Export Flexibility and Hedging

The paper considers a risk-averse international firm which sells its output in either the domestic or the foreign market. The firm possesses export flexibility, and so it can choose between the domestic and export markets after considering the foreign exchange rate. It is shown that a separation property holds if the proper hedging instrument is used: the firm's production depends on market prices and technology and does not depend on its attitude towards risk nor on its expectations. A full-hedge proposition is derived.     

Academicians' and practitioners' views on the content and importance of the advanced financial accounting course

This study reports the results of a survey of accounting academicians and accounting practitioners in public and private accounting. The purpose of the study was to examine the content and importance of the advanced financial accounting course. The results indicate that most schools require the course for accounting majors and the topics most often covered are consolidations and business combinations, partnership accounting, governmental/nonprofit accounting, and foreign currency accounting. Regarding the respondents' perceptions of what should be covered in this course, academicians indicated that significantly more time should be devoted to consolidations and business combinations while accounting practitioners indicated that a broader range of topics should be covered in the course. Also, academicians are more in agreement with the statement that the advanced financial accounting course is a good indicator of students' analytical skills. The results of this study should be of interest to accounting departments that are reviewing their curricula and individuals teaching advanced financial accounting.     

Effects of EU dairy policy reform for Dutch dairy farming: a primal approach using GMM estimation

This paper estimates a production function for milk using ageneralised method of moments estimator to avoid the endogeneityproblem. Using the first-order conditions for profit maximisation,the economic effects for individual Dutch dairy farms of the2003 EU dairy policy reform are analysed. With an expected milkprice decrease of 21 per cent, profit decreases on average by22 per cent. EU direct payments compensate for roughly 53 percent of this fall in profit. The profit reduction means that69 per cent of all small farms have negative income from farming,compared with 15 per cent in the initial situation.     

RELATIVE EFFICIENCIES OF NON-LIFE REINSURANCE MARKETING METHODS

Abstract: This paper extends the study of the relative cost efficiency of insurance delivery systems from the primary market to the market for non-life reinsurance services. As in the primary market for insurance services there are two predominant methods of marketing reinsurance services: reinsurers who rely on employees, termed direct writers, and those who rely on brokers.
An extensive literature relating to the primary market for non-life insurance consistently indicates that independent agency insurers have a cost disadvantage relative to exclusive agency insurers. This literature also suggests that independent agency insurers may supply superior service but a continuing erosion of the market share of independent agency insurers suggests that the perceived service differential is not valued sufficiently to offset the perceived cost differential.
The authors find evidence that, cet. par., broker supplied reinsurers operate with lower costs than direct reinsurers but we find less convincing evidence of a service differential favoring direct reinsurers. More significantly, we observe that the largest component of the traditional measure of the reinsurer's cost is the commission paid back to the primary insurer: the seemingly lower cost brokers provide a higher net cost product. Yet brokers thrive in the marketplace suggesting the existence of a product differentiated by service or quality. With the important caveat that measures of service are imperfect and data is limited, we find no evidence of a service differential.     

The Role,Use and Activation of Strong and Weak Network Ties: A Qualitative Analysis*

abstract A characteristic of studies seeking to explain the structure and operation of networks is the use of Granovetter's strong and weak tie hypothesis. Whilst this hypothesis has become an established paradigm, questions and disagreements arise over its applicability at demonstrating the real use and value of each tie. This study extends the work of Granovetter. Using a qualitative ethnographic approach to explore in‐depth the networking activities of fourteen respondents, it aims to enhance understanding about the role of ties, how they are used and activated for business activity. Findings demonstrate that it is strong ties that are instrumental for business activity and used extensively to provide knowledge and information but also to maintain, extend and enhance business and personal reputations. Unless activities require their reactivation and manifestation, strong ties remain latent and dormant within the network. Strong ties also provide the mechanism to invoke ‘weak’ ties, represented by nodes operating in a wider social context.     

The impact of market conditions on the organizational structure and effectiveness of firms operating in Italy

In the past decade, several organization theorists have begun to examine the organization—environmental interface in the functioning of complex organizations and have argued that an organization's internal structural arrangement is contingent upon the demands of the external environment. The purpose of this article is to further examine the validity of the findings of these theorists with reference to firms operating in Italy. The variables studied consisted of: a) Market conditions—which was divided into the two categories of high and low competition. b) Decentralization of decision-making, and c) Organization effectiveness. To investigate the impact of decentralization on the organization effectiveness of firms under differing market conditions the statistical techniques of a Mann-Whitney U Test and Kendall's Tau Measure of Correlation were used to compute the scores. The resulting computations provide some support for the contingency theory of organization, but also indicates areas of disagreement.     

Portfolio analysis of asset and liability management in small-, medium- and large-sized banks

The paper presents an analysis of the commercial banking firm based on Markowitz portfolio analysis. A bank is treated as a portfolio of five banking assets and three banking liabilities. The average rate of return and risk of each asset and liability is estimated empirically for groups of banks categorized by size — small, medium and large. Banks' rates return on equity are defined as the weighted average of the assets' rates of return less the liabilities' rates of return. Quadratic programming is used to delineate the set of banking portfolios which have the maximum rate of return on equity at each level of risk.     

Presenting hypothesis testing by analogy

Auditing students often have difficulty with hypothesis testing. In this article, a concise approach for presenting hypothesis testing is discussed. Specifically, the author shows that the construction of an hypothesis test for the mean per-unit estimator is analogous to the formulation of such a test for auxiliary estimators. Because these tests are comparable, the approach encompasses a logical progression from the mean per-unit estimator to the auxiliary estimators. This approach enables students to perceive the similarities among these estimators and to better understand and assimilate the subject matter.