FROM MY PERSPECTIVE: VIII. Continuum of change: Perspectives on physical or “hard” sciences

This article, the eighth in a series on the new millennium, describes timelines that provide the setting and context for basing very long forecasts. The longer and more complete the historic patterns of past and present, coupled with conceptual possibilities and prospective developments, the clearer the pattern of ongoing incremental change becomes. Likely patterns of continuing change literally “pop out” when assessing such chronologies. Feasibility, credibility and practicality of 1000 year forecasting typically is dismissed out-of-hand. To help dispel such mindsets, timelines covering wide-ranging natural science phenomena spanning thousands to billions of years are presented here. Depicting the coming and going of familiar natural science phenomena in this manner reveals how the future fate of the world we live in is predetermined. These very long horizons suggest potentials for projecting physical science possibilities a mere 1000 years into the future.     

Does Membership Homogeneity Matter for Group-based Financial Services? Evidence from the Gambia

This paper examines the effect of membership composition on the components of group design to provide financial services, and on the performance of these groups. Regression results based on data from RoSCAs in the Gambia show that gender homogeneity is less likely to affect components of group design than is homogeneity in income generating capacity of members. Membership homogeniety does not directly affect the repayment performance of the members but only indirectly through the components of the group design. — Cet article examine l’incidence de la composition sur les composantes et la performance des groupes constitués en vue de la fourniture de services financiers. Selon les résultats d’une analyse de régression basée sur les données de “RoSCA” en Gambie, il apparaît que l’homogénéité du genre influe moins sur les composantes de la conception des groupes que l’homogénéité de la capacité des groupes à générer des revenus. En ce qui concerne la performance en matière de remboursement, l’incidence de l’homogénéité de la composition n’est pas directe mais indirecte au travers des composantes de la conception des groupes.     

TAX PROGRESSIVITY AND CORPORATE INCENTIVES TO HEDGE

If a company faces some form of tax progressivity—that is, its marginal tax rate increases over the firm's expected range of reported taxable income—corporate hedging can reduce the firm's expected tax liability by reducing the volatility of pre-tax income. In a study described in this article, the authors used simulation methods to investigate the extent to which tax progressivity arises from various provisions of the tax code, such as the AMT and tax carryforwards and carrybacks. Based on their analysis of over 80,000 COMPUSTAT firm-year observations, the authors find that, in about 50% of the cases, corporations face effective tax functions that exhibit progressivity. The other 50% of cases are about evenly divided between firms that are tax neutral and those facing tax schedules that are "regressive" (again, over the relevant range of expected reported income).
For those companies facing progressive tax functions, the authors estimate that the projected average tax savings from a 5% reduction in the volatility of taxable income is about 5.4% of the expected tax liabilities. However, the distribution of expected reductions is highly skewed, in extreme cases exceeding 40% of the total tax liability. Most of these extreme cases are small to medium-sized companies, since such firms are much more likely to meet the two conditions for achieving large tax benefits: (1) expected pretax income that is close to zero; and (2) sufficiently volatile income that the firm (in the absence of hedging) expects to report losses in some years. In sum, small to medium-sized companies experience the greatest tax benefits from hedging.     

Fearful asymmetry: The consumption of accounting signs in the Algoma Steel pension bailout

This paper examines the role of accounting in society by looking at the consumption of accounting signs during the financial restructuring of a corporation. The paper builds upon insights from prior research on accounting as simulacrum and hyperreality. It examines how accounting numbers serve as reconfigurable signs that construct appropriate “crises”, motivate government intervention, and marshal stakeholders towards solutions. The incident at the heart of this study is the 2001 bailout of the Algoma Steel pension plan by the Ontario government. The incident demonstrates how accounting technologies are required both for the production of accounting signs and for their consumption. The paper asks how the production and consumption of accounting signs is different from that of other communication signs, what role consumers of accounting signs play in determining their meaning, and what difference this makes in how corporate pension plans are protected by government. It concludes that the structures and mechanisms surrounding the consumption of accounting signs enable different stakeholders to influence the production of meaning at the moment when accounting signs are consumed, changing the way that risk and wealth are redistributed, and shaping government intervention.     

Reviews

Social Europe. European Commission 1996: SOCIAL EUROPE: PROGRESS REPORT ON THE IMPLEMENTATION OF THE MEDIUM-SOCIAL ACTION PROGRAMME 1995-97 (Supplement 4/96).

SOCIAL EUROPE: WORK AND CHILDCARE -A GUIDE TO GOOD PRACTICE (Supplement 5/96). Luxembourg: Office for Official Publications of the European Communities.

Spatial planning. Healey, P., Khakee, A., Motte, A. and Needham, B. (eds) 1997: MAKING STRATEGIC SPATIAL PLANS: INNOVATION IN EUROPE. Basingstoke: Taylor and Francis, £14.95 paper.

Competing cities. Jensen-Butler, C., Shachar, A. and Weesep, J. (eds) 1997: EUROPEAN CITIES IN COMPETITION. Aldershot: Avebury, £55.00 cased.

Evaluating the City Challenge. Robinson, F. 1997: THE CITY CHALLENGE EXPERIENCE. Newcastle: Newcastle City Challenge West End Partnership Ltd, £15.00 paper.     

Estimation and Testing of Forecast Rationality under Flexible Loss

In situations where a sequence of forecasts is observed, a common strategy is to examine „rationality” conditional on a given loss function. We examine this from a different perspective—supposing that we have a family of loss functions indexed by unknown shape parameters, then given the forecasts can we back out the loss function parameters consistent with the forecasts being rational even when we do not observe the underlying forecasting model? We establish identification of the parameters of a general class of loss functions that nest popular loss functions as special cases and provide estimation methods and asymptotic distributional results for these parameters. This allows us to construct new tests of forecast rationality that allow for asymmetric loss. The methods are applied in an empirical analysis of IMF and OECD forecasts of budget deficits for the G7 countries. We find that allowing for asymmetric loss can significantly change the outcome of empirical tests of forecast rationality.     

Airport-specific traffic forecasts: a critical perspective

This paper offers some comments on the nature of airport-specific traffic forecasting. While the argument acknowledges the importance of reconciling local hinterland-derived and global macro-economic forces in such projections, it is argued that the primary causative factors in airport forecasts relate primarily to supply as distinct from demand. In particular, the discussion examines the effects of deregulation on airline and airport strategies. It concludes that future forecasting methodologies have to build on the role and viability of specific airlines at specific airports, rather than prolong an increasingly timeworn dependence on hinterland-derived factors and related assumptions of consumer choice.     

The strategic role of relational capabilities in the business-to-business service profit chain

This paper extends the original service profit chain by examining the role of relational capabilities with employees, customers and strategic partners on process and performance outcomes in a business-to-business context. More specifically, we demonstrate how satisfied and loyal employees are better in developing relationships with customers and strategic partners. These relationships enable firms to be more responsive towards customers and become more innovative, which increase customer satisfaction and loyalty and, ultimately, financial performance. Our results provide support for the development of relational capabilities in a business-to-business environment by extending the service profit chain (SPC) model. However, we find that while the development of strong customer relationships contributes to an improved service responsiveness of the firm, strategic partners do not.