INTEGRATING STUDENTS, FACULTY AND INDUSTRY EXECUTIVES

Abstract: The authors describe a program which has been devised for students at the University of Georgia. The program allows students and faculty to interact with industry leaders. As the authors point out, the same type of program could be implemented at other universities. This article describes the project for which the authors received the 1996 Les Strickler Innovation in Instruction Award, given at the 1996 annual meeting of the American Risk and Insurance Association.     

The Stochastic Behavior of Commodity Prices: Implications for Valuation and Hedging

In this article we compare three models of the stochastic behavior of commodity prices that take into account mean reversion, in terms of their ability to price existing futures contracts, and their implication with respect to the valuation of other financial and real assets. The first model is a simple one-factor model in which the logarithm of the spot price of the commodity is assumed to follow a mean reverting process. The second model takes into account a second stochastic factor, the convenience yield of the commodity, which is assumed to follow a mean reverting process. Finally, the third model also includes stochastic interest rates. The Kalman filter methodology is used to estimate the parameters of the three models for two commercial commodities, copper and oil, and one precious metal, gold. The analysis reveals strong mean reversion in the commercial commodity prices. Using the estimated parameters, we analyze the implications of the models for the term structure of futures prices and volatilities beyond the observed contracts, and for hedging contracts for future delivery. Finally, we analyze the implications of the models for capital budgeting decisions.     

Actual Share Reacquisitions in Open-Market Repurchase Programs

Unlike Dutch auction repurchases and tender offers, open-market repurchase programs do not precommit firms to acquire a specified number of shares. In a sample of 450 programs from 1981 to 1990, firms on average acquire 74 to 82 percent of the shares announced as repurchase targets within three years of the repurchase announcement. We find that share repurchases are negatively related to prior stock price performance, suggesting that firms increase their purchasing depending on its degree of perceived undervaluation. In addition, repurchases are positively related to levels of cash flow, which is consistent with liquidity arguments.     

Interprofessional conflict, accommodation, and the flow of capital: The ASB vs The securities industry and its lawyerS

In an earlier paper, Martens and McEnroe (1991) found that the Auditing Standards Board (ASB) substantially rewrote major sections of the exposure draft (ED) of Statement on Auditing Standards (SAS) No. 54 to accommodate the wishes of a special interest group, the legal profession. This study involves a similar examination of the development of SAS 72, from its status as an ED to its release as an official auditing promulgation. Specifically, an analysis is made of the positions existing in the ED for SAS 72, the comments submitted to the ASB, and the changes made to the final SAS in light of those comments. The results indicate that the ASB once again accommodated the desires of a special interest group; in this case, the securities industry and its lawyers. A reason for the accommodation is proposed in the context of certain sociological theories of the professions. It is suggested that the ASB, acting as an agent of capital, was convinced that a less restrictive standard was necessary in order to facilitate the role that underwriters play in the flow of investment capital.     

The use of organic models of control in JIT firms: generalising Woodward’s findings to modern manufacturing practices

Prior research indicates that technology plays an important role in the determination of management control systems. A fully developed JIT system represents a radical departure from the traditional approach to organising and managing mass production. In probing the management control implications of JIT, this study extends some well-established concepts from organisation theory to the modern manufacturing practices literature to develop a framework which suggests that mass production firms adopting JIT (a new technology) must abandon a mechanistic management control system and adopt an organic model of control. Findings from three case studies describing the control structures used in JIT firms are also presented as part of the theoretical and hypothesis development. In addition, survey results are reported which are highly consistent with the framework, indicating that Woodward’s findings (Industrial organization: theory and practice (2nd ed.). Oxford: Oxford University Press.) generalise (are robust) to a new technology. Finally, a preliminary examination into whether improvements in certain key areas are higher for those JIT firms utilising an organic model of management was performed and found to be consistent with expectations.     

A question of character

For the most part, Glamor-a-Go-Go's board has been thrilled with CEO Joe Ryan's performance. Ryan, after all, had transformed the private-label cosmetics company into a retail powerhouse with flashy outlets from New York to Los Angeles. In addition to saving the company from bankruptcy shortly after his arrival in 1992, Ryan had made Glamor-a-Go-Go a fun and exciting place to work, increasing workers' wages and creating boundless opportunities for anyone willing to work hard and think out of the box. He had also brought more women and people of color on board. And he had made many employees wealthy, with generous stock giveaways and options for the most senior employees down to the most junior. Glamor-a-Go-Go's stock price had grown tenfold during Ryan's tenure. But Ryan's personal affairs were beginning to call into question his leadership abilities. The local paper's gossip column recently ran a photo of Ryan--a married man--leaving a gala event with a beautiful young woman from the company, with the headline "Who's That Girl?" Indeed, rumors about Ryan's philandering were starting to take on a harsher edge. Some people believed his secretary left because Ryan had sexually harassed her. Others believed a mail-room employee had been promoted to factory supervisor because of her affair with the CEO. Having warned Ryan several times about his alleged infidelities, the board is stuck. What should it do about Ryan's extracurricular behavior? Does Ryan's personal behavior even affect the company? Is what Ryan does outside the office the board's concern? Six commentators weigh in.     

Empowering the managed care consumer: not as easy as it sounds

Managed care remains one of the most highly publicized issues in employee benefits, with its accompanying controversy causing concern to the consumer and the employer. The authors of this article discuss the very basic things consumers of health benefits should know about their plans in order to be prepared, as well as what they should reasonably expect from employers that sponsor the plans.     

Integration managers: special leaders for special times

Although the integration of an acquired company with the parent organization is a delicate and complicated process, traditionally no one has ever been responsible for that process--for charting how the two companies will combine their operations, for seeing to it that the integration project meets its deadlines and performance targets, and for educating the new people about the parent company and vice versa. Some enlightened companies have recognized this gap and have appointed a guide--the integration manager--to shepherd everyone through the rocky territory that two organizations must cross before they can function effectively together. The authors have interviewed a number of these leaders in depth, as well as some of the people with whom they've worked. They've determined that integration managers help the merger process in four principal ways: they speed it up, create a structure for it, forge social connections between the two organizations, and help engineer short-term successes. In this article, the authors detail five acquisitions--at TI, General Cable, Meritor Automotive, Lucent, and Johnson & Johnson--and discuss the role that integration managers played in each. They describe exactly what sort of person should do this job. The integration manager must be able to jump into complex situations quickly, relate to many levels of authority smoothly, and bridge gaps in culture and perception. The ever-changing organizations of the Internet age will need leaders with similar skills. In fact, the authors contend, the integration manager should be considered a prototype for the leader of the future.     

Non-Segmented Equilibria Under Differential Taxation: Evidence from the Canadian Government Bond Market

This paper investigates tax effects in the Canadian governmentbond market during the period 1964—1986. Unlike previousstudies, we apply both statistical and nonstatistical teststoanalyze clientele effects and market equilibria. The resultsdivide the sample into two distinct periods of time, with theend of 1976 marking the division. We find that tax effects arealmost nonexistent in the Canadian government bond market beforethe end of 1976, but are predominant in the post-1976 period.Non-segmented market equilibria cannot be rejected before 1977,but are strongly rejected after 1976. In fact, segmented equilibriawith clientele effects in both quantities and prices characterizethe entire five year period from 1982 to 1986. These findingsare consistent with tax reforms, government deficit financingand interest rate fluctuations in Canada during our sample period.     

Understanding the Large Negative Impact of Oil Shocks

This paper offers a plausible explanation for the close link between oil prices and aggregate macroeconomic performance in the 1970s. Although this link has been well documented in the empirical literature, standard economic models are not able to replicate this link when actual oil prices are used to simulate the models. In particular, standard models cannot explain the depth of the recession in 1974–75 and the strong revival in 1976–78 based on the oil price movements in that period. This paper argues that a missing multiplier-accelerator mechanism from standard models may hold the key.