Error management at different organizational levels - Frontline, manager, and company

The influence of service recovery efforts in the form of apology (error management) at three organizational levels - frontline, manager, and company - on consumer satisfaction and behavioral intentions was examined with a 2 × 2 × 2 experimental study. Results support the main effects of all three apology levels on consumer satisfaction with the service exchange (recovery) process. The results also indicate that frontline apology has greater influence on consumers’ satisfaction when a manager's apology is also present. Moreover, the study identifies perceived control and fairness as mediators of the relationships between apology levels and consumer satisfaction indicating potential theoretical and managerial implications.     

Outsourcing of front-end business processes: Quality,information, and customer contact

We examine the recent supply chain phenomenon of outsourcing front-end business processes in this paper. Few, if any, of the existing theories provide satisfactory explanation for the rapid growth in this area. We use a model proposed by Sridhar and Balachandran [Sridhar, S.S., Balachandran, B.V. 1997. Incomplete information, task assignment, and managerial control systems. Manage. Sci. 43(6), 764–778] to determine the factors that might contribute to this phenomenon. Our analysis reveals that the ability of the vendor to forecast the task environment without bias and to gain sophistication in interpreting contract terms might make the firm indifferent between outsourcing and retaining front-end processes in-house. We validate our findings against the work of Apte and Mason [Apte, U.M., Mason, R.O., 1995. Global disaggregation of information-intensive services. Manage. Sci. 41(7), 1250–1262], who develop a theoretical framework to identify criteria for companies to select services to be outsourced. They base their decisions predominantly on the nature of “customer contact.” The combined theories are shown to provide a rich framework for identifying customer-facing tasks that can be outsourced.     

Corporate governance and the information environment: Evidence from state antitakeover laws

We examine the relation between corporate governance and firms' information environments. We use the passage of state antitakeover laws in the U.S. as a source of exogenous variation in an important governance mechanism to identify changes in firms' information environments. We find that information asymmetry and private information gathering decreased and that financial statement informativeness increased following the passage of the antitakeover laws. Cross-sectional analyses indicate that the increased level of financial statement informativeness is attributable to firms that are most likely to access equity markets rather than managerial entrenchment, managerial career concerns, or managers' pursuit of the quiet life.     

BRITAIN TOO SANGUINE ON MINIMUM WAGE

This article examines and summarises the history and research regarding minimum wages in the USA and the UK. Despite a gradual shift in opinions among policy‐makers, empirical research generally confirms the traditional hypothesis that disemployment effects accompany the imposition of minimum wages that exceed the market wage.     

PRICE EFFECTS OF SHOPPING HOURS REGULATION: EVIDENCE FROM GERMANY

This article investigates the price effects of shopping hours legislation in order to evaluate empirically the theoretical argument that such regulations protect consumers from price increases. The paper first provides a review of the literature; it then analyses the data prior to and following the liberalisation of German shopping hours regulations in 2006 and 2007 in order to estimate the effects of these changes. The article finds that liberalisation resulted in a fall in prices. This conclusion adds to a growing body of literature suggesting that shopping hours regulations entail significant economic costs.     

TRACTABLE ROBUST EXPECTED UTILITY AND RISK MODELS FOR PORTFOLIO OPTIMIZATION

Expected utility models in portfolio optimization are based on the assumption of complete knowledge of the distribution of random returns. In this paper, we relax this assumption to the knowledge of only the mean, covariance, and support information. No additional restrictions on the type of distribution such as normality is made. The investor’s utility is modeled as a piecewise‐linear concave function. We derive exact and approximate optimal trading strategies for a robust (maximin) expected utility model, where the investor maximizes his worst‐case expected utility over a set of ambiguous distributions. The optimal portfolios are identified using a tractable conic programming approach. Extensions of the model to capture asymmetry using partitioned statistics information and box‐type uncertainty in the mean and covariance matrix are provided. Using the optimized certainty equivalent framework, we provide connections of our results with robust or ambiguous convex risk measures, in which the investor minimizes his worst‐case risk under distributional ambiguity. New closed‐form results for the worst‐case optimized certainty equivalent risk measures and optimal portfolios are provided for two‐ and three‐piece utility functions. For more complicated utility functions, computational experiments indicate that such robust approaches can provide good trading strategies in financial markets.     

The Textual Contents of Media Reports of Information Security Breaches and Profitable Short-Term Investment Opportunities

Information security-related incidents continue to make headlines. Interestingly, researchers have found mixed results when attempting to associate reports of information security breaches with changes in the affected firm's stock price. This research delves further into this puzzle by investigating the association between the textual contents of information security breach media reports and the stock price, as well as the trading volume reactions of the affected firm(s) around the breach announcement day. Our findings suggest that when the textual contents of breach reports provide more detailed information regarding the incidents, a more consistent belief is formed by the market about the negative impact of the reported security incident on the firm's business value. However, when there is a lack of specific information regarding the reported breach, the market does not seem to reach consensus on the impact of reported security incidents. We further demonstrate that different perceptions exist among general and sophisticated investors regarding the impact of reported information security incidents on a firm's future performance as demonstrated by changes in trading volume. By exploiting the different perceptions among investors, we form a trading strategy to demonstrate that, on average, one can make about 300% annual profit around the breach announcement day.     

Foreign competition for shares and the pricing of information asymmetry: Evidence from equity market liberalization

Using the equity market liberalization of 23 emerging market countries between 1996 and 2006, we examine how the degree of competition for a firm's shares affects the price of information asymmetry. We find evidence of a significant decline in the pricing of information asymmetry as countries remove regulatory restrictions on foreign ownership. Our study provides novel evidence on the link between the degree of competitiveness of equity markets and the price of information asymmetry. The work also furthers our understanding of the economic consequences of foreign stock ownership.     

On the optimal number of advertising slots in a generalized second-price auction

In search advertising, a search engine uses a generalized second-price auction to sell advertising slots adjacent to search results on its webpage. In this paper, we study an interesting question related to the design of the generalized second-price auction: how should a search engine strategically decide on the number of advertising slots? To answer this question, we analyze the implication of varying the number of slots in a base model in which the click-through rates are assumed to be independent of the number of slots. When deciding the number of slots, we find that a search engine’s profit is based on two counteracting factors: the incremental clicks from an extra slot and the influence of the extra slot on advertisers’ payments per click. Our analysis characterizes the conditions for optimality of the number of slots and the implications of different distributions for advertiser valuations. We also extend the base model to allow for attraction and cannibalization of clicks from existing slots by new ad slots and show how such effects affect the optimal number of slots. Our overall results show that search engines need to optimize the number of ad slots offered for auction in order to maximize profit.