Corporate Risk Management under Information Asymmetry

This paper examines the financial and operational hedging activities of US pharmaceutical and biotech firms that are subject to a high level of information asymmetry stemming from R&D investments during 2001–2006. We find evidence in support of the information asymmetry hypothesis à la Froot, Scharfstein and Stein (1993) that hedging helps mitigate the under‐investment problem. Specifically, we find that the use of financial derivatives is associated with greater firm value and that the value enhancement is larger for firms subject to greater information asymmetry and better growth opportunities. There is a synergy between financial hedging and operational hedging where the latter is used to counter product development risk. The results are robust with respect to alternative performance measures, industry‐specific growth measures, and the endogeneity problem. Our work is differentiated from existing studies that examined commodity‐based industries without addressing information asymmetry.     

The Effects of Advertising on Mutual Fund Flows: Results from a New Database

We examine 471,000 mutual fund company advertisements from 1997 to 2003 to study advertising's effect on fund inflows. We find advertising is generally ineffective in attracting inflows but was more effective during the bear market despite smaller advertising expenditures during this time. The top 10 advertisers in our sample were most successful in capturing inflows. These companies generated inflows with mutual fund ads; other companies succeeded when advertising their other products and their brand image. Within a fund family, advertising affects the flagship fund differently than the other funds. Sample firms appeared unable to choose correctly between print and TV ads.     

Men and women as managers: A significant case of no significant difference

What does it all mean? We've reviewed five studies involving almost 2,000 people compared on a total of 43 scales. We've studied matched pairs and controlled for level of managerial achievement. And after all is said and done, we have detected a total of two overall differences between male and female managers. One of these, involving managerial work motivation, favors females: Their work motivation profiles are more “achieving” than those of their male counter-parts. The other difference, pertaining to interpersonal competence, favors the male managers: They are more open and candid with their colleagues than are females. Add to these the more titillating than significant anomalies of differing back-up style preferences and we are left with one conclusion: Women, in general, do not differ from men, in general, in the ways in which they administer the management process.Managers themselves and their subordinates concur. It seems that the disproportionately low numbers of women in management can no longer be explained away by the contention that women practice a different brand of management from that practiced by men. Whereas this may amount to good news in some quarters, we ought not be prematurely elated by discovering that women manage just the way men do. Carolyn Sherif has pointedly called attention to the fact that all is not necessarily well in today's male-oriented management activities.We of course view management in its more global aspects: The important issue to us is how an individual manages in relation to achievement criteria. Individual achievement and organizational health ultimately depend on the way management is practiced. And we now see that the way management is practiced is not related to the sex of the manager — the issue is generic rather than gender-bound.     

Anonymous monotonic social welfare functions

This paper presents two results about preference domain conditions that deepen our understanding of anonymous and monotonic Arrovian social welfare functions (ASWFs). We characterize the class of anonymous and monotonic ASWFs on domains without Condorcet triples. This extends and generalizes an earlier characterization (as Generalized Majority Rules) by Moulin (Axioms of Cooperative Decision Making, Cambridge University Press, New York, 1988) for single-peaked domains. We also describe a domain where anonymous and monotonic ASWFs exist only when there are an odd number of agents. This is a counter-example to a claim by Muller (Int. Econ. Rev. 23 (1982) 609), who asserted that the existence of 3-person anonymous and monotonic ASWFs guaranteed the existence of n-person anonymous and monotonic ASWFs for any n>3. Both results build upon the integer programming approach to the study of ASWFs introduced in Sethuraman et al. (Math. Oper. Res. 28 (2003) 309).     

If the Banks are Doing So Well,Why Can't I Get a Loan? Regulatory Constraints to Financial Inclusion in Indonesia

Indonesia's financial sector has two paradoxes: (i) Indonesia has been a global leader in microfinance for the past 25 years, but access to microfinance services is declining; and (ii) Indonesia's commercial banks are liquid, solvent, and profitable, and the Indonesian economy has been doing well over the past decade, but small and medium enterprises are facing a credit crunch. Although Indonesia is underbanked, most commercial banks have been unresponsive to unmet effective demand. The behavior of banks has been in their own short‐term best interests, primarily because of the unintended consequences of Indonesia's financial sector reregulation after the East Asian crisis and contradictory monetary policies, which have produced a prudentially sound but inefficient, narrow, and homogenized banking oligopoly. Indonesia should not respond to financial exclusion by artificially pumping out and administratively allocating more credit. Instead, it should promulgate smart regulation so that banks maintain their sound risk management without pursuing noncompetitive and noninclusive business practices.     

Does hospitality diversity education make a difference in undergraduate students’ emotional intelligence

Soft skills are typically referred to as the attributes exhibited or contained by an individual that display his/her ability to interact with others. Two types of soft skills that are often discussed within the hospitality industry are diversity awareness and emotional intelligence. Diversity may be explained or defined as a state of unlikeness, the conditions of being different, and all things that make us different. Areas where differences may exist include race, ethnicity, gender, sexual orientation, socio-economic status, age, physical abilities, religious beliefs, political affiliation and emotional reaction. Emotional intelligence (EI) has been defined as the ability to perceive, understand, regulate, and harness emotions in the self and others. How one deals with emotion is one characteristic that varies from culture to culture. Research has shown that EI may be a contributing factor in a moment of truth being considered a failure or success. The purpose of this study was to examine if undergraduate student EI scores change after completing a diversity issues course. Students completed the Assessing Emotions Scale on the first class day. At the conclusion of the 15-week course covering approximately 20 diversity issues concepts students completed the same EI assessment. Paired sampled t-testing was conducted to determine whether mean differences existed when comparing post and pre-course scores. Results of this study suggest that certain components of EI are significantly changed after taking the diversity issues course.     

The satisfaction-performance controversy: New developments and their implications

Current speculation continues to imply that satisfaction and performance are causally related. While the performance-causes-satisfaction proposition is a more recent development, the contention that satisfaction causes performance remains more widely held. Recent research findings, however, offer only moderate support of the former view and reject the latter. The evidence indicates that the relationship is more complex: rewards constitute a more direct cause of satisfaction than does performance, and rewards based on current performance cause subsequent performance. Thus, the manager who wants to improve his subordinates' performance must, first, provide valued rewards of sufficient magnitude and then establish the necessary contingencies between effort and performance and between performance and rewards. Last, he needs to consider a range of nonmotivational factors.