An Empirical Analysis of the Pricing of Bank Issued Options versus Options Exchange Options

Since 1998, large investment banks have become active as issuers of options, generally referred to as call warrants or bank‐issued options. This has led to an interesting situation in the Netherlands, where simultaneously call warrants are traded on the stock exchange, and long‐term call options are traded on the options exchange. Both entitle their holders to buy shares of common stock. We start with a direct comparison between call warrants and call options, written on the same stock and with the same exercise price, but where the call option has a longer time to maturity. In 13 out of 16 cases we find that the call warrants are priced higher, which is a clear violation of basic option pricing rules. In the second part of the analysis we use option pricing models to compare the pricing of call warrants and call options. If implied standard deviations from options are used to price the call warrants, we find that the call warrants are strongly overpriced during the first five trading days. The average overpricing is between 25 and 30%. Only a small part of the overpricing can be explained by rational arguments such as transaction costs. We suggest that the overvaluation can be explained by a combination of an active financial marketing by the banks and the framing effect.     

Ethical Decision Making: The Effects of Escalating Commitment

Despite the recent emergence of many new ethical decision making models, there has been minimal emphasis placed on the impact of escalating commitment on the ethical decision making process. In this paper a new variable is introduced into the ethical decision making literature. This variable, exposure to escalation situations, is posited to increase the likelihood that individuals will choose unethical decision alternatives. Further, it is proposed that escalation situations should be included as a variable in Jones's (1991) comprehensive model of ethical decision making. Finally, research propositions are provided based on the relationship between escalating commitment and the ethical decision making process.     

AN EMPIRICAL INVESTIGATION OF THE EXTENT AND NATURE OF BRAND VALUATION ACTIVITY IN NEW ZEALAND

An empirical study concerned with investigating the prevalence and nature of brand valuation activity in strongly-branded New Zealand based companies is reported. Analysis of data provided by 60 companies responding to a questionnaire mailed to all New Zealand companies identified as owning recognisable brand names revealed that 15 (25%) had been involved in brand valuation activity. Support for a hypothesised relationship between the acquisitive orientation of companies and the propensity to value brands has been provided. The extent to which brand valuation is conducted as an information service to management suggests that the financial accounting orientation that has characterised much of the brand valuation debate may be somewhat inappropriate.     

Union membership and campaign contributions

Summary and Conclusions Laws governing labor relations in the United States are written in a manner which gives significant monopoly power to unions and also creates an incentive for workers to support union security arrangements. These laws would serve to reduce the gains which workers receive from unionization. They would also serve to increase the surplus which unions extract from their members. The argument that an important part of these laws is the creation of rents which can be transferred to the politicians who support laws. An examination of the effect of right-to-work laws on political contribution received by candidates for office indicates that, as the theory would predict, the existence of such laws serves to significantly reduce the contributions from unions. This reduction occurs largely because these laws reduce the number of union members who contribute; they do not seem to change the contributions per union member. The authors hypothesize that it is the monopolization which increases per member contributions, though testing this hypothesis is not possible. Nonetheless, it is the authors' belief that the empirical results have demonstrated the form of the laws mandating unions is explained by the interaction between the union and the politicians who support unionization.     

Determinants of indian export performance in the 1970s

Zusammenfassung Bestimmungsgründe für die indische Exportt?tigkeit in den 70er Jahren. — In diesem Aufsatz werden verschiedene Hypothesen, welche die indischen Exportleistungen in den 70er Jahren erkl?ren sollen, quantitativ getestet. Es wird ein umfassender Satz von Daten über Exporte, Industrieproduktion und indische und amerikanische Gro\handelspreise — jeweils aggregiert gem?\ der indischen Input-Output-Klassifikationbenutzt, um den Einflu\ finanzieller Anreize, der inl?ndischen Angebots-Nachfrage-Verh?ltnisse sowie infrastrukturbedingter und anderer Angebotsengp?sse auf das indische Exportverhalten zu untersuchen. Jede Hypothese l?\t sich bis zu einem gewissen Grad stützen. Finanziel-le Variable erweisen sich als ziemlich bedeutsam in den exportorientierten arbeitsintensiven Sektoren. In den mehr geschützten kapitalintensiven Sektoren dominieren die heimischen Angebots-Nachfrage-Bedingungen. Au\erdem zeigt sich quer durch alle Industriezweige eine negative Korrelation zwischen dem Exportwachstum und dem Ausma\ rückw?rtiger Verflechtungen mit anderen Wirtschaftsbereichen im allgemeinen und der Abh?ngigkeit von ?ffentlichen Versorgungs- und Transportleistungen im besonderen. Der Artikel schlie\t mit wirtschaftspolitischen Schlu\folgerungen.

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Résumé Déterminants de la performance d’exportation indienne dans les années soixante-dix. — Cet article évalue d’une manière quantitative quelques hypothèses expliquant la performance d’exportation indienne pendant les années soixante-dix. Les auteurs utilisent des données sur les exportations, la production industrielle ainsi que sur les prix de gros indiens et des E.U., qui sont agrégés conformément au système indien de classification ‘input-output’, pour analyser l’influence des stimulants financiers, des balances de l’offre-demande locale, des impasses infrastructurelles et d’autres goulots d’offre sur la conduite indienne d’exportation. Ils trouvent une certaine évidence pour chaque hypothèse. Ce sont les variables financières qui sont importantes pour les secteurs intensifs à main d’∄uvre et orientés vers les exportations. Les conditions de l’offre et de la demande locale dominent dans les secteurs industriels plus protégés et intensifs au capital. De plus, une correlation négative est trouvée au travers des branches manufacturières entre la croissance d’exportation et, en général, la mesure des ?backward linkages? et, plus spécifique, la dépendance des services publiques et de transport. Enfin, les auteurs discutent quelques implications de leurs résultats pour la politique économique.

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Resumen Determinantes del comportamiento de exportación de la India en los a?os 1970. — En este artículo se evalúan cuantitativamente diferentes hip?tesis para explicar el comportamiento de exportación de la India en los a?os 1970. Se utiliza un conjunto de datos ilustrativos sobre exportaciones, producción industrial y precios al por mayor de la India y los EEUU, cada cual agregado en concordancia con el sistema de clasificación de insumoproducto de la India, para analizar la influencia de incentivos financieros, balanzas de oferta-demanda demésticos, y cuellos de botella de infraestructura y otros de oferta sobre el comportamiento de exportación de la India. Se encuentra cierto apoyo para cada hipótesis. Las variables financieras resultan ser de relativa importancia para sectores intensivos en mano de obra y orientados hacia la exportación. Condiciones de oferta-demanda domésticas dominan en los sectores mas protegidos e intensivos en capital. Adicionalmente, se encontró una correlation negativa a través de ramas industrials entre crecimiento de exportación y la magnitud de los entrelazamientos hacia atrás generalmente, y la dependencia de servicios y transporte específicamente. Se discuten algunas implicaciones de los resultados para la adopción de políticas.

     

Rice Price Stabilisation in Indonesia: An Economic Assessment of the Changes in Risk Bearing

One important reason the Indonesian government stores rice is to reduce risk for growers who have restricted access to private insurance It does so to stabilise their real incomes, and to promote rice production with a view to ‘self-sufficiency’. This paper shows that grower risks are reduced only to the extent that growers' real incomes ate linked through taxation to the financial flows of the storage scheme. This is because their real incomes and the financial flows are negatively correlated. Under current arrangements this linkage is negligible, so price stabilisation raises the share of the production nsk they face, Recent increases in production are shown to result from larger expected grower profits, and not from reduced risk. In addition to profiting from price stabilisation, growers have benefited from government subsidies on fertiliser, irrigation and plant research, and from increases in the average domestic price of nee through Bulog intervention.     

A stake in the business

When Chris Sullivan and three friends opened the first Outback Steakhouse in March 1988, in Tampa, Florida, they were hoping it would be successful enough to spawn a few more and maybe some other kinds of restaurants as well. Since then, their chain of Australia-themed restaurants has grown to some 900 locations and counting-plus another 300 or so "concept" restaurants that operate from under Outback's corporate umbrella. Growth like that doesn't happen accidentally, Sullivan says, but it certainly wasn't part of the original plan. In this first-person account, Outback's chairman describes the organization's formula for growth and development, which is consciously rooted in the founders' belief in putting people first. They've created an organizational model in which field managers make most of the decisions, garner the rewards, and live with the consequences. Specifically, the founders believe that the most effective way to make customers happy is to first take care of the people who cook for them, serve them, and supervise operations at the restaurants. Outback servers have fewer tables to worry about than those at other restaurant chains; the cooks have bigger, cooler, better-equipped kitchens; and the supervisors work their way up the ranks toward an equity stake in the restaurant or region they run. There are no administrative layers between field managers and the executives at headquarters. Giving employees good working conditions and the chance to become owners has proved to be good business: Turnover among hourly employees is low, and Outback and its subsidiaries opened 120 restaurants last year, increasing sales by 20.1%. The company must grow in order to keep offering career opportunities to its workers; in turn, those opportunities ensure that Outbackers remain committed to making customers happy and the company successful.     

Structural change in the presence of network externalities: a co-evolutionary model of technological successions

The paper uses a two-stage, multi-agent simulation model to examine the conditions under which technological successions can occur in the presence of network externalities. Data is used to identify a robust econometric model of the probability of succession. Four key factors are identified. First, the trade-off between higher direct utility from new technology goods and the network utility of old technology goods. Second, the relative innovative performance of new and old technology firms. Third, cost (price) differentials due to increasing returns in production. Fourth, the time old (new) firms have to develop their product designs prior to entry.JEL Classification: O30, C15 Correspondence to: Paul WindrumThe authors would like to thank Richard Nelson and Uwe Cantner for their helpful comments on an earlier draft of the paper, and for the comments provided by the anonymous referees. The usual disclaimers apply. The authors gratefully acknowledge supportive funding through SEIN-Project, European Commissions Framework 4 Programme (contract# SOEI-CT-98-1107) and through the Policy Regimes and Environmental Transitions (PRET) project funded by the Dutch Scientific Research Council (NWO).     

Organizational learning and management information systems

The current debate around the implementation crisis of management information systems is re-examined in the light of a theory of organizational learning (the detection and correction of error). The analysis suggests that many of the recommendations to overcome the difficulties may be inadequate and, in some cases, counterproductive.