New evidence on the price and liquidity effects of the FTSE 100 index revisions

We study the price and liquidity effects following the FTSE 100 index revisions. We employ the standard GARCH(1,1) model to allow the residual variance of the single index model (SIM) to vary systematically over time and use a Kalman filter approach to model SIM coefficients as a random walk process. We show that the observed price effect depends on the abnormal return estimation methods. Specifically, the OLS-based abnormal returns indicate that the price effect associated with the index revision is temporary, whereas both SIM with random coefficients and GARCH(1,1) model suggest that both additions and deletions experience permanent price change. Added (removed) stocks exhibit permanent (temporary) change in trading volume and bid-ask spread. The analysis of the spread components suggests that the permanent change associated with additions is a result of non-information-related liquidity. We interpret the permanent price effect of additions and deletions combined with the permanent (temporary) shift in liquidity of added (removed) stocks as evidence in favour of the imperfect substitution hypothesis with some non-information-related liquidity effects in the case of additions.     

Is targeted advertising always beneficial?

In this paper, we study a simple model in which two horizontally differentiated firms compete in prices and targeted advertising on an initially uninformed market. First, the Nash equilibrium is fully characterized. We prove that when the advertising cost is low, firms target only their “natural markets”, while they cross-advertise when this cost is high. Second, the outcome at equilibrium is compared with random advertising. Surprisingly, we prove that firms' equilibrium profits may be lower with targeted advertising relative to random advertising, while firms are given more options with targeted advertising.     

Developing dynamic capabilities through resource accretion: expanding the entrepreneurial solution space

We report our findings from the analysis of crisis episodes that resulted in the development of new capabilities in eight small firms. When dealing with resource constraints in periods of crisis, entrepreneurs engaged in a number of actions to develop their firms' capabilities. By accreting resources such as knowledge, skills and other assets, entrepreneurs were able to expand their repertoire of potential solutions and change the firm's learning trajectory. Our contribution is to describe the process of resource accretion (the gradual accumulation and integration of resources) through grafting and bonding of capabilities into the firm's ambit, which is dependent on the proximities, salience and relationships of resources. We observe three patterns within the accretion pathways of the eight firms in the study, namely the combination of coping mechanisms, the extension of networks, and the reprisal of previously successful solutions. These activities support resource accretion and the subsequent expanded solution space where entrepreneurs begin the process of embedding new capabilities. Such coping routines are necessary antecedents for the development of nascent dynamic capabilities in small firms.     

Rethinking organizational resilience and strategic renewal in SMEs

ABSTRACT

Building on work that associates organizational resilience with crisis recovery and strategic renewal, I examine how small- and medium-sized enterprises (SMEs) vary in the formalisation of activities intended to achieve strategic growth and activities to enhance resilience against acute operational interruptions. Drawing on data from 265 SMEs in the United Kingdom, the main argument of this paper is that variations in formalisation activities reflect differences in firm location, personal networks, the influence of external crisis events, and entrepreneurs’ attitudes towards the prevention of crises. The resulting typology identifies four clusters: Attentive Interventionists, Light Planners, Rooted Strategists and Reliant Neighbours. These findings contrast with prior theorizations of firms as either resilient or vulnerable and further illuminate our understanding of SME resilience and how this is shaped by historical, developmental and strategic factors. The study further develops associations between resilience and social capital, examines how locational choices generate a proximity premium, and develops a growth-survival-maturity perspective on SME resilience. Data reveals an interplay between an ensemble of entrepreneurial activities and decisions about planning, networks, learning, and location. Thus, the study offers a rethinking of prior theorizations about organizational resilience and strategic renewal.     

Stock price reaction to profit warnings: the role of time-varying betas

This study investigates the role of time-varying betas, event-induced variance and conditional heteroskedasticity in the estimation of abnormal returns around important news announcements. Our analysis is based on the stock price reaction to profit warnings issued by a sample of firms listed on the Hong Kong Stock Exchange. The standard event study methodology indicates the presence of price reversal patterns following both positive and negative warnings. However, incorporating time-varying betas, event-induced variance and conditional heteroskedasticity in the modelling process results in post-negative-warning price patterns that are consistent with the predictions of the efficient market hypothesis. These adjustments also cause the statistical significance of some post-positive-warning cumulative abnormal returns to disappear and their magnitude to drop to an extent that minor transaction costs would eliminate the profitability of the contrarian strategy.     

Shedding New Light on How Advertising Literacy Can Affect Children's Processing of Embedded Advertising Formats: A Future Research Agenda

Advertisers are continuously searching for new ways to persuade children; current methods include fully integrating commercial content into media content, actively engaging children with the commercial content, and increasing the number of commercial messages children are confronted with at one moment in time. This poses a challenge for how children cope with embedded advertising. This conceptual article aims to develop a theoretically grounded framework for investigating how children process embedded advertising. More precisely, it sheds light on previous research and conceptualizations of advertising literacy and provides suggestions for future research. The article examines conceptual and methodological issues and discusses the need for research on how to improve children's coping with embedded advertising by emphasizing the value of persuasive intent priming and implementation intentions. To conclude, future research directions are discussed regarding strategies to strengthen children's coping skills and their dispositional (i.e., associative network consisting of cognitive, moral, and affective beliefs related to advertising) and situational (i.e., actual recognition of and critical reflection on advertising) advertising literacy.     

Real-world comparison of hospitalization costs for heart failure in type 2 diabetes mellitus patients with established cardiovascular disease treated with canagliflozin versus other antihyperglycemic agents

Abstract

Aims: This real-world study compared hospitalization for heart failure (HHF) costs and all-cause healthcare costs in patients with type 2 diabetes mellitus (T2DM) and established cardiovascular disease treated with the sodium glucose co-transporter 2 inhibitor (SGLT2i) canagliflozin and non-SGLT2i antihyperglycemic agents (AHAs).

Materials and methods: Propensity score-matched cohorts from a retrospective observational study (OBSERVE-4D) using the Truven MarketScan Commercial Claims and Encounters and Optum Clinformatics databases were analyzed. HHF and all-cause healthcare costs per-patient-per-month (PPPM) were compared for patients initiated on canagliflozin and non-SGLT2i AHAs in the on-treatment analysis.

Results: Baseline characteristics were well balanced between matched cohorts that included new users of canagliflozin or non-SGLT2i AHAs in the Truven (13,954 and 45,101, respectively) and Optum (11,490 and 53,360, respectively) databases. The mean (95% CI) PPPM cost of HHF was lower for canagliflozin than for non-SGLT2i AHAs in analyses of both the Truven ($21.31 [$21.25, $21.37]) and Optum ($30.43 [$30.41, $30.45]) databases. The mean (95% CI) PPPM all-cause healthcare cost was also lower for canagliflozin than for non-SGLT2i AHAs in analyses of both the Truven ($321 [$280, $361]) and Optum ($449 [$402, $495]) databases.

Limitations: This study is subject to the limitations inherent to observational research including potential for coding errors and biases and unobserved confounding. Because all patients were in commercially administered health plans, these findings cannot be easily generalized to uninsured or Medicaid populations. Patient costs were evaluated up to and including their first HHF event. Post-discharge costs such as the costs of subsequent rehospitalizations were not included in this analysis.

Conclusions: For patients with T2DM and established cardiovascular disease in this real-world study, treatment with canagliflozin was associated with lower HHF costs and all-cause healthcare costs compared with treatment with non-SGLT2i AHAs.     

A cost-analysis model for anticoagulant treatment in the hospital setting

Background:

Rivaroxaban is the first oral factor Xa inhibitor approved in the US to reduce the risk of stroke and blood clots among people with non-valvular atrial fibrillation, treat deep vein thrombosis (DVT), treat pulmonary embolism (PE), reduce the risk of recurrence of DVT and PE, and prevent DVT and PE after knee or hip replacement surgery. The objective of this study was to evaluate the costs from a hospital perspective of treating patients with rivaroxaban vs other anticoagulant agents across these five populations.

Methods:

An economic model was developed using treatment regimens from the ROCKET-AF, EINSTEIN-DVT and PE, and RECORD1-3 randomized clinical trials. The distribution of hospital admissions used in the model across the different populations was derived from the 2010 Healthcare Cost and Utilization Project database. The model compared total costs of anticoagulant treatment, monitoring, inpatient stay, and administration for patients receiving rivaroxaban vs other anticoagulant agents. The length of inpatient stay (LOS) was determined from the literature.

Results:

Across all populations, rivaroxaban was associated with an overall mean cost savings of $1520 per patient. The largest cost savings associated with rivaroxaban was observed in patients with DVT or PE ($6205 and $2742 per patient, respectively). The main driver of the cost savings resulted from the reduction in LOS associated with rivaroxaban, contributing to ～90% of the total savings. Furthermore, the overall mean anticoagulant treatment cost was lower for rivaroxaban vs the reference groups.

Limitations:

The distribution of patients across indications used in the model may not be generalizable to all hospitals, where practice patterns may vary, and average LOS cost may not reflect the actual reimbursements that hospitals received.

Conclusion:

From a hospital perspective, the use of rivaroxaban may be associated with cost savings when compared to other anticoagulant treatments due to lower drug cost and shorter LOS associated with rivaroxaban.