Revisiting the Roots of Japan's Economic Stagnation: The role of the Japanese corporation

For a long period in the 20th century, the development of the Japanese corporation appeared congruent with the development of the Japanese economy. The growth-maximising behaviour of the Japanese corporation and the preference for internal growth over acquisitions (see Odagiri, 1992) appeared to suit the long-term ambitions of Japan. Now, that formerly clear connection between the ambitions of corporate Japan and the Japanese public interest is no longer so clear. Increasingly, the global ambitions of the corporation appear as an impediment to Japan's economic development. By favouring the development of large-scale transnational corporations, Japanese industrial policy-making appears to have contained a fundamental flaw. Japan is now dominated by large-scale organisations with global ambitions, controlled by corporate elites. It is unlikely that their strategic decisions will correspond with the wider public interest, which raises the possibility that Japan is now afflicted with 'strategic failure'. Other examples from around the world suggest that Japan is not unique in this respect. Alternative ways forward are suggested.     

Look sharp,feel sharp,be sharp and listen — anecdotal excellence: People,places and things

While the techniques become more sophisticated, the hardware and software go through new generations and we move towards such unexplored options as internet fundraising and legal restraints, the challenges and successes in the field of fundraising and in the personality of fundraisers should not change very much: they are faced with the assignment of making the donors feel important, the causes seem attractive, and making the system move with ease and comfort for everyone concerned. The author gives strong credence to such ‘simple’ matters as appearance, health, ethics, virtue and giving attention to words as well as innuendo. The reader will learn if he or she ‘listens’ to the message of this paper; if, on the other hand, he or she is looking for a shortcut or a foolproof plan short of living and loving in the field, it will not be found — in this or any other paper. Fundraising is a synergestic system: you put everything you know together, and it comes out to equal more than the sum of its parts. Still, you keep on learning. The best fundraiser has not yet been born; the most successful campaign has not yet begun; the wisdom is still being assembled. This paper is one man's overview of where we have been, what we are doing in best practice scenarios, and what is possible if we ‘Look sharp, feel sharp, be sharp and listen’; it includes a good overview of ‘Anecdotal excellence: people, places and things’. The paper starts with a word from God and ends with a reminder for us all: ‘We must remember — to look forward!’ Copyright © 2002 Henry Stewart Publications     

Teaching New Product Development To Employed Adults

The purpose of this article is to report the lessons derived from broad practical experience in teaching new product development (NPD) to employed adults. My observations are importantly augmented by diverse comments from nine other service providers who also conduct and participate in similar NPD education. Our combined lessons summarize what works and what to be forewarned about. (“Those who cannot remember the past are condemned to repeat it.”– George Santayana.) We believe that what we have learned from our very different and extensive involvement can help several audiences: (1) others who offer or plan to offer and deliver NPD education – educators, service providers, or practitioners; (2) organizations that may wish to sponsor NPD training in any form; and (3) those who expect to participate as students in NPD seminars or courses. The article has four main sections, all of which are intended to provide pointers and helpful suggestions based on our collective experience. First is a discussion of issues concerning program set‐up and acceptance. Both sponsors and participants have important responsibilities for this, which are explained. Second is a discussion of practical issues specific to NPD education. The varieties of subject matter and support materials, format options, techniques to sustain interest, instructor characteristics, and client confidentiality are covered. Third is a discussion of practical logistic issues that apply to all adult education but with an emphasis on NPD. Advance warning of what can be and has been encountered may help you circumvent many avoidable problems. Fourth is a brief discussion about the future for NPD education. In this we speculate that the emergence of broadband Internet may provide a new modality, the effectiveness of which is still uncertain. An important insight for you to note is that we do not always do the same thing or approach teaching situations in the same way. What has worked for one of us may not have been effective for another or in another situation. In summary, the experiences we record should help you improve the delivery of NPD education or more efficiently benefit from participation in such training. © 2002 Elsevier Science Inc. All rights reserved.     

The Relation between Market Values,Earnings Forecasts,and Reported Earnings*

Recently, much of the research into the relation between market values and accounting numbers has used, or at least made reference to, the residual income model (RIM). Two basic types of empirical research have developed. The “historical” type explores the relation between market values and reported accounting numbers, often using the linear dynamics in Ohlson 1995 and Feltham and Ohlson 1995 and 1996. The “forecast” type explores the relation between market value and the present value of the book value of equity, a truncated sequence of residual income forecasts, and an estimate of the terminal value at the truncation date. The analysis in this paper integrates these two approaches. We expand the Feltham and Ohlson 1996 model by including one‐ and two‐period‐ahead residual income forecasts to infer “other” information regarding future revenues from past investments and future growth opportunities. This approach results in a model in which the difference between market value and book value of equity is a function of current residual income, one‐ and two‐period‐ahead residual income, current capital investment, and start‐of‐period operating assets. The existence of both persistence in revenues from current and prior investments and growth in future positive net present value investment opportunities leads us to hypothesize a negative coefficient on the one‐period‐ahead residual income forecast and a positive coefficient on the two‐period‐ahead residual income forecast. Our empirical results strongly support our hypotheses with respect to the forecast coefficients.     

The composition of interest: The judaic prohibition

An interest charge is made up of an award for waiting known as the real rate of interest, a premium for risk and compensation for transaction costs. Where inflation exists the lender seeks further compensation. In order to understand the composition and evolution of different versions of the usury prohibition it is necessary to ask which components of an interest charge are prohibited by each version. The Judaic prohibition has two aspects which are of particular interest to business historians and students of usury. First, the general rule is that a reward for waiting is prohibited. This focuses on the time-based part of interest charge. Second, interest is prohibited because it amounts to placing a stumbling block before the blind. This focuses on the typical gullibility of the borrower confronted by a more expert, better funded lender. Economics confirms and enriches our understanding of these important aspects of the prohibition. They achieve this by increasing our understanding of two facts: first, that the borrower is a gullible individual subject to irrational and inconsistent behaviour; and, second, that this behaviour relates to the waiting aspect of interest which is proscribed in the prohibition. How far these insights apply to other civilisations' prohibition, particularly those which derive from the Judaic prohibition, merits further study; so also do the ethical lessons of the Mosaic rules for a globalised society based on capitalism.     

A MULTINOMIAL APPROXIMATION FOR AMERICAN OPTION PRICES IN LÉVY PROCESS MODELS

This paper gives a tree-based method for pricing American options in models where the stock price follows a general exponential Lévy process. A multinomial model for approximating the stock price process, which can be viewed as generalizing the binomial model of Cox, Ross, and Rubinstein (1979) for geometric Brownian motion, is developed. Under mild conditions, it is proved that the stock price process and the prices of American-type options on the stock, calculated from the multinomial model, converge to the corresponding prices under the continuous time Lévy process model. Explicit illustrations are given for the variance gamma model and the normal inverse Gaussian process when the option is an American put, but the procedure is applicable to a much wider class of derivatives including some path-dependent options. Our approach overcomes some practical difficulties that have previously been encountered when the Lévy process has infinite activity.     

Does Hedging Affect Firm Value? Evidence from the US Airline Industry

Does hedging add value to the firm, and if so, is the source of the added value consistent with hedging theory? We investigate jet fuel hedging behavior of firms in the US airline industry during 1992–2003 to examine whether such hedging is a source of value for these companies. We illustrate that the investment and financing climate in the airline industry conforms well to the theoretical framework of Froot, Scharfstein, and Stein (1993). In general, airline industry investment opportunities correlate positively with jet fuel costs, while higher fuel costs are consistent with lower cash flow. Given that jet fuel costs are hedgeable, airlines with a desire for expansion may find value in hedging future purchases of jet fuel. Our results show that jet fuel hedging is positively related to airline firm value. The coefficients on the hedging variables in our regression analysis suggest that the “hedging premium” is greater than the 5% documented in Allayannis and Weston (2001), and might be as large as 10%. We find that the positive relation between hedging and value increases in capital investment, and that most of the hedging premium is attributable to the interaction of hedging with investment. This result is consistent with the assertion that the principal benefit of jet fuel hedging by airlines comes from reduction of underinvestment costs.     

Analysis of Beef Producers' Risk Management Perceptions and Desire for Further Risk Management Education

Beef cattle producers were surveyed in Texas and Nebraska to investigate perceptions of sources of risk, the effectiveness of risk management strategies, and interest in further risk management education, particularly production risk, using probit analysis. Important decision variables identified are age, prior use of risk management tools, previous attendances of risk management education, and risk aversion. Severe drought and cattle price variability are identified as primary risk factors with potential to affect farm income. Extremely cold weather and disease are of less importance. Understocking pasture and storing hay are perceived most effective as risk management options.