corporate bankruptcy filings in the United States. BankruptcyData.com also
determined that companies that filed for Chapter 11 bankruptcy protection in
2008 had a total of over $1 trillion in assets to their name. It is very
difficult for companies to reorganize, survive, turnaround, and be profitable
again after filing for bankruptcy. This
paper focuses on some of the companies that filed for bankruptcy in 2008 or 2009
and they have been able to reorganize and reemerge as strong organizations. To
accomplish this goal, company financial statements were analyzed to determine
whether the bankruptcies could have been predicted by market participants, based
upon the financial information provided by the companies. The paper also
compares predecessor (pre-bankruptcy) and successor (post-bankruptcy) financial
ratios to investigate the improvements made by the companies. Finally, the
paper reviews how the companies were able to turn their bankruptcies around and
become financially strong organizations again. It requires a great deal of
planning and effort on the part of companies to file for bankruptcy under
Chapter 11.
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Accounting Expert Systems and the Treatment of Uncertainty
Dr. Awni Zebda, Texas A&M
University-Corpus Christi, Corpus Christi, Texas
Dr. Michelle McEacharn,
University of Louisiana at Monroe, Monroe, Louisiana
ABSTRACT
Recent years have witnessed
a rising growth pattern in the development and use of expert systems in
accounting and auditing. A very important consideration in expert system
development is the treatment of uncertainty. New approaches to handling
uncertainty have been explored but, in accounting and auditing expert systems,
probabilistic logic has been the typical solution method. This paper will
briefly describe the expert system environment within accounting and auditing,
illustrate a major criticism in the design of these systems, and introduce fuzzy
logic as a potential solution to the weakness. In particular, this paper serves
to encourage the use of fuzzy logic in accounting and auditing, arguing for its
continued application to the discipline.
Expert system development has been experiencing a rising growth pattern. The
introduction of special programming languages and "shells" has contributed to
the growing popularity of expert systems. Advances in computer capabilities and
declines in computing costs have also helped the growth. The events have made
expert system technology more accessible to users. Though the technology arose
from the research and development laboratories of medicine and the military,
expert system development has experienced a significant involvement in the
business world. The design of XCON by the Digital Equipment Corporation
provided evidence of the economic benefits in improved efficiency and quality
associated with an expert system [Giarratano and Riley 1989]. Published reviews
(e.g., Brown and Phillips [1990], O’Leary and Watkins [1995], Coakley and Brown
[2000]) show that expert system research has been substantial in accounting and
auditing context. Many of the problems faced by accountants, auditors, and tax
practitioners are ill-defined and unstructured problems which are well-suited
for expert system application.
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Ex Ante
Recognition of Bubble Stock Gauges and Forecasts of Their Bursting in the United
States and Japan
Dr. Robert H. Parks, The
Lubin School of Business, Pace University, New York, NY
ABSTRACT
Section I of this article
summarizes the ex ante identification of four major stock gauges as
bubbles fated to burst. Section II presents the pure theory of a fully
integrated stock valuation model coupling the Gordon (1962) dividend model with
the Miller-Modigliani dividend irrelevancy model (1961), hereafter the G-MM
model. Section III, the applied analysis, presents four matching valuation
recipes I used to identify bubble stock gauges. Given its still current
relevance, I devoted the core of this article in Section III (A) to the bursting
of the S&P 500 in 2000. Section III (B) reviews the predicted collapse of the
“megabubble” Nasdaq Composite. Section III (C) tracks, but briefly, my forecast
of the bursting of the S&P 500 in 1987. Section III (D) also reviews briefly the
predicted crash of the megabubble Nikkei 225 in 1990. I stressed throughout the
role of fiscal and monetary policy. A principal theme is that Federal Reserve
policy 1997-2000 fueled and fired an overinvestment boom that collapsed and
bubble stock gauges that crashed, predictably. A related thesis is the failure
of the regulatory officials and the central bank to suppress systemic financial
fraud. Section IV sets forth my conclusions and suggestions for further
research. The appendix lists all ex ante bubble recognition and
forecasts. All forecasts there are press documented, and each bubble burst as
forecasted. The footnotes include additional press documentation and further
ex ante evidence of bubble gauges in published articles. Defining and
identifying bubbles ex ante are inseparable tasks.
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The
Effects of Shelf Registration on Cost of Debt
Dr. Debra Skaradzinski,
Siena College, Albany, NY
Dr. Allan Graham, University of Rhode Island, RI
Dr.
Pamela Stuerke, University of Rhode Island, RI
ABSTRACT
This paper
examines publicly traded bonds that were issued from 1995 through 1998 to see
whether shelf-registered debt is riskier than traditionally-issued debt, as
measured by issuance prices. Using a sample of new industrial issues, we
find that the yield of a bond issue is not significantly influenced by whether
the debt was shelf- or traditionally-registered. We also find that any
increased risk as a result of shelf registration is impounded in bond ratings,
which do significantly influence yields. We believe this implies that the
choice of registration method (shelf vs. non-shelf) is most likely an indicator
of firm size and capital structure rather than an indicator of firm risk, and
that potential changes in risk due to the expectation of increased leverage are
recognized by market participants prior to bond issuance. This paper
examines publicly traded bonds that were issued from 1995 through 1998 to see
whether or not the higher risk identified in shelf-registrations of debt (Moerhle
et. al., 2004) is priced at issuance. Earlier research on
shelf-registered debt (Allen, et al. 1990, Fung and Rudd 1986) found that
the method of issue was not significantly associated with bond price at issue,
so Moehrle et al.’s subsequent result was somewhat surprising.
Furthermore, Moehrle, et al.’s warning to regulators to consider
reexamining the issue of shelf registration, and to investors that they should
“beware of the inherent risks of shelf-registered securities,” emphasized that
this result had considerable economic repercussions. Shelf registration
was originally intended to allow stable, highly visible firms additional
flexibility in accessing capital markets. The mechanism of shelf
registration works like an option for the firms that utilize it. Firms
that shelf-register a specific amount of debt or equity securities are
subsequently allowed, but are not required, to issue those securities within two
years of registration.
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Twenty Years of
Advances in Accounting—1984 - 2003
Dr. Jeffrey J. McMillan,
Clemson University, Clemson, SC
Dr. Daryl M. Guffey, Clemson University, Clemson, SC
ABSTRACT
This paper provides a
description and categorization of the topical content appearing and research
methods employed in Advances in Accounting (AIA) since its inception in
1984. AIA was established to provide an important forum for discourse among and
between academic and practicing accountants. Its goal of being an outlet for
quality research across a wide spectrum of topics based on varying research
methodologies has resulted in a journal that arguably has the most unique mix of
articles among quality accounting journals. For twenty years Advances in
Accounting (AIA) has provided researchers an outlet for disseminating new
conceptual arguments, models, and proposals that enhance our existing knowledge
base. AIA was established to provide an important forum for discourse among
and between academic and practicing accountants on issues of significance to the
future of the discipline. Emphasis was placed, and still is, on original
commentary, critical analysis and creative research that would substantively
advance our understanding of financial markets, behavioral phenomenon,
regulatory policy, and accounting education. Over the years the trends in
contributors, topical content, and research methods utilized in various research
outlets has been examined (Hutchison and White 2003; Meyer and Rigsby 2001;
Urbancic and Zimmerman 1994; Carnaghan et al. 1994; Mitchusson and Steinbart
1993; Heck and Bremser 1986; Dyckman and Zeff 1984). Periodic analyses of the
content and methods used in an academic journal help identify the trends and the
most prolific authors that have had significant influence on the evolution of
accounting knowledge. It also helps one to better appreciate and understand
what the journal has been able to achieve over a time period.
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Trade Liberalization and Relative Performance Contracts in Import Competing
Industries
Dr. Ya-Chin Wang,
Department of Finance and Banking, Kun Shan University, Taiwan
ABSTRACT
To foster economic growth,
multilateral agreements within the WTO/FTA framework have inspired attention on
the wave of trade liberalization. Although a tariff raises revenue and may earn
profits from foreign firms, it sacrifices consumer surpluses and reduces the
social welfare for both countries. This paper introduces relative performance
contracts into a quality-differentiated market and examines how import policy
responds to this mechanism. It found that in an import competing model with
managerial delegation, free trade is optimal. Therefore, tariff imposing is not
only a beggar-thy-neighbor policy, but also a “lose-lose” solution. The
incentive contract plays a pivotal role on replacing trade intervention. Along
with the increasingly fierce competition in globalized market, many governments,
both in less-developed and developed countries, protect domestic industries
through adopting a variety of trade policies, and tariff and non-tariff
barriers. Authorities could adopt import protection on the basis of quality of
products to extract rent from foreign firms for increasing tariff revenue or
domestic welfare. For example, a higher tariff rate is imposed on a luxurious
car compared to a stock car. However, under the WTO (World Trade Organization)
and FTA (Free Trade Agreement) between countries, import tariff or trade
obstacles are not allowed. It explains why many countries alter their economic
policies towards free trade by opening markets and reducing tariffs. Simply put,
free tree enable foreign firms to trade as effectively and easily as domestic
firms.
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Modeling Market Adoption of a Retail Innovation over Time and Space
Dr. Arthur W. Allaway, The
University of Alabama,
Tuscaloosa, Alabama
Dr. David Berkowitz, The
University of Alabama in Huntsville, Huntsville, AL
ABSTRACT
Although the adoption of
innovations / diffusion of innovations literature is very rich, the spatial
study of adoption and diffusion has been limited - even though a large number of
innovations are launched into geographically defined markets. This paper
explores and models the driving forces of consumer adoption of a new loyalty
card program launched in a major U.S. metropolitan area. Event history modeling
is used to parameterize the effects of distance from the diffusion propagator,
the firm’s marketing efforts, the competitive environment, and the role of
previous adopters in influencing later adopters. The results yield new insights
into the understanding of adoption and diffusion across space and time. The
spatial tradition is central to the study of marketing. In retailing, in
particular, but in other areas as well, most marketing decisions have to take
into account their impact on the size, shape, depth, or dynamics of the existing
(or potential) customer base of the firm, i.e., the market area. One approach
to the study of spatial phenomena in marketing has involved the modeling of
consumer spatial behavior. Building on Reilly (1931), Huff (1964), and McKay
(1973), significant advances have been made in understanding how consumers make
choice decisions among different competitors in a market Craig, Ghosh, and
McLafferty 1984). Extensions in this area have considered the effects of image,
habit, loyalty, competitive strategies, variety-seeking, and misspecification
error in models of consumer spatial behavior (see, for example: Stanley and
Sewell 1976, Fischer, Nijkamp, and Papageorgiou 1990, Rust and Donthu 1995,
Fotheringham and Curtis 1999). A second approach to the study of spatial
processes in marketing has treated the market area itself as the unit of
analysis.
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The
Price-Earnings Relation: The Case of Arthur Andersen
Dr. Kirk L. Philipich,
University of Michigan, Dearborn, Dearborn, MI
ABSTRACT
The purpose of this study is
to examine the impact of auditor reputation on the price-earnings relation. More
specifically, this study examines annual earnings response coefficients (ERC)
before (2001 year-ends) and after (2002 year ends) the September 11th
through the primary Enron events (the shredding of audit documents on January
10, 2002, that substantially impaired Arthur Andersen’s reputation). Two
possibilities exist. First, the market may perceive that Andersen’s shredding of
audit documents, and its subsequent loss of reputation, may have caused
auditors, in general, to take greater care, thus increasing the reliability of
the reported earnings numbers. This would manifest itself by stronger reactions
to reported earnings. Alternatively, the market’s confidence in the reliability
of reported earnings may have eroded leading to smaller responses to reported
earnings. In addition, any resulting change in the market’s response to reported
earnings might be even more pronounced for Andersen clients. Statistical tests
reveal a significant decrease in ERCs in the post-period. However, upon further
examination, it is found that the clients of Deloitte and Touche and
PriceWaterhouseCoopers exhibited large declines in the market’s response to
their earnings releases. The clients of KPMG also saw declines, but not nearly
as dramatic as those of Deloitte and Touche and PriceWaterhouseCoopers. However,
the clients of Arthur Andersen and Ernst & Young saw their ERCs rise
substantially. This study investigates
the impact of a decline in auditor reputation on the price-earnings relation.
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The
Unintended Effects of the HIPAA Privacy Protections on Health Care Treatment
Team and Patient Outcomes
Dr. Kimberly Jarrell, SUNY Institute of Technology, Utica, NY
Dr.
Jan Welker, SUNY Institute of Technology, Utica, NY
Dr. Donna Silsbee, SUNY Institute of Technology, Utica, NY
Dr. Francis Tucker,
Syracuse University, Syracuse, NY
ABSTRACT
This study looked for
unintended consequences of the Health Insurance Portability and Accountability
Act of 1996 (HIPAA), legislation related to privacy of health care information.
More specifically, the study examined effects of the legislation on health care
teams and patient care outcomes. Findings revealed that both the quality and
flow of information between team members, including patients and their families
as co-producers of health care services, declined following the implementation
of the HIPAA Privacy Rules (Rules). Change in information flow had significant
negative effects on flow of services, patient satisfaction, team satisfaction
and quality of care. Change in information quality had no significant effects
on any of the outcome variables. Implications for policy and practice are
discussed by the authors. Key words: health and hospital administration,
teamwork, unintended consequences, public policy, co-production. The United
States Congress enacted the Health Insurance Portability and Accountability Act
(HIPAA) August 21, 1996 with a threefold intent: provide better access to health
insurance, limit insurance fraud and abuse, and administrative simplification
(New York State Office for Technology 2004). The latter intent included
requirements for the standardization of information transactions, the privacy of
individually identifiable health information, and the security of health
information and electronic signatures. The Rules actually took effect on April
14, 2003 (U.S. Department of Health & Human Services 2005) and the privacy
portion of the Rules is the subject of this research.
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Corporate Governance: Theory and Practice
Dr. Malek Lashgari, CFA,
University of Hartford, West Hartford, CT
ABSTRACT
Various theories and
philosophies have provided the foundation for the development of alternative
forms of corporate governance systems around the world. Furthermore, as
economies have evolved through time it appears that corporate executives have
deviated from the sole objective of maximizing shareholders’ wealth. Owners of
the capital have responded to these forces for the purpose of preserving their
wealth and earning a reasonable return on their invested capital. Whereas
internal corporate control, external financial market forces, and institutional
investors’ responses have been effective in securing shareholders’ wealth, legal
protection needs to be provided for them. As a legal entity, a corporation
enters into contracts to produce goods and services and it has the right to own
property. Furthermore, the firm can borrow from various lenders and raise cash
by issuing shares of its ownership. Shareholders would not only benefit from the
earnings generated by the corporation, but by electing members of the board of
directors they could indirectly oversee actions undertaken by the managers.
These managers, as agents of the shareholders, are expected to perform for the
best interest of the owners of the corporation. Corporate managers can add
value to common stockholders without decreasing the welfare of the other
corporate stakeholders. For example, borrowing a portion of the capital that is
needed for financing activities of the firm, would lead to a higher return to
common stockholders.
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An Evaluation of State Income Tax Systems and their Impact on State Spending and
Revenue - A Multi-State Study
Prof. Demetrios Giannaros,
University of Hartford, CT
ABSTRACT
The primary objective of
this study is to carry out a multi-state public finance behavioral impact
comparative analysis, regarding the introduction of the income tax system in
various states. The emphasis of this multi-state study is to determine whether
the introduction of an income tax system, a politically controversial issue,
resulted in significantly higher levels of state spending or taxation after the
introduction of such revenue system. We use econometric (such as interaction
variable analysis) techniques to evaluate whether a significant structural
change in state public policy on spending and taxation did materialize after the
introduction of the income tax in ten states. Our results do not show
behavioral consistency for the ten states under study--subsequent to the
introduction of the income tax. In the last few years, about forty five state
governments in the USA have struggled to cover unexpected large budget
deficits. The economic debate on the issue of state budget deficits revolved
around the level of state government spending and taxing, the appropriate form
of taxation, the impact of such forms of taxation on politicians’ behavior, and
the relative stability (steady stream of revenue) of alternative tax systems.
Some of the discussion and debate turned to the system of taxation and its
impact on the budget, spending, taxing and the state economy. This study
attempts to evaluate whether the introduction of the income tax system resulted
in behavioral changes in terms of taxing and spending by the state
legislatures. For this purpose, we use econometric techniques to determine if
there were structural changes after the introduction of the state income tax in
ten different states.
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Muse Air: Management in Crisis
Toby Pratt, Embry-Riddle
Aeronautical University
Dr. Marian Schultz, The
University of West Florida
Dr. James Schultz,
Embry-Riddle Aeronautical University
ABSTRACT
This paper details the variables
which led to the incorporation, operation and eventual demise of Muse Air. The
individuals involved with Muse Air, and its inexplicable ties to Southwest
Airlines, make this story unique. After its launch bad timing, poor strategy,
grueling competition, and unexpected obstacles plagued the fledgling airline.
After four years of operation in a post-deregulation environment with no
operating profits, Muse Air is sold to Southwest Airlines and eventually,
liquidated. This paper not only includes historical facts regarding the
organization of the airline, but also tells a story of a company, and the affect
it had on customers, employees and the management team. Lamar Muse is at the
head of Southwest Airlines as the first flight takes to the skies in June 1971.
Muse is the company President and CEO. Years later, Muse finds himself at the
helm of another airline, but this carrier bears his own name, Muse Air (Muse,
2002). Lamar Muse is no stranger to the airline industry. His experience
within commercial aviation is extensive, having worked in senior positions with
Trans-Texas Airways, American Airlines, Southern Airways, Central Airlines and
Universal Airlines (Leary, 1992). During his 12 years at Trans-Texas Airways (TTA)
as Secretary-Treasurer and Chief Financial Officer, Muse helps to transform the
carrier into one of the most profitable in the industry. TTA becomes only one of
two carriers to make a profit, and his success at TTA attracts the attention of
American Airlines, where he is recruited as Assistant Vice-President for
Corporate Planning (Leary, 2002). At
American Airlines (AA), one of Muse’s tasks includes the recommendation for a
new airplane to replace AA’s aging Convair fleet. But despite his recommendation
that the airline purchase the Boeing 737, AA selects the BAC One-Eleven, a
decision the airline would later regret due to performance and maintenance
problems.
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Consumer Loyalty – A Synthesis, Conceptual Framework, and Research Propositions
Dr. Lance Gentry, Missouri University of Science and Technology,
Rolla, MO
Dr.
Morris Kalliny, Missouri University of Science and Technology, Rolla, MO
ABSTRACT
Numerous conceptual and
empirical studies utilize the loyalty construct as a core part of their
theoretical work. These studies purport to explain if and why loyal consumers
are more profitable for firms, mental models of satisfaction and loyalty, and
guidelines for marketing strategies. However an objective view of the
literature shows little progress in approximately eighty years of research. In
this article, the authors propose a conceptual definition of consumer loyalty,
synthesize and discuss the
probable factors of loyalty
within a framework that is useful to scholars and practitioners.
In 1923, Copeland wrote an article describing the
theoretical relationship between brands and consumers’ buying habits. Albeit
with different terminology, he described a continuum of consumer loyalty that
incorporated both behavior and attitude. Throughout the next eight decades
researchers have argued for measurements of loyalty that were strictly
behaviorally based (e.g., Burford, Enis, and Paul, 1971; Cunningham, 1956;
Passingham, 1998; Olsen, 2002; Tucker, 1964) or strictly attitudinal based
(e.g., Bennett and Kassarijian, 1972; Guest, 1942; Jain, Pinson, and Malhotra,
1987; Perry, 1969). Many others have echoed Copeland’s original thought and
argued for a two-dimensional construct with both behavioral and attitudinal
components (e.g., Backman, 1991; Chaudhuri & Holbrook, 2001; Day, 1969; Gahwiler
and Havitz, 1988; Newman and Werbel, 1973; Oliver, 1999; Pritchard, Howard, and
Havitz, 1992). Tucker (1964) strongly advocated using a purely behavioral
measure of loyalty, not because he dismissed the importance of attitudes, but
because he predicted scholarly “chaos” would ensue if attitudes were included in
the operationizations of loyalty.
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A
Quantitative Review of Organizational Outcomes Related to Electronic Performance
Monitoring
Dr. D. Scott Kiker, Auburn University Montgomery, AL
Dr.
Mary Kiker, Auburn University Montgomery, AL
ABSTRACT
We employ meta-analysis to
assess the relationships between electronic performance monitoring (EPM) and
subordinate job performance, stress, and job satisfaction. We found that EPM
has a positive effect on performance quantity but a negative effect on
performance quality. However, the EPM-performance quality relationship was
moderated by task difficulty such that EPM improves performance quality when the
task is simple, but detracts from it when the task is complex. EPM was also
shown to be negatively correlated with employee job satisfaction and positively
associated with job stress. Implications of these findings, as well as
recommendations for future research are discussed. The widespread proliferation
of computer technology has significantly altered many traditional business
practices. In the context of monitoring employee performance, the availability
of these technologies has the potential to more accurately quantify indicators
of employee performance without the inherent shortcomings of human processing.
In addition, there may be significant cost savings associated with assessing
employee performance electronically. Electronic performance monitoring (EPM)
systems use electronic technologies to collect, store, analyze, or report the
actions or performance of individuals on the job (Nebeker & Tatum, 1993). A
2001 survey of U.S. corporations attests to the pervasiveness of EPM systems in
today’s organizations. Specifically, the American Management Association
reported that 78% of mid- to large-sized companies in the U.S. were conducting
electronic monitoring activities.
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Intertemporal Linkages Between Hong Kong and Shanghai Stock Markets Surrounding
the Handover of Hong Kong
Dr. Joseph French,
University of Northern Colorado, CO
ABSTRACT
The linkages between the
stock markets of Hong Kong and Shanghai are examined in this paper for the
period before, during and after the 1997 handover of Hong Kong. Return
relationships of the two markets are shown to have changed after the handover.
Variance decomposition and Granger Causality indicate an increasingly important
role of the Shanghai stock market relative to that of the Hong Kong stock
market. The two markets are shown to be cointegrated and results indicate that
this cointegration has increased after the handover. The existence of linkages
across different national stock markets has important implications for investors
who are seeking diversification opportunities internationally. When linkages
suggest co-movement between different markets, any one market would be
representative of the behavior of the group of markets. This would effectively
reduce the scope for portfolio diversification possibilities. This implication
has increased interest in the topic of market linkages and led many researchers
to investigate whether different markets are interrelated. This paper looks at
the intemporal linkages between the Shanghai and Hong Kong stock markets for the
periods before, during and after the handover of Hong Kong. The linkages across
markets that will be examined include contemporaneous co-movements, causal
relationships, responses to cross-market shocks, and long-run interdependence.
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Microfinance: Effects of Contingent Incentive Programs on the Performance &
Productivity of Loan Officers
Dr. Jamaluddin Husain,
Purdue University Calumet
Dr. Jay Jiwani, Roosevelt
University Chicago
ABSTRACT
Global interest in
alleviating poverty and assisting the poor through microfinance institutions
(MFI) continues to grow. Since the operation of microfinance services is
essentially labor extensive, the MFI industry is continuing to strive to
identify productivity improvement strategies for achieving cost-reduction.
Incentives are the best tools to motivate MFI employees and staff to align with
their organizations’ objectives. The purpose of the study is to provide an
overview of the incentive strategies available for and used by MFIs and its
impact on their outcomes, with a focus on the financial motivation of extrinsic
incentives to stimulate the productivity and performance of loan officers in
MFIs. The Central Intelligence Agency fact book (2007) reports there are over
6.5 billion people on this planet (www.cia.gov) of which approximately 1.2
billion people live on less than one dollar a day, and 2.8 billion people live
on less than two dollars a day (Holvoet, 2004; Stiglitz, 2002). The seminal work
of Stiglitz (2002), the winner of the 2001 Nobel Prize in economics, notes that
the greatest challenge to address is the growing problem of world poverty.
According to a Harvard Business School case study by Prahalad and Hammond
(2002), the vast majority of the world’s population is at the bottom of the
world pyramid. More than 62% (4 billion people out of 6.5 billion) of the world
population is thus classified as poor, and thus the potential of microfinance
institutions (MFIs) is enormous. Already there are over 10,000 MFIs
internationally and the number is growing. However, experts agree that less than
200 MFIs worldwide are self-sustaining while the remaining survive on donations,
grants and subsidies (as cited in Koveos, 2004).
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A
Geopolitical Issue: Energy at a Turning Point
Dr. Flory
Anette Dieck-Assad, Instituto Tecnológico y de Estudios Superiores de Monterrey,
Monterrey, N.L., Mexico
ABSTRACT
Petróleos Mexicanos
(PEMEX), a Mexican
state-owned company, is the only authorized by law to produce oil and gas in
Mexico. PEMEX can neither issue equity nor borrow money by selling bonds;
however, it finances one-third of the Federal Government expenses, leaving
scarce money for drilling activities and, thus, restricting its ability to
develop new reserves. PEMEX requires huge flows of investment in order to avoid
its financial bankruptcy and secure the energy supply for Mexico’s sustainable
development. The objective of the case is to place the student in the debate
about sustainable development that encompasses political, economic, financial,
and ethical decisions, in a geopolitical changing scenario where the “global
warming” issue is presenting a new challenge for doing business in the future. A
detailed Teaching Note is available from the author. In the foggy morning of
April 7, 2006, Elba Esther Gordillo Morales, national president of the Education
Syndicate—Sindicato Nacional de Trabajadores de la Educación (SNTE)—was staring
through the window. Suddenly, she decided to call for a reunion in her office
with Expert Consultants, Inc. (EC, Inc.). She needed their evaluation to know if
what she did in 2003 to support the energy reform was the right decision. As a
member of the Mexican Congress, she had supported the energy reform even though
the rest of the members of her political party, the PRI, decided not to support
it. As a result, she was expelled from her political party. She worried about
the repercussions that her decisions had caused. When she read the statement of
José Ramón Ardavín, undersecretary of Natural Resources and Environment—Secretaría
del Medio Ambiente y Recursos Naturales (Semarnat)—on April 1, 2006, she was
reminded of the effects her decision would have on Mexico’s energy future.
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Large Firms & Small Firms: Job Quality, Innovation and Economic Development
Dr. Richard Judd, University of Illinois at Springfield, IL
Dr.
Ronald D. McNeil, University of Illinois at Springfield, IL
INTRODUCTION
Economic development
strategies and methods must change. Why? Competition for new plants or
companies to locate in communities no longer comes from other communities,
counties or states. Competition for plants and companies has become global in
today’s flat economic landscape. Globalization of services and production along
with markets for goods, capital, services and currencies impacts decision-making
for all companies. However, within the United States, most federal programs for
economic development are written for the economy of the 20th century,
not that of the 21st century. In order to successfully compete in
the global environment, some experts are abandoning traditional approaches to
economic development. Rather than relying solely on recruiting large firms with
tax breaks, financial incentives and other inducements, more progressive
economic development experts are beginning to extend efforts to support the
growth of existing enterprises and to promote the practice of building
businesses from the ground up. The 21st Century Economic Development
Model has three complementary features which were not part of the 20th
century approach to economic development. The three features of the 21st
Century Economic Development Model are: (1) development and support of
entrepreneurs and small businesses; (2) expansion and improvement of the
infrastructure; and (3) development or recruitment of a skilled and educated
workforce.
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The
3D Transformational Leadership Model
Dr. Eli Konorti, P. Eng.,
University of British Columbia, Canada
ABSTRACT
One of the most interesting
topics of all times is leadership. Bass (1990) stated, “The study of history has
been the study of leaders–what they did and why they did it” (p. 3). The first
studies of leadership centered on theory. Researchers and scholars sought to
identify leaders’ styles and compare them to the demands or conditions of
society. In later years, as leadership became a topic of empirical study,
researchers, academics, and scholars alike attempted to understand and define
leadership. Definitions such as process, power, initiation of structure,
influence, and others began to emerge. Bass
(1990) postulated that scholars and researchers have debated and deliberated the
definition of leadership for many years. Bass wrote that there are as many
definitions of leadership as there are people attempting to define leadership.
However, as one looks at the evolution of the leadership field, a trend emerges.
The earlier definitions identified leadership as a movement and one that
consisted of individual traits and physical characteristics (Bass, 1990). In
later years, scholars used the term inducing compliance to describe the
role of the leader. More recently, the view of leadership has become one of
influencing relationships, initiating structure, and achieving goals (Friedman &
Langbert, 2000). Starting in the early 1930s, theorists used pictorial models
to explain their theories. The first few theories on leadership centered on
types of leadership such as autocratic, democratic, and laissez-faire (Wren,
1990). Theorists later expanded the field of leadership to include human
attributes such as ability and intellect. The leadership continuum started with
the study of traits and proceeded to behavioral, situational, and eventually,
contingency theories. Leadership models shifted their focus to leader traits and
personality.
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An
Analysis of Perceptions of Managers in Manufacturing Operations of Personal
Engagement in
Pre-Event Natural Disaster Planning
Dr. James L. Morrison,
University of Delaware, Newark, DE
Dr. G. Titi Oladunjouye,
Albany State University, Albany, GA
ABSTRACT
The findings of this study
suggest that managers in the manufacturing sector appear to be bystanders in
natural disaster preparedness planning. While they feel fairly confident
themselves about being able to contend with a natural disaster, they are
generally not actively engaged in planning process. Ironically, even though
they exhibit a self-confidence in their individual ability to take care of
themselves if a natural disaster struck, they are not satisfied with the
thoroughness of their current natural disaster pre-event planning process.
Natural disasters pose challenges for leaders, employees, customers, and
suppliers, among others, in both the short-term and long-term. In the face of
great uncertainty, there is generally little time in which to respond, and
employee decisions on how to proceed during a natural disaster can become
life/death issues. Therefore, the degree to which an organization undergoes
planning in anticipation of enduring a natural disaster is likely to affect the
success or failure of outcomes. Being involved in the planning process is
critical since policies and practices in place will likely have limited effect
if individuals are unaware of them or have little confidence in their effect.
Personal involvement in pre-event planning for eliminating situations or
conditions that interfere with an individual’s capacity to survive a natural
disaster may be critical in generating practices that are meaningful and
purposeful to the employees themselves. Perceiving a natural disaster as a
personal opportunity to get involved is also an act of engaging in a learning
process. By creating a mindset that participation is important, managers will
likely become more responsible for the success of their organization’s
preparedness.
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The
Effect of Extending the Trading Hours on Volume and Volatility:
The Case of Euronext Paris and Deutsche Boerse
Dr. Deniz Ozenbas,
Montclair State University, NJ
ABSTRACT
There is interest in both
academic literature and the finance industry about how extending the trading
hours in stock markets affect the trading volume and volatility in that market.
This study compares the extension of trading hours in Euronext Paris and
Deutsche Boerse that took place within a few months of each other. We show that
Euronext Paris was more successful in implementing the rule change in terms of
the trading volume and volatility patterns compared to Deutsche Boerse . How
extending the trading hours in stock markets affect the trading volume and
volatility in that market is an interesting question for both finance
practitioners and academics. In this study we compare the extension of trading
hours in Euronext Paris and Deutsche Boerse that took place within a few months
of each other. We investigate the trading volume and intra-day volatility
patterns in these markets and show that Euronext Paris was more successful in
implementing the rule change in terms of trading volume and volatility patterns
compared to Deutsche Boerse. For both Euronext Paris (Paris Bourse) and the
Deutsche Boerse we study the transaction records, during the year 2000, of
stocks that make up a major index. We use the BDM database of the Paris Bourse
for the transactions of the stocks that make up the CAC 40 index. The
transactions database of the stocks that make up the DAX 30 index was obtained
from the Deutsche Boerse. Trading hours at the Paris Bourse at the beginning of
2000 were 9:00 am to 5:00 pm. The hours were extended on April 1st to
9:00 am to 5:30 pm.
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A
Review of Employee Motivation Theories and their Implications for Employee
Retention within Organizations
Dr. Sunil Ramlall,
University of St. Thomas, Minneapolis, MN
ABSTRACT
The article provides a
synthesis of employee motivation theories and offers an explanation of how
employee motivation affects employee retention and other behaviors within
organizations. In addition to explaining why it is important to retain critical
employees, the author described the relevant motivation theories and explained
the implications of employee motivation theories on developing and implementing
employee retention practices. The final segment of the paper provides an
illustration with explanation on how effective employee retention practices can
be explained through motivation theories and how these efforts serve as a
strategy to increasing organizational performance. In today’s highly competitive labor market, there
is extensive evidence that organizations regardless of size, technological
advances, market focus and other factors are facing retention challenges. Prior
to the September 11 terrorist attacks, a report by the Bureau of National
Affairs (1998) showed that turnover rates were soaring to their highest levels
over the last decade at 1.3 % per month. There are indeed many employee
retention practices within organizations, but they are seldom developed from
sound theories. Swanson (2001) emphasized that theory is required to be both
scholarly in itself and validated in practice, and can be the basis of
significant advances. Given the large investments in employee retention efforts
within organizations, it is rational to identify, analyze and critique the
motivation theories underlying employee retention in organizations. Low
unemployment levels can force many organizations to re-examine employee
retention strategies as part of their efforts to maintain and increase their
competitiveness but rarely develop these strategies from existing theories.
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Determinants of Consumer Trust of Virtual Word-of-Mouth: An Observation Study
from a Retail Website
Dr. Shahana Sen, Fairleigh
Dickinson University, Teaneck, NJ
ABSTRACT
Research in communication
has found that audiences establish a speaker’s credibility by his or her
reputation, experiences and knowledge, as well as how much he or she can be
trusted in a given situation. Extending this research, consumer psychologists
have found that the persuasive power of person-to-person word-of-mouth
communication is higher than marketer-generated communication, such as
advertising and promotion. In this paper, we study consumers’ trust and
consequently their perceptions of the helpfulness of virtual word-of-mouth,
in the form of consumer reviews on the Web, that consumers have been
increasingly relying upon, and test our propositions using observation data from
an e-retail Website.
Enabled by new information
technologies, today’s consumers have real-time access to information, insight
and analysis, giving them an unprecedented arsenal to help make purchase
decisions (Delloitte, 2007). According to the Delloitte study, to build their
knowledge arsenals, consumers are turning to virtual word-of-mouth (or e-WOM) in
the form of online consumer reviews in large numbers, and these reviews are
having a considerable impact on their purchase decisions. According to the
Deloitte Consumer Products Group survey, almost two-thirds (62 percent) of
consumers read consumer-written product reviews on the Internet. Of these, more
than eight in 10 (82 percent) say their purchase decisions have been directly
influenced by the reviews, either influencing them to buy a different product
than the one they had originally been thinking about purchasing, or confirming
the original purchase intention.
The impact of word-of-mouth (WOM) on consumer
decision-making has long been established by consumer psychologists (Brown and
Reingen 1987; Feldman and Spencer 1965; Herr, Kardes and Kim 1991; among
others). WOM information has been described as the most powerful form of
marketing communication, and studies have shown that users find WOM more
believable than commercially generated information (Hutton and Mulhern 2002).
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The
Hewlett Packard – Compaq Computers Merger: Insight from the Resource-Based
View
and the Dynamic Capabilities Perspective
Preeta Roy, The Wharton
School, University of Pennsylvania, Philadelphia, PA
Probir Roy, University of
Missouri-Kansas City, Kansas City, MO
INTRODUCTION
In this paper,
we investigate the ongoing
challenges faced by consolidation in the technology industry. We focus on
two different paradigms to
explore value creation in acquisition events: the resource-based view (RBV) and
the dynamic capabilities perspective.
We utilize the RBV perspective and Dynamic capability perspective to analyze the
potential of technology mergers by focusing specifically on the merger of HP and
Compaq. The
HP-Compaq merger presents an interesting case in which these two paradigms can
be used to gain insight on potential outcomes. We begin with an overview of
relevant literature. We then analyze HP and Compaq in terms of resource mix and
the combined synergies that might arise from related resources. This is
followed by an analysis of each company’s acquisition experience to determine if
there exists the (dynamic) capability to integrate. Mergers and acquisitions
have been, and continue to be, a topic of great interest to researchers trying
to understand the factors explaining why some firms perform better in managing
the acquisition process than others. In managerial practice as well as in
academic writings, the management of the post-acquisition integration phase is
established as the single most important determinant of shareholder’s value
creation (or value destruction) in the acquisition process (Zollo, 2001). As
Zollo and Singh (2001) find, the type of acquisition (horizontal or market
extension) is an important variable to understanding performance implications.
In horizontal acquisitions, there exists a higher potential for
efficiency-driven costs reductions. This position pertains to the
resource-based view of the firm and the impact of resource (and market)
relatedness between the two firms. On the other hand, such acquisitions require
a more complex integration process. There are a greater number of potential
overlaps of resources and activities across the organizations and the
consequently large array of simultaneous, independent decisions and action steps
necessary to accomplish this integration.
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Identifying Global Leadership Competencies: An Exploratory Study
Cristina Moro
Bueno, Grupo Antolin, North America
Dr. Stewart L. Tubbs,
Eastern Michigan University, Michigan
ABSTRACT
The influence of
globalization and technology requires new business paradigms and new leadership
competencies. The goal of this study was two-fold. First, to test the Global
Leadership Competencies Model developed by Chin, Gu, and Tubbs (2001) and
secondly to identify Global Leadership Competencies. The model consists of a
pyramidal hierarchy that represents developmental phases analogous to Maslow’s
need hierarchy. The phases are (1) ignorance, (2) awareness, (3) understanding,
(4) appreciation, (5) acceptance/internalization, and (6) transformation as
leaders mature as a result of their international experiences. For this
qualitative study, 26 interviews were conducted with international leaders from
several countries whose average international expatriate experience was 48
months. Results obtained demonstrated that the model was predictive. The
results presented also indicate that leaders consider the following to be some
of the most important global leadership competencies: (1) communication skills,
(2) motivation to learn, (3) flexibility, (4) open-mindedness (5) respect for
others, and (6) sensitivity. For the full text see; Cristina Bueno. Global
Leadership Competencies (GLC) Model. MBA Thesis, Eastern Michigan University,
Ypsilanti, Michigan, 2003.
The research in leadership development has
recently turned toward identifying leadership competencies (knowledge, skills,
abilities and behaviors); Charan, Drotter and Noel, (2001); Fulmer and
Goldsmith, (2001); Goleman, Boyatzis and McKee, (2002); Tubbs and Moss, (2003);
Tubbs, (2004); Vicere and Fulmer, (1997).
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A
Conceptual Model for Operations-Analytics Convergence
Dr. Joseph O. Chan,
Roosevelt University, Schaumburg, IL
ABSTRACT
As businesses are trying to
differentiate themselves in a competitive market, leveraging business
intelligence to enhance business operations has become a top priority in
business strategies. In spite of huge investments in technologies, companies are
often not reaping the anticipated benefits. The disconnection between analytics
and operations prohibits the effective execution of business strategies. A
critical success factor in gaining competitive advantage is the ability to apply
the right analytics at the right time, to the right people, at the right place
and under the right situation. This paper proposes a conceptual framework for
the convergence of operations and analytics through the construct of the
operational-analytic classes for an enterprise. It further describes an
enterprise model for operations-analytics convergence. Applications of the model
to customer relationship management and supply chain management are explored.
The capability to adapt and respond to changes quickly is a necessary condition
for businesses to compete in the global economy. Making the right decision at
the right time has taken special meaning in the world driven by real-time
processing of information where the right time is typically now. The traditional
planning-execution cycle is getting shorter and the line between analytics and
operations is becoming blurred. Sub-optimal performance may result from not
being able to apply the right analytical results in real-time operational
situations. In today’s crowded market, traditional strategies in operational
efficiencies, product excellence and price may not by themselves provide the
necessary competitive advantage. Businesses are extending their value chain to
include their customers, suppliers and alliance partners.
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An
Analysis of the Incentives to Licensing in U.S. Information Technology
Dr. YoungJun Kim, The
George Washington University, Washington D.C.
ABSTRACT
This paper investigates the
validity of the potential factors that might affect the incentives of companies
to license out their technology. Empirical analysis is provided with the help of
a panel data set of observed licensing transactions worldwide involving
information technology (IT) companies publicly traded in the United States. Our
results show that transaction cost, market competition, and knowledge
appropriability considerations weigh in heavily in explaining the licensing
behavior. The important explanatory factors relate to the firm’s prior
involvement in technology licensing, the industry concentration, the sales
growth and the propensity to receive patents in the primary industry of the
company. Company’s stock of technological knowledge (patent), the company size
and R&D intensity also play a key role in determining manager’s licensing
incentive. There is anecdotal evidence that market for technology is less
developed than socially desirable and not well functioned. For example, a study
by British Technology Group found that large companies in the United States,
Western Europe, and Japan ignore a large amount of their patented technologies,
which could be licensed or profitably sold (British Technology Group, 1998). The
inefficiency of market for technology is caused by a number of impediments it
faces. The best-known obstacle to the efficient market for technology is the
“appropriability problem”. In his early paper, Arrow (1962) argues that once an
idea is disclosed to a potential buyer, it is possible for that buyer to use the
information without paying for it.
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Global Terrorism: Past Present & Future
Dr. Jack N. Kondrasuk, University of Portland, Portland, OR
Dan
Bailey, University of Portland, Portland,
OR
Matt Sheeks, University of Portland, Portland, OR
ABSTRACT
Terrorism has a deep
history with instances of terrorist-type activities being recorded in the Bible,
presently involving many of the world’s countries with all continents but
Antarctica recording one or more terrorist attacks in the last year, and has
many facets to examine. Those facets include knowing about the perpetrators and
their goals, the targets, the weapons, the events, and the effects of those
events. Presently, the United States is the top target in the World and is
likely to be so for the foreseeable future. Al Qaeda is probably the top
terrorist organization aiming at the U.S. with intentions of using more lethal
weapons and producing severe damage. The future will probably see a significant
reduction in ideological terrorism and increases in single-issue terrorist
groups attacking major cities with weapons of mass destruction. To better
prevent and respond to terrorism in the world it is necessary to understand its
origins. For the U.S. September 11, 2001, when the Twin Towers in New York were
destroyed by terrorists and over 3,000 people were killed, marked a rude
awakening to terrorism. In Spain the bombings in Madrid significantly changed
political policies. Australians found how terrorism could impact them from a
bombing of a tourist restaurant in Bali. Russians were reminded of terrorism in
their midst when hundreds were killed at a school in Beslan. Israel was reminded
of terrorism every time a suicide bomber blew up a restaurant in Israel while
Palestinians thought of terrorism when one of their leaders was assassinated.
People throughout the world need to understand terrorism. The purpose of this
paper is to enable us to understand terrorism so as to be better able to deal
with it. To this end, this paper will look at the origins of terrorism in the
world and how they have led to present day terrorism. . . and very importantly,
what can we expect regarding terrorism in the future? Before we can answer
questions about origin, prevalence and future, we must define our
topic—“terrorism.”
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The
Impact of Internal Control to E-commerce Activities on the Quality of Accounting
Information in the Banks Operating in Jordan
Dr. Jamal Adel Al-Sharairi,
Al Al-Bayt University, Amman, Jordan
ABSTRACT
The study aims to identify
the impact of Security and protection, legislation and laws on the quality of
accounting information in banks operating in Jordan, which are (22) banks. A
questionnaire was designed by the two researchers and distributed for this
purpose on the internal auditors in banks and non-executive committees emanating
from the Board of Directors who have direct contact with internal audit in each
bank, the number of questionnaires distributed were (150) questionnaires, (120)
suitable questionnaires were recovered for analysis, with the rate of recovery
reached (80%). The questionnaire data was analyzed using the (SPSS) and a number
of statistical techniques through descriptive statistics, arithmetic means,
standard deviations and percentages, the study hypotheses were tested by
multiple regression tests. The study found that there was no significant impact
for the combined independent variables (Security and protection , legislation
and laws) on the quality of accounting information, but there is a statistically
significant impact of Security and protection on the quality of its own
accounting information. The study recommends the interest of existing and
decision-makers in banks operating in Jordan to raise the level of legislation
and laws in order to positively affect the quality of accounting information in
those banks. Due to the need for accounting information which is constantly
growing, especially after the emergence of companies diversified large, thus
increasing the burden of information on banks, so that the assembly, operation
and data processing methods can produce different information that meets the
needs of its users from outside and within the economic units, and this requires
a system of internal control to e-commerce activities with high efficiency,
especially in the commercial banks as the incubator for companies capital
sectors, and the leading commercial banks in the use of electronic commerce and
assumed a lot of business.
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The
Metaphor Matrix: Improving Metaphor Usage in Management Education
Dr. John P. Meyer,
Iona College, New Rochelle, NY
Dr.
Theodore Schwartz, Iona College, New Rochelle, NY
ABSTRACT
In this article, we review
the use of metaphor in management education, explore the shifting boundaries
between metaphorical and literal language, and suggest some improvements that
can be made to the use of metaphors in the management classroom. To that end, we
demonstrate how the use of any single metaphor is insufficient and potentially
misleading. It is better to introduce students to a wide range of metaphors –
juxtaposing their strengths and weaknesses in a metaphor matrix – in order to
present a more accurate picture. While the use of metaphors in management
education is both widespread and ultimately very beneficial to understanding the
abstract elements of organizations and illuminating the practice of management,
there are dangers and consequences related to their application and
misapplication. Based upon three approaches to dealing with the dichotomy
between metaphorical language and literal language in management education – a
“black and white” approach, a “shades of gray” approach, and a newly proposed
“metaphor drift” approach – we suggest that it is possible to understand some of
the common hazards of organizational metaphors and make even better use of the
ever-expanding range of vivid organizational images in our teaching through the
use of a metaphor matrix. When teaching in the field of management, figurative
organizational representations such as metaphors are inevitable, given the
complexity of the subject matter (Weick, 1989). There are boundaries of
experience that literal language cannot easily cross, but that metaphorical
language can breach (Hatch, 1999: 96). Dramatic descriptions of organizations as
a living organism (e.g., Cafferata, 1982; Morgan, 1981) that grow and change
give life to the subject of management.
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On
Calling Convertible Securities – New Empirical Evidence
Dr. Camelia S. Rotaru, St.
Edward’s University, Austin TX
ABSTRACT
This study shows that cash
redemptions of convertible securities are associated with a positive abnormal
market reaction on the day following the announcement. I am attributing this
positive reaction to the coupon savings resulting from the redeeming the
convertible security for cash. Results also show that companies do not force
conversion of their securities in order to avoid financial distress. Rather, it
appears that companies choose to force conversion even though the average amount
of dividends paid on the common shares to be issued as a result of the
conversion is higher than the amount of coupons saved through forced conversion.
Moreover, results show no relationship between the abnormal return to a forced
conversion announcement and the company’s probability of bankruptcy. The call
provision allows the issuer to repurchase a bond at a specified call price
before the maturity date. In most cases, the redemption price of a callable bond
is initially set equal to the public offering price plus one year’s interest on
the bond. However, the call price usually decreases over the life of the bond.
The schedule of call prices typically scales the call premium to zero by a date
up to one year prior to the maturity of the bonds. Previous studies look at the
call feature of convertible securities. Some studies attempt to explain the role
of call protection on convertible securities. Other studies analyze the stock
price reaction to announcements of redemptions of convertible securities.
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Momentum Strategies on Optioned and Non-Optioned Stocks
Dr. Keh-Yiing Chern,
HedgeIQ Inc.
Dr. Susana Yu, Montclair
State University
Dr. Kishore Tandon, Baruch
College / CUNY
ABSTRACT
As implied by Mayhew and
Mihov (2004), an ideal control sample of non-optioned stocks used in comparing
or contrasting to optioned stocks must consider the liquidity and the volatility
of these stocks. Following this and the study by Chan, Jegadeesh, and Lakonishok
(1996), we study price and earnings momentum strategies on both optioned stocks
and selected non-optioned stocks over 1983 to 2002. The purpose is to examine
whether information issued by or related to non-optioned stocks have more
information contents than similar information regarding optioned stocks. We find
that both price and earnings momentum strategies can be applied more
successfully in the sample of non-optioned stocks than in the sample of optioned
stocks. This better performance in the sample of non-optioned stocks is
associated with the wider spread of earnings estimate revisions between the
winning portfolio and the losing portfolio, an indication of a richer
information content regarding the sample of non-optioned stocks than that of the
sample of optioned stocks. The evidence of return predictability constitutes a
controversial aspect of the debate on market efficiency. Jegadeesh and Titman
(1993) added a new twist to the literature by documenting that over an
intermediate horizon of three to twelve months, past winners on average continue
to outperform past losers, concluding that there is “momentum” in stock prices.
Investment strategies that exploit such momentum, by buying past winning stocks
and selling past losing stocks, predate the scientific evidence and have been
implemented by many professional investors. One explanation for the success of
momentum strategies is that the market responds only gradually to new
information and that previous information provides an ongoing source of
information about a firm’s prospects.
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