Continuous rainbow options on commodity outputs: what is the real value of switching facilities?

We develop real rainbow option models to value an operating asset with the flexibility to choose between two commodity outputs. We provide a quasi-analytical solution and a numerical lattice solution to a model with continuous switching opportunities between two commodity outputs, taking into account operating and switching costs. The models are applied to an illustrative case, demonstrating that the quasi-analytical solution and the lattice approach provide near identical results for the asset valuation and optimal switching boundaries. We find that the switching boundaries generally narrow as prices decline. In the presence of operating costs and temporary suspension, however, the thresholds diverge for low enough prices. A fertilizer plant with flexibility between selling ammonia and urea is valued in an empirical section using our real option models. Despite the high correlation between the two alternative commodities, ammonia and urea, there is significant value in the flexibility to choose between the two. Both strategic and policy implications for stakeholders in flexible assets are discussed, with some generalisations outside the fertilizer industry.     

The Tourinho model: neglected nugget or a receding relic?

This article evaluates Tourinho's (1979b Tourinho, O. A.F. 1979b. “The valuation of reserves of natural resources: an option pricing approach”. Berkeley: University of California. PhD thesis [Google Scholar]) work as one of the earliest contributors to the real options literature. His model pioneered the application of risk neutrality to uncertain investments, but his originality of introducing an option-holding cost albeit to overcome the extraction paradox is rarely imitated. We claim that the combination of a convenience yield and an option-holding cost produces a more satisfying representation. Moreover, variations in the holding cost give rise to a host of investment decisions ranging from the standard real option solution for a zero-holding cost to a net present value solution for an infinite-holding cost. Not only does the holding cost mediate between these two poles, but it provides the option seller (usually a landowner or a government) with a policy instrument for influencing the extraction timing and thus the extraction profit of the option buyer. We derive the holding cost that optimizes the landowner's combined value of the option premium, holding costs and eventual royalties.     

Enhancing the Accessibility of Accounting and Business Archives: The Role of Technology in Informing Research in Accounting and Business

The application of advanced digitization technologies to accounting and business archives has created new opportunities for accounting and business historians. The joint American Accounting Association and European Accounting Association Task Force (2006–2010) that examined digitization confirmed this. This paper explores these opportunities, along with some attendant challenges and cautions, with reference to the digitization of two significant archives located in Australia. The first is the archive of CPA Australia, a professional accounting association that has its beginnings in 1886 and which today has over 132,000 members. The second is the archive accumulated by the pre‐eminent accounting scholar Raymond Chambers during his long and extraordinarily productive tenure at the University of Sydney. Studies of surviving business records, biography and institutional history provide examples of scholarship that is enabled by digitization technology and which has the capacity to inform contemporary issues and debates.     

Political branding: sense of identity or identity crisis? An investigation of the transfer potential of the brand identity prism to the UK Conservative Party

Abstract

Brands are strategic assets and key to achieving a competitive advantage. Brands can be seen as a heuristic device, encapsulating a series of values that enable the consumer to make quick and efficient choices. More recently, the notion of a political brand and the rhetoric of branding have been widely adopted by many political parties as they seek to differentiate themselves, and this has led to an emerging interest in the idea of the political brand. Therefore, this paper examines the UK Conservative Party brand under David Cameron’s leadership and examines the applicability of Kapferer’s brand identity prism to political branding. This paper extends and operationalises the brand identity prism into a ‘political brand identity network’ which identifies the inter-relatedness of the components of the corporate political brand and the candidate political brand. Crucial for practitioners, this model can demonstrate how the brand is presented and communicated to the electorate and serves as a useful mechanism to identify consistency within the corporate and candidate political brands.     

Rising top-income persistence in Australia: Evidence from income tax data

Using income tax administrative data for Australia, we examine levels and trends in the persistence in top-income group membership, focusing on the top 1 percent. Top-income persistence increased markedly between 1991 and 2018, with most of the increase occurring in the mid-2000s and early 2010s. In the mid- to late-2010s, Australian top-income persistence rates were near the top of the range of tax-data estimates for other countries. We decompose the increase into factors associated with (i) changes in the composition of the top-income group and (ii) increases in persistence rates for specific population subgroups. We find that the rise in top-income persistence is accounted for by changes in subgroup persistence rates, notably for individuals aged 35–64, and especially those aged 55–64. We suggest that these effects are partially related to increases in the effective retirement age over the relevant period.     

The effects of ownership concentration and corporate debt on corporate divestitures in Chinese listed firms

This study examines how ownership concentration and corporate debt impact corporate divestitures in China. Corporate divestitures reduce the asset base of a company and the opportunity for expropriation by majority shareholders. In emerging economies, weak legal institutions, combined with equity ownership concentration and high corporate debt, allow majority shareholders to avoid such disciplines. Consequently, the relationship between these governance mechanisms and divestiture activity exhibits a pattern that is different from that in developed economies. Using archival data collected from 1,210 Chinese listed companies during 1999–2003, we found that ownership concentration by the largest shareholder depressed corporate divestitures both in state-controlled and in non-state-controlled firms. The negative effect of corporate debt on divestitures only existed for state-controlled firms. Our finding provides corroborating evidence for principal–principal conflicts in emerging economies. It suggests that corporate strategy in these countries can be better explained by taking into account the unique agency problems that are prevalent in these economies.     

Organizational values and procedures as antecedents for goal interdependence and collaborative effectiveness

Organizational values of people and respect and interdependent structures of team procedures and task interdependence may help departments believe their goals are cooperative and thereby coordinate effectively. CEOs in China completed measures of their organization’s values and interdependent structures and their Vice-Presidents completed measures of the department’s goal interdependence (cooperative, competitive, and independent) and collaborative effectiveness. Structural equation analysis suggested that values and interdependent structures promote cooperative, but not competitive or independent, goals that in turn results in collaborative effectiveness. These results, coupled with previous research, were interpreted as suggesting that people and respect values, team procedures, task interdependence, and cooperative goals are complementary foundations for synergy in China and perhaps other countries as well.

Insurance,credit, and technology adoption: Field experimental evidencefrom Malawi

Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take-up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the uninsured loan. There is suggestive evidence that reduced take-up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract: insured loan take-up was positively correlated with farmer education, income, and wealth, which may proxy for the individual's default costs. By contrast, take-up of the uninsured loan was uncorrelated with these farmer characteristics.     

Combining stated and revealed choice research to simulate the neighbor effect: The case of hybrid-electric vehicles

According to intuition and theories of diffusion, consumer preferences develop along with technological change. However, most economic models designed for policy simulation unrealistically assume static preferences. To improve the behavioral realism of an energy–economy policy model, this study investigates the “neighbor effect,” where a new technology becomes more desirable as its adoption becomes more widespread in the market. We measure this effect as a change in aggregated willingness to pay under different levels of technology penetration. Focusing on hybrid-electric vehicles (HEVs), an online survey experiment collected stated preference (SP) data from 535 Canadian and 408 Californian vehicle owners under different hypothetical market conditions.Revealed preference (RP) data was collected from the same respondents by eliciting the year, make and model of recent vehicle purchases from regions with different degrees of HEV popularity: Canada with 0.17% new market share, and California with 3.0% new market share. We compare choice models estimated from RP data only with three joint SP–RP estimation techniques, each assigning a different weight to the influence of SP and RP data in coefficient estimates. Statistically, models allowing more RP influence outperform SP influenced models. However, results suggest that because the RP data in this study is afflicted by multicollinearity, techniques that allow more SP influence in the beta estimates while maintaining RP data for calibrating vehicle class constraints produce more realistic estimates of willingness to pay. Furthermore, SP influenced coefficient estimates also translate to more realistic behavioral parameters for CIMS, allowing more sensitivity to policy simulations.