What's different about banks?

Negotiable certificates of deposit (CD's) trade in the capital market in competition with other securities like commercial paper and bankers' acceptances. If CD's must pay lenders competitive monetary interest, the reserve tax on CD's is borne by bank borrowers. Viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk. Moreover, there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with CD's.     

Impact of narrative versus factual print ad copy on product evaluation: The mediating role of ad message involvement

The relative impact of narrative versus factual message strategies on product evaluation was explored. The role of ad message involvement (AMI) as a mediator was also investigated. Narrative versus factual print ad copy resulted in more favorable product evaluations for two fictitious brands, one each from the cell phone and sunglasses product categories. Narrative print ad copy also elicited higher ad message involvement which, in turn, mediate the differential effect of narrative versus factual copy on product evaluations. The study demonstrated one of the major pathways through which the relatively more persuasive effects of narrative versus factual print ad copy appears to operate. © 2007 Wiley Periodicals, Inc.     

Value versus Growth: The International Evidence

Value stocks have higher returns than growth stocks in markets around the world. For the period 1975 through 1995, the difference between the average returns on global portfolios of high and low book-to-market stocks is 7.68 percent per year, and value stocks outperform growth stocks in twelve of thirteen major markets. An international capital asset pricing model cannot explain the value premium, but a two-factor model that includes a risk factor for relative distress captures the value premium in international returns.     

Problems with detecting assumed mediation using the hierarchical multiple regression strategy

In human resource management (HRM) and allied fields (e.g., organizational behavior, management, and industrial and organizational psychology), tests of mediation are frequently conducted using the hierarchical multiple regression (HMR) strategy of Baron and Kenny [Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51, 1173–1182]. Although previous research has identified a number of serious problems with this approach, the present study adds to the literature by identifying yet additional problems with its use in inferring the existence of mediation. Using a statistical simulation, we found that certain patterns of correlation coefficients guarantee inferences about mediation, whereas other patterns preclude such inferences. On the basis of various analyses including logistic regression and inspection of three-dimensional plots, we identified patterns of correlation coefficients needed to satisfy Baron and Kenny's [Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51, 1173–1182] conditions for inferring mediation. The same patterns have no necessary relation to actual causal connections among variables in mediation models. Moreover, as a consequence of the failure of the HMR strategy to detect mediating effects, many instances of actual mediation in HRM and allied fields may have gone undetected. In view of the foregoing, we conclude that the HMR strategy should no longer be used in testing for mediation.     

Poisson Regression for Clustered Data

We compare five methods for parameter estimation of a Poisson regression model for clustered data: (1) ordinary (naive) Poisson regression (OP), which ignores intracluster correlation, (2) Poisson regression with fixed cluster‐specific intercepts (FI), (3) a generalized estimating equations (GEE) approach with an equi‐correlation matrix, (4) an exact generalized estimating equations (EGEE) approach with an exact covariance matrix, and (5) maximum likelihood (ML). Special attention is given to the simplest case of the Poisson regression with a cluster‐specific intercept random when the asymptotic covariance matrix is obtained in closed form. We prove that methods 1–5, except GEE, produce the same estimates of slope coefficients for balanced data (an equal number of observations in each cluster and the same vectors of covariates). All five methods lead to consistent estimates of slopes but have different efficiency for unbalanced data design. It is shown that the FI approach can be derived as a limiting case of maximum likelihood when the cluster variance increases to infinity. Exact asymptotic covariance matrices are derived for each method. In terms of asymptotic efficiency, the methods split into two groups: OP & GEE and EGEE & FI & ML. Thus, contrary to the existing practice, there is no advantage in using GEE because it is substantially outperformed by EGEE and FI. In particular, EGEE does not require integration and is easy to compute with the asymptotic variances of the slope estimates close to those of the ML.     

Plant Scale and Exchange‐Rate‐Induced Productivity Growth

This paper examines the impact of exchange rate movements on firm‐level productivity through changes in the scale of production. We employ plant‐level data to examine whether, and in what direction, exchange rate movements affect the scale of production, and how these changes in scale influence productivity. The paper finds that a real appreciation of the domestic currency reduces shipments and this negative effect is larger for exporters (both domestic and foreign owned). The paper also finds evidence that the appreciation‐induced reduction of scale negatively affects productivity at the plant level. This scale effect more than offsets any potential gains from the appreciation‐induced reduction in the price of imported inputs.