Exchange rate exposure among European firms: evidence from France, Germany and the UK

We investigate the pre-Euro exposure to exchange rate changes of large firms in the UK, France and Germany. We find that the exchange rate sensitivity is considerably stronger than previously thought. In all three countries, firms typically gain value when their local currency depreciates against the US dollar, yet most UK firms lose value when sterling depreciates against the European currency unit. We also document the existence of an intriguing intervalling effect in the measurement of exchange rate exposure, which suggests that share prices might exhibit a delayed response to information, and prevents us from making robust generalizations concerning other exchange rate sensitivities.     

Interplay between reputation and growth: the source,role and audience of reputation of rapid growth technology-based SMEs

Abstract

Drawing on resource-based view and signalling theory, this paper presents a comparative case of four (young vs. old; small vs. medium-sized) business-to-business firms to examine how (i.e. through which sources), why (i.e. for which managerial purposes) and for whom (i.e. for which audiences) do technology-based small and medium-sized enterprises build their reputation along the process of rapid growth? The results indicate that in the pre-growth stage product awards as well as technological and financial partners are important sources of reputation for demonstrating technological capabilities and firm sustainability to potential customers especially for young firms. Older firms, in turn, rely on technology partners and acquisitions in the rapid growth stage to convince existing customers that the firms’ can keep up with their customer’s changing needs. Moreover, the reputation gained from the first well-known customer and a focused clientele appear to be two critical antecedents of rapid growth whereas patents do not seem to have a significant reputational role in rapid growth. Our study informs the theory of reputation development of growing technology-based firms by abstracting a more nuanced understanding of stakeholder- and stage-contingent reputation that fosters rapid growth, and provides new insight into the literature on small firm growth.     

The power of goal internalization: studying psychological empowerment in a Venezuelan plant

This study, based in a manufacturing plant in Venezuela, examines the relationship between perceived task characteristics, psychological empowerment and commitment, using a questionnaire survey of 313 employees. The objective of the study was to assess the effects of an organizational intervention at the plant aimed at increasing productivity by providing performance feedback on key aspects of its daily operations. It was hypothesized that perceived characteristics of the task environment, such as task meaningfulness and task feedback, will enhance psychological empowerment, which in turn will have a positive impact on employee commitment. Test of a structural model revealed that the relationship of task meaningfulness and task feedback with affective commitment was partially mediated by the empowerment dimensions of perceived control and goal internalization. The results highlight the role of goal internalization as a key mediating mechanism between job characteristics and affective commitment. The study also validates a Spanish-language version of the psychological empowerment scale by Menon (2001).     

Implications of Short Selling for Corporate Finance

Corporate managers often view short sellers as market manipulators whose actions drive their company's stock price below intrinsic value. But recent academic research suggests that some short sellers are effective in processing publicly available information and that their short selling may provide useful information to market participants. This article summarizes the authors’ own published research, which provides evidence of informed short selling by linking it to changes in corporate fundamentals. More specifically, the authors’ findings indicate that increases in short interest are reliable indicators of an economically (as well as statistically) significant decline in a company's operating performance over the following three years. And when examining changes in short interest around announcements of seasoned equity offerings, the authors also find a negative relation between an increase in short interest and future operating performance. In addition, they find that the greater the increase in short interest in the period leading up to the SEO announcement, the more negative is the stock‐price response to the announcement itself. The authors’ findings suggest that corporate managers can benefit from monitoring the short‐selling activity in their company's stock. Short‐selling data can be used to reassess corporate strategy or rethink major corporate decisions that have been announced but not carried out, and take preemptive actions to forestall impending future declines in performance and so preserve value.     

Indian Consumer Attitudes Toward Food Safety: An Exploratory Study

The aim of this research is to segment Indian consumers based on their attitudes toward food safety and to demographically characterize each segment with sound risk communication strategies and outreach program may be developed to target vulnerable groups. This article uses exploratory factor analysis and hierarchical cluster analysis to find the factors that accentuate consumers’ attitude toward food safety and generalizes the heterogeneity of consumer attitudes based on five factors: apprehension, trust, appetence for a high degree of regulation, acknowledgment from foodborne illness, and propensity for the right to purchase foods that are not guaranteed to be safe.     

Factors Affecting New Product Success: Cross-Country Comparisons

Although considerable effort has been devoted to identifying the factors that contribute to new product success and failure, plenty of work remains to be done in this area. For example, many studies of this subject focus on companies in specific parts of the world (in particular, North America, Europe, and Japan). It remains to be seen whether the findings from these studies apply to the new product development (NPD) efforts of companies in other regions, let alone on a global basis. Sanjay Mishra, Dongwook Kim, and Dae Hoon Lee address this issue in a study of the factors that contribute to the success or failure of NPD efforts in South Korean firms. To explore the question of whether a global set of success factors can be identified, they compare their findings with those of similar studies conducted in Canada and China. Classifying these countries in terms of stages of economic development (with China and Canada at opposite extremes and Korea in the middle), they expect to find the greatest dissimilarities in their comparisons of China and Canada. Marketing managers from 144 Korean firms provided in formation about 288 successful and unsuccessful products. Their responses indicate that the factors most closely related to new product outcomes in Korea are market intelligence, product-firm compatibility, the nature of the new product idea (for example, whether the product idea was market derived, whether the product specifications were clearly defined by the marketplace), launch effort, and general characteristics of the new product venture (such as the product's innovativeness to the market and its technical complexity). Several of these factors were emphasized in studies of Canadian and Chinese NPD success, though respondents to those studies also highlighted the importance of the product offering and proficiency of formal NPD activities. Contrary to expectations, China and Canada show the greatest similarity among the three countries studied, in terms of the relative importance of the various NPD success factors. On the other hand, China and Korea are more similar in terms of the effects of the variables studied. In other words, if a variable is related to new product failure in Korea, that variable is most likely also related to failure in China. Although some similarities are evident among all three countries, the findings in this study do not point toward a single, global formula for NPD success.     

The Asymmetric Impact of Monetary Policy on Currency Markets

This study examines whether tightening and easing actions of the Federal Reserve symmetrically influence currency markets. Using daily data on four exchange rates from 1989 to 2001, we find that changes in the Fed's interest rate target are positively related to changes in the value of the dollar. Surprises associated with monetary tightening have a larger announcement effect as compared to monetary easing for the British pound, German mark, and Canadian dollar, whereas the opposite is true for the Japanese yen. The results appear to be driven by the reactions of foreign central banks to Fed actions, the Fed's credibility as a policymaker, and by the change in the Fed's disclosure policy beginning in 1994.     

Optimal inflation persistence: Ramsey taxation with capital and habits

Ramsey models of fiscal and monetary policy featuring time-separable preferences and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit persistence predicts highly persistent inflation. The result depends on increases in either the ability to smooth consumption or the preference for doing so. The effect operates through the Fisher relationship: a smoother profile of consumption implies a more persistent real interest rate, which in turn implies persistent optimal inflation. Our work complements a recent strand of the Ramsey literature based on models with nominal rigidities. In these latter models, inflation volatility is lower than in the baseline model but continues to exhibit little persistence. We quantify the effects of habit and capital on inflation persistence and also relate our findings to recent work on optimal fiscal policy with incomplete markets.     

Short Selling and Firm Operating Performance

While it is well known that short selling predicts future negative stock price performance, it has not been established whether short selling predicts future negative operating performance. We find that firms in the top decile of increases in short interest (an increase of about four percentage points) experience a 21% subsequent decline in operating performance relative to matched control firms. The greater the increase in short interest, the larger the decline in operating performance. The results are robust to alternative performance measures and to sample splits based on firm size. These results suggest that short interest may reflect private information about firm fundamentals rather than other factors that may drive stock price changes.     

Cross-border linkages among Asian closed-end funds

This study investigates the behavior of nine Asian closed-end country funds traded on the NYSE over the period 1990–2001. The results indicate that fund discounts follow a mean-reverting process and, furthermore, display various cross-border patterns of influence that are contingent on the period examined. Notably, for the overall period, the Korean Fund exhibits the strongest market leadership. However, in the period following the Asian financial crisis, movements in the Thai Fund's discount have the strongest influence on, and responsiveness from, the other country funds.