Dealing with consumer default: Bankruptcy vs garnishment

What are the positive and normative implications of eliminating bankruptcy protection for indebted individuals? Without bankruptcy protection, creditors can collect on defaulted debt to the extent permitted by wage garnishment laws. The elimination lowers the default premium on unsecured debt and permits low-net-worth individuals suffering bad earnings shocks to smooth consumption by borrowing. There is a large increase in consumer debt financed essentially by super-wealthy individuals, a modest drop in capital per worker, and a higher frequency of consumer default. Average welfare rises by 1% of consumption in perpetuity, with about 90% of households favoring the change.     

New product introduction under demand uncertainty in competitive industries

A game-theoretic model is employed to examine the conditions under which firms in a duopoly, faced with a new product introduction opportunity of uncertain profitability (because of uncertainty in demand), choose to enter the market immediately or, alternatively, decide to wait, thereby avoiding the risk of failure. The implications for a firm's strategic behavior are contrasted with situations in which the competitor is believed to be (1) passive, implying that the firm expects to enjoy indefinite monopoly status if it introduces the new product, and (2) committed to a waiting strategy, implying monopoly status for a limited time period, if the new product is successful.     

Analysis of marginally specified semi-nonparametric models for clustered binary data

Generalized linear mixed models are widely used for analyzing clustered data. If the primary interest is in regression parameters, one can proceed alternatively, through the marginal mean model approach. In the present study, a joint model consisting of a marginal mean model and a cluster-specific conditional mean model is considered. This model is useful when both time-independent and time-dependent covariates are available. Furthermore our model is semi-parametric, as we assume a flexible, smooth semi-nonparametric density of the cluster-specific effects. This semi-nonparametric density-based approach outperforms the approach based on normality assumption with respect to some important features of 'between-cluster variation'. We employ a full likelihood-based approach and apply the Monte Carlo EM algorithm to analyze the model. A simulation study is carried out to demonstrate the consistency of the approach. Finally, we apply this to a study of long-term illness data.     

Ethical perceptions of Asian managers: evidence of trends in six divergent national contexts

Global link building is having a substantial impact in every sphere of Asian managerial activity. The economic upheavals of the Asian ?nancial crisis have cast a long shadow, and ethical clarity has become a social issue. For instance, corporate performance in terms of long-term survival, growth and global competency is seen to depend to a considerable extent upon the ethical infrastructur of managers and emerging managerial culture in Asia. One ?eld in which Asian managers and their managerial practices are often considered weak is the area of ethical clarity. Corporate managerial leaders in Asia need to develop new responses to the ethical complexities arising out of the increasing global interfaces. In spite of a growing awareness of the importance of ethical centrality in an intensely competitive international business arena, very little empirical work has been conducted to strengthen the relevant management literatures. The purpose of the research reported in this paper was to examine the perceptions of ethical probity among managers in six Asian countries. The results of the study indicate interesting convergences and divergences across countries and organisational demographies. The ?ndings lead to observations of the apparent similarities of ethical conceptualisation in global, societal and often in the organisational arena while revealing noticeable divergences in the domain of individual ethical perceptions.     

Systematic risk estimation in the presence of large and many outliers

It is well recognized that the effect of extreme points on systematic risk estimates is not adequately captured through least squares estimation. This article uses the reweighted least median squares (RWLMS) approach, first proposed by Rousseeuw (1984), which accurately detects outlier presence. Using a large sample of 1350 NYSE/AMEX firms, the article demonstrates that least squares does indeed mask several potentially influential points, that this masking is very pervasive over the sample, and that it may persist even after conventional robust estimation techniques are applied. When these masked points are “unmasked” by RWLMS and zero weights assigned to such observations, the resulting RWLMS estimates of beta are on average 10%–15% smaller. However, a Bayesian treatment of such points (assigning a priori nonzero weights) is possible in both one and two factor market models.     

Types of synergy and economic value: The impact of acquisitions on merging and rival firms

Acquisitions, in general, have been demonstrated to create economic value. The intuitive reason underlying this value creation stems either from an ability to reduce costs of the combined entity, an ability to charge higher prices, or both. Current research in the area attributes these abilities to an opportunity to utilize a specialized resource. Our focus in this study is to compare three broad classes of resources that contribute to the creation of value. Following the conventional wisdom, these resources are classified as cost of capital related (resulting in financial synergy), cost of production related (resulting in operational synergy), and price related (resulting in collusive synergy). Given the limitations of our sample and research design, we find that collusive synergy is, on average, associated with the highest value. Further, the resources behind financial synergy tend to create more value than the resources behind operational synergy.     

ESTIMATING THE MARKET MODEL ROBUSTLY

There is now considerable evidence in the literature that the ordinary least squares assumptions fail to hold when estimating the market model parameters. This paper describes a robust estimation procedure which provides automatic protection against departures from normality. The market model parameters are then estimated for a sample of securities using both the least squares method and the robust procedure. Analysis shows that the results under the two procedures may differ considerably.     

Financial knowledge among Iranian investors

This research is the first to describe financial knowledge in the Islamic Republic of Iran. Data were collected from a convenience sample of investors in the Tehran Stock Exchange. The data were used to examine objective and subjective knowledge as well as overconfidence in one's financial knowledge. The results indicated that compared with other populations, Iranians did not perform well on either basic or advanced financial knowledge questions, especially when the questions dealt with interest rates. This is likely related to the Islamic law ban on usury‐based investing. Regression analysis indicated that demographic charactristics related to basic financial knowledge were income, labour force status and being a student. Demographic characteristics related to advanced financial knowledge were education, labour force status and age. Higher income and education reduced the odds of being overconfident about one's financial knowledge, while being a student and male increased the odds. The article concludes with recommendations about future research as well as building a national financial education strategy.     

Sibling gender and wage differences

Family influences on economic performance are investigated. In particular, sibship sex composition is related to hourly wages using data from the National Longitudinal Survey of Youth 1979. The wages of men are increasing in the proportion of siblings who are brothers, but the wages of women are insensitive to sibling gender. Nonwage outcomes are generally unaffected. Contrasts by age structure and demographic group are also presented. The analysis addresses econometric challenges like the endogeneity of fertility and selection into the workforce. In addition, mechanisms such as labour market interactions, human capital investment and role model effects are documented. A questionnaire on job search indicates a same-gender bias in the use of brothers and sisters in obtaining employment. Developmental and psychological assessments suggest that brothers may be associated with worse childhood home environments and more traditional family attitudes among women. The findings are policy relevant and contribute to an understanding of gender differences and earnings inequality.     

Selection of influential variables in ordinal data with preponderance of zeros

Presence of excess zero in ordinal data is pervasive in areas like medical and social sciences. Unfortunately, analysis of such kind of data has so far hardly been looked into, perhaps for the reason that the underlying model that fits such data, is not a generalized linear model. Obviously some methodological developments and intensive computations are required. The current investigation is concerned with the selection of variables in such models. In many occasions where the number of predictors is quite large and some of them are not useful, the maximum likelihood approach is not the automatic choice. As, apart from the messy calculations involved, this approach fails to provide efficient estimates of the underlying parameters. The proposed penalized approach includes ?₁ penalty (LASSO) and the mixture of ?₁ and ?₂ penalties (elastic net). We propose a coordinate descent algorithm to fit a wide class of ordinal regression models and select useful variables appearing in both the ordinal regression and the logistic regression based mixing component. A rigorous discussion on the selection of predictors has been made through a simulation study. The proposed method is illustrated by analyzing the severity of driver injury from Michigan upper peninsula road accidents.