Key problems facing industrial distributors

This article reports on a survey of the problems faced by industrial distributors. Five major problem categories are identified and managerial implications are derived from the findings.     

Anomalies in finance: What are they and what are they good for?

In the natural sciences, anomalies contribute significantly to the development of new and ultimately more successful theories. The role of anomalies in financial economics, however, has been quite different. Although at the beginning, the word was used to show deviations from the Efficient Markets Hypothesis (EMH)/Capital Asset Pricing Model (CAPM) paradigm, lately, it has been applied to a new literature that is also more accurately called Behavioral Finance (BF). This paper argues that this misuse and misapplication of the word anomaly is not a simple coincidence. It is rather a sophisticated and accordant effort to imply that although there are some unresolved deviations from the norm, the reigning paradigm is irreplaceable, and its validity needs no empirical proof. In fact, an alternative paradigm such as BF is not only insignificant but also unnecessary and even impossible.     

Determinants of the ARM share of national and regional lending

We model the ARM share of mortgage lending and provide several unique contributions to the mortgage choice literature. First, we motivate the use of the price spread between fixed- and adjustable-rate credit as a regressor by constraining the effect of FRM and ARM prices to be symmetric and show that the data support this restriction. Second, our data span a far longer time period (six years) than previous research. Third, we estimate separate share equations by region, allowing us to contrast geographic variation in ARM shares. Fourth, we examine the effect of convertible ARMs—which became prevalent in mid-1987—on overall ARM lending.     

Seasonal Variation in Cost-of-Funds at Thrift Institutions

The purpose of this note is threefold. First, in addition to the well-known seasonal pattern to the eleventh-district cost-of-funds (COF), we document a twelve-month seasonal in the national median COF. Second, we demonstrate that the cause of seasonality in each of these COF series is due to the maladjustment of length-of-month effects. In particular, the eleventh-district COF is biased upwards in relatively short months while the national median is biased downward. Third, we show that the popular partial adjustment model for modeling the COF is misspecified.     

FDI and Growth: What Causes What?

This paper examines the causal relationship between FDI and economic growth by using an innovative econometric methodology to study the direction of causality between the two variables. We apply our methodology, based on the Toda‐Yamamoto test for causality, to time‐series data covering the period 1969–2000 for three developing countries, namely Chile, Malaysia and Thailand, all of them major recipients of FDI with a different history of macroeconomic episodes, policy regimes and growth patterns. Our empirical findings clearly suggest that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, there is a strong evidence of a bi‐directional causality between the two variables. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of our results.     

Stock options as a means of adding value in business markets: A powerful potential communication vehicle for business marketing managers

In this paper, the authors argue that stock options are a highly effective marketing communications (marcoms) medium, which due to their influence on the profitability of the organisation, possess characteristics that should be included in strategic marketing planning for financial and non-financial organisations. This study aims to test whether stock options can be used as a means for marketing strategists to build effective branding and loyalty programmes.It is argued that the strategic role of stock options in marketing decision making adds value in business markets. Stock options play a unique role in marketing and in the achievement of corporate goals and targets. The study is supported by the findings of a questionnaire survey based on a sample of Greek companies, grouped into two categories. The first category consists of the most profitable organisations supplying business markets, listed on the Athens Stock Exchange (ASE) and the second consists of large financial organisations.     

DEFAULT RISK PREMIA IN THE NEAR-CASH INVESTMENT MARKET: THE CASE OF AUCTION RATE PREFERRED STOCK VERSUS COMMERCIAL PAPER

Auction rate preferred stock (ARPS) is often regarded as an alternative to other near-cash instruments such as commercial paper while the dividend exclusion for ARPS offers tax advantages to corporate purchasers. The mean default risk premium for ARPS, relative to commercial paper, is estimated at 83 basis points during stable financial markets. This default premium appears to surge during unstable equity markets, having jumped by 192 basis points in November 1987. Lower-rated ARPS shows even larger changes, with yields 40–50 basis points above yields on high-rated ARPS, adjusted for the normal risk premium differential. The perceived risk change of ARPS underscores how quickly market participants re-evaluate default risk, and even the importance of the priority order among debt and equity claimants. Findings suggest ARPS and commercial paper are not an acceptable substitute for commercial paper during times of unsettled equity markets.     

Trade Reform in Indonesia, 1987–95

This paper quantifies Indonesian trade liberalisation between 1987 and 1995 as measured by changes in real effective rates of protection (RERP), i e effective rates of protection corrected for trade policy-induced changes in wages. The RERP for manufacturing, including oil refining, fell from 27% in 1987 to 11% in 1995, for manufacturing, excluding oil refining, the fall was from 59% to 16%, and for agriculture from 9% to 4% The standard deviation of RERPs for all tradeable sectors fell from 42 percentage points to 26; and for manufacturing, excluding oil refining, from 102 percentage points to 39.     

Capital costs and profitability

The paper estimates a line-of-business (LB) cost-of-capital and derives explicitly its link — in long-run competitive equilibrium — to profitability measured as LB operating income to LB assets. The ways that observed profitability differs from what would obtain in competitive equilibrium are explored.     

The INTUG view on the EEC green paper

This paper is INTUG's response to the EEC's express wish to obtain a wide range of views from the community at large. It specifically handles each of the Green Paper's proposed positions, outlining them briefly and giving INTUG's attitudes to them. In general, INTUG welcomes the Green Paper, declaring a belief that it fulfills its purpose of provoking wide discussion, and trusting that it will result in a positive document committed to firm future plans.