The price effects of cross‐market mergers: theory and evidence from the hospital industry

We consider the effect of mergers between firms whose products are not viewed as direct substitutes for the same good or service, but are bundled by a common intermediary. Focusing on hospital mergers across distinct geographic markets, we show that such combinations can reduce competition among merging hospitals for inclusion in insurers' networks, leading to higher prices (or lower‐quality care). Using data on hospital mergers from 1996–2012, we find support that this mechanism operates within state boundaries: cross‐market, within‐state hospital mergers yield price increases of 7%–9 % for acquiring hospitals, whereas out‐of‐state acquisitions do not yield significant increases.     

Some Economics of Audit Market Reform

The purpose of audit market reforms since 2001 is to restore public confidence in the institution of auditing based on two considerations: (1) ensuring audit quality; and (2) controlling the ‘adverse effect of competition’ in audit supply. Market reforms for audit quality are delivered through a package of prescribed actions motivated by an analytical relationship between audit quality and its possible determinants: (1) limiting audit tenure through a combination of mandatory firm rotation, partner rotation and re‐tendering; (2) limiting provision of non‐audit services (NAS) by the incumbent auditor; and (3) joint auditing and empowering the audit committee to enhance audit quality. This paper examines the competing independence hypothesis and expertise hypothesis that produce ambiguous theoretical relationships for audit quality–audit tenure and the independence‐provision of NAS. We then review whether the empirical literature resolves these conundrums. We also review the usefulness of joint auditing and empowering the audit committee to improve audit quality in the context of audit market reform.     

The Diversification Effects of Initial Public Offerings

Abstract:  A firm's stock becomes publicly tradable through an initial public offering (IPO). This study suggests a portfolio diversification perspective to explore IPOs. We examine whether investors can gain diversification benefits by adding an IPO portfolio to a set of benchmark portfolios sorted by firm size and book-to-market ratio. Using US IPOs from 1980-2002, we find that adding a value-weighted IPO portfolio does lead to a statistically and economically significant enlargement of the investment opportunity set for investors relative to investing solely in a set of benchmark portfolios. Specifically, the Sharpe ratio of the tangency portfolio increases by 5.50% on average after including IPO stocks. Furthermore, IPOs associated with prestigious lead underwriters are the main source of this augmentation of the mean-variance investment opportunity set. Finally, our study implies that issuing IPO exchange traded funds or similar products can provide diversification gains to investors.     

Technological Gap and Uneven Accumulation in a Classical Production Model

Two regions are distinguished by their technological capabilities. In autarky, the advanced region accumulates more rapidly. Trade augments both regions' growth rates, but can initially worsen the uneven accumulation. The advanced region's faster growth turns the terms of trade against itself. The growth gap narrows. Yet, trade can never close that gap completely. Further decline in the advanced region's growth rate is arrested by its investment in, and technology transfer to, the backward region to augment the latter's export. Whether uneven accumulation persists depends on how successfully the backward region's indigenous capitalists adopt the more efficient `foreign' technology.     

Social Capital or Ethnic Enclave Location? A Multilevel Explanation of Immigrant Business Growth

The rapid increase in migration into host countries and the growth of immigrant‐owned business enterprises has revitalized research on ethnic business. Does micro (individual)‐level social capital, or meso (group)‐level location within the ethnic enclave lead to immigrant business growth? Or do you need both? We analyze quantitative data collected from 110 Chinese restaurants in Australia, a major host country. At the micro level we find that coethnic (same ethnic group) networks are critical to the growth of an immigrant entrepreneur's business, particularly in the early years. But non‐coethnic (different ethnic group) social capital only has a positive impact on business growth for immigrant businesses outside the ethnic enclave. Our findings are relevant, not only to host‐country policymakers, but also for future immigrant business owners and ethnic community leaders trying to better understand how to promote healthy communities and sustainable economic growth. © 2015 Wiley Periodicals, Inc.     

Intraday information efficiency on the Chinese equity market

Bid-ask spread is a direct measure of information asymmetry. As such, it can be used to evaluate information efficiency. In this paper, we show that both the quoted and effective spreads on the Shanghai Stock Exchange are extremely high at the open, decrease over the trading day, and experience a small rebound at the close. The spread decreases with share volume, daily trades, and market capitalization, but increases with average trade size. We further examine the beta using the unbiasedness regression from Biais et al. [Biais, B., Hillion, P., Spatt, C. (1999). Price discovery and learning during the pre-opening period in the Paris Bourse. Journal of Political Economy, 107, 1218–1248] and find that intraday prices are efficient and unbiased for more liquid stocks. This suggests that liquidity prompts information-motivated trading, which, in turn, improves information dissemination. Moreover, our findings indicate that small and medium trades are more likely to facilitate the formation of efficient prices at the open and close of the market, while large trades play a more important role during the other trading periods.     

Economic design of an chart for short-run production

The aim of this paper is to present an economical design of an X chart for a short-run production. The process mean starts equal to μ₀ (in-control, State I) and in a random time it shifts to μ₁>μ₀ (out-of-control, State II). The monitoring procedure consists of inspecting a single item at every m produced ones. If the measurement of the quality characteristic does not meet the control limits, the process is stopped, adjusted, and additional (r-1) items are inspected retrospectively. The probabilistic model was developed considering only shifts in the process mean. A direct search technique is applied to find the optimum parameters which minimizes the expected cost function. Numerical examples illustrate the proposed procedure.     

Estimating fixed-effect panel stochastic frontier models by model transformation

Traditional panel stochastic frontier models do not distinguish between unobserved individual heterogeneity and inefficiency. They thus force all time-invariant individual heterogeneity into the estimated inefficiency. Greene (2005) proposes a true fixed-effect stochastic frontier model which, in theory, may be biased by the incidental parameters problem. The problem usually cannot be dealt with by model transformations owing to the nonlinearity of the stochastic frontier model. In this paper, we propose a class of panel stochastic frontier models which create an exception. We show that first-difference and within-transformation can be analytically performed on this model to remove the fixed individual effects, and thus the estimator is immune to the incidental parameters problem. Consistency of the estimator is obtained by either N→∞$N\to \infty$ or T→∞$T\to \infty$, which is an attractive property for empirical researchers.     

How Much More (or Less) Is a Brand Worth When Made in a Low Labor-Cost Country? It Depends Upon Who and Where You Ask

ABSTRACT

This multinational adaptive conjoint study measures how much more, or less, consumers might be willing to pay for different brand/manufacturing country combinations. Chinese, South Korean, and US respondents were asked about their preferences for laptop computers carrying different combinations of price, country of manufacture (CM), and country of brand (CB) cues. For all three respondent groups, price was the most salient attribute, followed by country of manufacturing, and then CB. Nonetheless, respondents from different countries differed in their preferences for price/country of manufacturing/brand combinations. The findings suggest that brands having both positive CB and CM images can charge premium prices in their home countries and abroad. Brands with weaker CB and CM images may enjoy home court advantages domestically; however, they may have to price their products lower when competing in countries with stronger CM and CB reputations.     

An investigation of the corporate identity construct in China: Managerial evidence from the high technology industry

The study develops and extends existing frameworks of corporate identity and investigates what organisations in China perceive as essential components of the corporate identity concept including their dimensions and contents. The study adopted a qualitative approach and the method of research was a case study. Using the soft-laddering approach, and a multidisciplinary categorisation of analyses of corporate literature and websites, a systematic analysis of the corporate identity was carried out. Different from previous studies, the study reveals new dimensions on the basis of the industry practitioners’ views. The context of China has shown to influence a different focus, more significantly around the ‘impression’ that corporate identity can contribute with commercially. It is suggested that new high-tech firms in China may not have enough experience and capacity to engage in a more holistic corporate identity concept provided. The lack of such experience is particularly likely for new firms, which are still in their early stage of development. Implications for management of corporate identity in China are presented along with directions for further research in the marketing communications literature.