What's on the Menu? Policies to Reduce Young People's Sugar Consumption

Young people in the UK consume far above the maximum recommended levels of added sugar. It is likely that neither they nor their parents fully take account of the future health, social and economic costs of this high sugar consumption. This provides a rationale for policy intervention. The majority of young people's added sugar consumption occurs in the home, where purchases are typically made by parents. This means that understanding the purchase decisions of adults is important for policy design, even if the policies aim to reduce the consumption of young people. We discuss the merits of popular policies, including taxes, advertising restrictions and restrictions on the availability of specific foods, and we identify promising avenues for future research.     

What's the matter with business ethics?

The more business ethics secures its status in campuses across the country, the more bewildering it appears to actual managers. It's not that managers dislike the idea of doing the right thing. As University of Toronto Assistant Professor Andrew Stark argues, far too many business ethicists just haven't offered them the practical advice they need. Before business ethics became a formal discipline, advocates of corporate social responsibility claimed that the market would ultimately reward ethical behavior. But ethics and interests did not always intersect so fruitfully in the real world. And when they did not, managers were left in the dark to grope for the right ethical course. In the 1970s, the brand-new field of business ethics came onto the scene to address this issue. Critical of the "ethics pays" approach, academics held that ethics and interests can and do conflict. Still, scholars took an equally unrealistic line. To them, a manager's motivation could be either altruistic or self-interested, but never both. In short, ethicists still weren't addressing the difficult moral dilemmas that managers face on a day-to-day basis, and only recently have they begun to do so. After some initial stumbles, ethicists are getting their hands dirty and seriously considering the costs of doing the right thing. Finally, a new business ethics is emerging that acknowledges and accepts the messy world of mixed motives. As a result, novel concepts are springing up: moderation, pragmatism, minimalism, among others.(ABSTRACT TRUNCATED AT 250 WORDS)     

Second time lucky? Withdrawn IPOs that return to the market

We investigate issuers withdrawing an IPO (after security regulation filings) that return later for a successful offering. Venture capital backing and reputation of the lead underwriter are key factors in predicting successful return. The possibility of returning has a significant impact on the decision to withdraw and the pricing of offerings that succeed. Our sample of returning IPOs also provides a unique setting to investigate underwriter switching after a withdrawal but before a successful IPO. We find that switching occurs in response to poor bank performance and when switching firms “graduate” to banks that have high industry market shares.     

What's your story?

When you're in the midst of a major career change, telling stories about your professional self can inspire others' belief in your character and in your capacity to take a leap and land on your feet. It also can help you believe in yourself. A narrative thread will give meaning to your career history; it will assure you that, in moving on to something new, you are not discarding everything you've worked so hard to accomplish. Unfortunately, the authors explain in this article, most of us fail to use the power of storytelling in pursuit of our professional goals, or we do it badly. Tales of transition are especially challenging. Not knowing how to reconcile the built-in discontinuities in our work lives, we often relay just the facts. We present ourselves as safe--and dull and unremarkable. That's not a necessary compromise. A transition story has inherent dramatic appeal. The protagonist is you, of course, and what's at stake is your career. Perhaps you've come to an event or insight that represents a point of no return. It's this kind of break with the past that will force you to discover and reveal who you really are. Discontinuity and tension are part of the experience. If these elements are missing from your career story, the tale will fall flat. With all these twists and turns, how do you demonstrate stability and earn listeners' trust? By emphasizing continuity and causality--in other words, by showing that your past is related to the present and, from that trajectory, conveying that a solid future is in sight. If you can make your story of transition cohere, you will have gone far in convincing the listener--and reassuring yourself--that the change makes sense for you and is likely to bring success.     

What's New in Finance?

This paper prepares a list of the 300 most cited articles published in the area of Finance during the period 2000–2006. The articles are ranked based on the ratio of the number of citations and the number of years since publication, as of August 2007. Citation data come from Google Scholar and cover all articles in 29 Finance journals and Finance articles in 21 Economics, six Accounting, and two Operations research journals. The paper also reports the number of highly cited articles by number of authors, journal, research area, and institution.     

What's wrong with strategy?

Why is it that successful strategies are rarely developed as a result of formal planning processes? What is wrong with the way most companies go about developing strategy? Andrew Campbell and Marcus Alexander take a common sense look at why the planning frameworks managers use so often yield disappointing results. Companies often fail to distinguish between purpose (what an organization exists to do) and constraints (what an organization must do in order to survive), the authors say. Many executives mistakenly believe, for example, that satisfying stakeholders is an objective that drives thinking about strategy. In fact, it's a constraint, not an objective. Companies that don't win the loyalty of stakeholders will go out of business. Strategy is not about plans but about insights, the authors add. Strategy development is the process of discovering and understanding insights and should not be confused with planning, which is about turning insights into action. Furthermore, because executives develop most of their insights while actually doing the real work of running a business, it is important for companies not to separate strategy development from implementation. Is there a better way? The answer is not new planning processes or more effort. Instead, managers must understand two fundamental points: the benefit of having a well-articulated, stable purpose and the importance of discovering, understanding, documenting, and exploiting insights about how to create value.     

How does news sentiment affect the states of Japanese stock return volatility?

This paper examines the impact of public news sentiment on the volatility states of firm-level returns on the Japanese Stock market. We firstly adopt a novel Markov Regime Switching Long Memory GARCH (MRS-LMGARCH), which is employed to estimate the latent volatility states of intraday stock return. By using the RavenPack Dow Jones News Analytics database, we fit discrete choice models to investigate the impact of news sentiment on changes of volatility states of the constituent stocks in the TOPIX Core 30 Index. Our findings suggest that news occurrence and sentiment, especially those of macro-economic news, are a key factor that significantly drives the volatility state of Japanese stock returns. This provides essential information for traders of the Japanese stock market to optimize their trading strategies and risk management plans to combat volatility.     

What's a business for?

In the wake of the recent corporate scandals, it's time to reconsider the assumptions underlying American-style stock-market capitalism. That heady doctrine--in which the market is king, success is measured in terms of shareholder value, and profits are an end in themselves--enraptured America for a generation, spread to Britain during the 1980s, and recently began to gain acceptance in Continental Europe. But now, many wonder if the American model is corrupt. The American scandals are not just a matter of dubious personal ethics or of rogue companies fudging the odd billion. And the cure for the problems will not come solely from tougher regulations. We must also ask more fundamental questions: Whom and what is a business for? And are traditional ownership and governance structures suited to the knowledge economy? According to corporate law, a company's financiers are its owners, and employees are treated as property and recorded as costs. But while that may have been true in the early days of industry, it does not reflect today's reality. Now a company's assets are increasingly found in the employees who contribute their time and talents rather than in the stockholders who temporarily contribute their money. The language and measures of business must be reversed. In a knowledge economy, a good business is a community with a purpose, not a piece of property. If, like many European companies, a business considers itself a wealth-creating community consisting of members who have certain rights, those members will be more likely to treat one another as valued partners and take responsibility for telling the truth. Such a community can also help repair the image of business by insisting that its purpose is not just to make a profit but to make a profit in order to do something better.     

Reference-dependent preferences and the risk–return trade-off

This paper studies the cross-sectional risk–return trade-off in the stock market. A fundamental principle in finance is the positive relation between risk and expected return. However, recent empirical evidence suggests the opposite. Using several intuitive risk measures, we show that the negative risk–return relation is much more pronounced among firms in which investors face prior losses, but the risk–return relation is positive among firms in which investors face prior gains. We consider a number of possible explanations for this new empirical finding and conclude that reference-dependent preference is the most promising explanation.     

Regime switches in the risk–return trade-off

This paper deals with the estimation of the risk–return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk–return relation through a Markov-switching specification. We find strong evidence for regime changes in the risk–return relation. This finding is robust to a large range of specifications. In the first regime characterized by low ex-post returns and high volatility, the risk–return relation is reversed, whereas the intuitive positive risk–return trade-off holds in the second regime. The first regime is interpreted as a “flight-to-quality” regime.     

Re-examining the risk–return relationship in Europe: Linear or non-linear trade-off?

This paper analyzes the risk–return trade-off in Europe using recent data from 11 European stock markets. After relaxing the linear assumptions in the risk–return relationship by introducing a new approach that considers the current state of the market, we obtain significant evidence for a positive risk–return trade-off for low volatility states. However, this finding is reduced or even non-significant during periods of high volatility. Maintaining the linear assumption over the risk–return trade-off leads to non-significant estimations for all cases. These results are robust across countries despite the conditional volatility model used. These results also demonstrate that the inconclusive results in previous studies may be due to strong linear assumptions when modeling the risk–return trade-off. This previous research fails to uncover the global behavior of the relationship between return and risk.     

Will employee choice and defined contribution health plans salvage the embattled managed care system?

Defined contribution or consumer-driven health approaches will shift to employees not just the risks and rewards of the managed care system, but also decisions that will determine whether that system can survive. This article reviews the current state of the employer-sponsored health care system, describes defined contribution and consumer-driven health plan concepts, and outlines the approaches and steps employers can take to implement them. The author argues that, if fully implemented, such approaches could salvage the embattled managed care system by giving employees a financial stake in controlling medical costs while educating them to wisely take control of health plan spending decisions.     

Do return prediction models add economic value?

We compare statistical and economic measures of forecasting performance across a large set of stock return prediction models with time-varying mean and volatility. We find that it is very common for models to produce higher out-of-sample mean squared forecast errors than a model assuming a constant equity premium, yet simultaneously add economic value when their forecasts are used to guide portfolio decisions. While there is generally a positive correlation between a return prediction model’s out-of-sample statistical performance and its ability to add economic value, the relation tends to be weak and only explains a small part of the cross-sectional variation in different models’ economic value.     

Conglomerates on the rise again? A cross-regional study on the impact of the 2008–2009 financial crisis on the diversification discount

This paper investigates how the 2008–2009 financial crisis affected the value of diversification in different regions of the world, thereby emphasizing the role of the institutional context. We show that the effect of the credit crunch upon the diversification discount varied with the regions' level of capital market maturity and legal environment. In developed Asia Pacific, the British Isles, and North America, we find that the discount on conglomerates fell significantly during the crisis years; however, in Continental Europe – the region possessing the least developed capital markets and lowest legal investor protection in our sample – the impact of the financial meltdown upon the relative value of diversified firms was insignificant. Our study provides additional evidence on factors influencing the relative costs and benefits of diversified firms and highlights in particular the importance of accounting for different institutional settings.     

Who Blows the Whistle on Corporate Fraud?

To identify the most effective mechanisms for detecting corporate fraud, we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but rather takes a village, including several nontraditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives, help to explain this pattern. In‐depth analyses suggest that reputational incentives in general are weak, except for journalists in large cases. By contrast, monetary incentives help explain employee whistleblowing.     

Does the effect of revealed private information on initial public offering (IPO) first trading day return differ by IPO market heat?

By IPO market regime, I decompose the effect of revealed private information on the initial return of IPOs (initial public offerings) into adjusted and unadjusted private information and find (i) investment banks partially adjust the offer price in return for revealed private information in all but the non‐hot IPO market; (ii) the economic importance of private information associated with IPOs (and hence agency costs) is procyclical; and (iii) industry information spillovers between IPOs occur only in the hot and very‐hot IPO markets.     

Are return seasonalities due to risk or mispricing?

Stocks tend to earn high or low returns relative to other stocks every year in the same month (Heston and Sadka, 2008). We show these seasonalities are balanced out by seasonal reversals: a stock that has a high expected return relative to other stocks in one month has a low expected return relative to other stocks in the other months. The seasonalities and seasonal reversals add up to zero over the calendar year, which is consistent with seasonalities being driven by temporary mispricing. Seasonal reversals are economically large and statistically highly significant, and they resemble, but are distinct from, long-term reversals.