Likelihood ratio tests for model selection of stochastic frontier models

An important issue when conducting stochastic frontier analysis is how to choose a proper parametric model, which includes choices of the functional form of the frontier function, distributions of the composite errors, and also the exogenous variables. In this paper, we extend the likelihood ratio test of Vuong, Econometrica 57(2):307–333, (1989) and Takeuchi’s, Suri-Kagaku (Math Sci) 153:12–18, (1976) model selection criterion to the stochastic frontier models. The most attractive feature of this test is that it can not only be used for testing a non-nested model, but also still be applicable even when the general model is misspecified. Finally, we also demonstrate how to apply this test to the Indian farm data used by Battese and Coelli, J Prod Anal 3:153–169, (1992), Empir Econ 20(2):325–332, (1995) and Alvarez et al., J Prod Anal 25:201–212, (2006).     

The Determinants and Effects of Clients Following Audit Partners Who Switch Audit Firms

Abstract

We examine the determinants of clients’ decision to follow departing partners to new audit firms and the effect of this decision on the likelihood of financial restatements. Using Taiwanese audit partner turnover data from 1984 to 2010, we find that clients are more likely to follow departing partners when the partners have more clients, longer tenure, and when both lead and concurring partners leave simultaneously. By contrast, clients are more likely to stay with their incumbent audit firms when the firms are one of the Big Four or when only the concurring partners leave. The extended partner tenure due to clients following departing partners, however, does not enhance audit quality. In fact, clients that stay at the incumbent firm experience a significant decrease in the probability of financial restatements in the first year after the audit partners leave, but clients that follow do not.     

Categorical and continuous non-discretionary variables in data envelopment analysis: a comparison of two single-stage models

Non-discretionary or environmental variables are regarded as important in the evaluation of efficiency in Data Envelopment Analysis (DEA), but there is no consensus on the correct treatment of these variables. This paper compares the performance of the standard BCC model as a base case with two single-stage models: the Banker and Morey (1986a) model, which incorporates continuous environmental variables and the Banker and Morey (1986b) model, which incorporates categorical environmental variables. Simulation analyses are conducted using a shifted Cobb-Douglas function, with one output, one non-discretionary input, and two discretionary inputs. The production function is constructed to separate environmental impact from managerial inefficiency, while providing measures of both for comparative purposes. Tests are performed to evaluate the accuracy of each model. The distribution of the inputs, the sample size and the number of categories for the categorical model are varied in the simulations to determine their impact on the performance of each model. The results show that the Banker and Morey models should be used in preference to the standard BCC model when the environmental impact is moderate to high. Both the continuous and categorical models perform equally well but the latter may be better suited to some applications with larger sample sizes. Even when the environmental impact is slight, the use of a simple two-way split of the sample data can produce significantly better results under the Categorical model in comparison to the BCC model.     

Cause‐related events: fulfilling the objectives of social partnerships

• Cause‐related events are growing in frequency and popularity. These events enable corporates and not‐for‐profit organisations to collaborate for mutual benefit, within the strategic framework of a social partnership. However, while anecdotal evidence indicates that millions of dollars are invested in events, less is known about how the strategic objectives of social partnerships are achieved via cause‐related events. We present the findings of an ethnographic study of two social partnerships and contribute insights into how and why events help them achieve their strategic objectives. Case analysis data reveals that the fit between events and partnerships; the people, teams, and relationships; and collaboration of resources all contribute to generating competitive advantage and value. We discuss the managerial implications for those collaborating to organise a cause‐related event.

Copyright © 2016 John Wiley & Sons, Ltd.     

Random aggregation without the Pareto principle

Barberà-Sonnenschein (J Econ Theory 18:244–254, 1978) have shown that any binary and Paretian random social choice function can be associated with a mapping which associates a real number with each coalition of individuals. This function gives, for each coalition, the power that this group has in imposing on society, their common preference relation on a pair of alternatives. The aim of this paper is to extend this result, showing that the Pareto criterion is not a necessary condition for the existence of such a coalitional power function.     

A stochastic frontier model with correction for sample selection

Heckman’s (Ann Econ Soc Meas 4(5), 475–492, 1976; Econometrica 47, 153–161, 1979) sample selection model has been employed in three decades of applications of linear regression studies. This paper builds on this framework to obtain a sample selection correction for the stochastic frontier model. We first show a surprisingly simple way to estimate the familiar normal-half normal stochastic frontier model using maximum simulated likelihood. We then extend the technique to a stochastic frontier model with sample selection. In an application that seems superficially obvious, the method is used to revisit the World Health Organization data (WHO in The World Health Report, WHO, Geneva 2000; Tandon et al. in Measuring the overall health system performance for 191 countries, World Health Organization, 2000) where the sample partitioning is based on OECD membership. The original study pooled all 191 countries. The OECD members appear to be discretely different from the rest of the sample. We examine the difference in a sample selection framework.     

On the linearity of the wage–profit relation in a Sraffa’s model: a mathematical summing-up

This paper sums up in a common analytical structure the main results, scattered in economic literature, concerning the linearity between rate of profit and real wage in a simple Sraffa’s model. The paper is mainly based on previous results of one of the two authors and on results of Miyao (Int Econ Rev 18:151–162, 1977) and Schefold (Zeitschrift für angewandte Mathematik und Physik 27:873–875, 1976a; Zeitschrift für National?konomie 36:21–48, 1976b).     

Workplace Bullying: Application of Novak’s (1998) Learning Theory and Implications for Training

This paper applies Novak’s (1998) theory of learning to the problem of workplace bullying. Novak’s theory offers an understanding of how actions of bullying and responses to bullying can be seen as deriving from individualized conceptualizations of workplace bullying by those involved. Further, Novak’s theory suggests that training involving Ausubel’s concept of meaningful learning (Ausubel Educational Theory 11(1): 15–25, 1961; Ausubel et al. 1978) which attends to learners’ pre-existing knowledge and allows for new meaning to be constructed regarding workplace bullying can lead to new actions related to workplace bullying. Ideally, these new actions can involve both a reduction in workplace bullying prevalence, and responses to workplace bullying which recognize and are informed by the negative consequences of this workplace dynamic.     

A model of promotion and relegation in league sports

Sports leagues in different parts of the world are set up in different ways, some as open leagues and some as closed leagues. It has been shown that spending on players is higher in open leagues (Szymanski and Ross 2000; Szymanski and Valletti Rivista di Politica Economica 95:3–39, 2005). This paper extends these studies, finding that sports leagues that practice promotion and relegation will have unambiguously higher aggregate spending on player talent than closed leagues. This will lower profits in the open league, but increase fan welfare.     

The examination of pseudo-allocative and pseudo-overall efficiencies in DEA using shadow prices

The original Data Envelopment Analysis (DEA) models developed by Charnes et al. (Eur J Oper Res 2:429–444, 1978), Banker et al. (Manag Sci 30:1078–1092, 1984) were both radial models. These models and their varied extensions have remained the most popular DEA models in terms of utilization. The benchmark targets they determined for inefficient units are primarily based on the notion of maintaining the same input and output mixes originally employed by the evaluated unit (i.e. disregarding allocative considerations). This paper presents a methodology to investigate allocative and overall efficiency in the absence of defined input and output prices. The benchmarks determined from models based on this methodology will consider all possible input and/or output mixes. Application of this methodology is illustrated on a model of the financial intermediary function of a bank branch network.     

Cultural norms & business start-ups: the impact of national values on opportunity and necessity entrepreneurs

It has long been known that the level of entrepreneurship, indicated as the percentage of incorporated and unincorporated nascent businesses relative to the labor force differs strongly across countries. This variance is related to differences in levels of economic development (Wennekers et al. 2005), but also to diverging demographic, cultural, and institutional characteristics (Acs and Armington 2004; Busenitiz et al. 2000; Fusari 1996; Karlsson and Duhlberg 2003; Rocha 2004; Thurik et al. 2006; Wong et al. 2005). Incorporating an institutional perspective, the aim of this research is to test if culture, operationalized through the World Values Survey (WVS) data, is a significant factor in predicting opportunity and necessity entrepreneurship rates at the country level. Opportunity and necessity entrepreneurship rates will be averaged from the 2001 to 2003 Global Entrepreneurship Monitor (GEM) and aggregated for 38 countries in this cross-sectional analysis.     

A model to evaluate the effectiveness of enterprise training programmes

This paper describes a model developed to measure customer satisfaction with enterprise training programmes. Based on developments in customer satisfaction and quality measurement, it is proposed as an alternative to the training evaluation model developed by Kirkpatrick (1959). A single indicator, a Customer Satisfaction Index (CSI), quantifies the level of satisfaction with each training programme. The model also measures the individual parameters that contribute to the CSI, as well as their relative importance. It facilitates a benchmarking process regarding these parameters and between training programmes. The development process of the model is described, as is its use in practice.     

Asymptotics of SIMEX-based variance estimation

In this paper, we study the asymptotic properties of simulation extrapolation (SIMEX) based variance estimation that was proposed by Wang et al. (J R Stat Soc Series B 71:425–445, 2009). We first investigate the asymptotic normality of the parameter estimator in general parametric variance function and the local linear estimator for nonparametric variance function when permutation SIMEX (PSIMEX) is used. The asymptotic optimal bandwidth selection with respect to approximate mean integrated squared error (AMISE) for nonparametric estimator is also studied. We finally discuss constructing confidence intervals/bands of the parameter/function of interest. Other than applying the asymptotic results so that normal approximation can be used, we recommend a nonparametric Monte Carlo algorithm to avoid estimating the asymptotic variance of estimator. Simulation studies are carried out for illustration.     

Measurement of an individual entrepreneur��s social capital: a multidimensional model

The aim of this paper is twofold. First of all, we participate in the open discussion on the nature of social capital and we show that the one-dimensional approach is not enough to capture the complex nature of social capital. Second, we present, implement and validate a specific three-dimensional measurement tool that can be used to analyze the role of social capital in further entrepreneurship research. The measurement tool is implemented through a Structural Equation Model, which is estimated and validated from a database including information from 282 Argentinean entrepreneurs who answered a questionnaire specifically designed for this research. Our measurement model considers the dimensions proposed by Koka and Prescott (Strategic Management Journal, 23:795–816, 2002), i.e. relational, resources and structural.     

Mapping the successful succession process in family firms: evidence from Greece

The succession process in family firms has by far been determined to be the most critical phase in the family business life-cycle (e.g. Morris et al. Journal of Business Venturing 18:513–531, 1997; Wang et al. 2000) and characterized as the period in which most family firm fatalities occur (Handler and Kram Family Business Review 1:361–381, 1988). This paper is an empirical study on Greek family firms and seeks to identify the critical success factors that have a major impact on the outcome of a generational transition in the leadership of the family firm. Based on an integrated conceptual framework proposed by Pyromalis et al. (2006), we test the impact of five factors, namely the incumbent’s propensity to step aside, the successor’s willingness to take over, the positive family relations and communication, succession planning, and the successor’s appropriateness and preparation on both the satisfaction of the stakeholders with the succession process and the effectiveness of the succession process per se. The results provide a useful insight and confirm the importance of the aforementioned factors in the succession process by mapping a safe passage through the family business succession process, and by contributing not only to the overall family business literature but also generating strong arguments in favor of the family firm as an integral entrepreneurial element for a region’s sustainable economic development.     

Timing of price clustering and trader behavior in the foreign exchange market: evidence from Taiwan

In this paper, I use a unique proprietary dataset from the foreign exchange market to examine the existing hypotheses on price clustering. I find that market uncertainty plays an important role in price clustering. Moreover, since trading behavior changes under different market conditions, market timing also affects the likelihood of price clustering. The results support both the price resolution hypothesis (Ball et al. J Futures Mark 5:29–43, 1985) and the negotiation hypothesis (Harris Rev Financ Stud 4:389–415, 1991). Since the data covers the interbank foreign exchange market, which is the market for the professional bank dealers, the attraction hypothesis is less likely to be a plausible explanation for price clustering in the foreign exchange market.     

Benefits of Cross‐sector Partnerships in Markets at the Base of the Pyramid

In this paper we analyze whether cross‐sector partnerships enable companies to respond to the specific conditions at the base of the pyramid (BOP). We develop three hypotheses in which we argue how cross‐sector partnerships support companies to face unfamiliar conditions in these markets. We test the developed hypotheses against the data of 103 companies operating in BOP‐markets. The results show that companies rely on organizations from the civil society sector in order to meet customer needs. Partners from the business sector are supportive when responding to restrictive market conditions. Institutional partnerships should be considered when companies aim at responding to the regulatory environment. We outline theoretical and managerial implications and reflect some limitations of the study. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Increased word‐of‐mouth via strategic cause‐related marketing

• This research examines word‐of‐mouth (WOM) promotions as an additional consequence of a successful cause‐related marketing (CRM) partnership. Firms properly aligned in CRM partnerships should increase positive feelings that can translate into positive WOM from the public. WOM efforts should be considered in marketing campaigns to develop successful long‐term CRM strategies. Additionally, carefully planned CRM campaigns with positive WOM give firms a competitive advantage without the backlash of consumer skepticism often reported when firms attempt to manipulate WOM campaigns. This study is grounded in associative learning theory which provides support for the strengthened associative links between firm and charity when the relationship is properly aligned. This empirical study suggests that strategically aligned CRM relationships can improve positive WOM recommendations. Results of ANOVA and factor analysis indicate that consumers are more receptive to CRM partnerships that consist of compatibility between firm and charity that persist over time. Results suggest that consumers are more likely to recommend the more properly aligned partnerships to others.

Copyright © 2010 John Wiley & Sons, Ltd.     

Uncertainty and its perception: experimental study of the numeric expression of uncertainty in two decisional contexts

According to a consolidated tradition of research about the psychology of decisions (Newell et al. 2007) and the psychometric psychology (Sartori 2008), the present study aims at analysing the preferences of individuals between the main numeric expressions of uncertainty: the probabilistic form (expressed by percentages) and the fractional form (expressed by fractions). The purpose is to verify a different management of credit on the basis of a different expression of the representation of risk. The scientific outline refers to the most relevant studies in the field of decision making, which show the demonstrations and the experiments carried out by different authors starting from the investigations by Kahneman and Tversky. These results joined in their most accredited two theories: the Framing Effect and the Cumulative Prospect Theory, an evolution of the Prospect Theory. The following survey is designed to experimentally demonstrate the change in preferences on the basis of a different numeric representation of uncertainty. The study considers a generic sample of 100 individuals who were submitted two questionnaires especially designed. The obtained data were drawn up with statistic means in order to find out common norms in decision-making processes. The results showed the tendency of individuals to assign a different preference on the basis of the numeric representation, probabilistic or fractional. Referring to this feedback, one hypothesis is proposed as well as a new theory linked to the informative context of the options is presented.     

Two-stage DEA: <Emphasis Type="Italic">caveat emptor</Emphasis>

This paper examines the wide-spread practice where data envelopment analysis (DEA) efficiency estimates are regressed on some environmental variables in a second-stage analysis. In the literature, only two statistical models have been proposed in which second-stage regressions are well-defined and meaningful. In the model considered by Simar and Wilson (J Prod Anal 13:49–78, 2007), truncated regression provides consistent estimation in the second stage, where as in the model proposed by Banker and Natarajan (Oper Res 56: 48–58, 2008a), ordinary least squares (OLS) provides consistent estimation. This paper examines, compares, and contrasts the very different assumptions underlying these two models, and makes clear that second-stage OLS estimation is consistent only under very peculiar and unusual assumptions on the data-generating process that limit its applicability. In addition, we show that in either case, bootstrap methods provide the only feasible means for inference in the second stage. We also comment on ad hoc specifications of second-stage regression equations that ignore the part of the data-generating process that yields data used to obtain the initial DEA estimates.