Incrementality of SME Loan Guarantees

In many countries, loan guarantee programs are important elements of government policy with respect to small- and medium-sized enterprises (SMEs). If loan guarantee schemes are to be effective, a majority of firms obtaining assistance through such a scheme ought not to be able to obtain financing from existing sources: a property known as incrementality or additionality. This paper describes a new approach to measuring incrementality. This work uses a two-stage process to estimate the incrementality of loans made under the terms of the Canada Small Business Financing (CSBF) program. First, a logistic regression-based model of loan outcomes (essentially a credit-scoring model) is estimated based on a large representative sample of SMEs. The resulting model was consistent with prior expectations and exhibited high levels of goodness-of-fit. The model was then employed to classify a sample of firms that had received loans under the terms of the loan guarantee scheme. Incremental loans ought to be classified as “turndowns” by the model; hence the proportion of loan guarantee recipients that the model classified as turndowns is a direct measure of incrementality. For the CSBF loan guarantee program incrementality was estimated (with 95% confidence) as 74.8±9.0%.     

Delineating Publicly Listed Family and Nonfamily Controlled Firms: An Approach for Capital Market Research in Australia*

Recent capital market research evidence suggests that a large proportion of public companies worldwide are characterized by controlling stockholders who are more often families, usually the founder(s) or their descendants. There has been considerable debate on whether “family” firms can indeed be accurately delineated from nonfamily firms given the diversity and abundance of family business definitions in the literature. This paper provides a robust definition of family business for the purposes of capital market research. Using an accounting‐based definition of family business, the paper outlines a four‐step procedure that provides validation for identifying family controlled companies listed on the Australian Stock Exchange. A significant feature of the research methodology was reliance on data collected from the Australian Securities and Investments Commission. Having access to the corporate regulator's restricted data enabled the researchers to establish important links between directors and their private related entities.     

Government Public Policy, Regulatory Intervention, and Their Impact on IPO Underpricing: The Case of Malaysian IPOs

This study examines the impact of government initial public offering (IPO) regulation intending on promoting public policy. The study examines the results of the implementation of a Malaysian government policy in 1976, which mandated that at least 30 percent of any new shares on an IPO offer be sold to the indigenous Bumiputera population or to mutual funds owned by them. The study examined the short-run and long-run underpricing of Malaysian IPOs and found that Malaysian IPOs are highly underpriced compared to IPOs in developing countries, creating a market microstructure effect. It also confirmed that the Malaysian government's regulatory intervention in spite of noble public policy intentions appeared to be the significant factor for the emergence of an average first-day underpricing increase of Malaysian IPOs by 61 percent during the period after the regulatory economic policy was instituted. Furthermore, the study found that this high underpricing persists even for the long run, in contrast to the long-run performance of IPOs in the United States.     

If you feel it now you will think it later: The interactive effects of mood over time on brand extension evaluations

While mood has been found to affect brand extension evaluations, the specific mechanisms by which it affects those evaluations remain largely untested. This study suggests that mood‐induced differences in cognitive processing style (relational vs. item‐specific elaboration) are possible explanations affecting brand extension evaluations. Results of two experiments showed that consumers in a positive (vs. negative) mood engaged in relational (vs. item‐specific) elaboration and consequently evaluated brand extensions and brand extension fit more favorably than consumers in a negative mood. The effects were found immediately after exposure (Experiment 1) and after a one‐week delay (Experiment 2). Theoretical and practical implications are discussed. © 2011 Wiley Periodicals, Inc.     

Detecting log-periodicity in a regime-switching model of stock returns

Log-periodic precursors have been identified before most and perhaps all financial crashes of the Twentieth Century, but efforts to statistically validate the leading model of log-periodicity, the Johansen–Ledoit–Sornette (JLS) model, have generally failed. The main feature of this model is that log-harmonic fluctuations in financial prices are driven by similar fluctuations in expected daily returns. Here we search more broadly for evidence of any log-periodic variation in expected daily returns by estimating a regime-switching model of stock returns in which the mean return fluctuates between a high and a low value. We find such evidence prior to the two largest drawdowns in the S&P 500 since 1950. However, if we estimate a log-harmonic specification for the stock index for the same time periods, fixing the frequency and critical time according to the results of the regime-switching model, the parameters do not satisfy restrictions imposed by the JLS model.     

Perspective: New Product Failure Rates: Influence of Argumentum ad Populum and Self‐Interest

A persistent myth in product innovation and management is that the failure rate of new products is 80% or higher. How does this false idea continue to displace the conclusions of empirical studies since 1977 that the new product failure rate is 40% or less? We examine the influence of a fallacy that encourages people's unthinking acceptance of ideas on new product failure rates and whose appeal rests primarily on an emotional, rather than a reasoned, argument. Self‐interest also plays a major role in keeping this myth alive.     

Performance Contracting In Practice: Experience and lessons from the water sector in Ghana

This article provides some insights into how performance contracting works in practice in a developing country context, using the case of the Ghana Water and Sewerage Corporation (GWSC). Performance contracting has been a useful instrument for restructuring the state-owned enterprises (SOE) sector in Ghana, and the GWSC has made some moderate improvements since its introduction. However, the article highlights some of the institutional constraints and capacity issues that reformers will have to pay attention to, including overstretched capacity of the monitoring agency, a weak information management system and inconsistent compliance to contract by government. The findings also highlight the difficulty of separating politics from operational/management issues, especially in politically sensitive public services, yet performance contracting relies on such separation to be effective. Also it shows how informal behaviour undermines the formality of performance contracting.