The determinants of interest margins and their effect on bank diversification: Evidence from Asian banks

An endogenous switching regression model is employed for this study, categorizing the banks into regimes of high and low degrees of diversification, with our results indicating that net interest margins can be less sensitive to fluctuations in bank risk factors for functionally diversified banks as compared to more specialized banks. In turn, this implies that by diversifying their income sources, these banks can reduce the shocks to net interest margins arising from idiosyncratic risk. Our results show that prior findings can hold when the banks are located in a regime with a low degree of diversification.     

Option implied cost of equity and its properties

The estimation of the cost of equity capital (COE) is one of the most important tasks in financial management. Existing approaches compute the COE using historical data, i.e. they are backward‐looking methods. This study derives a method to calculate forward‐looking estimates of the COE using the current market prices of stocks and stock options. Our estimates of the COE reflect the expectation of the market investors about the COE during the life of the investment project. We test empirically our method and compare it with the Fama/French (1993) three‐factor model for the S&P 100 firms. The empirical results indicate that our COE estimates (1) are plausible and stable over the years as required by appropriate discount rates for capital budgeting, (2) yield an equity risk premium close to the market equity risk premium reported by Fama E. F. and French K. R. (2002), (3) generate strong return‐risk relationships, and (4) are significantly related with investor sentiment. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29: 599–629, 2009     

Threshold non-linear dynamics between Hang Seng stock index and futures returns

We test the joint dynamics between the Hong Kong Hang Seng Index futures and the underlying cash index using a Bivariate Threshold AutoRegressive model, which is better able to capture the complex return dynamics evident in financial time series. The results are consistent with a three-regime version of the model, where the lead-lag relation between the index and futures returns is a non-linear threshold-type and the regime switching process depends on the state of the threshold variable. This interaction is symmetric rather than unidirectional, with the strength of the interaction dependent on the regime. These three regimes are also characterised by significant variation in volume, which is consistent with liquidity-induced arbitrage trading.     

Service quality,perceived value,corporate image,and customer loyalty in the context of varying levels of switching costs

The current study moves beyond customer‐perceived value and corporate image and demonstrates that switching costs are important factors in influencing a customer's decision to stay with a service provider. This work finds support for a contingency model involving customer‐perceived value, corporate image, and switching costs. The results indicate that the impacts of customer‐perceived value and corporate image on customer loyalty decrease under conditions of high switching costs. Implications of the results are discussed. © 2010 Wiley Periodicals, Inc.     

Uncertainty,market structure,and liquidity

In this study we show that market uncertainty [measured by the Chicago Board Options Exchange Market Volatility Index (VIX)] exerts a large market-wide impact on liquidity, which gives rise to co-movements in individual asset liquidity. The effect of VIX on stock liquidity is greater than the combined effects of all other common determinants of stock liquidity. We show that the uncertainty elasticity of liquidity (UEL: percent change in liquidity given a 1% change in VIX) has increased around regulatory changes in the US markets that increased the role of public traders in liquidity provision, reduced the minimum allowable price variation, weakened the affirmative obligation of NASDAQ dealers, and abolished the specialist system on the NYSE.     

Pitting real options theory against risk diversification theory: International diversification and joint ownership control in economic crisis

This study examines how MNE divestment decisions differ according to real options vs. risk diversification perspectives. We develop competing hypotheses in relation to international diversification and joint ownership control. Empirical results give consistent support to the real options perspective. We find that large MNEs with greater international diversification are less likely to divest their subsidiaries during times of economic crisis. The negative effect of joint ownership control is however manifested in both crisis-stricken and non-crisis country subsidiaries as well as in their interaction effect.     

Liquidity and Returns to Target Shareholders in the Market for Corporate Control: Evidence from the US Markets

In this paper we analyze how stock market liquidity affects the abnormal return to target firms in mergers and tender offers. We predict that target firms with poorer stock market liquidity receive larger announcement day abnormal returns based on the following considerations. First, target firms with poorer stock market liquidity receive greater liquidity improvements after a merger or tender offer. Second, deals that involve less liquid targets are less anticipated and/or more likely to be completed. Third, less liquid stocks have more diverse reservation prices across shareholders and thus require a higher takeover return. Consistent with these expectations, we show that abnormal returns to target firms’ shareholders are significantly and positively related to the difference in liquidity (measured by the bid‐ask spread) between acquirers and targets as well as the magnitude of target firms’ liquidity improvement.     

Tipping Behavior of Diners in Three Upscale Chinese Restaurants in Hong Kong

This study intends to fill a gap in the literature and explores customers' tipping behaviors in the Chinese foodservice industry. The main focus of this study is to test a model that examines the influences of “food quality”, “service quality”, “conformity”, “universalism”, “reputation”, “likelihood of return” and “overall meal satisfaction” on tip size. A survey was conducted with 611 restaurant patrons in three selected Chinese restaurants in Hong Kong. The findings of this study reveal that five of these seven factors were found to be good predictors of overall satisfaction except “universalism”. However, the overall impact of these seven factors on tip amount was small. Implications of the findings were discussed and directions for future studies were included.     

Permutation flowshop scheduling to minimize the total tardiness with learning effects

Scheduling with learning effects has received considerable attention recently. Often, numbers of operations have to be done on every job in many manufacturing and assembly facilities. However, it is seldom discussed in the general multiple-machine setting, especially without the assumptions of identical processing time on all the machines or dominant machines. With the current emphasis of customer service and meeting the promised delivery dates, we consider a permutation flowshop scheduling problem with learning effects where the objective is to minimize the total tardiness. A branch-and-bound algorithm and two heuristic algorithms are established to search for the optimal and near-optimal solutions. Computational experiments are also given to evaluate the performance of the algorithms.