The Impact of Activity-Based Costing on Managerial Decisions at Insteel Industries—A Field Study

In this field-based study, we interview top- and middle-level managers at Insteel Industries and conduct statistical analysis of firm-level data in order to shed light on whether activity-based costing (ABC) provides new information to managers and whether activity-based management (ABM) significantly influences product and customer-related decisions. We find that after the ABC analysis, Insteel undertook a number of process improvements that resulted in significant cost savings. Additionally, Insteel displayed a higher propensity to discontinue or increase prices of products and discontinue customers that were found comparatively unprofitable in the ABC study. Thus we provide empirical evidence that ABC influences both strategic and operational managerial decisions.     

OPTIMAL DIVIDEND POLICY WITH MEAN-REVERTING CASH RESERVOIR

Motivated by empirical evidence and economic arguments, we assume that the cash reservoir of a financial corporation follows a mean reverting process. The firm must decide the optimal dividend strategy, which consists of the optimal times and the optimal amounts to pay as dividends. We model this as a stochastic impulse control problem, and succeed in finding an analytical solution. We also find a formula for the expected time between dividend payments. A crucial and surprising economic result of our paper is that, as the dividend tax rate decreases, it is optimal for the shareholders to receive smaller but more frequent dividend payments. This results in a reduction of the probability of default of the firm.     

Banks' option to lend,interest rate sensitivity,and credit availability

Interest rate risk is a major concern for banks because of the nominal nature of their assets and the asset-liability maturity mismatch. This paper proposes a new way to derive a bank's interest rate sensitivity, by examining separately the effects of interest rate changes on existing loans(loans-in-place) and potential loans (loans-in-process). A potential loan is shown to be equivalent to an American option to lend, and is valued using option theory. An increase in interest rates generally has a negative effect on existing loans. However, if both deposit and lending rates rise by the same amount, the value of a potential loan generally increases. Hence a bank's lending slack (or ratio of loans-in-process to loans-in-place) will determine its overall interest rate risk. Empirical evidence indicates that low-slack banks indeed have significantly more interest rate risk than high-slack banks. The model also makes predictions regarding the effect of deposit and lending rate parameters on bank credit availability. Empirical tests with quarterly data are generally supportive of these predictions. This revised version was published online in June 2006 with corrections to the Cover Date.     

Sourcing decisions under risks of catastrophic event disruptions

In this paper, a supplier selection problem is studied under risks of supplier failure due to the catastrophic events disruption. An analytical model is developed to determine the optimal number of suppliers considering different failure probability, capacity, and compensation. An algorithm is designed to find the optimal solution and numerical study is carried out to illustrate the model. Results of numerical study and sensitivity analysis provide useful guidelines for managers to select the optimal number of suppliers under the risks of supply disruption.     

Is the relative risk aversion parameter constant over time? A multi-country study

In this paper, an information matrix (IM)-based test is developed for testing the hypothesis of constant relative risk aversion parameter in the GARCH-M set up. A detailed Monte Carlo study is then carried out to evaluate the performance of this test in terms of size and power. Further, a bootstrap technique is suggested to correct the over-size problem found in small samples. The proposed test is then applied to the time series of returns on stock markets of five important countries to examine whether this important hypothesis holds or not, and it is found that the relative risk aversion parameter is not time invariant for all the five time series.     

A possible solution to tropical troubles? : Debt-for-nature swaps

Two major problems spurred the development of debt-for-nature swaps —the high rate of destruction of tropical forests and the heavy debts accumulated by these countries. Debt-for-nature agreements are part of a new wave of thinking about the links between the environment and debt. With funds procured through conservation organizations, debt-for-nature swaps and funds have been arranged in several developing countries. This article examines myriad proposals to reduce the debt burden, identifies the link between debt, development and the environment, and clarifies the conceptual framework of the debt-for-nature swaps approach. Debt-for-nature swaps are analysed in terms of sovereignty, socioeconomic impacts and policy implications. It is concluded that the debt-for-nature swaps approach is not intended to provide debt relief on any significant scale nor resolve the debt crisis. Their nominal impact on the debt situation does not imply failure: they improve the management of natural resources. It is a strategy in which a number of goals converge for different groups in developing as well as developed countries.     

Individualism–collectivism as predictors of BPO employee attitudes toward union membership in India

Drawing on data from a survey of 342 employees from three BPO organizations in Mumbai (India), this study examined whether cultural variables of individual cultural orientation and organizational culture, and their interaction were predictive of employees’ attitudes toward union membership in BPO organizations in India where unionization has hitherto not taken place. Using regression analysis, the researcher found that over and above the effects of demographic and job-related variable, and work stress and job satisfaction, horizontal individualism could predict union attitudes significantly and negatively whereas vertical individualism and collectivism could predict the attitudes significantly and positively. Similarly, organizational collectivism could predict employees’ attitudes toward union membership significantly and negatively. Using the univariate analysis of variance, the researcher found that the contrast between personal value and organizational culture of an individualist working in a collectivistic organizational culture or collectivist working in an individualistic culture are found to have stronger influence on union attitudes compared to the congruence of an individualist working in an individualistic culture or collectivist working in a collectivistic culture. The results and implications of findings are discussed in the paper with reference to the literature on role of cultural and attitudinal variables in relation to organizational outcomes like union membership.

Optimal mechanism for land acquisition

Review of Economic Design - Sellers with one unit of land each are located at the nodes of a graph. Two sellers are contiguous if they are connected by an edge in the graph. The buyer realizes a...     

Notes on the postulate of the monotonicity in distance in inequality

In this paper, we strengthen Cowell and Flachaire's observation regarding the failure to satisfy Cowell's “monotonicity in distance” postulate by several well-known inequality indices. We also identify a general analytical reason for this failure to arise.