Can investors time their exposure to private equity?

Private equity performance, both for buyouts and venture capital, has been highly cyclical: periods of high fundraising have been followed by periods of low performance. Despite this seemingly predictable variation, we find modest gains, at best, to pursuing realistic, investable strategies that time capital commitments to private equity. This occurs, in part, because investors can only time their commitments to funds; they cannot time when commitments are called or when investments are exited. There is a high degree of time-series correlation in net cash flows even across commitment strategies that allocate capital in a very different manner over time.     

MODELING THE TERM STRUCTURE FROM THE ON‐THE‐RUN TREASURY YIELD CURVE

We propose a new model to estimate the term structure of interest rates using observed on‐the‐run Treasury yields. The new model is an improvement over models that require a priori knowledge of the shape of the yield curve to estimate the term structure. The general form of the model is an exponential function that depends on the estimation of four parameters fit by nonlinear least squares and has straightforward interpretations. In comparing the proposed model with current yield‐curve‐smoothing models, we find that, for the data used, the proposed model does best overall in terms of pricing accuracy both in sample and out of sample. JEL classification: E43, G12     

Impact of the timing of receipt of an inherited explanation on auditors' analytical procedures judgements

The present study extends prior research relating to auditors’ analytical procedures (AP) processes in two ways. First, it examines whether the timing of receipt of an inherited explanation (before or after self‐generating explanations) affects auditors’ hypothesis generation. Second, responding to calls to address how the auditors’ performance of the earlier stages of the AP process affects their performance in later stages of that process ( Koonce, 1993 ; Cohen, Krishnamoorthy and Wright, 2000 ) the present study concurrently addresses the hypothesis generation, information search, hypothesis evaluation and final judgement stages of the AP process. Consistent with a facilitation effect, more non‐error explanations were generated by auditors initially inheriting a non‐error explanation. Further, consistent with a recency effect, the initial likelihood assessed for the inherited explanation was higher when it was received after self‐generation of alternatives. Despite these initial differences, the timing of the inherited explanation did not significantly affect the auditors’ information search, evaluation processes or outcome performance (in terms of cause selection). Results relating to the receipt of an inherited explanation were similar, except that significantly fewer subjects not inheriting an explanation selected a cause the same as the inherited explanation. These results suggest that although inheriting an explanation from management does affect the outcome of the AP process, it does not lead to fewer correct outcomes, and highlight the importance of examining the AP process in its entirety rather than in a piecemeal manner.     

Should we let employees contract away their rights against arbitrary discharge?

This article argues that the moral right to be discharged only for good cause and like rights can be contracted away by employees in appropriate circumstances. It maintains that the rights in question are not inalienable, and that there is nothing irrational about an employee's wishing to deal them away. It also maintains that inequalities in bargaining power between employers and employees are insufficiently pervasive to justify a flat ban on the alienation of these rights. For a waiver of such rights to be valid, however, employees must have full knowledge of its terms.The question addressed here bears on several legal and policy issues affecting termination of the employment relation. If employees can contract away their right to a goodcause discharge, the American doctrine of employment at willmight find justification in the face of that right. In addition, the alienability of such discharge rights may be necessary to justify express disclaimers of wrongful discharge liability and the waiver provision of the new U.S. Draft Uniform Employment-Termination Act.Michael J. Phillips is Professor of Business Law and Chairman of the Business Law Department of Indiana University's School of Business. He is a former editor-in-chief of theAmerican Business Law Journal, and has authored numerous law journal articles.     

Dynamics of the federal funds target rate: a nonstationary discrete choice approach

We apply a discrete choice approach to model the empirical behaviour of the Federal Reserve in changing the federal funds target rate, the benchmark of short‐term market interest rates in the US. Our methods allow the explanatory variables to be nonstationary as well as stationary. This feature is particularly useful in the present application as many economic fundamentals that are monitored by the Fed and are believed to affect decisions to adjust interest rate targets display some nonstationarity over time. The chosen model successfully predicts the majority of the target rate changes during the time period considered (1994–2001) and helps to explain strings of similar intervention decisions by the Fed. Based on the model‐implied optimal interest rate, our findings suggest that there is a lag in the Fed's reaction to economic shocks during this period. Copyright © 2004 John Wiley & Sons, Ltd.     

Discontinuous innovation and supply relationships: strategic dalliances

The authors address the need for supply relationships to generate, support, and respond to discontinuous innovation (DI), noting that established ways of working appear insufficient. The peculiarities of DI are explained and contrasted with well-known concepts within innovation. The need for customer firms to be both closely collaborative with suppliers while also exploring potential, unpredictable DI elsewhere is proposed, by means of strategic dalliances . A model is presented for understanding and exploring this emerging management challenge.     

Service procurement in manufacturing companies: Results of three embedded case studies

An increasing part of companies' purchasing expenditures is being spent on (business) services. At the same time, the interactive character of business services has so far largely been neglected in purchasing and supply management studies. The success of a service purchase is however established during the ongoing production and consumption of that service, which takes place in continuous interaction between buyer and seller.This paper investigates these ongoing interactive processes between buyer and seller after the purchase decision has been made. The specific focus is on services buying by manufacturers, since manufacturers' services spend increasingly encompasses services that eventually become part of the final offering to customers. This is expected to pose specific challenges for manufacturing companies, who have traditionally been involved with purchasing goods.Case studies into ongoing buyer-seller interaction are conducted at three manufacturing companies. Starting from a usage-based classification which contains four types of business services, four services are studied at each manufacturing company. The results show that indeed the different types of services can be associated with distinct patterns of ongoing interaction. Furthermore, the results provide initial support for the idea that having differentiated patterns of interaction contributes to successful ongoing service exchange.     

The identification of South African technological innovations: A proposed methodology

Technological innovations represent significant indicators of scientific and economic vigour in any society. They are however, extremely difficult to both identify, and to evaluate in terms of their importance.

This paper addresses itself to the problems of identification and measurement. As such it forms a necessary prerequisite to a survey of technological innovations in South Africa, and, in the process, seeks to contribute to the general field of technological enquiry.