Lancaster's characteristics approach revisited: product selection using non‐parametric methods

In consumer theory, the principles of Lancaster's characteristics approach and hedonic pricing appear to offer the most promising insight into choice when qualitative aspects are important. The paper reconciles these principles with the family of non‐parametric frontier estimation methods known as data envelopment analysis. It is shown that, with some straightforward adjustments, DEA is entirely consistent with the characteristics view of consumer choice found in the economics literature. In making Lancaster's ideas operational, the paper also addresses the theoretical concern voiced by Lancaster about combining indivisible products. The principles are illustrated with a case study involving the comparison of diesel cars. The paper concludes that the user will ultimately have to apply some judgement in choosing between competing efficient products. However, the analysis should help to restrict the number of products to be assessed to manageable proportions. Copyright © 2002 John Wiley & Sons, Ltd.     

Expatriate compensation and its link to the subsidiary strategic role: a theoretical analysis

This paper focuses on the strategic design of expatriates' salaries. Unlike standard expatriation literature that assumes a lack of connection between strategy and international managers' compensation, we use the theoretical concepts from the international strategic management research to discuss how different international strategies affect the way expatriates are compensated. In this respect, the paper proposes a series of hypotheses on how expatriate compensation systems take shape according to the role that the expatriates may play in the internationalization process. The hypotheses refer to the type of incentives offered to encourage acceptance of the assignment, the type of criteria used to evaluate their performance and the reference unit used to establish variable compensation.     

Estimating the effect of overcrowding on tourist attraction: The case of Canary Islands

This paper analyzes the influence of the tourist’s perception of overcrowding on a destination’s appeal. To do so, the use of the population density estimates is suggested to measure degrees of overcrowding in a tourist area, which in this paper is undertaken using panel data analysis. A tourist demand model is estimated in the study case, which consists of a number of resorts located in five islands of the same archipelago, Canary Islands. This distinctive case of close but different destinations makes it possible to isolate variations in demand due to changes in population density and other supply-side factors from other demand-oriented ones. Annual tourists coming from two different European countries to the islands were considered as endogenous variables. The empirical findings provide an indicator of each island’s maximum capacity and test some policy measures laid down to extend these limits. The estimation of the effect of population density on demand can serve as a useful tool for planning the future development in destinations where tourist attraction is mainly based on the natural values of the site.     

The behavior of stock returns in the mining industry following the Iraq war

The aim of this article is to characterize the dynamics of stock returns of 10 leading mining firms over a politically unstable period, marked by 9/11 and the subsequent invasion of Iraq. To that end, we analyze the evolution of return volatility over time, examine the dynamics of volatility persistence, and test for the presence of volatility shifts. We also examine whether volatility and trading volume obey the one-factor mixture-of-distribution hypothesis (MDH). Finally, we analyze whether the performance of mining stock returns may be influenced by the evolution of the energy sector. The results suggest that firms which belong to the same industry did not necessarily exhibit identical patterns of return volatility. Secondly, shocks to volatility and volume are in general dynamically asymmetric, which violates the one-factor MDH. Thirdly, the metals and minerals analyzed exhibited different degrees of dependency on energy prices.     

Path modelling to bankruptcy: causes and symptoms of the banking crisis

This article studies the bankruptcy of US banks since 2009. It first analyses the financial symptoms that precede bankruptcy, such as low profitability, insufficient revenue or low solvency ratios. It also goes into the causes of these symptoms. It poses several hypotheses on causes of failure, such as loan growth (some of them risky), specialization (in this case concentration in real estate) and the pursuit of a turnover-driven strategy neglecting margin. It presents and tests a structural equation modelling based on partial least squares path modelling (PLS-PM) and logistic regression. Results show that, 5 years before the crisis, failed banks had, compared to solvent banks, the following: higher loan growth, higher concentration on real estate loans, higher risk ratios, higher turnover, but lower margins. A relationship is found between symptoms and causes. Failed banks present a significant relationship between the percentage of real estate loans and risk. This relationship is negative in excellent banks, confirming that they allocated less real estate loans with a high quality. Nonfailed banks compensated increases in risk by strengthening their core capital.     

Entrepreneurship research in service industries: a literature classification and trend analysis

In this paper, the influence of entrepreneurship on service management research is examined. Entrepreneurship research occupies a central place in organizational theory and strategic thinking, but its theories and models have little influence on business management. Entrepreneurship research can have a better integration with other areas of management, but there is still certain isolation. This article reviews the emerging areas in entrepreneurship research that provides complementary theoretical framework to service business models. In order to determine the areas in service management research in which entrepreneurship theories can be useful, a classification of the papers published in the last 2 years in the JCR service management journals is carried out. The study concludes that innovation is the most outstanding priority in service management research that can be enriched by entrepreneurial theories. The entrepreneurial approach to networks and institutional environment are the theoretical frameworks that better suit to introduce entrepreneurship variables as antecedents in business innovation models.     

How broker ability affects institutional trading costs

The present paper shows that broker research and trade execution ability has a significant impact on the cost of institutional trading. The results reveal that there is significant variation in the ability of brokers to control execution costs. Trades executed by brokers with stronger research ability exhibit a higher permanent price impact, whereas those executed by brokers with better execution ability exhibit a lower temporary price impact. Brokers are also found to specialize on an industry level that gives rise to variation in ability within a brokerage house.     

Determinants of the Euro Real Effective Exchange Rate: A BEER/PEER Approach

This paper presents an empirical analysis of the medium–term determinants of the euro effective exchange rate. The empirical analysis builds on synthetic quarterly data from 1975 to 1998, and derives a Behavioural Equilibrium Exchange Rate (BEER) and a Permanent Equilibrium Exchange Rate (PEER). Four different specifications are retained, due to the difficulties encountered in specifying an encompassing model. The results indicate that differentials in real interest rates and productivity, and (in some specifications) the relative fiscal stance and the real price of oil, have a significant influence on the euro effective exchange rate. Assessing the existence and the extent of the over– or undervaluation of the exchange rate is not straightforward, since these different specifications often lead to contrasting findings. However, all four specifications point unambiguously to the undervaluation of the euro in 2000, although the extent of this undervaluation largely depends on the specification chosen.     

What determines market development?: Lessons from Latin American derivatives markets with an emphasis on Chile

There is considerable heterogeneity in the development of derivatives markets in different countries. The question is: why? This paper addresses this question in the context of major derivatives markets in Latin America. The largest derivatives exchanges in Latin America are located in Argentina, Brazil, and Mexico. In addition, over-the-counter (OTC) markets exist in Chile and Peru. Excluding Peru, Chile's derivatives market is to date the least developed. We show that this is due to regulatory constrains and illiquidity. Domestic transactions are OTC, and consist mostly of exchange rate forwards. Recent changes in the Central Bank of Chile's exchange rate policy have not had a considerable impact on the aggregate trading volume of forwards. However, amendments made to the Law of Capital Markets in 2001 bring the possibility of having a more developed derivatives market in the future.