Bank generic strategies: does Porter's theory apply in an international banking center

This study examines banks' competitive strategies and their relationship with performance in a highly internationalized banking center, Hong Kong. The factor analysis results have, by and large, provided support to Porter's three strategy typology. Nevertheless, the empirical findings from the cluster analysis and the subsequent inter-group comparison of performances have cast doubt on Porter's stuck-in-the-middle proposition by demonstrating that banks adopting a multi-strategic approach did outperform other strategically monotonous rivals. While the stuck-in-the-middle proposition is grounded in the premise of inherent inconsistencies for pursuing more than one generic strategy simultaneously, the resource-based view and the present empirical findings hint at the feasibility for well-resourced banks to combine apparently incompatible value creating activities in a synergistic way to achieve integrated flexibility and consequently, a sustainable multi-strategic position. It is suggested that this feasibility very much depends on a bank's organizing and coordinating capabilities that are developed and refined through managerial commitment, learning and experience, as well as a careful assessment of various organizational activities and its inter-relationships within the entire business system.     

Understanding organizational citizenship behavior from a cultural perspective: An empirical study within the context of hotels in Mainland China

Scholarly concerns in organizational citizenship behaviors (OCBs) have increased dramatically over the past two decades. Nevertheless, there are significant issues yet to be addressed and resolved, one of which relates to the influences of cultural values on such voluntary behaviors. In view of the importance of OCB in meliorating hotel service and cultivating customer loyalty, the current study seeks to investigate a possible mechanism through which Chinese values (CVs) may function on employee citizenship behaviors within the hotels in Mainland China. The research questions focus on whether CVs have a direct impact on OCB and its verified antecedents, leader–member exchange (LMX) and employee organizational commitment (OC). Eventually, the research findings have verified the conceptual model and confirmed all the postulated linkages among the constructs under study.     

An empirical study of voluntary transfer pricing disclosures in China

This paper empirically investigates the factors that affect the management’s voluntary disclosures of the transfer pricing details of related-party transactions. Using Chinese data from 2004 and 2005, we hypothesize and find that firms that make voluntary disclosures of the pricing methods of related-party transactions are negatively associated with (i) a higher level of earnings management (as captured by abnormal related-party transactions) and (ii) its underlying incentives (as captured by the management’s performance-linked bonuses and the firm’s incentives to achieve earnings targets); further, they are positively associated with (i) a higher percentage of independent directors and (ii) a higher percentage of government ownership. Overall, our findings suggest that earnings management and its incentives, board composition, and ownership structure significantly influence the voluntary disclosure decisions of managers.     

Progressive taxation and the intensity and timing of investment

This paper examines the effect of progressive taxation on a firm's investment intensity and timing decisions using a real options approach. The firm possesses a perpetual option to invest in a project at any instant by incurring an irreversible investment cost at that time. The amount of the irreversible investment cost determines the intensity of investment that augments the value of the project. Tax progression is specified in a particular case of a constant marginal tax rate with an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. We show that the firm's investment decisions are neutral to tax progression only when the exogenously given tax exemption threshold is sufficiently large. When tax neutrality does not hold, we show that progressive taxation has a perverse effect on investment intensity. Finally, we show that progressive taxation induces the firm to invest earlier as compared to the case under proportional taxation (i.e., in the absence of any tax exemption).     

Regret theory and the banking firm: The optimal bank interest margin

This paper examines the optimal bank interest margin, i.e., the spread between the loan rate and the deposit rate of a bank, when the bank is not only risk-averse but also regret-averse. Regret-averse preferences are characterized by a utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the presence of regret aversion raises or lowers the optimal bank interest margin than the one chosen by the purely risk-averse bank, depending on whether the probability of default is below or above a threshold value, respectively. Regret aversion as such makes the bank less prudent and more prone to risk-taking when the probability of default is high, thereby adversely affecting the stability of the banking system.     

Exchange rate volatility and bilateral exports of Malaysia to Singapore,China, Japan,the USA and Korea

This study examines the impact of exchange rate volatility on bilateral exports of Malaysia to Singapore, China, Japan, the USA and Korea. Exchange rate volatility is estimated by an autoregressive conditional heteroscedasticity model. The Johansen cointegration method and the dynamic ordinary least squares estimator are used in the estimations. There is some evidence of exchange rate volatility to have significant impact on real total exports in the long run, but more evidence of exchange rate volatility is found to have significant impact on sub-categories of real total exports in the short run. The impact of exchange rate volatility differs across bilateral exports. The impact of exchange rate volatility on exports can be negative or positive. Generally, exchange rate volatility is not harmful to bilateral exports of Malaysia.     

EXPORT AND HEDGING DECISIONS UNDER CORRELATED REVENUE AND EXCHANGE RATE RISK

This paper examines the behaviour of a competitive exporting firm under joint revenue and exchange rate risk. The firm can trade unbiased currency futures contracts for hedging purposes. We show that neither the separation theorem nor the full‐hedging theorem holds when the revenue shock prevails. If the correlation between the revenue shock and the random spot exchange rate is non‐positive, the firm optimally produces less than the benchmark level when the revenue shock is absent. If, in addition, the firm is prudent, the optimal futures position is an under‐hedge. Finally, we derive sufficient conditions under which the firm's optimal output level is higher in the presence than in the absence of the revenue shock. Operational hedging and financial hedging as such interact in a complicated way to better cope with the multiple sources of uncertainty faced by the firm.