Further examination of the demographic and social factors affecting risk aversion

In this paper we examine how social and demographic factors explain risk aversion. Specifically, we focus on how an individual’s place of residence effects his level of risk aversion. Israel is a natural experiment field for such an investigation since the majority of its population lives either in big or small cities, moshavs, or kibbutzim, where the last two forms of settlement being unique to Israel. The kibbutz follows the prototype of a collectivist culture; the moshav follows the prototype of an individualistic culture. This environment also allows us to reexamine the contradiction between the “cushion hypothesis” and previous findings regarding the risk aversion of Israeli kibbutz residents. In general, we find that the moshav respondents demonstrate the lowest level of risk aversion and the kibbutz (and the small city) respondents demonstrate the highest. However, further examination reveals that the risk aversions are domain specific. The urban residents of both big and small cites are similar to each other than they are to residents of the kibbutz and the moshav, who, in turn, are more similar to each other than they are to the urban residents. For example, kibbutz and moshav respondents are less risk averse in insurance and gambling, but more risk averse in driving and sport, compared to urban residents. Interestingly, on average, the respondents demonstrate the highest level of risk aversion for extreme sports and the lowest level of risk aversion for irresponsible driving.     

The Impact and Implications of International Financial Reporting Standards in the United Kingdom: Evidence from the Alternative Investment Market

This paper investigates the implications of the adoption of International Financial Reporting Standards (IFRS) from the perspective of small and growing companies listed on the United Kingdom's (UK) Alternative Investment Market (AIM). We consider the cost–benefit issues of IFRS adoption and investigate its economic consequences. The results reveal that only a small number of comparatively larger AIM companies have voluntarily adopted IFRS for some anticipated economic objectives. The results also suggest that most of the mandatory adopters have done so for regulation compliance purposes and they would not have adopted IFRS if a choice was available to them. As the existing literature mainly covers the impact of IFRS adoption on large listed companies, the findings of this study will give better insights into extending IFRS to private companies. The findings show an association between the early adoption of IFRS and firm size and conclude that size matters in both the adoption and implications of IFRS. This study also contributes to the debate on the implications of the new IFRS‐based UK GAAP for SMEs‐FRS 102, which will replace the majority of existing UK accounting standards for small and medium enterprises (SMEs) with effect from 2015. Our findings have implications for managers, regulators, market participants, practitioners and other stakeholders.     

Detecting self-organisational change in economic processes exhibiting logistic growth

This paper offers an econometric methodology for the detection of self-organisational change (defined in terms of the presence of time irreversibility, structural change and fundamental uncertainty) in economic processes that follow logistic diffusion growth paths in historical time. The approach we adopted is built upon recent developments in `moving window' spectral methods which are applied to the scaled residuals generated by estimated logistic diffusion models. We illustrate the use of such methods by examining the case of a financial instrument, namely, the Australian Building Society Deposit, which experienced logistic growth in its market share until bank deregulation was enacted in the 1980s. We show that there is clear evidence that self-organisational change is present over the historical period considered.     

Accession of the Czech Republic,Hungary and Poland to the European Union: Impacts on Agricultural Markets

We analyse the consequences on agricultural markets of enlargement of the European Union (EU) to include the Czech Republic, Hungary, and Poland. We produce a market outlook up to 2010 for two enlargement scenarios assuming different policy restrictions on grain and dairy production in the acceding countries. Accession of the three Central and Eastern European countries (CEECs) leads to a permanent but moderate decrease in EU prices for most commodities. In the three acceding CEECs, domestic prices increase drastically, final consumption of agricultural products decreases in most instances, while production increases. Higher domestic prices in the CEECs reduce exports of most commodities to non‐union countries. Consequently, excess supplies are placed in stocks or exported to the original 15 member countries. Supply management mechanisms in the dairy and grain sectors would reduce the build‐up of surpluses in the new member states, but limit their ability to take advantage of the expanded market. Accession of the three CEECs would increase the CAP budget over its proposed maximum if area payments are extended to incoming crop producers.     

The Effects of Regulated Premium Subsidies on Insurance Costs: An Empirical Analysis of Automobile Insurance

State regulation of rates is sometimes used as a means to make automobile insurance more affordable to consumers by restricting insurer profits and pricing practices. Incentive distortions arising from this type of rate regulation might lead to higher accident rates and higher insurance loss costs. Annual state‐level panel data for the time period 1980–1998 are used to investigate these effects, using empirical methods that recognize the endogenous determination of states’ regulatory choices. Results suggest that rate regulation that systematically suppresses (some or all) drivers’ insurance premiums is associated with significantly higher average loss costs and higher insurance claim frequency.     

An Optimal Product Mix for Hedging Longevity Risk in Life Insurance Companies: The Immunization Theory Approach

This article investigates the natural hedging strategy to deal with longevity risks for life insurance companies. We propose an immunization model that incorporates a stochastic mortality dynamic to calculate the optimal life insurance–annuity product mix ratio to hedge against longevity risks. We model the dynamic of the changes in future mortality using the well‐known Lee–Carter model and discuss the model risk issue by comparing the results between the Lee–Carter and Cairns–Blake–Dowd models. On the basis of the mortality experience and insurance products in the United States, we demonstrate that the proposed model can lead to an optimal product mix and effectively reduce longevity risks for life insurance companies.     

The efficiency of the Australian dairy processing industry

In this article we analyse trends in the economic performance of the dairy processing industry and evaluate the link between these trends and the deregulation of the industry. Using Stochastic Frontier Analysis to derive Malmquist total factor productivity estimates, we show that the industry exhibits a relatively high level of technical efficiency. Victoria, the major producing state, has been effectively on the frontier over the period studied. In recent years, the rapid expansion in capital investment that has attended the shift towards deregulation, has been accompanied by an apparent slowdown in both productivity growth and technical progress. There is also evidence of a convergence in productivity levels across states.     

Online brand communities: constructing and co-constructing brand culture

Consumers act and interact via social media networks and online brand communities, collectively generating brand culture. In this context, organisations have the opportunity to develop a cultural following. The respective task for brand managers and marketers is to understand how consumers collectively generate online brand culture? Using active and overt netnography and investigating the specific context of the Behance Network, the findings presented here demonstrate that online brand community members collectively generate brand culture in variant ways: through construction of self, emotional relationships, storytelling and ritualistic practices. Pragmatically, this work demonstrates that online brand community members are curators of online brand culture and netnography offers a window through which to identify what actions and interactions need to be facilitated and fostered.     

Do VCs matter? the importance of owners on performance variance in start‐up firms

Adding to the corporate effect literature, we study the effect of owners on firm performance in a new context, that of venture capital firms (VCs) and the start‐up firms in which they invest. After discussing the effect that VC ownership can have on start‐ups, we estimate that start‐up‐specific, owner (VC), and year effects account for significant variance in performance (26.3 percent, 11.2 percent and 3.7 percent, respectively). The effects of industry and investment stage are not statistically different from zero. We also provide an analysis that separates the owner effect into two components: a selection component—which impacts investment—and a management component—which explains significant variance in performance. By examining the owner effect in a different institutionalized form of governance—that of the start‐up and its relationship to VC owners—our study also contributes to an understanding of the ‘ownership’ effect in the strategy literature more generally. Copyright © 2008 John Wiley & Sons, Ltd.