Bond indenture provisions and the risk of corporate debt

This paper examines the effect of alternative bond indenture provisions on the allocation of risk among the firm's claimants. The approach taken here differs from that of earlier studies in that risk allocation is examined while the firm's leverage (in market value terms) is held constant. In this context, four indenture provisions are examined: (1) the time to maturity, (2) the promised payment schedule, (3) financing restrictions and (4) priority rules. It is concluded that risk is transferred from stockholders to bondholders as the time to maturity and promised payment increase appropriately. Furthermore substitution of longer-term debt for an equal amount of shorter-term debt also increases the risk to bondholders while decreasing the risk to stockholders. The analysis shows that a coupon bond can be represented by a unique discount bond with the same risk and value. This permits the characterization of the effective maturity of a risky debt issue, a concept analogous to the stochastic duration of a default-free coupon bond. These results are shown to be independent of the means used to finance the debt issue. Finally, it is concluded that the relative risk associated with different bonds issued by the same firm cannot be determined by the structure of priority rules alone. It is also necessary to consider the timing of the promised payments compared to that of the other debt issues in the firm's capital structure.     

THE VALUE OF A FORWARD CONTRACT IN FOREIGN CURRENCIES

Under some assumptions a valuation model for a forward contract in foreign currencies is developed. The model produces the value of the contract which is consistent with the value of other types of forward contract; the initial value is zero, and subsequent values are the present values of the differences between the forward rate when the contract is written and current forward rates.     

An Empirical Examination of the Parimutuel Sports Lottery Market versus the Bookmaker Market

A sports lottery in Korea presents a unique opportunity for comparing a parimutuel‐type sports lottery market against a bookmaker market outside the realm of horse racing. Using two‐ and three‐game soccer final‐score betting in the sports lottery market in Korea, which features matches in the English Premier League, we compare winning payoffs in this parimutuel‐type sports lottery against corresponding payoffs from an established bookmaker market in the United Kingdom. We find that for outcomes with relatively high payouts (that is, lower‐probability events), winning bets placed in the sports lottery market have greater payoffs than corresponding bets placed in the bookmaker‐based market. However, the opposite is true for outcomes with relatively low payouts (that is, higher‐probability events). Results suggest that participants in the sports lottery market tend to bet more toward high‐probability events than the amount implied by the bookmaker's odds. Results also suggest that the favorite‐longshot bias is still present in the bookmaker market, even when there is less threat of privately informed bettors than in horse racing.     

Will Japan,Taiwan or the US be isolated by China? A macroeconomic game approach

In Taiwan, Japan and even the United States, economic isolation has become a major concern due to the growing Chinese economy, which may lead to welfare losses for the isolated countries. On the basis of the framework developed by Plasmans et al. [Plasmans, J., Engwerda, J., van Aarle, B., Di Bartolomeo, G., Michalak, T., 2005. Dynamic Modelling of Monetary and Fiscal Cooperation Among Nations. Springer], this paper establishes a four-player game with an open-loop information structure to measure possible losses by an international policy coordination approach instead of the conventional free trade agreements. We simulate macroeconomic adjustments of the four countries according to the different institutional scenarios and economic shocks. The baseline simulation and sensitivity analyses indicate that Taiwan can get benefit by participating in coalitional mechanisms including China. In addition, most of the feasible policy coalitions cannot come into effect without US participation. This implies that at the current stage the US rather than China should be the main economic partner of Taiwan and Japan to prevent them from being economically marginalized.     

A discussion of refractive medical behavior from an experiential marketing viewpoint

Since the launch of National Health Insurance System, the financial source of funding for hospital financing has been reduced. Meanwhile, more and more customers attach importance to the experience of the medical process. Our study adopts "strategic modules of experiential marketing" by Schmitt to be the theoretical basis and proceed with in-depth interviews to discuss the influence of "medical behavior" on customers' experiences. We interviewed 32 patients who had a refractive surgery experience. The results show there are 10 propositions, which could be developed from 5 experiential modules - SENSE, FEEL, THINK, ACT, and RELATE - of customers' medical experiences. This study clarifies the experiences of customers during the process of a refractive surgery experience in order to provide medical institutions with the direction of experiential marketing to consider how to use experiential providers to reinforce customers' experiences.     

Measuring the Transaction sector in the Australian economy, 1911–1991

Following Wallis and North's pioneering attempt to estimate the size of transaction costs in the United States over the period 1870 to 1970, we seek to augment this seminal study by applying their methodology to the Australian economy for the period 1911 to 1991. Broadly speaking, our results support the Wallis and North finding with comparable magnitudes and growth rates in both the private and public transaction sectors.     

Technological Gap and Uneven Accumulation in a Classical Production Model

Two regions are distinguished by their technological capabilities. In autarky, the advanced region accumulates more rapidly. Trade augments both regions' growth rates, but can initially worsen the uneven accumulation. The advanced region's faster growth turns the terms of trade against itself. The growth gap narrows. Yet, trade can never close that gap completely. Further decline in the advanced region's growth rate is arrested by its investment in, and technology transfer to, the backward region to augment the latter's export. Whether uneven accumulation persists depends on how successfully the backward region's indigenous capitalists adopt the more efficient `foreign' technology.     

Theory-Driven Choice Models

We explore issues in theory-driven choice modeling by focusing on partial-equilibrium models of dynamic structural demand with forward-looking decision-makers, full equilibrium models that integrate the supply side, integration of bounded rationality in dynamic structural models of choice and public policy implications of these models.     

Advertising in China—Problems and Prospects

Economic reform in China has revived the importance of the market forces and of advertising. Although advertising has a less important role in the Chinese market than in Western countries, it is the fastest growing industry in China. Foreign participation in advertising is limited and contributes about 10 per cent of Chinese advertising revenues. This paper argues that there is ample opportunity for foreign advertisers. Nevertheless, because the Chinese market is different, foreign advertisers need to be patient when attempting to enter the market. The problems and prospects of advertising in China are pinpointed in this paper. Some precautionary measures for the advertisers are also discussed.     

Social Capital or Ethnic Enclave Location? A Multilevel Explanation of Immigrant Business Growth

The rapid increase in migration into host countries and the growth of immigrant‐owned business enterprises has revitalized research on ethnic business. Does micro (individual)‐level social capital, or meso (group)‐level location within the ethnic enclave lead to immigrant business growth? Or do you need both? We analyze quantitative data collected from 110 Chinese restaurants in Australia, a major host country. At the micro level we find that coethnic (same ethnic group) networks are critical to the growth of an immigrant entrepreneur's business, particularly in the early years. But non‐coethnic (different ethnic group) social capital only has a positive impact on business growth for immigrant businesses outside the ethnic enclave. Our findings are relevant, not only to host‐country policymakers, but also for future immigrant business owners and ethnic community leaders trying to better understand how to promote healthy communities and sustainable economic growth. © 2015 Wiley Periodicals, Inc.