Differentiation and Cost Asymmetry: Solving the Merger Paradox

This paper investigates the impact of product differentiation and of cost asymmetry on the merger paradox using a Cournot framework. It finds that when all firms share the same costs, two-firm mergers in an n firm market generate at least no profit loss when goods are sufficiently differentiated. This result contrasts with that of Salant, Switzer, and Reynolds (1983) where mergers of strategic substitutes are rarely profitable, and Deneckere and Davidson (1985 Deneckere, Raymond, and Carl Davidson. 1985. Incentives to Form Coalitions with Bertrand Competition. The RAND Journal of Economics 16 (4): 473–486.[Crossref], [Web of Science ®] , [Google Scholar]) where competition among strategic complements yields profitable mergers. Critically, when costs are asymmetric, a merger between an efficient and inefficient firm, with differentiated products, can be more profitable to participants than to excluded rivals. Following this merger, welfare is shown to increase given that the cost asymmetry between insiders is large enough.     

Extending the theory of metaphor in marketing: The case of the art gallery

Abstract

This study analyses the metaphor of spirituality in the non-profit art gallery, a metaphor overlooked in previous marketing research. Using content analysis and interviews in a single depth case study, this article illustrates how spirituality has been a staple in the non-profit art gallery over time. It was found that even though the non-profit art gallery acknowledges its use of spirituality, it has a paradoxical attitude to it. Therefore this article (a) traces the historical influences that led to the extension of metaphor in the art gallery and its relationship to marketing theory, and (b) draws on Hunt and Menon (1995 Hunt, S.D. and Menon, A. 1995. Metaphors and competitive advantage: Evaluating the use of metaphors in theories of competitive strategy. Journal of Business Research, 33(2): 81–90. [Crossref], [Web of Science ®] , [Google Scholar]) to identify deliberate and emergent strategies using metaphor in the non-profit cultural organisation.     

Firm growth in the Swedish retail and wholesale industries

To identify the determinants of firm growth in the Swedish retail and wholesale industries during 2000–2004, we analyse a sample of 400 limited liability companies using quantile regression techniques. Firm growth was mainly found to depend upon time-invariant firm-specific effects, supporting Penrose's [1959 Penrose, E. 1959. The theory of the growth of the firm, 4, New York: Oxford University Press.  [Google Scholar]. The theory of the growth of the firm (4th ed.). New York: Oxford University Press] suggestion that internal resources such as firm culture, brand loyalty, entrepreneurial skills, and so on are important determinants of firm growth.     

Relevance of the Attention Effect in the Brazilian Stock Market

This article aims to analyze the impact of investor attention in the Brazilian stock market, particularly the effect of positive pressure on asset prices verified by Barber and Odean (2008 Barber, B. M., &; Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies, 21(2), 785–818. doi:10.1093/rfs/hhm079[Crossref], [Web of Science ®] , [Google Scholar]). Using the methodology of Da and colleagues (2011 Da, Z., Engelberg, J., &; Gao, P. (2011). In search of attention. The Journal of Finance, 66(5), 1461–99. doi:10.1111/j.1540-6261.2011.01679.x[Crossref], [Web of Science ®] , [Google Scholar]), we seek to assess whether investor attention, as measured by the volume of searches on Google, can explain abnormal variations in market activity and asset returns. The results indicated that the Internet search data does explain variations in turnover rate and trading volume of assets. However, unlike the results of studies conducted in other countries, the price pressure hypothesis was not observed in the Brazilian market.     

Herd Behavior in Latin American Stock Markets

ABSTRACT

This article investigates the presence of herd behavior in Latin American stock markets using the methodologies proposed by Christie and Huang (1995 Christie , W. G. , &; Huang , R. D. ( 1995 ). Following the pied piper: Do individual returns herd around the market? Financial Analysts Journal , 51 ( 4 ), 31 – 37 .[Taylor &; Francis Online] , [Google Scholar]) and Chang, Cheng, and Khorana (2000 Chang , E. C. , Cheng , J. W. , &; Khorana , A. ( 2000 ). An examination of herd behavior in equity markets: An international perspective . Journal of Banking and Finance , 24 ( 10 ), 1651 – 1679 .[Crossref], [Web of Science ®] , [Google Scholar]). Daily closing prices and trading volumes from January 3, 2000 to September 15, 2010 from the stock markets of Argentina, Brazil, Chile, Mexico, and the United States were analyzed. The US market was studied in order to provide a reference for comparison. The shares for which data was collected in each country were those listed in the most representative stock index for each market. It was not possible to establish evidence of herd behavior in any of the five countries studied using the Christie and Huang (1995 Christie , W. G. , &; Huang , R. D. ( 1995 ). Following the pied piper: Do individual returns herd around the market? Financial Analysts Journal , 51 ( 4 ), 31 – 37 .[Taylor &; Francis Online] , [Google Scholar]) method. However, evaluating the data for the entire period using the method proposed by Chang, Cheng, and Khorana (2000 Chang , E. C. , Cheng , J. W. , &; Khorana , A. ( 2000 ). An examination of herd behavior in equity markets: An international perspective . Journal of Banking and Finance , 24 ( 10 ), 1651 – 1679 .[Crossref], [Web of Science ®] , [Google Scholar]) we detected herd behavior in the Chilean market. These results were not affected by the addition of additional exogenous variables representing the September 11 attacks of 2001 and the subprime crisis, or when the effect of the behavior of US shares on other countries was analyzed. Asymmetric herd behavior was detected in the Chilean, United States, Argentinean, and Mexican markets.     

Consumers' value perceptions across retail outlets: shopping at mass merchandisers and department stores

Today value is considered a key hallmark of US shoppers. Although research has examined consumer perceived value (CPV) in the context of shopping in general, this study provides specifics about CPV in the context of consumers’ shopping experiences in two dominant retail outlets – mass merchandisers and department stores – where value provision and value seeking may be shifting. Using Dewey's (1939 Dewey, J. 1939. Theory of valuation. InInternational encyclopedia of Unified Science, Edited by: Neurath, O., Carnap, and, R. and Morris, C. Vol. 2: Chicago: The University of Chicago Press.  [Google Scholar]. Theory of valuation. In International encyclopedia of Unified Science, ed.O. Neurath, R. Carnap, and C. Morris, Vol. 2, 1–67. Chicago: The University of Chicago Press.) value theory as a framework and conducting both qualitative and quantitative analyses, the research identified, validated, and tested nine value dimensions sought by consumers when shopping in mass merchandisers and department stores: acquisition, transaction, efficiency, choice, exploration, esthetic, self-gratification, social interaction, and social status value. The study findings suggested that mass merchandisers may want to be careful in moving too far from their historic value proposition of low price and convenient shopping, while department stores may want to improve their provision of the exchange values currently so important to consumers, while finding new, creative ways to provide their historic value offerings of service and entertainment.     

Effects of Pre-Salt Regulation on the Market Value of Petrobras

This article measures the impacts of the process of pre-salt development related to new regulations in Brazil applicable to the offshore pre-salt hydrocarbon reserves. For this purpose, Bai and Perron (2003 Bai, J., and Perron, P. (2003). Computation and analysis of multiple structural change models. Journal of Applied Econometrics, 18, 1–22. doi:10.1002/jae.659[Crossref], [Web of Science ®] , [Google Scholar]) and Chow (1960 Chow, G. C. (1960). Tests of equality between sets of coefficients in two linear regressions. Econometrica, 28(3), 591–605. doi:10.2307/1910133[Crossref], [Web of Science ®] , [Google Scholar]) tests were used to identify structural breakpoints in the behavior of the price of Petrobras stock through a model that includes the ratio of the stock prices of Vale and Petrobras, and the proven oil reserves of Petrobras from 2000 to 2014. The results indicated structural breakpoints in the period of regulation change and when Petrobras issued new shares to raise funds for pre-salt development.     

Falling walls and lifting curtains: analysis of border effects in transition countries

Since McCallum's (1995 McCallum, J. 1995. National borders matter: Canada-US regional trade patterns. American Economic Review, 85(3): 615–23. [Web of Science ®] , [Google Scholar]) finding of surprisingly high border effects on trade between the US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to measure this effect accurately. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976–2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations.     

Malaysian Money Demand Function Revisited: The ARDL Approach

ABSTRACT

This article examines the long-run and short-run behavior of the demand for money (M1, M2, and M3) in Malaysia. In this study we used a robust estimation known as the unrestricted error correction model (UECM) and the Bounds test (Pesaran, Shin, &; Smith, 2001 Pesaran, H., Shin, Y. and Smith, R. J. 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16: 289–326. [Crossref], [Web of Science ®] , [Google Scholar]) to determine if the demand for money is cointegrated with real income, interest rate, and the price level. Prior to the cointegration analysis, we tested whether the demand for money series had undergone any structural breaks due to the 1997 Asian financial crisis using the Gregory–Hansen structural break approach. The study used annual data from 1970 to 2004. The Gregory–Hansen test suggests that the 1997 Asian financial crisis did not have a significant impact on the cointegration relationship between money demand and its determinants. The Bounds test revealed that the demand for M1, M2, and M3 are cointegrated with its determinants at the 1% level of significance. Thus, the long-run demand for money was found to be stable. This implies that monetary targeting may be a useful for the conduct of the monetary policy.     

The relationship between Co2 emissions,energy consumption,economic growth and FDI: the case of Turkey

This study investigates the relevance of the environmental Kuznets curve (EKC) hypothesis in Turkey for the period 1974–2010 using carbon dioxide (CO₂) emissions, energy consumption, economic growth, and foreign direct investment (FDI) variables. The long-run equilibrium relationship among CO₂ emissions, energy consumption, economic growth, and FDI is revealed using the bounds test. The error correction model under autoregressive-distributed lag mechanism suggests that CO₂ emissions converge to their long-run equilibrium level by a 49.2% speed of adjustment every year by the contribution of energy consumption, economic growth, and FDI. The Toda–Yamamoto (1995 Toda, H.Y., and T. Yamamoto. 1995. “Statistical Inference in Vector Autoregressions with Possibly Integrated Processes.” Journal of Econometrics 66 (1): 225–250.[Crossref], [Web of Science ®] , [Google Scholar]) causality test results imply that carbon emissions and FDI, energy consumption, and CO₂ emissions have bidirectional causal relationships. On the other hand, there are unidirectional causal relationships running from economic growth and energy consumption to FDI and from economic growth to energy consumption. Our findings provide evidence of the validity of the pollution haven hypothesis, in addition to the scale effect, and the EKC in the case of Turkey.     

Materiality and the comfort of things: drinks,dining and discussion with Daniel Miller

Daniel Miller is Professor of Material Culture at University College London. Miller’s foundational work in consumption studies, material culture studies and the anthropology of materiality has made profound contributions to our understanding of consumption, markets and culture. He is particularly known for Material Culture and Mass Consumption (1987 Miller, D. 1987. Material culture and mass consumption, Oxford: Blackwell.  [Google Scholar]), A Theory of Shopping (1998 Miller, D. 1998. A theory of shopping, Cambridge: Polity.  [Google Scholar]) and his edited collections Unwrapping Christmas (1995 Miller, D., ed. 1995. Unwrapping Christmas, Oxford: Oxford University Press.  [Google Scholar]), the four‐volume Consumption: Critical Concepts in the Social Sciences (2001 Miller, D., ed. 2001. Consumption: Critical concepts in the social sciences, Vol. 4, London: Routledge.  [Google Scholar]), and Materiality (2005 Miller, D., ed. 2005. Materiality, Durham, NC: Duke University Press. [Crossref] , [Google Scholar]). He is a tremendously prolific scholar and has worked with a large number of doctoral students. His 2008 Miller, D. 2008. The comfort of things, Cambridge: Polity.  [Google Scholar] book, The Comfort of Things, has introduced Miller to a wider audience. This interview took place in London on 25 November 2008.     

Bond Ratings and Income Smoothing in Brazil

ABSTRACT

In this article we use the variables proposed by Eckel (1981 Eckel , N. ( 1981 ). “The Income Smoothing Hypothesis Revisited.” Abacus , Vol. 17 , No. 1 , pp. 28 – 40 . [Google Scholar]) and Leuz et al. (2003 Leuz , C. , Nanda , D. , and Wysocki , P. ( 2003 ). “Earnings Management and Investors Protection: an International Comparison,” Journal of Financial Economics , Vol. 3 , No. 69 , pp. 505 – 527 . [Google Scholar]) as proxies to measure income smoothing and find that Brazilian companies that engage in this behavior receive better ratings in their public bond issues. Using data obtained from the National Bond Registration System and the Economatica, we evaluated public bond offerings. The results of univariate and multivariate analyses and robustness tests attest to the significance of the income smoothing factor, regardless of the rating agency. The results support the notion that income smoothing is an information-signaling mechanism and has an impact on bond ratings.     

Adjustability in production and dynamic effects of domestic competition policy

Abstract

This study explores the effect on trade balance of suppressing competition in the domestic non-tradable sector through the interaction between the short-run adjustment and the long-run adjustment in production process. Constructing a model that can capture a more short-run aspect than Yano (2001 Yano, M. 2001. Trade imbalance and domestic market competition policy. International Economic Review, 42: 729–750.  [Google Scholar]), this study demonstrates that the effect depends on the factor intensity ranking between the tradable sector and the non-tradable sector. In this model, a change in the price of the tradable good at time 0 plays an important role to explain this result.     

In or out? explaining state shares of the tobacco Master Settlement Agreement

In 1998, 46 states were involved in a Master Settlement Agreement (MSA) with the tobacco industry. The other four states settled on their own. Our goal is to answer a counter factual question: how would these four states have fared had they been included in the MSA? We use data from Viscusi (2002 Viscusi WK (2002) Smoke‐Filled Rooms Chicago University of Chicago Press  [Google Scholar]) to explain settlement shares for states participating in the 1998 tobacco MSA, and to predict settlement shares for the four nonparticipating states. We find that two nonparticipating states (Minnesota and Mississippi) may have fared substantially worse had they been included in the MSA.     

Regulatory valuation of public utilities: A case study of the twentieth century

This paper analyses the regulatory attitudes to asset valuation in the twentieth century. It focuses in particular on the US experience from Smith v Ames 169 US 466 (1898) to Federal Power Commission v Hope Natural Gas 320 US 591 (1944 Federal Power Commission v. Hope Natural Gas Co. 320 U.S. 591 (1944). [Google Scholar]) and on the experience in the UK in last two decades of the century. It is shown that movements in capital goods prices in the US had a significant impact on regulatory decisions, e.g., regulators were more likely to choose original cost as the regulatory valuation when replacement cost was high. In the UK regulatory agencies moved through valuations increasingly less favourable to the companies from a traditional historic cost model to an ‘original cost’ model based on flotation value. Far from displaying regulatory capture, the evidence is consistent with robust regulation against ‘monopoly’ incumbents.     

Consumer Technology Readiness and E-Service Quality in E-Tailing: What is the Impact on Predicting Online Purchasing?

Total online retail spending in China reached $427 billion in 2014 and is expected to surpass $1 trillion in 2018 (Chu and Wong 2015 Chu, K., and G. Wong. 2015. China tries to clean up e-commerce. The Wall Street Journal. http://www.wsj.com/articles/china-tries-to-clean-up-e-commerce-1427894413 [Google Scholar]). In addition, the number of online stores in China has been rapidly increasing. The present study proposes a model based on the theoretical frameworks of technology readiness (Parasuraman et al. 2005 Parasuraman, A., V. A. Zeithaml, and A. Malhotra. 2005. A multiple-item scale for assessing electronic service quality. Journal of Service Research 7 (3):213–33.[Crossref], [Web of Science ®] , [Google Scholar]) and e-service quality (Parasuraman and Malhotra 2005 Parasuraman, A., V. A. Zeithaml, and A. Malhotra. 2005. A multiple-item scale for assessing electronic service quality. Journal of Service Research 7 (3):213–33.[Crossref], [Web of Science ®] , [Google Scholar]), and tested the model on consumers from China. The results indicate that consumer technology readiness positively influences the perceived efficiency, system availability, fulfillment, and privacy dimensions of e-service quality as it relates to the online retailing environment in China. Moreover, the influence of technology readiness on the intention to purchase online in the future is both direct and mediated by the dimensions of perceived e-service quality. Implications and future research suggestions are also discussed.     

The impact of perceived crowding on consumers' store patronage intentions: Role of optimal stimulation level and shopping motivation

Abstract

Past empirical studies leave open the question of whether perceived crowding has a positive or a negative effect on shopping outcomes (Eroglu, Machleit, & Barr, 2005 Eroglu, S.A., Machleit, K.A. and Barr, T.F. 2005. Perceived retail crowding and shopping satisfaction: the role of shopping values. Journal of Business Research, 58(8): 1146–1153. [Crossref], [Web of Science ®] , [Google Scholar]; Hui & Bateson, 1991 Hui, M.K. and Bateson, J.E.G. 1991. Perceived control and the effects of crowding and consumer choice on the service experience. Journal of Consumer Research, 18(2): 174–184. [Crossref], [Web of Science ®] , [Google Scholar]). Based on the premise that shopping is a social phenomenon involving hedonic as well as utilitarian motivation, this study hypothesizes an inverted U-shaped relationship between perceived crowding and consumers' store patronage intentions. Additionally, past research considers the mediating role of emotions in the relationship between perceived crowding and shopping outcomes. In this research, the authors argue that consumers' cognitive evaluations of the store and its merchandise also mediate the perceived crowding?patronage intention relationship. Survey results of actual shoppers (n?=?201) in a hypermarket in India demonstrate that there exists an optimal level of crowding that maximises consumers' store patronage intentions. The effect of perceived crowding on patronage intention is mediated by the emotional dimension of pleasure and store evaluation. Further, the effect of perceived crowding on emotions and evaluations appears to be moderated by consumers' optimal stimulation level. In particular, the inverted U-shaped relationship of perceived crowding with pleasure and merchandise evaluation is increasingly manifested with increases in optimal stimulation level. The results also reveal that the effect of pleasure on patronage intention is stronger for individuals who score high on hedonic motivation than for individuals who score low on hedonic motivation. The article provides potential research and managerial implications of the findings.     

Performance implications of capital structure: evidence from quoted UK organisations with hotel interests

The objective of this article is to foster research on the relationship between capital structure and corporate performance with hotel companies. Using data collected from 43 UK quoted organisations which possess an interest in owning and managing hotels, Modigliani and Miller's (1958 Modigliani, F and Miller, MH. 1958. The Cost of Capital, Corporation Finance and the Theory of Investment. American Economic Review, 48(No.3): pp.261–97 [Google Scholar]) capital structure irrelevancy theorem is tested. Empirical analysis revealed no significant relationship between the level of debt found in the capital structure and financial performance. These results are consistent with Modigliani and Miller's theorem. Results also highlight that low levels of returns on equity are a feature of the sample. This latter point appears to an important issue for hotel investment, as hotel companies are continually looking to raise external finance to fund expansion. The findings of the study suggest that Chief Financial Officers of the sample organisations need to identify novel ways of expanding the business without increasing the levels of debt. The article concludes by providing examples of how some Chief Financial Officers are responding to the challenges of capital structure.     

Information and the Production of Management in a Theory of the Firm

Abstract

I show that the three main contributions to the theory of the business of the last century – those of Cobb and Douglas (1928 Cobb, Charles W., and Paul H. Douglas. 1928. “A Theory of Production.” American Economic Review 18 (Supplement): 139–165. [Google Scholar]), Coase (1937 Coase, Ronald. 1937. “The Nature of the Firm.” Economica 4 (16): 386–405.[Crossref] , [Google Scholar]), and Lucas (1978 Lucas Jr, Robert E. 1978. “On the Size Distribution of Business Firms.” Bell Journal of Economics 9 (3): 508–523.[Crossref] , [Google Scholar]) – are actually complementary and can be fitted into a general model of the firm size choice as the solution to a problem of optimal allocation of decision making in the economy. Decisions require information, and the availability and cost of information drives the optimization of firm size by the relevant decision makers - managers and entrepreneurs - pursuing the maximization of profits. Trends in firm size, and their reversals, are shown to depend on the aggregate information/output ratio.