Initial public offer pricing,corporate governance and contextual relevance: Australian evidence

This study examines the relationship between initial public offer (IPO) corporate governance, IPO pricing and possible contextual relevance. A comprehensive inventory of IPO governance attributes is modelled. A positive association is reported between the inventory and IPO initial returns. This relationship is attenuated for IPOs where a diminished price relevance of governance structure is posited: smaller scale firms and/or those with alternative monitoring agents in place. Relevance appears modified and even supplanted by particular corporate priorities or the presence of other monitoring mechanisms. These contexts inform the motivation of key players regarding whether and how to act in response to the governance signal.     

Physical and Economic Consequences of Sea-Level Rise: A Coupled GIS and CGE Analysis Under Uncertainties

This paper develops a modelling framework that links GEMINI-E3, a multi-regional, multi-sectoral computable general equilibrium model with a cost-benefit analysis approach at local level using geographical information system tools to assess the physical and economic consequences of sea-level rise (SLR) in the twenty first century. A set of future scenarios is developed spanning the uncertainties related to global warming, the parameters of semi-empirical SLR estimates, and coastal developments (cropland, urban areas and population). The importance of incorporating uncertainties regarding coastal development is highlighted. The simulation results suggest that the potential development of future coastal areas is a greater source of uncertainty than the parameters of SLR itself in terms of the economic consequences of SLR. At global level, the economic impact of SLR could be significant when loss of productive land along with loss of capital and forced displacement of populations are considered. Furthermore, highly urbanised and densely populated coastal areas of South East Asia, Australia and New Zealand are likely to suffer significantly if no protective measures are taken. Hence, it is suggested that coastal areas needs to be protected to ameliorate the overall welfare cost across various regions.     

Endogenous R&D networks when labour unions have preferences over wages and employment

We develop a model to analyse the pattern of R&D network formation when unions have relative preferences over wages and employment. Within a three-firm industry, we show that when the unions place a low weight on wages and technological spillovers are low, a partial R&D network that includes two firms but excludes the third emerges in equilibrium. In contrast, when the unions care a lot about wages, a complete R&D network that includes all firms emerges. For all other intermediate levels of union preferences over wages, there is no strong stable equilibrium network. Empirical implications emerge from these findings, which are also discussed.     

South African Exporters and the Global Crisis: Intensive Margin Shock,Extensive Margin Hangover

This paper examines how changes at the intensive (established exporters exporting existing products to established markets) and the extensive (new exporters, products or markets) margins contribute to South African export growth and how this was affected by the global financial crisis. We find that the intensive margin is the more important contributor to export growth, contributing more than three quarters of observed growth. The intensive margin contracted significantly during the global financial crisis of 2009 but bounced back to pre‐crisis levels quickly. However, the impacts on the extensive margin persisted after the crisis with lower levels of entry of firms, new products and new destinations. The short‐term impact of the crisis was mitigated by the concentration of South African exports among larger, more productive super‐exporters. However, the fall in entry of new firms, products and destinations as a result of the crisis may mean that this concentration persists, and, at least over the next few years, South Africa does not diversify and broaden its exports.     

Local economic development strategies for the UK computer services sector

This article considers ways in which local economic policy makers can best proceed with respect to the development of the computer services industry, one of the fastest-growing sectors of the British economy. I suggest that knowledge of the structural and locational dynamics of the industry is necessary before effective interventions can be made. My analysis indicates that while policies focusing on the attraction of investment from outside the local area, or on infrastructural and communications upgrading may well be ineffective, the provision of seed funding and advice for new and recent start-ups, in conjunction with attempts to stimulate the local market for computer services, may have positive impacts.     

Delay and Settlement in Litigation

Delay in litigation is a policy concern in many jurisdictions. Little evidence is available on the causes of such delay, however. We present a version of Spier's (1992) bargaining model of litigation and derive directly a functional form for the conditional probability of case settlement. We then estimate this and test predictions about the effects of legal costs and uncertainty over damages and liability on the conditional probability of settlement, using data from negligence claims against several NHS Trusts. Our results provide a direct test of the model and shed light on the causes of settlement delay in England.     

From Experience: Why Bad Things Happen to Good New Products

The rollout of a new product can be an exhilarating time for everyone involved in the development and launch effort. Just as a construction crew may meet at a local gathering place to hail the “topping-off” of a new home or office building, the development team—or possibly the entire company—may gather to celebrate a new product’s release. Launch meetings generate enthusiasm among the salespeople, and favorable reviews lead to an influx of inquiries from prospective customers. Despite this initial wave of enthusiasm, however, customer desire for the innovative new product may soon wane. Does this mean that everyone was wrong about the new product’s potential?Citing three examples of launches that followed this pattern, Neil Rackham addresses a key question for product development professionals: “Why should promising products from highly respected companies fail despite clear evidence of market need, strong marketing support, and real enthusiasm and energy from salespeople?” Based on his own experience in these three cases, as well as research investigations into elements of these and other launches, he rejects the conventional wisdom that the problem stems from resistance to change on the part of either the customers or the salespeople.He suggests that the problem rests with the way in which highly innovative products are launched to the salesforce, which in turn influences the manner in which the products are sold. He notes that the launch of an innovative product typically focuses on all the great new features the product offers. However, the new features that make the product so exciting may draw the salesperson’s attention away from the most important issue in the selling process: the customer’s needs. In other words, he suggests that the launch and the selling of innovative products tend to be product-centered instead of customer-centered, causing customer interest to fade as the selling process progresses.Rather than fill the salesforce with details about a product’s “bells and whistles,” he suggests that the launch should focus on describing the product in terms of the problems it solves for the customer. Similarly, rather than bombard customers with details about product features, he suggests that the salesperson should focus on asking questions. In this customer-centered approach, the product’s features are considered only in terms of the manner in which they meet the customer’s needs.     

Estimating unobservable valuation parameters for illiquid assets

A problem that often arises in applied finance is one where decision‐makers need to choose a value for some parameter that will affect the cash flows between two parties involved in the operation of an illiquid asset. Because the values of the cash flows also depend on various unobservable parameters, identifying the value of the policy parameter that achieves the desired allocation between the parties is no simple task, often resulting in disputes and the invocation of ad hoc approaches. We show how this problem can be solved using an extension of the well‐known ‘implied volatility’ technique from option pricing, and apply it to the determination of equilibrium rental rates on ground leases of commercial land.