The effect of control priming on irresponsible financial behavior

Debt has reached staggering levels among North Americans. Unfortunately, there is deficiency of research that investigates effective means of helping consumers control their debt. We examine how control priming changes consumers’ irresponsible financial behavior. We show that control priming reduces credit card spending and intentions to take credit card risk. We also demonstrate that consumers who score high on self-esteem are more likely to benefit from control priming while those who score low on self-esteem show a backlash effect.     

Does it really pay to do better? Exploring the financial effects of changes in CSR ratings

Previous literature on the link between corporate social responsibility (CSR) and financial performance has focused mainly on the financial implications of a firm’s level of CSR without considering the potential effects on financial performance of variations in CSR rating. We try to fill this gap by studying whether variations in a firm’s CSR rating affect systematic risk, firm value, and portfolio performance. First, our results show that an increase in firms’ CSR efforts, as reflected by an increase in their CSR ratings, significantly reduces systematic risk. Second, a positive variation in CSR ratings significantly improves firm value. Finally, from a portfolio perspective, a strategy that consists of buying stocks that have experienced a CSR ratings increase and selling stocks that have experienced a CSR ratings decrease (or remain stable) leads to lower financial performance. Taken together, our findings provide new evidence and financial implications for firms and portfolio managers.     

The dynamic effects of tax policies in a small open economy

We develop an intertemporal optimizing model of a small open economy with both durable and nondurable consumption to address the implications of alternative tax policies. An increase in lump sum taxes reduces the steady state level of consumption and improves the stock of foreign bonds. Consistent with empirical evidence, durable consumption exhibits initial excess volatility. Though an increase in the tax on durables increases the demand for nondurables and improves the bond holdings in the steady state, an increase in the tax on nondurables has insignificant effects on the stock of foreign bonds and the consumption of durables. Using quarterly data from the UK and estimating generalized impulse response functions we find empirical support. We also calibrate the welfare implications of different tax policies.     

Intertemporal consumer behaviour in developing countries

This paper explores aggregate consumption behaviour in four developing countries under the assumption that consumers' planning horizons do not extend over their expected lifetime. Under certain conditions, the resulting ‘moving planning horizon model’ suggests that changes in current income would exert considerably more influence over current consumer spending than is predicted by forward-looking theories of consumption which typically assume that consumers' planning horizons coincide with expected lifetime. Estimation of the model for the group of developing countries provides empirical support for the role of changes in current income in influencing the consumption process. The results also reveal that consumers are relatively short-sighted sinced the length of the planning period of consumers ranges from just over ten months. An important implication of these findings is that policy measures can be effective not only if they influence consumers' permanent incomes but also if they affect changes in current income.     

A note resolving the debate on “The weighted average cost of capital is not quite right”

Miller (2009a) derives a weighted average cost of capital for the special case where the cash flows to equity and the cash flows to debt are annuities. The paper attracts debate. We show that the weighted average cost of capital is redundant in a world where interest paid is not tax deductible. The required rate of return on unlevered equity will consistently and reliably estimate the net present value of any project no matter the idiosyncratic beliefs of the analyst as to the year-by-year leverage of the project, or of the firm. We recommend that the weighted average cost of capital method is discarded.     

Changing Patterns of Precipitation at the Sooke Reservoir in British Columbia

The paper is a parametric and nonparametric analysis of past precipitation data. We analyze 90 years of daily precipitation data at the Sooke Reservoir in British Columbia, Canada, for evidence of climate change. We fit probability density functions (PDFs) to the data and find evidence of a structural break in the data generating process by using the Andrews-Ploberger test. To confirm this finding, we analyze higher moments of the distribution of precipitation and show that the PDFs have become more leptokurtic. The results show how the pattern of precipitation has changed.     

Post-privatization corporate governance and firm performance: The role of private ownership concentration,identity and board composition

We examine and analyze the post-privatization corporate governance of a sample of 52 newly privatized Egyptian firms over a period of 10 years, from 1995 to 2005. We look at the ownership structure that results from privatization and its evolution; the determinants of private ownership concentration; and the impact of private ownership concentration, identity and board composition on firm performance. We find that the state gives up control over time to the private sector, but still controls, on average, more than 35% of these firms. We also document a trend in private ownership concentration over time, mostly to the benefit of foreign investors. Firm size, sales growth, industry affiliation, and timing and method of privatization seem to play a key role in determining private ownership concentration. Ownership concentration and ownership identity, in particular foreign investors, prove to have a positive impact on firm performance, while employee ownership concentration has a negative one. The higher proportion of outside directors and the change in the board composition following privatization have a positive effect on firm performance. These results could have some important policy implications where private ownership by foreign investors seems to add more value to firms, while selling state-owned enterprises (SOEs) to employees is not recommended. Also, the state is highly advised to relinquish control and allow for changes in the board of directors following privatization as changing ownership, per se, might not have a positive impact on firm performance unless it is coupled with a new management style.     

Access to credit and heterogeneous effects on agricultural technology adoption: Evidence from large rural surveys in Ethiopia

Modern agricultural technologies hold huge potential for increasing productivity and reducing poverty in developing countries. However, adoption levels of these technologies have remained disappointingly low in Africa. This paper analyzes the effect of access to credit on the likelihood of adoption and use intensity of chemical fertilizers using data from large rural surveys in Ethiopia. Using a heteroscedasticity-based identification strategy to address the endogenous nature of access to credit, we find that access to credit has significant positive effects on adoption and intensity of use of chemical fertilizers. However, important heterogeneities are observed. Credit obtained from formal sources is more important for the intensity of use than for the decision to adopt chemical fertilizers. Credit taken with the primary purpose of financing agricultural inputs is more likely to promote adoption of chemical fertilizers than credit taken per se. Furthermore, reported credit effects are larger when estimated against the sample of credit-constrained non-users as compared with the pool of the whole sample of credit non-users. The results remain robust to several sensitivity analyses. Our results yield useful implications for the design, promotion, and targeting of credit services to leverage their effect on adoption of agricultural technologies.     

A comparison between North and South business ethics: the concepts of Renzhi and Fazhi in China

The purpose of this study is to compare the ethical standards of business practitioners of Northern provinces of the People’s Republic of China (PRC) who follow the ‘rule by man’ (i.e. the Renzhi system) versus those of southern provinces who follow the ‘rule by law’ (i.e. the Fazhi system). Our Shanghai survey represented the south Chinese sample, and our Shijiazhuang mailing represented our north Chinese sample. We received 95 completed responses for the former and 102 completed responses for the latter. Our results found that the south Chinese practitioners were more likely to be idealistic, possessed virtue epistemic traits and were more sensitive to ethical practices than north Chinese practitioners were.     

Exploring customer’s mobile banking experiences and expectations among generations X,Y and Z

Customer’s adoption of mobile banking portrays tremendous growth in developing countries. However, it seems that there is a lack of studies about customer’s experiences and expectations on mobile banking services, and more research is needed considering generational differences between mobile banking customers in Iran. The purpose of this study is to explore the customer’s mobile banking experiences and expectations among generations X, Y, and Z in a developing country context, Iran. Twenty-seven in-depth interviews were conducted from active users of mobile banking services with a generational split in Iran. A qualitative content analysis was employed to understand customer’s mobile banking experiences and expectations. This study identified specific features of different generations regarding their experiences and expectations of mobile banking services. Each generation displayed distinct characteristics of mobile banking. Generation X customers perceive mobile banking as complicated; generation Y customers prefer to use mobile banking for quick payments, while generation Z customers want to have more customized services and ranked mobile banking as a spontaneous solution. Every generation expects different features to focus on: generation X expects to have more user-friendly functions; generation Y prefers to have an online transaction tracker while generation Z appeals to have enhanced the user interface. This study offers a detailed strategic starting point for management to tailor dynamic customer expectations among different generations.