EFFECT OF FED POLICY ACTIONS ON THE DEFAULT LIKELIHOOD OF COMMERCIAL BANKS

Using a measure of default likelihood based on an option pricing method, we provide evidence that Fed policy actions affect the financial distress of commercial banks. When the Fed increases (decreases) interest rates, the measure of default likelihood increases (decreases). We show that when the Fed uses a tight money policy, the increase in default likelihood is more pronounced for banks that have less capital, have greater financial leverage, are smaller, have fewer growth opportunities, and have lower asset quality. Additionally, the effects on bank default likelihood are more pronounced when the Fed's policy signals less concern about economic growth, as indicated by its bias toward further tightening, and when there is a market expectation of higher short‐term market rates in the future.     

INTRA-INDUSTRY EFFECTS OF BOND RATING ADJUSTMENTS

Several studies find that bond rating downgrades cause negative valuation effects. Other studies find that signals conveyed by earnings releases, earnings forecasts, bankruptcies, and stock offerings of individual firms can be transmitted to their corresponding industries. By combining the two sets of studies, we hypothesize that bond rating changes may contain relevant information not only about the firm, but also about the corresponding industry. We find significantly negative valuation effects for rating downgrades, which are transmitted throughout the industry. Furthermore, we find that intra-industry effects depend on particular characteristics of the bond downgrade, the downgraded firm, and industry rivals. Specifically, the negative intra-industry effects are more pronounced when (1) the downgraded firm experiences a more severe share price response to the bond rating downgrade, (2) the downgraded firm is dominant in the industry, (3) the downgraded firm is more closely related to its rivals in the industry, and (4) the downgrade is due to a deterioration in the firm's financial prospects.     

Sources of Bank Interest Rate Risk

We investigate bank stocks'sensitivity to changes in interest rates and the factors affecting this sensitivity. We focus on whether the exposure of commercial banks to interest rate risk is conditioned on certain balance sheet and income statement ratios. We find a significantly negative relation between bank stock returns and changes in interest rates over the period 1991–1996. We also find that bank characteristics measured from basic financial statement information explain bank stocks'sensitivity to interest rate changes. These results suggest that bank managers, analysts, and regulators can use this information to assess the relative risk exposure of banks.     

Validating the international tourist role scale

This study was designed to validate the international tourist role scale and the three dimensions it revealed. The purpose of this attitudinal scale was to measure the tourist role typology. United States adult outbound tourists flying with 11 major airlines returned useful questionnaires. This study validated the role scale as a reliable one that properly identified three conceptual dimensions of international tourist typology and successfully provided measures of tourists’ novelty-seeking preferences on the three dimensions. The study demonstrated, however, that the scale would measure the novelty-seeking preferences of international tourists more effectively if it were supplemented by other measures.     

Living in China： Hold the Oil Please

After residing in Beijing for over 6 years, many of my friends and colleagues in the d3.S. have said, Wow, it must be amazing living in China＂. Over the years I have to say, my experiences have been am...     

Ideology or pragmatism? trade union education in France and Britain

Trade union education–a significant area of trade union activity – has been characterised by a tension between the desire to provide a certain ideological, economic and political perspective and the need to develop pragmatic bargaining skills. This comparative study examines the differing ways in which trade union education has developed in France and Britain.     

Do managers make takeover financing decisions that circumvent more effective outside blockholders?

Consistent with agency theory, we find that bidder managers make takeover financing decisions in ways that circumvent more effective monitors. Bidder managers are more likely to use cash rather than stock when targets have aggressive outside blockholders. We also find that the likelihood of a cash offer decreases when aggressive outside bidder block ownership is relatively low. However, the likelihood of a cash offer increases when aggressive outside bidder blockholding is in the intermediate range, a range of ownership where their continued influence over managerial decisions is threatened by a stock offer. Furthermore, we find that bidder management tends to use cash when its outside bidder blockholders are less aggressive. Overall, our findings indicate that managerial decisions on financing takeovers are motivated to prevent aggressive outside blockholders from gaining more control.     

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

As supply chains become more complex, firms face increasing risks of supply disruptions. The process through which buyers make decisions in the face of these risks, however, has not been explored. Despite research highlighting the importance of behavioral approaches to risk, there is limited research that applies these views of risk in the supply chain literature. This paper addresses this gap by drawing on behavioral risk theory to investigate the causal relationships amongst situation, representations of risk, and decision-making within the purchasing domain. We operationalize and explore the relationship between three representations of supply disruption risk: magnitude of supply disruption, probability of supply disruption, and overall supply disruption risk. Additionally, we draw on exchange theories to identify product and market factors that impact buyers’ perceptions of the probability and magnitude of supply disruption. Finally, we look at how representations of risk affect the decision to seek alternative sources of supply. We test our model using data collected from 223 purchasing managers and buyers of direct materials. Our results show that both the probability and the magnitude of supply disruption are important to buyers’ overall perceptions of supply disruption risk. We also find that product and market situational factors impact perceptions of risk, but they are best understood through their impact on perceptions of probability and magnitude. Finally, we find that decisions are based on assessments of overall risk. These findings provide insight into the decision-making process and show that all three representations of risk are necessary for fully understanding risky decision-making with respect to supply disruptions.     

Small entrepreneurial ventures culture, change and the impact on HRM: A critical review

Effective management of people is increasingly recognized in the literature as a vital contributor to organizational performance and indeed survival. Nevertheless, studies of the dynamics of human resource management in small entrepreneurial ventures are relatively sparse. In this paper we draw upon a range of behaviourally-informed research publications to demonstrate that a culture of owner-influenced individualism and informality pervades these ventures, affecting prime human resource issues such as performance related practices, training and development, work–life balance and other critical dimensions of employee welfare. A preference for informality and an absence of strategy to inform owner–employee relations sits uneasily alongside growing political pressures toward codification of the management of employees in small entrepreneurial ventures. The response to these pressures may have significant implications both for relationships with employees and for organizational performance.     

Audit Market Response to PCAOB Censures of US Big 4 Firms

Abstract

Subsequent to the first-ever Public Company Accounting Oversight Board (PCAOB) censure of a US Big 4 firm (Deloitte) in December 2007, there were two other PCAOB US Big 4 firm censures as of 2016 year-end. We examine whether these two post-2007 PCAOB censures of US Big 4 firms conveyed new information to the audit market. For both censures, we find little or no evidence of any change in the factual audit quality of the censured firm over a three-year window surrounding the censure. Our findings suggest that the quality control deficiencies (identified during inspection of specific audit engagements) that triggered the PCAOB censure were isolated occurrences rather than systemic to the firm at large, i.e., the censures do not imply an impairment in the US Big 4 firm's overall factual audit quality. We also find that the negative response of investors and audit committees documented in prior research for the 2007 Deloitte censure disappeared for the later US Big 4 firm censures. Given that the PCAOB inspects (and can censure) non-US auditors who audit US-listed foreign companies, our findings are of potential interest to regulators, investors and audit committees outside the US.