SCALE ECONOMIES IN MULTIPRODUCT FIRMS

As normally employed, multioutput cost functions impose a bias against a finding of economies of scale, because a firm's optimal expansion path generally does not entail constant proportions over the various outputs. This bias can be overcome using a cost function defined in terms of a scalar aggregate output. An empirical example using New York commercial banks bears out the argument. As a sidelight, it is also argued that the traditional concept of scale economies is appropriate for policy purposes even when it conflicts with the more recently developed condition of natural monopoly (subadditivity of the cost function).     

Equity duration and convexity when firms can fail or stagnate

Previous analysis of equity duration and convexity has either ignored the risk that firms can fail or stop growing, or else has incorporated the risk of failure in an ad hoc way. This paper derives equity duration and convexity rigorously corrected for the risk of failure or stagnation. We show that the correction is large enough to be important in standard applications. Further, equity duration is unaffected by any liquidation payout at the time of failure.     

Ownership structure and market conduct among Swiss banks

This paper explores the degree of competition among each of several major categories of Swiss banks, using a structural econometric model. Conduct is found to vary across ownership structures, with foreign-owned banks exhibiting the most market power and state-owned or mutual banks the least. The results are consistent with agency theory but contrast with some previous empirical results. They are also consistent with a Swiss premium in the provision of international banking services, though this latter hypothesis is not formally tested.     

Ethical climate in Chinese CPA firms

Much concern has been expressed in recent years regarding the state of business ethics in the People’s Republic of China, and it has been suggested that unethical behavior is common both in the business community and in accounting firms. Despite such concerns, very little empirical research has been done on ethics in the Chinese public accounting profession, and no previous study has examined the ethical culture or climate in Chinese CPA firms. The current paper reports the results of a preliminary study of the ethical climate in local and international CPA firms operating in China, and the influence of ethical climate and personal ethical orientations on decision-making. Contrary to expectations, the perceived ethical climate in local firms was not more negative; however, auditors employed by local firms judged questionable actions as more ethical and indicated a higher likelihood of committing similar actions. Consistent with our hypotheses, perceptions of the ethical climate in one’s organization had a significant effect on intentions to commit ethically questionable acts. In addition, high relativists (who tend to reject broad moral principles in favor of situational analysis) were significantly influenced by the perceived organizational ethical climate, but low relativists were not similarly influenced.