Notes and Communications

Educational institutions in the Netherlands have some degree of economic independence. Their management decisions are not guided completely by a budget system, but in part also by a market mechanism. Still, budget management is crucial as survival is not primarily determined by the amount of equity capital, but by the annual funding received from the government. For the evaluation of capital management, a capitalization factor is introduced to measure the amount of capital employed by an educational institute in relation to its annual income. It can signal possible inefficiencies reflected in excessive capital assets. Actual budget and capital management is assessed with the help of four financial indicators. There appears to be scope for improvements in financial policies and some recommendations are offered on how to attain them.     

How digital platforms influence luxury purchase behavior in India?

In an emerging country such as India, consumers are tech savvy and connect easily with digital media platforms. They use these platforms even for luxury purchases. However, there have been only a few conceptual papers on this process. Therefore, this study aims to explain how digital platforms influence consumers’ decision for luxury brands in India. Two qualitative studies were conducted with young Indian consumers as they are the heaviest users of digital platforms and the most frequent purchasers of luxury brands. The first study consisted of 156 respondents in 15 focus groups in four major Indian cities. The second was made up of 95 on-site customer observations in 18 retail luxury stores and 45 consumers’ interviews. These data were further validated by 32 interviews with luxury brand managers and retail managers We found and developed a cyclical framework that projects digital media influences on Indian consumers at all the phases of purchase, i.e., pre-purchase is digital and hedonic, purchase is experiential and enjoyable while digital media is used and post-purchase is based on aspirations, lifestyles and virtual networks. More importantly, these consumers are always connected to reference groups digitally who significantly affect their purchase behavior and subsequent brand choices.     

Barriers to the upgrade cycle in a commodity process industry: evidence from the UK packaging industry

Attempting to move away from commodity‐based products into higher value added ones remains one of the key challenges for research and development (R&D) managers. This paper focuses on developing an understanding of these challenges in the UK packaging industry. The research presents evidence from the case of a single firm, within this process industry, that produces commodity products. The paper contributes to Lager's product degradation–upgrade cycle, which illustrates how functional products degrade into commodities unless product functionalities are continually improved. We characterise the ‘upgrade’ aspect within this model. The paper presents the findings of a 3‐year research project with one of the largest packaging manufacturers in Europe. Five barriers are uncovered that hinder firms attempting to increase the level of product differentiation in order to ‘upgrade’.     

The revival of shelf-registered corporate equity offerings

We report that traditional seasoned equity offerings (SEOs) are no longer firms' preferred choice for raising seasoned public equity. Traditional offerings have recently been surpassed by shelf-registered offerings in terms of both annual frequency and total capital raised. This represents a dramatic shift from the 1980s, during which the overwhelming majority of firms favored traditional over shelf-registered offerings. We find that the growth in shelf use is related to firms increasingly valuing and using the option feature of shelf registration to defer offerings. Moreover, the evidence indicates that the way firms now use shelf offerings resolves the shelf under-certification problem and results in no larger market penalties and significantly lower underwriter fees relative to non-shelf offerings. Finally, firms often use universal shelf filings and choose between debt and equity offerings based on the prevailing relative market conditions.     

Macroeconomic uncertainty and performance in the European Union

We use a very general bivariate GARCH-M model and monthly data on EU countries covering the 1962–2003 period to test for the impact of real (output growth) and nominal (inflation) macroeconomic uncertainty on inflation and output growth. Our evidence supports a number of important conclusions. First, in the majority of countries uncertainty regarding the output growth rate is related to the average growth rate and the effect in several countries is negative. Second, in half of the cases there is no significant relationship between inflation uncertainty and output growth performance. Third, inflation and output uncertainty have a mixed effect on inflation. Nevertheless, considerable evidence for the Cukierman–Meltzer hypothesis is obtained. Our conclusions are based on adopting both a structural and a reduced-form bivariate GARCH model. Finally, we also find statistically significant evidence of regime switching for both inflation and output growth volatility throughout the sample.     

Baylor University Roundtable on The Corporate Mission, CEO Pay, and Improving the Dialogue with Investors

A small group of academics and practitioners discusses four major controversies in the theory and practice of corporate finance:

• • What is the social purpose of the public corporation? Should corporate managements aim to maximize the profitability and value of their companies, or should they instead try to balance the interests of their shareholders against those of “stakeholder” groups, such as employees, customers, and local communities?
• • Should corporate executives consider ending the common practice of earnings guidance? Are there other ways of shifting the focus of the public dialogue between management and investors away from near-term earnings and toward longer-run corporate strategies, policies, and goals? And can companies influence the kinds of investors who buy their shares?
• • Are U.S. CEOs overpaid? What role have equity ownership and financial incentives played in the past performance of U.S. companies? And are there ways of improving the design of U.S. executive pay?
• • Can the principles of corporate governance and financial management at the core of the private equity model—notably, equity incentives, high leverage, and active participation by large investors—be used to increase the values of U.S. public companies?

     

Modelling superannuation fund management function as a two-stage process for overall and stage-level performance appraisal

We assess superannuation fund performance in a multi-dimensional framework by conceptualizing its management function as a serially linked two sub-process; operational management (OM) and portfolio management (PM). The procedure that we adopt is data envelopment analysis (DEA). We express overall efficiency as a weighted average of the two sub-process efficiencies and assess overall efficiency conditional on their relative importance. We demonstrate application of our model using a sample of Australian superannuation funds. By appraising performance in two sample periods; crisis (2008) and relatively non-crisis (2014), we show that some findings of previous studies may be explained further through the proposed multi-stage framework. The best overall performer in 2008 is public sector funds and in 2014 it is corporate funds. Decomposition of overall efficiency reveals that public sector funds, on average, outperform all other fund categories in OM. However, no specific fund category dominates PM performance in both assessment periods. The driving force behind the observed inverse association between superannuation fund size and performance appears to be PM performance. Number of investment options offered is not associated with overall, OM and PM performance. Here, we demonstrate that performance appraisal from different aspects of management provide insightful information to superannuation fund managers.     

The Impact of Perceived Ethical Culture of the Firm and Demographic Variables on Auditors’ Ethical Evaluation and Intention to Act Decisions

Studies into corporate social responsibility (CSR) in small and medium-sized enterprises (SMEs) have suggested that small businesses are different to the large companies on which CSR research usually focusses. Extending this argument, this article raises the question what differences in approaches to CSR there are within the SME category. Analysing the CSR strategy and performance of a medium-sized fashion retailer in the United Kingdom through manager interviews as well as customer and employee surveys, the article develops an analytical framework of CSR in small, medium and large firms. The argument is developed that medium-sized firms occupy a transition stage, where some CSR features that are reminiscent of small enterprises are still important but get overlaid with aspects that are more typical of large companies.