Texas Roundtable on: The Future of Graduate Business School Education

A small group of academics and practitioners discuss the challenges now facing today's business schools. First and foremost is the challenge now being mounted by “online” courses to the traditional methods of classroom lecture and discussion, supplemented in some cases by apprenticeships and other kinds of “experiential” learning. How will traditional universities burdened with high and rising fixed costs for buildings and faculty compete with very low‐cost competitors—programs that reportedly have enabled star lecturers to reach audiences that, in some cases, have exceeded 100,000 students? In assessing the seriousness of the challenge, the panelists start by attempting to articulate what is valuable in current business school education—valuable enough to enable the best business schools to command as much as $175,000 for two‐year (or shorter) programs that confer MBAs. Much of the discussion focuses on establishing the relative importance of the disciplines, or body of knowledge, that are taught in business schools, as compared to the development of “collaborative” habits and interpersonal skills aimed at enabling students to make more effective use of their knowledge within large organizations. Some of the panelists, notably Jeff Sandefer, founder of the (now ten‐year old) Acton School of Business, argue that far too much of today's business school curriculum is devoted to the classroom and conventional learning. And many of the changes in the top business schools during the past decade appear to reflect Sandefer's charges. But, to the extent there is a consensus among the other panelists, it is that the best business schools will continue to try to accomplish both of these goals, though with varying degrees of effectiveness, while most schools attempt to maintain their specialized capabilities, and carve out distinctive niches based on them. For some schools, such specialization is likely to mean continued emphasis on theory and classroom learning—though almost certainly with more attention to practical application and collaborative decision‐making. For other schools, the main focus will continue to be the development of general management and leadership skills.     

Short interest in exchange-traded funds

Short selling exchange-traded funds (ETFs) has become a common means of speculating or hedging in response to pessimistic expectations about a specific market or sector, as the short interest of ETFs is more than 10 times that of individual stocks, on average. We determine that sector-based ETFs have an abnormally large short interest level, whereas international ETFs have an unusually small short interest level. The level of short interest is larger for ETFs that have a higher trading volume and a lower market capitalization, regardless of the type of ETF assessed. The level of short interest is lower for ETFs representing indexes that have tradable derivatives, but higher for international ETFs representing indexes that have tradable derivatives. We also determine that the level of short interest in an ETF serves as an effective signal of bearish sentiment when considering all ETFs, but is not an effective signal when isolating any particular type of ETF.

Claiming Behavior in Workers' Compensation

Using administrative data on workers' compensation claims in Michigan combined with data collected from a sample of workers identified by physicians as having work‐related pain in their backs, wrists, hands, or shoulders, this article provides evidence that a substantial number of potentially eligible workers do not file workers' compensation claims. Multivariate analysis identifies the effects of various factors on the probability of filing a workers' compensation claim, conditional on having a work‐related health problem. We find that the severity of the worker's condition and the worker's general health are the most important determinants of the decision to file, and that the generosity of wage loss benefits also affects the decision of an eligible worker to file. Finally, claims propensities vary considerably across workplaces, holding all other measured factors constant.     

The Matthew effect,research productivity,and the dynamic allocation of NIH grants

Funding is important for research. However, research funding may suffer from the Matthew effect: the more researchers already have, the more they will be given. I develop an empirical framework to study how the National Institutes of Health (NIH) could allocate funding in a dynamically optimal manner by balancing funds between young and veteran principal investigators (PIs). I find that the discount factor that rationalizes NIH's funding behavior is about 0.75, implying it may underfund young PIs. Moreover, a temporary funding cut would have long-lasting effects on overall research output through its adverse impact on investment in young PIs.     

The Impact of Mispricing and Asymmetric Information on the Price Discount of Private Placements of Common Stock

The price discount on privately placed stock is large and can vary substantially among firms. While earlier studies attribute price discounts on privately placed stock to illiquidity and costs of gathering information, we offer a more complete explanation. We find that firms exhibiting higher overvaluation have significantly larger price discounts in private stock sales. We also find that higher levels of asymmetric information about the issuing firm and about the stock market environment at the time of the private placement cause more pronounced discounts in the offer price. Our analysis also shows that post-issue abnormal returns following private placements are higher when discounts are less pronounced.     

Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour*

Governments in Australia are purchasing water entitlements to secure water for environmental benefit, but entitlements generate an allocation profile that does not correspond fully to environmental flow requirements. Therefore, how environmental managers will operate to deliver small and medium‐sized inundation environmental flows remains uncertain. To assist environmental managers with the supply of inundation flows at variable times, it has been suggested that allocation trade be incorporated into efforts aimed at securing water. This paper provides some qualitative and quantitative perspective on what influences southern Murray–Darling Basin irrigators to trade allocation water at specific times across and within seasons using a market transaction framework. The results suggest that while irrigators now have access to greater risk‐management options, environmental managers should consider the possible impact of institutional change before intervening in traditional market activity. The findings may help improve the design of intervention strategies to minimise possible market intervention impacts and strategic behaviour.     

Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets

Canada and the European Union (EU) recently completed the Comprehensive Economic and Trade Agreement (CETA) to liberalize bilateral trade. Processed food trade between Canada and the EU is one of the fastest growing markets, in spite of large trade restrictions due to high tariffs and egregious nontariff barriers (NTB). The processed food sector is characterized by firms which differ in size, productivity, produce differentiated products, and engage in monopolistic competition. We implement a four‐region (Canada, the EU, the United States, and the Rest of the World) model of the processed food industry, incorporating these firm characteristics to study the effects of CETA. The results show Canadian and EU bilateral trade flows expand, the number of exporting firms rises, and net welfare in both these countries increases. Though CETA does not liberalize NTBs, we examine the impacts of a 40% cut in NTBs to highlight the benefits that would have accrued had CETA also covered NTBs. Under this scenario, the trade flows would have expanded significantly, and, more importantly, Canadian and EU welfare would have risen by 11.8‐ and 39.4‐fold, respectively. Since CETA excludes the United States, the U.S. processed food industry loses due to greater competition in Canadian and the EU markets, and the net U.S. welfare declines.     

Trade Reform and the Corn Market: Prospects for the World Trade Organization Negotiations on Agriculture

Government support and trade restrictions on agricultural commodities are among the most globally distorting protectionist policies. This is especially true with regards to corn. Vast production subsidies and import barriers, primarily within the European Union and China, have artificially inflated the global supply of this commodity, while restricting the available consumer markets. This impact is augmented by the preferential treatment granted in these countries to the production and importation of the best available substitute to corn, soybeans. Using an econometric model with commodity data over the past 20 years, this article predicts the likely impact of potential World Trade Organization (WTO) trade pacts on these corn trade distortions. Despite the WTO setback in Seattle, the vast global benefits resulting from agricultural trade liberalization in corn alone validate a continued push towards freer trade.     

The implicit use of business concepts in the UK Research Assessment Exercise

Research assessment exercises covering universities in the United Kingdom were established to produce quality ratings as a basis for allocating much of the research funding from central government. They represent some of the largest research management exercises ever undertaken. Amongst other aspects of university performance, the publications of all 'research active' UK academics are evaluated. This paper describes the way in which quality was assessed and funds were allocated as a result of the 1992, 1996 and 2001 exercises. It looks at how the exercises might continue to evolve and the value of a further exercise.
The strategies adopted by universities to maximise their ratings and their income are also considered. Universities have improved their research performance and their reporting methods in response to changes in the criteria and weightings used in the exercise. In parallel the HEFC (Higher Education Funding Council) has changed the ways in which funds have been distributed once the level of research performance has been determined.
The exercises have received much criticism as well as an acceptance that they have changed the culture of academic research. This paper considers the parallel evolution of trends in the management of R&D in business with trends in the management of university research via these exercises. There are underlying assumptions that seem to influence the transfer of policy design principles and management lessons between the two sectors.     

Convergent synergies in the global market for corporate control

We investigate the informational role of the takeover premium as a forward looking price to expected synergies in the global market for corporate control. We find that premiums paid in the global market for corporate control are clustered in waves and driven to some extent by the US premium. International takeover premiums have become more responsive to US premiums as the globalization process evolved over time. Short-run divergent dynamics due to idiosyncratic or country-specific factors have become less severe, which suggests that expected synergies have become increasingly integrated in the global market for corporate control. Furthermore, we find that the region’s takeover premiums typically become more responsive to US takeover premiums when US economic conditions are relatively weak, when the US monetary policy is restrictive, when US credit risk is high, and when the region’s corporate governance (as measured by legal system quality and accounting quality) is high.