Fuzzy Numbers in the Credit Rating of Enterprise Financial Condition

Most of the parameters used to describe the credit rating are in linguistic terms, which are vague and difficult to put into precise numerical values. Fuzzy set theory, which was developed to handle this kind of vagueness, is used to represent and to aggregate the various linguistic data usually used in commercial banks. To illustrate the approach, numerical examples are solved and compared with existing approaches.     

A heteroscedasticity-consistent covariance matrix estimator for time series regressions

This paper provides a covariance matrix estimator for the ordinary least squares coefficients of a linear time series model which is consistent even when the disturbances are heteroscedastic. This estimator does not require a formal model of the heteroscedasticity. One can also obtain a direct test of heteroscedasticity, although Monte Carlo experiments show that it may have low power.     

International risk sharing and the choice of exchange-rate regime

This paper examines the argument that the fixed exchange-rate regime should be preferred to the flexible rate regime because the former allows risk sharing across countries while the latter does not. The analysis is performed in a two-country overlapping generations model, where markets are incomplete under all exchange regimes. It is shown that risks are pooled across countries when the equilibrium exchange rate is constant across states of nature, which arises under the fixed rate regime with or without capital restriction, and under the flexible rate regime without capital restriction. Risks are not pooled across countries when the equilibrium exchange rate is different across states of nature, which arises under the flexible rate regime with capital restriction. But in a model with incomplete markets, the ability to share risk across countries in the regimes with constant exchange rates does not necessarily lead to higher welfare than the inability to share risk in the regime with random exchange rates.     

Toward a Better Understanding of the Link Between Ethical Climate and Job Satisfaction: A Multilevel Analysis

Research concerning the relationship between psychological ethical climate and job satisfaction is popular in the literature. However, to date, no study in the literature has simultaneously investigated both the effects of individual-level and organization-level ethical climates on employees’ job satisfaction. On the basis of a multilevel analysis, the present study used a sample of 472 full-time employees from 31 organizations in Taiwan to examine the above two effects. Results from the analyses showed that within the organizations, individual employees’ instrumental climate perceptions were negatively related to job satisfaction, whereas their caring climate perceptions and rules climate perceptions were positively related to job satisfaction. Also, the results indicated that between organizations, organizational instrumental climate was negatively related to job satisfaction, whereas organizational caring, independence, and rules climates were positively related to job satisfaction. Implications for research and managerial practices were derived from these findings.     

A framework for the selection of Six Sigma projects in services: case studies of banking and health care services in Taiwan

This study develops a framework for effectively implementing service Six Sigma projects. The framework is composed of four phases: (1) initial project identification, which deploys candidate projects in accordance with a firm’s strategic goals, (2) project value assessment, which evaluates project’s value based on the financial return, cost, and its impact on employee behavior, (3) project complexity assessment, which examines scope, data availability, and risk associated with the project, and (4) project prioritization, which identifies Six Sigma projects and categorizes them into black belt and green belt categories. Two cases in banking and health care services are discussed to demonstrate the proposed framework.     

Evaluating Constructive Lease Capitalization and Off‐Balance‐Sheet Financing: An Instructional Case with FedEx and UPS

This case illustrates the effects of the proposed new lease standard by the Financial Accounting Standards Board and the International Accounting Standards Board on existing outstanding operating leases. Specifically, the case examines the effects of the proposal that all firms report existing operating leases as capital leases upon the initial adoption of the proposed standard. By applying a constructive capitalization model to two firms who rely on operating leases for financing, FedEx and UPS, we found that both companies would have to record billions of dollars of liabilities that had only appeared in the footnotes of their financial statements under the current lease standards. In addition, the firms would experience a decline in retained earnings and key financial ratios, such as the debt‐to‐equity, return‐on‐assets, and interest coverage ratios, by reporting operating leases as capital leases under the new proposed standard. Furthermore, the magnitude of the lease capitalization impact is much smaller for UPS than for FedEx.     

Exploring customer online reviews for new product development: The case of identifying reinforcers in the cosmetic industry

This study analyzes online customer reviews in order to investigate customers' preferences regarding cosmetic products. Based on the marketing firm theory, this research explores the possibility of enhancing the bilateral contingent relationships between the customer and the marketing firm within the cosmetics domain. Hence, this study applies market-search concepts by extracting customer reviews and employing text analytics to identify reinforcers and factors in cosmetic products, which customers are expecting, and their sentiments towards them. Our results suggest that some reinforcers are shared among all customers, but some vary among the different customer segments based on their age and skin tone.     

A comparison of alternative models for estimating firm’s growth rate

The growth rate plays an important role in determining a firm’s asset and equity values, nevertheless the basic assumptions of the growth rate estimation model are less well understood. In this paper, we demonstrate that the model makes strong assumptions regarding the financing mix of the firm. In addition, we discuss various methods to estimate firms’ growth rate, including arithmetic average method, geometric average method, compound-sum method, continuous regression method, discrete regression method, and inferred method. We demonstrate that the arithmetic average method is very sensitive to extreme observations, and the regression methods yield similar but somewhat smaller estimates of the growth rate compared to the compound-sum method. Interestingly, the ex-post forecast shows that arithmetic average method (compound-sum method) yields the best (worst) performance with respect to estimating firm’s future dividend growth rate. Firm characteristics, like size, book-to-market ratio, and systematic risk, have significant influence on the forecast errors of dividend and sales growth rate estimation.     

The Puzzle Between Banking Competition and Profitability can be Solved: International Evidence from Bank-Level Data

This article applies the GMM techniques for dynamic panels using bank-level data for 61 countries over the period 1992 to 2006 to re-investigate the impact of banking competition on profitability. The extant literature, which ignores influence factors, presents ambiguity towards the impact of banking competition on profitability. However, when the effects of a broad range of factors are taken into consideration, five conclusions are reached. First, along with the change in market structure, a higher degree of activity restriction enhances banks’ profits. Second, restrictions on the rights of commercial banks to engage in securities, insurance, and other non-banking-related business, along with restrictions on the entry of foreign banks into these markets, weaken the positive relationship between banking competition and profits. Third, a higher degree of efficiency within the judicial system and the added protection afforded to investors may weaken or else have no impact on the positive relationship. Fourth, the positive relationship may weaken in countries having a sound financial system or high income per capita. Finally, greater competitive pressure facing banks may weaken or eliminate the impact of banking competition on profit.     

Business group characteristics and affiliated firm innovation: The case of Taiwan

This paper investigates the relationship between business group factors and affiliated firm innovation in terms of patents granted. We examine the following factors for business groups: group affiliation, group diversification, inside ownership, and family ties. In emerging markets, business groups act not only as an internal capital market, but also as a platform for resource sharing among affiliates. We use Taiwan's business groups as a research sample to investigate how these group factors affect affiliated firms' innovation. The findings indicate that firms that are affiliated with business groups innovate better than their unaffiliated counterparts. Group diversification and family ties have positive effects on firm innovation, while inside ownership has no significant positive effect. Our study contributes to the innovation literature by shedding light on business group factors and firm innovation.