The significance of trust and renqing in the long-term orientation of Chinese business-to-business relationships

While business relationships with China are receiving increased attention in both practitioner and academic discourse, very little empirical work however, has been undertaken to isolate and examine measures that focus on business-to-business relationships, and as such, research in this area is somewhat scant. In an attempt to bridge this gap, and add to the knowledge in this emerging discipline, the research aims to develop a conceptual framework to explore the relationship between trust and the long-term orientation in Chinese business-to-business market relationships. Based on a survey with Hong Kong companies that have a buyer-seller relationship with Chinese companies, the empirical findings indicate the mediating role and significance of ‘renqing’ for enhancing trust and contributing towards the long-term stability in relational exchange. The results highlight several implications for practicing managers to consider when aiming to establish and develop relationships in a Chinese business-to-business context.     

Optimality for controlled jump processes: a simple approach

Summary This note presents a very simple method for deriving the necessary optimality conditions for optimal control of jump (point) processes. By means of Bellman's principle of optimality, the original stochastic control problem is transformed into a simple optimization problem. The derivation is remarkably simpler than the existing ones in the literature.I am grateful to the referee for many useful comments and suggestions. This research was supported in part by the Bradley Foundation and the Hewlett Foundation.     

The Roles of Justice and Customer Satisfaction in Customer Retention: A Lesson from Service Recovery

Customers complain because they want to be treated fairly by the company when a service failure occurs. The role of perceived complaint justice and its relation to customer satisfaction has been discussed and researched. However, a static view is mostly adopted in previous literature. We argue that satisfaction is cumulative and both prior satisfaction and post-recovery satisfaction should be looked at in relation to complaint justice in the context of service recovery. This study attempts to fill the gap by investigating the mediating role of justice in the relationship between prior satisfaction and post-recovery satisfaction (both with the recovery and with the organization) and examining the mediating role of post-recovery satisfaction in the relationship between the dimensions of justice and customer retention. Hypotheses were tested using a sample of 200 customers that had service failure experience at Chinese restaurants in Hong Kong. Justice dimensions (distributive justice, procedural justice, and interactional justice) were found to fully mediate the relationship between prior satisfaction and satisfaction with recovery. All dimensions, except the interactional justice, were also found to be partial mediators in the relationship between prior satisfaction and post-recovery satisfaction with organization. Findings also revealed the mediating roles of two post-recovery satisfaction variables in transferring the justice dimensions into behavioral intention, with the two variables playing almost opposite roles. Discussion and recommendations are provided for future development and improvement in building long-term relationship with customers.     

On the calibration of mortality forward curves

In 2007, a major investment bank launched a product called “q‐forward,” which may be regarded as a forward contract on a mortality rate. The pricing of mortality forwards is similar to the pricing of other forward‐rate contracts, such as interest‐rate forwards or foreign exchange forwards. In particular, since investors require compensation to take on longevity risk, the forward mortality rate at which q‐forward contracts will trade will be smaller than the expected mortality rate. The relationship between the forward rate and the time to maturity is called a mortality forward curve. In this study, we contribute a method for calibrating mortality forward curves. This method consists of two parts, one of which is the generation of the distribution of future mortality rates, and the other of which is the transformation of the distribution into its risk‐neutral counterpart, using the idea of canonical valuation developed by Stutzer, M. ( 1996 ). To illustrate the method, mortality forward curves for English and Welsh males are calibrated. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark     

Training and enterprise performance in transition: evidence from China

The role of training and its impact on company performance is studied in different types of enterprises in a transitional economy. A sample of manufacturing enterprises is drawn, using China as a case study. The findings indicate that training is perceived to be relatively important in non-state-owned enterprises (non-SOEs). Training objectives have three major dimensions, namely enhancing working relationships, tackling skill deficiencies and skills development. SOEs tend to focus more on skill development, while non-SOEs emphasize both enhancing working relationships and skills improvement. Comparing the expectations of training and the perceived achievement of training objectives, the gap is seen to be small within all types of enterprises, and training effectiveness is perceived to be similar. The production function estimation shows that there is a positive relationship between training expenditures and enterprise productivity.     

Lifestyle and Demographic Influences on Females' Consumption of Alcoholic Beverages

Using responses to a national survey, levels of consumption of beer, wine and spirits were related to life-style, age, education, and income. The findings suggest different sets of factors are linked to consumption levels for the various beverages, but that most life-style variables are of limited value in predicting higher levels of consumption. Implications to advertising are highlighted.     

The impact of the servicescape on the desire to stay in convention and exhibition centers: The case of Macao

This study examines the important role of the servicescape in relation to customers’ cognitive (beliefs about servicescape quality), affective (affect and satisfaction) and behavioral responses (desire to stay) in the context of convention and exhibition centers in Macao. Unlike previous servicescape studies, we include two personal customer characteristics, namely perceived sacrifice and value-for-money considerations, as potential moderators of the relationship between customers’ satisfaction and the desire to stay. Overall, our results suggest that servicescape elements positively influence customers’ perceived quality of the service, their affect, customer satisfaction and desire to stay. Furthermore, this study reveals that value-for-money considerations enhance the positive impact customer satisfaction has on customers’ desire to stay in convention centers and that customers’ perceived level of sacrifice has a direct effect on their desire to stay. Theoretical and managerial implications are also presented.     

On optimal reinsurance,dividend and reinvestment strategies

We investigate an optimal reinsurance and dividend problem of an insurance company with the presence of reinvestments, or retained earnings. We consider the general situation that the company needs to pay both fixed and proportional costs. The object of the company is to determine reinsurance, dividend and reinvestment strategies so as to maximize the difference between the expected discounted dividends minus the expected discounted reinvestment until the time of ruin. We focus on the excess-of-loss reinsurance strategy, which is shown to be optimal. The mixed classical-impulse control is then used to discuss the problem. Using inventory control theory, the value function and optimal strategy are derived.     

On Valuing Participating Life Insurance Contracts with Conditional Heteroscedasticity

In this paper, we consider a novel approach for the fair valuation of a participating life insurance policy when the dynamics of the reference portfolio underlying the policy are governed by an Asymmetric Power GARCH (APGARCH) model with innovations having a general parametric distribution. The APGARCH model provides a flexible way to incorporate the effect of conditional heteroscedasticity or time-varying conditional volatility and nests a number of important symmetric or asymmetric ARCH-type models in the literature. It also provides a flexible way to capture both the memory effect of the conditional volatility and the asymmetric effects of past positive and negative returns on the current conditional volatility, called the leverage effect. The key valuation tool here is the conditional Esscher transform of Bühlmann et al. (1996, 1998). The conditional Esscher transform provides a convenient and flexible way for the fair valuation under different specifications of the conditional heteroscedastic models. We illustrate the practical implementation of the model using the S&P 500 index as a proxy for the reference portfolio. We also conduct sensitivity analysis of the fair value of the policy with respect to the parameters in the APGARCH model to document the impacts of different conditional volatility models nested in the APGARCH model and the leverage effect on the fair value. The results of the analysis reveal that the memory effect of the conditional volatility has more significant impact on the fair value of the policy than the leverage effect.     

A PDE approach for risk measures for derivatives with regime switching

This paper considers a partial differential equation (PDE) approach to evaluate coherent risk measures for derivative instruments when the dynamics of the risky underlying asset are governed by a Markov-modulated geometric Brownian motion (GBM); that is, the appreciation rate and the volatility of the underlying risky asset switch over time according to the state of a continuous-time hidden Markov chain model which describes the state of an economy. The PDE approach provides market practitioners with a flexible and effective way to evaluate risk measures in the Markov-modulated Black–Scholes model. We shall derive the PDEs satisfied by the risk measures for European-style options, barrier options and American-style options.