Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses

With the adoption of Regulation Fair Disclosure (Reg FD), market behavior around earnings releases displays no significant change in return volatility (after controlling for decimalization of stock trading) but significant increases in trading volume due to difference in opinion. Analyst forecast dispersion increases, and increases in other measures of disagreement and difference of opinion suggest greater difficulty in forming forecasts beyond the current quarter. Corporations increase the quantity of voluntary disclosures, but only for current quarter earnings. Thus, Reg FD seems to increase the quantity of information available to the public while imposing greater demands on investment professionals.     

Balance Sheet Restructuring and Investment

Abstract
This article looks at the evolution of corporate balance sheets and investment over the past few years .
We find that many companies have significantly improved their balance sheets in this time. Leverage has been reduced, and this, coupled with lower nominal interest rates, has improved the interest cover and cash flows of the corporate sector. For many firms, the process of balance sheet repair has proceeded a long way so that the extent to which the financial position of firms will impinge on investment is much lower than it was a few years ago.
Looking further ahead, it appears that the rate of return to investing in capital is relatively high, at least when judged against the standards of earlier downturns. With the recovery picking up pace we should, therefore, see firms more inclined to expand their capital expenditure and less focused on financial restructuring.     

Participation in the National Flood Insurance Program: An Empirical Analysis for Coastal Properties

A perennial question about the National Flood Insurance Program is: how can participation be increased? An empirical analysis of individual‐level data reveals that in a sample of coastal areas the participation rate is 49 percent of eligible properties. Participation responsiveness to price is inelastic, but it has been increased by the mandatory purchase requirements for mortgage borrowers. Easing conditions for participation in the program would probably not reduce flood control measures, such as seawalls, which may degrade beach conditions and coastal ecosystems.     

Constructivist Negotiation Ethics

The success of Discourse Ethics is premised on the discovery and use of shared values. If this is true what type of negotiation style, especially when used in an intercultural setting, is best suited to make use of shared values. Research focusing on moral arguments between Germans and Americans uncovered an array of shared values. But the existence of shared values, by itself, was not an adequate predictor of a negotiation's success. What did prove to be a predictor of success was the use of a Constructivist style of negotiation by both parties.     

The Dynamic Production Axioms and System Dynamics Behaviors: The Foundation for Future Integration

Realistically, organizational and/or system performance is dynamic and non-linear. However, in the efficiency literature, system performance is frequently evaluated considering linear combinations of the input/output variables and without explicitly taking into account the causes of efficiency behavior nor the dynamic behavior of systems. Policy decisions based on these results may be sub-optimized because the non-linear relationships among variables, causal relationships, and feedback mechanisms are ignored.This research takes the initial step of evaluating system performance in a dynamic environment, by relating the factors that effect system performance to the policies that govern it. To accomplish this, this paper extends the concepts of the static production axioms into a dynamic realm, where inputs are not instantaneously converted into outputs. The relationships of these new dynamic production axioms to the basic behaviors associated with system dynamics structures are explored.     

The effectiveness of interest-rate futures contracts for hedging Japanese bonds of different credit quality and duration

This study investigates the effectiveness of the Tokyo Stock Exchange (TSE)-traded Japanese 10-year JGB futures contract to hedge portfolios of Japanese bonds of differing maturity and credit quality. The bond portfolios examined are Government, AAA-, and AA-rated Eurobonds with maturities of 2, 3, 5, 7, 10, and 20 years. Consistent with the recent literature, the study employs univariate methods for calculating hedge ratios based on levels, first differences, and percentage change of each series. Out-of-sample forecasting is used to determine the effectiveness of the calculated hedge ratios for each of the bond portfolios and to determine which approach to calculating hedge ratios is the most effective. The results show that this particular futures contract does provide a good hedge, particularly for those bond terms closest to the 10-year term of the contract. There is some evidence, although not strong, that JGBs are better hedged than AAA and AA bonds. Investors should take some caution when using this futures contract to hedge bond portfolios of different maturities and credit ratings.     

Informed and uninformed trading on the Australian dollar

Using a high-frequency data set of the spot Australian/US dollar, this study examines the distribution of quotes, spreads, and returns across the trading day. By identifying the direction of trade and the subsequent quote returns from contributing banks, the segmented nature of the market into market-makers and informed and uninformed traders is investigated. The results suggest that the economic gain possible from private information is maximised over 2 to 5 quotes and is rapidly eroded by 20 quotes (about 2 min later during busy trading times) as other new information enters the market. Also, the analysis is revealing of discontinuities in trading and the volatility of pricing across the trading day.     

Making judgment calls. The ultimate act of leadership

According to the traditional view, judgment is an event: You make a decision and then move on. Yet Tichy, of the University of Michigan's Ross School of Business, and Bennis, of the University of Southern California's Marshall School of Business, found that good leadership judgment occurs not in a single moment but throughout a process. From their research into the complex phenomenon of leadership judgment, the authors also found that most important judgment calls reside in one of three domains: people, strategy, and crisis. Understanding the essence of leadership judgment is crucial. A leader's calls determine an organization's success or failure and deliver the verdict on his or her career. The first phase of the judgment process is preparation--identifying and framing the issue that demands a decision and aligning and mobilizing key stakeholders. Second is the call itself, And third is acting on the call, learning and adjusting along the way. Good leaders use a "story line"--an articulation of a company's identity, direction, and values--to inform their actions throughout the judgment process. Boeing CEO Jim McNerney, for instance, focused on a story line of Boeing as a world-class competitor and ethical leader to make a judgment call that launched the company's recovery from a string of ethical crises. Good leaders also take advantage of "redo loops" throughout the process, reconsidering the parameters of the decision, relabeling the problem, and redefining the goal in a way that more and more people can accept. Procter & Gamble's A.G. Lafley and Best Buy's Brad Anderson have both used redo loops--in preparation and execution, respectively--to strengthen not only support for their calls but also the outcomes.