The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions

This paper examines the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts. Using a sample of actively traded commerical banks and stock savings and loan associations, common stock returns are found to be correlated with interest rate changes. The co-movement of stock returns and interest rate changes is positively related to the size of the maturity difference between the firm's nominal assets and liabilities.     

A comparative examination of the time-series properties and predictive ability of annual historical cost and general price level adjusted earnings*

Abstract. This empirical study is a response to the FASB's call for further research into the properties of alternative accounting measurement methods. There exists no empirical evidence on the time-series properties and predictability of general price level (GPL)-adjusted annual earnings data. In order to assess the effect of the monetary gains or losses on the stochastic properties of GPL-adjusted data, earnings were calculated both with and without inclusion of the monetary gains or losses. The results of the time-series analysis of the earnings series across the alternative accounting methods indicated that (a) just under one-half of the historical cost (HC) series followed a random-walk-type process with most of the remainder being autoregressive, and (b) the GPL series showed substantially fewer following a random walk process with a corresponding increase in the number of stationary series (modeled as autoregressive or white noise processes). The predictive ability results were consistent with the time series findings. That is, application of a random-walk model to the HC series indicated that these series were fairly well-represented by the random walk, but a similar application to the GPL series confirmed that these series were not as well-represented by a random walk. Résumé. L'étude empirique qui fait l'objet du présent article a été effectuée en réponse à l'invitation du FASB à poursuivre les recherches sur les attributs des méthodes de mesure comptable de rechange. Il n'existe aucune démonstration empirique des attributs des séries chronologiques et de la valeur prédictive des données relatives aux bénéfices annuels indexés sur le niveau général des prix (N.G.P.). En vue d'évaluer l'incidence des gains ou des pertes monétaires sur les propriétés stochastiques des données indexées sur le N.G.P., les bénéfices on été calculés à la fois avec et sans la prise en compte des gains ou des pertes monétaires. Les résultats de l'analyse chronologique des séries de données relatives aux bénéfices à travers les différentes méthodes comptables ont donné lieu aux constatations suivantes: a) à peine moins de la moitié des séries de données au coût d'origine (C.O.) ont connu des variations de type aléatoire, la plupart des autres séries étant autorégressives, et b) beaucoup moins de séries de données indexées sur le N.G.P. ont affiché des variations aléatoires avec une augmentation correspondante du nombre de séries stationnaires (modélisées comme étant autorégressives). Les résultats relatifs à la valeur prédictive étaient compatibles avec les résultats de l'analyse chronologique. En d'autres termes, l'application d'un modèle aléatoire aux séries de données au C.O. a permis de constater que ces séries sont assez bien représentées par la méthode aléatoire, mais l'application du même modèle aux séries de données indexées sur le N.G.P. confirme que ces séries ne sont pas aussi bien représentées par la méthode aléatoire.     

ROLE OF THE INTERNATIONAL GOLD STANDARD IN PROPAGATING THE GREAT DEPRESSION

I do not claim in this paper that the international gold standard was a principal cause of the Great Depression. Instead, I explore the events that allowed the world to slip deeper into depression despite the gold standard. The volatility of international short-term capital flows surely contributed greatly to the Depression. I argue that this volatility was exacerbated—rather than ameliorated—by the international gold standard. The reason is that despite governments' legal assurances that they are committed to a gold standard, speculators never perceive the terms of gold parity as immutable. This statement holds with increasing force when one observes the precarious status of government debts and international finance during the 1920s. This reality renders a gold standard vulnerable to precisely the type of volatility in international capital markets that made the 1931 downturn more severe.     

Japanese Companies in Germany: A Case Study in Cross-Cultural Management

From a series of qualitative interviews with Japanese managers and German managers and workers in thirty-one Japanese-owned companies in the Düsseldorf region of western Germany, this article discusses differences in cultural patterns and organizational styles between the German and Japanese employees and the problems these pose for communication, cooperation, and morale. First, we deal with cultural contrasts: language issues, interpersonal styles (personability and politeness), and norms regarding the taking of responsibility. Second, we examine the impact on cross-nationality relations of established organizational practice: for example, German specialism vs. Japanese generalism; direct and vertical vs. indirect and incremental decision making. We also discuss efforts by these firms to find compromise systems that would meet the needs and interests of both sides. The third focus is the reactions of Japanese companies in North Rhine-Westphalia to German unions, works councils, and codetermination regulations. In the labor view, Japanese firms overall do no better or worse than comparable German firms.