Influence of strategies and heuristics on farmers' response to change under uncertainty

Hierarchical Decision Models of woolproducers' decisions provide unique insights into the impact of major price changes. Producers' lagged response in some contexts appear to be due to the ambiguous decision environment they face, their strategic goals and responses to that environment apart from lags caused by factors such as attitude to risk, expectations adjustment, adjustment costs and learning costs. Much of the response to major price changes comes from strategic decisions to change enterprises rather than marginal changes to existing enterprises. In ambiguous environments, methods may need to be found that incorporate simplifying behavioural rules and strategies.     

Improving retirement adequacy through asset class prioritization

Highly risk-averse retirees are generally advised to adopt a fixed spending strategy such as the 4% withdrawal rule. To prevent the premature depletion of a retirement portfolio, the rule attempts to proxy as the ‘safe withdrawal rate’. But a constant withdrawal rate means that retirees accumulate unspent surpluses when markets outperform and face spending shortfalls when markets underperform. While a safe withdrawal rate can prevent spending shortfalls, the opportunity cost of unspent surpluses associated with this strategy can be extreme. We apply a range of basic investment decision rules to a retirement portfolio applying various withdrawal rates and examine the probability of shortfalls over a retirement horizon. Using a block bootstrap simulation technique, we examine decision rules relating to stock and bond investments. Our results show that retirement portfolios with a bias towards stocks coupled with a decision rule that sources withdrawals from bonds and cash before stocks significantly outperforms alternative withdrawal strategies, despite the inherent increase in volatility. This finding is in direct contrast to the safe withdrawal rate conventions used in contemporary financial advice models.     

Resurrecting the size effect: Evidence from a panel nonlinear cointegration model for the G7 stock markets

Firm size is known to be an important factor affecting stock returns. This study proposes a panel threshold cointegration model to investigate the impact of the size effect on stock returns for the panel of G7 countries: Canada, France, Germany, Italy, Japan, the U.K., and the U.S. over the period 1991:1–2012:12. The empirical analysis is based upon the nonlinear cointegration framework using the asymmetric ARDL cointegration methodology (Shin et al., 2011). This methodological approach permits a much richer degree of flexibility in the dynamic adjustment process toward equilibrium, than in the classical linear model. Our findings indicate the presence of asymmetric adjustment around a unique long-run equilibrium. In particular, the empirical analysis provides evidence of asymmetric effects between stock returns and the size effect, while controlling for the book-to-market ratio and the price-to-earnings ratio.     

Applying the Principles of Soccer Training to the Design and Delivery of Classes in Introductory Accounting Courses

Accounting instructors face numerous challenges in structuring and teaching accounting classes. This paper describes the experience of redesigning classes in an introductory accounting course to follow the format of team training sessions in the sport of soccer. The soccer format includes six sections: warm‐up, balance/agility/coordination, skill/technique, simplified small game, game, and cooldown. We explain how the activities in each of these sections can be translated into parts of a class session. While adopting this format requires instructors to invest time in preparation and to be flexible and responsive when facilitating classes, informal results indicate that this class format is rewarding for both instructor and students and that it enhances student performance and experience. We suggest that elements of this class format could be successfully adopted for courses in other business subjects, and in nonbusiness disciplines.     

Was Deng Xiaoping Right? An Overview of China's Equity Markets

In the western world, stock markets arose from the search by privately owned companies for capital to build their businesses. Over time, the markets became places where ownership interests and even entire companies were bought and sold. In China, the complete opposite has happened. The markets arose out of the need for capital by bankrupt state‐owned enterprises operating in an economy with no history of private property. Deng Xiaoping, China's last emperor, gave the green light for the stock market experiment in early 1992 more with the hope of encouraging reform and efficiency than from any conviction that stock markets were the next sure thing. Now, after more than 20 years of experimentation with domestic and international listings, it appears evident that stock markets whose primary function is to trade minority interests in government‐controlled companies have not achieved the goal of improving enterprise performance, as China's leaders originally hoped. Instead, the combination of state monopolies with Wall Street expertise and international capital has led to the creation of national companies that represent little more than the incorporation of China's old Soviet‐style industrial ministries. As for the markets, the government's determination to prevent real privatization has produced separate classes of shares that are defined almost entirely by one thing: the shareholder's relationship to the government. And with all aspects of stock market activity regulated, managed, and owned by various state agencies, it is not surprising that non‐state investors have become motivated more by speculative opportunities than by investment fundamentals. But a quarter of a century is a short time in any country's development and, for all their shortcomings, the markets in mainland China and Hong Kong have played a significant role raising capital for China. It may be too early, perhaps, to suggest that China's equity markets have failed to accomplish what they were intended to do.     

Broad‐Based Employee Stock Ownership: Motives and Outcomes

Firms initiating broad‐based employee share ownership plans often claim employee stock ownership plans (ESOPs) increase productivity by improving employee incentives. Do they? Small ESOPs comprising less than 5% of shares, granted by firms with moderate employee size, increase the economic pie, benefiting both employees and shareholders. The effects are weaker when there are too many employees to mitigate free‐riding. Although some large ESOPs increase productivity and employee compensation, the average impacts are small because they are often implemented for nonincentive purposes such as conserving cash by substituting wages with employee shares or forming a worker‐management alliance to thwart takeover bids.     

The power of imperfect imitation

We examine the power and limitations of imitation. Naive intuition may hold that the efficacy of imitation would be diminished by imperfections in copying high‐performing firms. Employing a computational model, we study the dynamics of imitation when firms are subject to bounded rationality that limits their ability to copy the market leader. We find that imperfect imitation can generate unexpectedly good outcomes for follower firms—indeed, better than the outcomes achieved if they were perfect imitators. Moreover, imperfect imitation, from time to time, enables follower firms to surpass superior firms. These findings suggest there is an adaptive role to mechanisms, such as bounded rationality, that make perfect imitation difficult. Copyright © 2012 John Wiley & Sons, Ltd.     

Strength in numbers or guilt by association? Intragroup effects of female chief executive announcements

We predict that the media reports on female CEOs as a coherent group, whereas male CEOs are treated as individuals by the media. We also suggest that the resulting investors' perceptions of group entitativity of female‐led firms may not only influence the succession event–performance relationship at the focal firm, but may also have a significant effect on the value of other female‐led companies. Results of a text analysis and an event study of appointments of female CEOs to Fortune 1000 firms provide support for these predictions. Copyright © 2013 John Wiley & Sons, Ltd.     

How Central Is Too Central? Organizing Interorganizational Collaboration Networks for Breakthrough Innovation

Firms increasingly look to collaboration with alliance partners in their quest for breakthrough innovation. But how does the position of a firm in its alliance network weighted by the centrality of its partners—a concept which we term “partner‐weighted alliance centrality”—and the heterogeneities in the types of partners that it cooperates with—in terms of its private‐public collaboration—influence this quest? Using longitudinal data from the U.S. pharmaceutical industry, we build alliance networks in the period 1985–2001 to investigate these questions. We show that, for breakthrough innovation, collaborating with more partners that are more central in alliance networks the better, but only to a point. Beyond that point, we find that the likelihood of achieving breakthrough innovation drops. Furthermore, and looking at the kinds of knowledge provided by the partners in each firm's alliances, we report that firms with a greater share of private partners, relative to public partners, suffer less from the diminishing benefits of collaboration with central partners when developing breakthrough innovation. Taken together, we make novel contributions about how to organize for breakthrough innovation, and provide actionable managerial advice in terms of selecting collaborative partners in alliance networks.