Relationship banking and escalating commitments to bad loans

The relationship banking literature suggests that business relationships play an important role in the loan decisions of small banks. We test one aspect of this hypothesis using a cross-sectional panel dataset of small banks located in Texas from 1994 to 2002. Our results suggest that small banks located in smaller counties escalate their commitment to bad loans when compared with those located in larger counties, even after controlling for psychological and social factors that influence escalation tendencies. These results highlight the need for small banks to trade-off the positive benefits of adopting a relationship banking strategy against its unintended negative consequence. We provide some suggestions on how small banks may lessen their escalation tendencies despite adopting a relationship banking strategy. The results of this study also suggest that small and medium-sized enterprises (SMEs) that develop strong relational bonds with small banks may benefit from continued access to credit facilities, especially during periods when they experience financial distress.     

A reduced version of the horizontal and vertical individualism and collectivism scale: A four-country assessment

Individualism/Collectivism is the most widely used cultural dimension in the marketing literature; yet researchers suggest that distinctions within cultures, such as the horizontal and vertical dimensions of Individualism and Collectivism (Singelis et al., 1995; Shavitt et al., 2006), may provide better insights into consumption behavior and responses to marketing stimuli. However, the 32-item attitudinal scale typically used to measure H/V dimensions has been plagued by measurement problems limiting its use and applicability in cross-cultural marketing and consumer research. This paper presents data from six samples in four countries (China, Denmark, India, the U.S.) conducted to test a parsimonious and psychometrically stable 14-item scale measuring the horizontal/vertical and individualist/collectivist dimensions of culture. Theoretical and methodological support for the new scale is offered. The 14-item reduced scale adequately taps into the domain of the construct.     

Medical costs in patients with heart failure after acute heart failure events: one-year follow-up study

Aims: This study investigated annual medical costs using real-world data focusing on acute heart failure.

Methods: The data were retrospectively collected from six tertiary hospitals in South Korea. Overall, 330 patients who were hospitalized for acute heart failure between January 2011 and July 2012 were selected. Data were collected on their follow-up medical visits for 1 year, including medical costs incurred toward treatment. Those who died within the observational period or who had no records of follow-up visits were excluded. Annual per patient medical costs were estimated according to the type of medical services, and factors contributing to the costs using Gamma Generalized Linear Models (GLM) with log link were analyzed.

Results: On average, total annual medical costs for each patient were USD 6,199 (±9,675), with hospitalization accounting for 95% of the total expenses. Hospitalization cost USD 5,904 (±9,666) per patient. Those who are re-admitted have 88.5% higher medical expenditure than those who have not been re-admitted in 1 year, and patients using intensive care units have 19.6% higher expenditure than those who do not. When the number of hospital days increased by 1?day, medical expenses increased by 6.7%.

Limitations: Outpatient drug costs were not included. There is a possibility that medical expenses for AHF may have been under-estimated.

Conclusion: It was found that hospitalization resulted in substantial costs for treatment of heart failure in South Korea, especially in patients with an acute heart failure event. Prevention strategies and appropriate management programs that would reduce both frequency of hospitalization and length of stay for patients with the underlying risk of heart failure are needed.     

Tourist expectations and perception of service providers: a Brazilian perspective

Service Business - This research studies the formation of tourist expectations around a tourist destination and the existence of a knowledge gap between this group and perceptions of tourism...     

TESTING THE QUANTAL RESPONSE HYPOTHESIS

We develop a nonparametric test for consistency of player behavior with the quantal response equilibrium (QRE). The test exploits a characterization of the equilibrium choice probabilities in any structural QRE as the gradient of a convex function; thereby, QRE‐consistent choices satisfy the cyclic monotonicity inequalities. Our testing procedure utilizes recent econometric results for moment inequality models. We assess our test using lab experimental data from a series of generalized matching pennies games. We reject the QRE hypothesis in the pooled data but cannot reject individual‐level quantal response behavior for over half of the subjects.     

Role of international politics on agri‐food trade: Evidence from US–Canada bilateral relations

A well‐functioning trade relationship between Canada and the United States is crucial to the economic vitality of the Canadian agri‐food industry. However, agri‐food trade is more susceptible than other sectors to political interventions. The Trump presidency has strained Canada–US relations and his trade policy actions have significantly increased trade restrictions and trade policy uncertainty and undermined the rules‐based global trading system. We examine the pattern of agri‐food trade between the two countries and find that the upward trajectory of bilateral agri‐food trade ended in 2013. Although this flatlining predates the Trump administration, we show that Trump increased trade policy uncertainty starting in 2017 and likely impacted further expansion of trade. We examine what might change under the Biden presidency and argue that the new administration is likely to restore strong relationships with allies and work to rebuild important international institutions such as the World Trade Organization (WTO). Although protectionist forces will continue to impact bilateral agri‐food trade, we expect closer political ties between a Biden administration and the Canadian Prime Minister. This should have a positive effect on the Canadian agri‐food industry by reducing trade uncertainties, thereby increasing agri‐food trade between Canada and the United States.     

Self-enforcing collusion in large dynamic markets

The “folk theorem” in game theory implies that any outcome that is better for all players than some single period Nash outcome can be achieved through noncooperative equilibrium in repeated games with discounting. Whether the folk theorem holds for a repeated Cournot oligopoly as the number of firms, N, increases without bound, is investigated. It is shown that the folk theorem holds in the limit iff demand increases at the same rate as the number of firms and the Cournot price sequence is bounded strictly above by the supremum of marginal cost for large N.     

Forward and spot exchange rates

There is a general consensus that forward exchange rates have little if any power as forecasts of future spot exchange rates. There is less agreement on whether forward rates contain time varying premiums. Conditional on the hypothesis that the forward market is efficient or rational, this paper finds that both components of forward rates vary through time. Moreover, most of the variation in forward rates is variation in premium, and the premium and expected future spot rate components of forward rates are negatively correlated.     

Francesco Paolo Cantelli

Francesco Paolo Cantelli made fundamental contributions to the foundations of probability theory and to the clarification of different types of probabilistic convergence. He is remembered through the Borel–Cantelli Lemma, the Glivenko–Cantelli Theorem, and Cantelli's Inequality. He also made seminal contributions to actuarial science.