APPLICATIONS OF DECISION TREES TO THE EVALUATION OF APPLIED RESEARCH PROJECTS

Abstract I n this paper two applications of decision trees are described. These relate to the electronics and chemical industries and are concerned with the evaluation of applied research projects aimed at new products. It is demonstrated that decision tree diagramming is a demanding yet flexible technique which allows the representation of sequential decisions and subjectively based data in a readily understood form.     

Foreign owners and American cement: Old cartel hands,or new kids on the block?

In 1961, all portland cement producing capacity in the United States was owned by companies domiciled here. Thirty years later, about 70% was controlled by foreign owners, mostly European. It has been suggested by various authorities — academic economists, the business press, even cement executives — that foreign governments' tolerance for formal or tacit collusion would bring the American cement industry a kind of ‘price discipline’ that it has been largely unable to practice since 1948. This contention is tested as an hypothesis, using regional data from the U.S. Bureau of Mines and the Portland Cement Association. The test shows either no or a negative relation between foreign control and the level of regional cement prices. At the same time, we observe the traditional positive relation between concentration (HHI) and prices. The results imply that horizontal mergers between cement producers are a better subject for the attention of public policy than where they are owned.     

OVER-REACTIONS IN US AGRICULTURAL COMMODITY PRICES

The purpose of this paper is to test rationality in agricultural commodity markets. We investigate the price-adjustment process after significant events using abnormally large cash commodity price changes as proxies for the arrivals of significant events in the markets. The evidence suggests that market rationality is violated. Generally, agricultural commodity prices tend to reverse after significant events. This is consistent with the over-reaction hypothesis which maintains that traders in spot commodity markets over-weight more recent information and under-weight prior information in their expectations.     

The Role of Banks in Dividend Policy

We use loan‐specific data to document a significant inverse relation between a firm's dividend payouts and the intensity of a firm's reliance on bank loan financing. Banks limit dividend payouts to protect the integrity of their senior claims on the firm's assets. Moreover, dividend payouts decline in the presence of monitoring by relationship banks, which acts as an effective governance mechanism, thereby reducing the gains from precommitting to costly dividend payouts. Bank monitoring and corporate governance (insider stake and institutional block holdings) are complementary mechanisms to resolve firm agency problems, both reducing the firm's reliance on dividend policy.     

The new retirement reality: calculating the true cost of retirement income adequacy

Recognizing that 401(k) plans are emerging as many employees' sole source of employer-sponsored retirement income, plan sponsors are increasingly adding paternalistic plan features to increase the amount--and effectiveness--of dollars invested in 401(k) accounts. The authors describe the results of a study they prepared for Hewitt Associates that assesses retirement income adequacy for individuals represented in a plan participant database of 1.8 million individuals. The study includes analysis of retirement income adequacy for the aggregate population as well as the results for different subgroups, reflecting factors such as whether individuals actively contribute; the impact of different levels of retiree medical coverage; and the presence of a defined benefit pension. Finally, the authors discuss how plan sponsors can bolster the adequacy of retirement income from 401(k) plans, depending on employer objectives.     

Leadership learning: Crucial conversations,next steps,and thoughts for consideration

Forty years ago, the questions most discussed among those who cared about leadership were “is leadership possible among those who don't have titles and positions?”; “what are the characteristics possessed by effective leaders?”; and “how do we find the people who are the best leaders and help them prepare for positions that will allow them to have an impact?” After many conversations, conferences, research studies, and books, the terrain has shifted among scholars. Now the conversations focus on questions such as “If leadership is a shared responsibility among members of groups, how can the full leadership potential of all be cultivated?”; “What role do collaborators play in empowering positive leadership and defending against those who misuse it?”; and “How can organizations cultivate cultures that support and encourage visionary leadership dedicated to benefitting all?” The shift in the questions that leadership educators now explore, coupled with the breadth and variety of the initiatives dedicated to nurturing it, demonstrate that leadership can be taught. More importantly, the practice of leadership demonstrates that many can pursue leadership and that they must if the opportunities of the 21st century are to be fulfilled. The conversations and the needs for leadership have both shifted and it is now incumbent on those who value leadership most to agree to unifying perspectives that can draw us together in common purpose. From your vantage point, what are the crucial conversations, next steps, and/or thoughts for consideration as we enter the second decade of the 21st century?     

Global M&A: Still the chocolate industry sweetspot?

Like a dividing cell under the microscope, the American snack food market has split apart into two distinct cells, each with its own unique consumer DNA. The two market segments can best be defined as legacy consumers and next‐generation consumers. This tectonic shift in the confectionery industry may make global industry‐giant mergers more a battle between dinosaurs, lit by meteor light.