The introduction of seasonal unit roots and cointegration to test index aggregation optimality: An application to a Spanish farm price index

In this paper we present a methodological proposal of the way integration and cointegration analysis can best be used to test if the level of aggregation of an index is adequate. Using this proposal, we enquire the extent to which a Spanish aggregate farm price index captures the behavior of its components. First version received: October 1994/final version received: September 1998     

The Dynamics of Markups and Inventories in Retailing Firms

This paper is concerned with the interaction between price and inventory decisions in retailing firms and its implications for the dynamics of markups and the existence of sales promotions. We consider a model where a monopolistically competitive retailer decides price and inventories, and assumes lump-sum costs when placing orders or changing nominal prices. In this model, the existence of stockout probabilities and fixed ordering costs generate a cyclical price behaviour characterized by long periods without nominal price changes and short periods with very low prices ( i.e. sales promotions). We estimate this model using a unique longitudinal dataset with information about retail and wholesale prices, inventories, orders, and sales for several brands in a supermarket chain. Based on the estimated model we perform several counterfactual experiments that show the important role that inventories and fixed ordering costs play in the dynamics of retail prices and the frequency of sales promotions in this dataset.     

The bright and dark side of staging: Investment performance and the varying motivations of private equity firms

Previous papers that examined investment decisions by private equity funds are divided on whether staging has a positive or negative effect on returns. We believe these opposing views can be reconciled by studying when staging is used during the life of the investment relationship: We find that staging has a positive effect on investment returns in the beginning of the investment relationship, consistent with the notion that staging helps mitigate information asymmetry. However, staging appears to be negatively associated with returns when used prior to the exit decision. Our unique dataset allows us to measure these intertemporal effects precisely.     

An Integrated Model of Quality for Mass Services in the Context of the Ghanaian Retail Banking Sector

This study draws upon the service literature and operationalizes the investment model in the services domain to examine factors that contribute to customers’ desire to maintain service relationships with firms (i.e., retail banks) in an emerging economy in sub‐Saharan Africa: Ghana. We empirically test the explanatory power and robustness of the investment model using 218 customers of various banking institutions in Ghana. Results from partial least squares—structural equation modeling (PLS‐SEM)—reveal that (1) service quality is positively associated with customer satisfaction, investment size, and customer commitment; and (2) while customer satisfaction is positively associated with customer commitment, both investment size and quality of attractive alternatives are not associated with customer commitment. Interestingly, we found investment size to have a positive association with customer commitment only when fully mediated by customer satisfaction. Our model reveals that service quality and customer satisfaction predict 79.3% of the variation in customer commitment toward maintaining a service relationship with their retail banks. Discussion and managerial implications conclude the article. © 2015 Wiley Periodicals, Inc.     

Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective

This paper sheds light on the incongruent findings concerning the relationship between family involvement and firms’ corporate social responsibility (CSR). While prior studies have mainly taken the perspective of families’ socioemotional wealth preservation, we approach this relationship from the perspective of behavioral agency theory, highlighting the important role played by CEOs’ family memberships. Specifically, we posit that family firms are more likely to invest in CSR when their CEOs are members of the controlling families. Furthermore, we examine how family firms can employ long-term incentives to encourage non-family CEOs to act in the interests of the controlling families to preserve SEW and thus enhancing family firms’ CSR performance. We tested our hypotheses using hand-collected data of family firms included in the S&P 500 index, in the period of 2003–2010. The empirical findings support our hypotheses that (a) family firms with family members as the CEOs have better CSR performance and (b) family firms tend to provide a high level of long-term incentives to non-family than family CEOs. In addition, long-term incentives strongly motivate CEOs to improve firms’ CSR performance, regardless of their family memberships.     

Strategic decisions on bilateral bidding behavior: evidence from a wholesale electricity market

This article analyzes the strategic bilateral bidding behavior in the Spanish electricity wholesale market (OMEL). The collection of data includes information regarding weekly averages of spot prices, the quantity bid in the wholesale market, the quantities purchased in the wholesale market and sold in the open market, and the behavior of conduct parameters for the period from January 2002 to April 2007 for the four largest firms of the Spanish electricity market: Endesa, Iberdrola, Unión Fenosa and Hidrocantábrico. This article employs the New Empirical Industrial Organization approach. The empirical analysis was based on the autoregressive distributed lag approach to cointegration and on the Toda–Yamamoto Granger causality tests to validate the standard version of the theoretical formulation of the standard Cournot model, and its theoretical extension, to encompass the hypothesis of the presence of bid interdependence for electricity quantities sold and bought in the Spanish electricity wholesale market. The results of cointegration and causality analysis reinforce the empirical results of the extended Cournot model with the inclusion of the two main bidding variables that solved the optimization problem of profit maximization for each of the four firms analyzed.     

The effect of marketing regulations on efficiency: LeChatelier versus coordination effects

Government regulations designed to promote social welfare can have unintended consequences on efficiency. According to the LeChatelier Principle, regulations that effectively limit substitution possibilities among inputs will reduce firm and industry-wide efficiency. In imperfectly competitive markets, however, government constraints on a strategic variable can facilitate coordination. An advertising restriction, for example, would improve efficiency if it enables firms to produce the same level of sales with less advertising spending. We use data envelopment analysis to estimate the effect of marketing regulations on efficiency in the U.S. cigarette industry. Unlike previous studies, we do not assume that marketing and production technologies are separable. Our results demonstrate that coordination effects dominate LeChatelier effects. Cigarette producers have benefited from advertising restrictions, a result consistent with the capture theory of regulation.

A panel data approach to economic forecasting: The bias-corrected average forecast

In this paper, we propose a novel approach to econometric forecasting of stationary and ergodic time series within a panel-data framework. Our key element is to employ the (feasible) bias-corrected average forecast. Using panel-data sequential asymptotics we show that it is potentially superior to other techniques in several contexts. In particular, it is asymptotically equivalent to the conditional expectation, i.e., has an optimal limiting mean-squared error. We also develop a zero-mean test for the average bias and discuss the forecast-combination puzzle in small and large samples. Monte-Carlo simulations are conducted to evaluate the performance of the feasible bias-corrected average forecast in finite samples. An empirical exercise, based upon data from a well known survey is also presented. Overall, these results show promise for the feasible bias-corrected average forecast.     

Tools of Survival: Sovereign Wealth Funds in Singapore and China

The rise of sovereign wealth funds (SWFs) as major investors in the global economy has raised worries that they serve the geopolitical ends of owner countries. However, given the paramount importance of surviving domestic political competitions, SWFs are likely also tools of domestic political survival. In examining the corporate governance and underlying political environment in which SWFs in Singapore and in China operate, this paper further examines the role of political unity in directing SWF behaviour in authoritarian regimes. The main finding is that a highly unified autocracy is more likely to direct SWFs to maximise long-term profit, while a fragmented one like China is more likely to treat its SWF as an arena for domestic political and bureaucratic infighting. SWFs operating in a fragmented regime are unlikely to make long-term profit and foreign policy objectives top priorities, and their behaviour can be highly unpredictable.