Australian Student Loans

The Australian Government introduced the so-called ‘AUSTUDY Supplement’ in the 1992–93 budget. The scheme gives AUSTUDY recipients the option of trading in up to $2000 per year of their grant for $4000 of an income-contingent loan, to be paid back according to the current HECS arrangements, implying that the Government is acting as an insurer against future default by students. This article addresses the theoretical basis of the scheme, and explores two related questions: will it be in the financial interests of average students to take up the option? and what is likely to be the take-up rate of loans? Through the use of both cross-sectional data and the HARDING microsimulation model it is demonstrated that for many students the loan option will result in financial advantages, and that the take-up rate is likely eventually to be high.     

Human due diligence

Most companies do a thorough job of financial due diligence when they acquire other companies. But all too often, deal makers simply ignore or underestimate the significance of people issues in mergers and acquisitions. The consequences are severe. Most obviously, there's a high degree of talent loss after a deal's announcement. To make matters worse, differences in decision-making styles lead to infighting; integration stalls; and productivity declines. The good news is that human due diligence can help companies avoid these problems. Done early enough, it helps acquirers decide whether to embrace or kill a deal and determine the price they are willing to pay. It also lays the groundwork for smooth integration. When acquirers have done their homework, they can uncover capability gaps, points of friction, and differences in decision making. Even more important, they can make the critical "people" decisions-who stays, who goes, who runs the combined business, what to do with the rank and file-at the time the deal is announced or shortly thereafter. Making such decisions within the first 30 days is critical to the success of a deal. Hostile situations clearly make things more difficult, but companies can and must still do a certain amount of human due diligence to reduce the inevitable fallout from the acquisition process and smooth the integration. This article details the steps involved in conducting human due diligence. The approach is structured around answering five basic questions: Who is the cultural acquirer? What kind of organization do you want? Will the two cultures mesh? Who are the people you most want to retain? And how will rank-and-file employees react to the deal? Unless an acquiring company has answered these questions to its satisfaction, the acquisition it is making will be very likely to end badly.     

The future of urban sociology: report of joint sessions of the British and American Sociological Associations

This article reports on two joint sessions of the British and American Sociological Associations held during the course of 2001 as a first step toward more structured dialogue and debate between the two national associations. Drawing on the comments of a number of leading academics on both sides of the Atlantic, this paper presents a series of discussions about the role and future of urban sociology. It explores the challenges and opportunities offered to urban sociology by increasing interdisciplinarity and multidisciplinarity in the field of urban studies as a whole. It then explores the role of sociology in understanding the relationship between contemporary processes of globalization and urban change and the degree to which this constitutes a new dynamic core of sociological theory and research. The paper reveals that there are a variety of alternative futures for urban sociology and there would appear to be little agreement on one specific route, nor on how to get there. Urban sociology continues to face a variety of challenges and more debate on its future trajectory is clearly needed but it remains a vital and expanding sub–field. Cet article rend compte de deux sessions communes des associations de sociologie britannique et américaine qui ont eu lieu en 2001, premier stade vers un dialogue et un débat plus structurés entre les deux organismes nationaux. Partant des remarques d’un certain nombre de grands intellectuels des deux côtés de l’Atlantique, ce travail présente plusieurs discussions sur le rôle et l’avenir de la sociologie urbaine. Il examine les défis et possibilités que lui offrent l’interdisciplinarité et la pluridisciplinarité croissantes dans l’ensemble du domaine des études urbaines. Il explore ensuite comment la sociologie aide à comprendre la relation entre les processus contemporains de mondialisation et de changement urbain, et la mesure où peut ainsi émerger une nouvelle dynamique nodale pour la théorie et la recherche sociologiques. L’article expose plusieurs avenirs possibles de la sociologie urbaine, sans qu’il y ait apparemment d’accord sur une voie particulière ni sur le moyen d’y parvenir. La sociologie urbaine rencontre toujours de multiples défis et il faut manifestement approfondir les débats sur sa future trajectoire, mais elle demeure un sous–domaine à la fois crucial et en expansion.     

How to calculate total purchase cost

Companies wanting to implement a total cost-based supplier selection process often stumble over how to include nonmonetary issues such as delivery and quality performance, lead time, services, and social policies. This article describes a process that allows a company to include any issue it deems relevant and to determine its cost factor.     

Do Owners Take Better Care of Their Housing Than Renters?

According to conventional wisdom, homeowners take better care of their housing than do renters, as a result of the rental externality. We argue that two forms of homeowner externality ootentially create similar incentives for owners to undermaintain their housing. The first is due to the inability of prospective buyers to fully observe past seller maintenance, and the second is a result of the limited liability of borrowers in the event of mortgage default. Empirical analysis verifies the existence of the mortgage externality, but we find no evidence for the resale externality.     

Commercial mortgage underwriting: How well do lenders manage the risks?

Loan-to-value ratio and debt service coverage ratios have long been viewed as the two most important quantitative measures of the default risk of commercial mortgages. Option-based models of default provide strong theoretic support for the importance of original loan-to-value ratio. The same theoretical predictions have found strong empirical support in residential single-family mortgage analyses. However, recent empirical studies of commercial mortgage default have raised questions about the role of loan-to-value ratio in assessing the riskiness of commercial mortgages. These studies generally either find no relationship or a puzzling negative relationship between loan-to-value ratio and default. This paper uses a very large database of commercial loan histories to thoroughly investigate this issue. It finds strong evidence that loan-to-value and debt service coverage ratios are endogenous to the underwriting process. Lenders react to other—unmeasured—risk factors with credit rationing and pricing. As a result, unusually low loan-to-value ratio loans appear to have above average risk in other dimensions and their default probabilities are equal to or higher than average. The results show that the pricing spread that lenders establish as part of the underwriting process serves as an excellent summary measure of the riskiness of the loan. A test of lenders’ ability to appropriately price loan-to-value risk finds that, while there is some unpriced effect of loan-to-value ratio after controlling for the lender’s pricing, introducing lender pricing into the model removes the otherwise puzzling negative loan-to-value and default relationship previously observed in the literature.     

New purchasing measures for stellar performance.

According to this article, many manufacturing companies evaluate their purchasing departments using inappropriate measures. One reason is that the measures chosen are easy to use. Another is that the companies tend to favor predictability, and they thus prefer numbers that they can try to achieve. But predictability is not always a virtue. In fact, an obsession with predictability can prevent the kind of flexibility that is often necessary to respond to changes in the market. The article suggests that the best measures to use in evaluating purchasing departments are behavior measures, not price, delivery, or quality measures.     

Explaining the Variation in REIT Capital Structure: The Role of Asset Liquidation Value

We test the Shleifer-Vishny hypothesis that asset liquidation values influence both firm leverage and the choice of debt maturity. Using panel data on real estate investment trusts, we estimate a simultaneous equation model and find that firms specializing in the most (least) liquid assets use more (less) leverage and longer (shorter) maturities. The evidence also suggests that, for REITs, debt maturity and leverage are substitutes, consistent with the theory and predictions of Barclay, Marx and Smith.