A theory of global strategic alliances: The case of the global auto industry

The theory articulated in this paper suggests that the desire to reduce demand and competitive uncertainty are two separate, important motives for alliance formation. Taking this as a starting point, we predict the configuration of horizontal alliances that we might expect to observe within an industry when firms experience these uncertainties to different degrees. An empirical test of this theory using data from the global auto industry yields results consistent with the view (1) that alliances are a device for reducing both the uncertainties that arise from unpredictable demand conditions and those that arise from competitive interdependence, and (2) that variation of demand uncertainty and competitive uncertainty across firms explains differentials in both the intensity and structure of their horizontal alliance activity.     

Testing for abnormal security-price performance under conditions of event-period uncertainty

This paper examines an event study test procedure based on cumulative average residuals (CARs) and a boundary-crossing probability for Brownian motion. The boundary-crossing test procedure is designed to detect abnormal security-price performance under conditions of event-period uncertainty. Simulations with daily security-return data show that the boundary-crossing test is well specified under the null hypothesis and has good power properties under the alternative hypothesis of abnormal security-price performance distributed over an event period of uncertain length.     

Stock Market Reactions to SFAS No. 96: Evidence from Early Bank Adopters

Statement of Financial Accounting Standards (SFAS) No. 96, “Accounting for Income Taxes,” issued by the Financial Accounting Standards Board (FASB) in December 1987 changed accounting for income tax recognition and accrual. The original deadline for implementation of SFAS No. 96 was December 15, 1988, and earlier adoption was encouraged. This study examines empirically the stock price impact of four pertinent announcement dates regarding SFAS No. 96 for 19 banks that adopted the statement in late 1987 and early 1988. Our results suggest that these early bank adopters have different characteristics from other banks that cause them to benefit from the changes in accounting for deferred taxes and explain their voluntary adoption of the standard.     

A longitudinal study of the cause and consequences of changes in diversification in the U.S. pharmaceutical industry 1977–1986

The paper hypothesizes that diversification by firms based in the pharmaceutical industry during the 1977-86 time period was primarily undertaken to reduce the risks associated with being dependent upon a technologically dynamic environment. Consistent with this non-efficiency motive for diversification, declining economic performance is predicted. A longitudinal empirical analysis provides support for these propositions.     

Privatization in China's industry

This paper adopts property rights and organization theory perspectives to analyze the process of privatization of state enterprises and performance of newly created shareholding corporations in China. Relying on case study information, the paper concludes that although the shareholding corporations have contributed, to a certain extent, to better performance, their potentials have not been fully realized due to various economic environmental and ideological constraints.     

Spreads, depths, and the impact of earnings information: an intraday analysis

For a sample of NYSE firms, we show that wide spreads are accompaniedby low depths, and that spreads widen and depths fall in responseto bigger volume. Spreads widen and depths fall in anticipationof earnings announcements; these effects are more pronouncedfor announcements with larger subsequent price changes. Spreadsare also wider following earnings announcements, but this effectdissipates quickly after controlling for volume. Collectively,our results suggest liquidity providers are sensitive to changesin information asymmetry risk and use both spreads and depthsto actively manage this risk.     

How Does a Development Moratorium Affect Development Timing Choices and Land Values?

This paper investigates how a development moratorium affects choices of development timing and land values in a framework where both the value of developed property evolves stochastically and the development costs are fully irreversible. We assume that a regulator initially announces that land is not allowed to be developed during a finite period of time in the future. A developer, thus, must decide whether to develop land before the timing ordinance is imposed, or after it expires. The development moratorium reduces the developer’s option value from waiting and, thus, accelerates development. We also use simulation analysis to demonstrate how the other factors that relate to the demand and supply conditions of the real estate market affect this accelerating effect.     

Technical innovation and 3.5 mobile phone generation: Lessons from Korea

In 1996, the Korean mobile communication market was the first in the world to commercialize the code division multiple access (CDMA). Since then, the voice-based mobile phone market has continued to grow and has now reached near saturation. Having recognized the potential of the mobile data service as a new source of profit, telecommunication operators are scrambling to evolve 3.5 generation (3.5G) technology in order to lead market competition. Recently, the Korean 3.5G mobile telecom market has faced stiff competition from CDMA-based EVDO Rev.A and global system for mobile telecommunications (GSM)-based high-speed downlink packet access (HSDPA). In addition, the world's first wireless LAN-based wireless broadband internet (WiBro) service was commercialized in June, 2006. This paper reviews the current status of the 3.5G technology and analyzes the service standardization strategies from the viewpoint of technological evolutions. This paper also suggests implications for Korea's specific circumstances where different mobile telecom technologies complement and compete with one another. Korea's experiences may serve as important lessons for other countries or operators who try to introduce the 3G and look beyond mobile telecom technologies.     

Who's in charge of the central city? The conflict between efficiency and equity in the design of a metropolitan area

A circular metropolitan area consists of a central city surrounded by a suburb. Households sort over the two jurisdictions based on public service levels and their costs of commuting to the metropolitan center. Using numerical simulations, we show that (1) there typically exist two equilibria: one in which the poor form the voting majority in the central city and the other in which the rich form the majority in the central city; (2) there is an efficiency vs. equity trade-off as to which equilibrium is preferred; and (3) if the central city contains only poor households, equity favors expanding the central city to include rich households. The third result arises not because of a fiscal subsidy from rich to poor households induced by a property tax but rather because of a change in house price capitalization.     

The Political Economy of Exchange Rate Regimes: Evidence from Hong Kong and Taiwan

This paper investigates whether the macroeconomic performance of a small- open economy depends on the choice of exchange rate regimes. Hong Kong and Taiwan - two economies with many similar macroeconomic characteristics, but different in their choices of exchange rate regimes - provide a good setting to study the relation between the choice of exchange rate regime and macro-economic performance. We examine the basic facts of growth and inflation and the coefficients' stability of their vector autoregression (VAR), as well as cyclical characters of other aggregate variables in Hong Kong and Taiwan. Our empiric finding indicates that macroeconomic performance is not systematically related to exchange rate regimes.