Uncharted territory: investigating individual business ethics in Cyprus

The research purpose of the study is to investigate and identify correlates of ethical behaviour and attitudes of individuals currently working or pursuing a business‐related graduate degree in Cyprus. Analysis of the quantitative questionnaire revealed that the majority of the respondents had a concept of ‘ethical behaviour’, consider ethics important, and hold attitudes that are conducive to ethical behaviour in business. In addition, findings revealed significant differences in three correlates: age, gender and position. Finally, reflecting the findings, the authors suggest specific actions that aim to improve ethical decision making in the Cyprus business environment.     

Value investing in credit markets

We outline a parsimonious empirical model to assess the relative usefulness of accounting- and equity market-based information to explain corporate credit spreads. The primary determinant of corporate credit spreads is the physical default probability. We compare existing accounting-based and market-based models to forecast default. We then assess whether the credit market completely incorporates this default information into credit spreads. We find that credit spreads reflect information about forecasted default rates with a significant lag. This unique evidence suggests a role for value investing in credit markets.     

Too little or too much R&D?

According to the first generation models of endogenous growth based on expanding product variety, the market economy unambiguously generates too little R&D. Later, by disentangling returns to specialization from the market power parameter, it was shown that with sufficiently low returns to specialization too much R&D can occur. The present paper takes a step further, disentangling the market power parameter from the capital share in final output. At a theoretical level this helps finding too much R&D as well. On the other hand, in view of the empirically realistic order of magnitude between the parameters, disentangling market power and capital share tends to diminish the scope for excess R&D. Finally, by differentiating between net and gross returns to specialization we demonstrate what drives the differing inefficiency results in this literature.     

Performance Evaluation of Pension Funds Management Companies with Data Envelopment Analysis

This article uses Data Envelopment Analysis (DEA) to evaluate the performance of Portuguese pension funds management companies from 1994 to 2003, combining operational and financial variables. We evaluate how close the pension funds management companies are to the best practices frontier, also analyzing how they manage their funds. Implications of this research for managerial purposes are then drawn.     

Using accessibility indicators and GIS to assess spatial spillovers of transport infrastructure investment

This paper proposes a methodology to measure spatial spillovers of transport infrastructure investment and to monetize them by distributing the costs of the infrastructures envisaged according to the regional distribution of the potential accessibility benefits. We use a transport master plan (the Spanish “Plan Estratégico de Infraestructuras y Transporte” 2005–2020, PEIT) as a case study for applying our methodology. In order to calculate and map regional spillovers, economic potential values are computed using network routines in a Geographic Information System (GIS) by comparing two scenarios: firstly, the scenario PEIT 2020; and secondly the scenario which includes the improvements envisaged for the year 2020 in all the regions except the region whose spillover effects are being analyzed. The differences between these two scenarios represent the potential spatial spillover effects of this region on the rest of the regions. This procedure is repeated for each of the Spanish regions in order to calculate a matrix of inter-regional spillovers in economic potential units. In a second step, this matrix is monetized by distributing the costs of the investment in infrastructures envisaged in the region according to the regional distribution of the economic potential benefits. This inter-regional matrix of investments flows characterizes the “inner”, “export”, and “import” values of each of the regional road investments. Subtracting from the direct investment the exports to other regions and adding the imports from other regions, an estimation of the real investment of the plan in each region taking into account all the spillover effects is obtained. This value can be compared with the direct investment in the region, analyzing whether one region has more or less direct investment than real. The proposed methodology makes it transparent which regions benefit more from national transport investment irrespective of where the investment occurs. The spillover matrix can be a valid instrument, especially in federal states or in the case of transnational projects, in the field of regional economics because it offers very useful information for both planners and policy makers.     

The effect of neglecting the slope parameters’ heterogeneity on dynamic models of corporate capital structure

We present a parsimonious representation of debt-ratio dynamics that is able to nest the Trade-Off, Pecking-Order and Market-Timing theoretical models, at the same time avoiding the poolability of the slope parameters. The inference on the heterogeneous speed of adjustment of the firm towards the target debt ratio is based on a comparison of the unit root results from both individual company and (this is a relative novelty in the case of micro-data) panel data. Results show that company behavior is largely heterogeneous with regard to the theory underlying the historical data. Our proposed methodology may be usefully employed in order to identify sub-samples of companies behaving in an homogeneous manner, and can be extended to study the empirical capital structure models with more appropriate quantitative instruments. This would avoid the arbitrary a priori selection of sub-samples and the imposition of untested poolability assumptions as commonly occurs in the empirical literature.     

Malmquist-type indices in the presence of negative data: An application to bank branches

In this paper we develop an index and an indicator of productivity change that can be used with negative data. For that purpose the range directional model (RDM), a particular case of the directional distance function, is used for computing efficiency in the presence of negative data. We use RDM efficiency measures to arrive at a Malmquist-type index, which can reflect productivity change, and we use RDM inefficiency measures to arrive at a Luenberger productivity indicator, and relate the two. The productivity index and indicator are developed relative to a fixed meta-technology and so they are referred to as a meta-Malmquist index and meta-Luenberger indicator. We also address the fact that VRS technologies are used for computing the productivity index and indicator (a requirement under negative data), which raises issues relating to the interpretability of the index. We illustrate how the meta-Malmquist index can be used, not only for comparing the performance of a unit in two time periods, but also for comparing the performance of two different units at the same or different time periods. The proposed approach is then applied to a sample of bank branches where negative data were involved. The paper shows how the approach yields information from a variety of perspectives on performance which management can use.