The performance of insolvency prediction and credit risk models in the UK: A comparative study

Theoretically-driven, market-based contingent claims models have recently been applied to the field of corporate insolvency prediction in an attempt to provide the art with a theoretical methodology that has been lacking in the past. Limited studies have been carried out in order directly to compare the performance of these models with that of their accounting number-based counterparts. We use receiver operating characteristic curves to assess the efficacy of thirteen selected models using, for the first time, post-IFRS UK data; and investigate the distributional properties of model efficacy. We find that the efficacy of the models is generally less than that reported in the prior literature; but that the contingent claims models outperform models which use accounting numbers. We also obtain the counter-intuitive finding that predictions based on a single variable can be as efficient as those which are based on models which are far more complicated – in terms of variable variety and mathematical construction. Finally, we develop and test a naïve version of the down-and-out-call barrier option model for insolvency prediction and find that, despite its simple formulation, it performs favourably compared alongside other contingent claims models.     

The Persistence of Dominant‐Firm Market Share: Raising Rivals' Cost on the New York Stock Exchange

To explain the persistence of dominant New York Stock Exchange (NYSE) market share in stock trading of listed securities from 1992 to 2002, we develop a dominant‐firm price leadership model and hypothesize that NYSE specialists raised the costs of rival market makers. The model predicts that natural and induced cost advantages will determine the NYSE's market share vis‐à‐vis the regional exchanges, electronic trading systems, and NASDAQ dealers. Empirically, NYSE market share increases with economies of scale and scope, abnormal price volatility, high asymmetric information, and with trading practices that raise rivals' costs, such as failure to display limit orders that bettered the existing quotes.     

‘Devolution’ of transport powers to Local Government: Impacts of the 2004 Traffic Management Act in England

The concept of ‘Devolution’—the transfer of powers away from the Central Government to more local bodies of Government, has been used across many different areas of policy and by many different national governments. This paper examines the devolution of transport powers to the existing Local Traffic Authorities in England via the 2004 Traffic Management Act. The paper first presents a summary of how several different nations have undertaken this process of devolving transport powers and responsibilities to either new or existing bodies. It then presents research from an electronic survey concerning how English Local Traffic Aut`horities are choosing to use some of the new powers available to them and their opinion on complementary areas of transport policy. Research is also presented from structured telephone interviews, concerning how individual Local Authorities perceive the efficacy and equity of the new legislation. Overall, the results show that only some of these new powers are likely to be used by English Local Authorities, with limited variation in how different types of LTA are choosing to implement these new powers. The structured telephone interviews provided some evidence that rural Authorities in particular are more dissatisfied with the legislation and consider some of the measures unhelpful. The results provide some insights on the formulation of devolved policy applicable to existing Local Government bodies and the varying benefits that can be perceived to apply to different types of Local Authority. Conclusions are drawn on some of the practical difficulties arising from the English experience, and lessons of relevance are drawn for other nations considering a similar devolution of transport powers.     

South Asia's Export Structure in a Comparative Perspective

World-wide cross-country regressions are used to examine South Asia's export structure through the lens of Heckscher‐Ohlin trade theory. By comparison with other regions, South Asia's exports are unusually concentrated on labour-intensive manufactures. This distinctive export structure is shown to be the result mainly of South Asia's distinctive combination of resources: by comparison with other regions, it has a low level of education and few natural resources, relative to its supply of labour. This basic economic fact must be recognized in the design of trade and development strategy for South Asia over the next few decades.     

Leisure Research and Leisure Practice: Three Perspectives on Constructing the Research?Practice Relation

The leisure research?leisure practice relation remains uncertain. Assuming leisure provides a preexisting link is not supported by research. Leisure research and leisure practice are independent professional paradigms between which a relation must be constructed. Three perspectives on constructing the research?practice relation are examined in this article: the traditional, the personal, and the critical. The benefits approach to leisure is a test case in each perspective. The traditional and personal perspectives subordinate one professional paradigm to the other or intensify their separation. The benefits approach fails to resolve these difficulties. The critical perspective emphasizes developmental activity and emancipation, facilitates research?practice interaction, and maintains the professional paradigms' integrity, and it reveals shortcomings in the benefits approach. The critical perspective enables the most dynamic research?practice relation.     

Shareholders as Norm Entrepreneurs for Corporate Social Responsibility

This article advances the idea that shareholders who seek to influence corporate behaviour can be understood analytically as norm entrepreneurs. These are actors who seek to persuade others to adopt a new standard of appropriateness. The article thus goes beyond studies which focus on the influence of shareholder activism on single instances of corporate conduct, as it recognises shareholders’ potential as change agents for more widely shared norms about corporate responsibilities. The article includes the empirical example of US internet technology companies who, in their Chinese operations, face conflicts of norm systems in regard to freedom of expression on the internet. Shareholders have been active in seeking to persuade these companies to adopt a norm of adhering to global standards for human rights over restrictions implied by authoritarian regimes to which they deliver services.     

Interest rate volatility,asymmetric interest rate pass through and the monetary transmission mechanism in the Caribbean compared to US and Asia

We analyse asymmetric interest rate pass through, the impact of interest rate volatility on interest rates and the monetary transmission mechanism in the countries of the CSME² using the Asymmetric TAR and MTAR cointegration models by Enders and Siklos (2001) and the EC-EGARCH(1, 1)-M model by Wang and Lee (2009), who examined the same issue for the US and nine Asian countries. The CSME is a unique case of study given that it contains within it a monetary union: the OECS². First, our results show that there is complete pass through in the retail lending rate for Trinidad and Tobago and for St. Lucia and therefore, by extension, in all the countries of the OECS³ but not the other countries of the CSME. In contrast, Wang and Lee (2009) found complete pass through for the US deposit rate but not in the rates of the other nine Asian countries. Second, in Wang and Lee (2009) the results of the TAR and MTAR models show asymmetric cointegrating relationships in the lending rate of three Asian countries and the deposit rate of five Asian countries. Comparatively, our results show asymmetric cointegrating relationship in the lending and deposit rate of only three countries out of six: Jamaica, Guyana and St. Lucia. Third, the results from the conditional mean equation in the EC-EGARCH(1, 1)-M model in Wang and Lee (2009) show that for the countries with asymmetric cointegrating relationships, the lending rate displays downward adjustment rigidity and the deposit rate displays upward adjustment rigidity. In contrast, our results show that both rates for Jamaica display upward adjustment rigidity and both rates for Guyana and St. Lucia display downward adjustment rigidity. Finally, similarly to Wang and Lee (2009), our results from the EC-EGARCH(1, 1)-M models show that the effect of interest rate volatility on interest rates varies among countries. Three out of the Asian countries from Wang and Lee (2009) support the collusive pricing arrangement hypothesis while in our case it happens only in two countries out of six from the CSME: Guyana and St. Lucia. Moreover, the leverage effect exists in the lending rate for two out six countries in the CSME as it happens in Wang and Lee (2009) in two out of their Asian countries. Along the same lines, the leverage effect exists in the deposit rate of three countries in the CSME, contrary to Wang and Lee (2009), who do not find any evidence at all. This shows evidence of an important heterogeneity in the behaviour of the CSME countries and that Trinidad and Tobago and St. Lucia (showing the effect of belonging to a monetary union) are our only analysed countries where, as in the US, there is complete pass through and the central bank can transfer all the cost associated with an increase in its policy rate to the retail rates.