Tranching and Rating

In this paper we analyse the source and magnitude of marketing gains from selling structured debt securities at yields that reflect only their credit ratings, or specifically at yields on equivalently rated corporate bonds. We distinguish between credit ratings that are based on probabilities of default and ratings that are based on expected default losses. We show that subdividing a bond issued against given collateral into subordinated tranches can yield significant profits under the hypothesised pricing system. Increasing the systematic risk or reducing the total risk of the bond collateral increases the profits further. The marketing gain is generally increasing in the number of tranches and decreasing in the rating of the lowest rated tranche.     

The impact of stocks and flows of organizational knowledge on firm performance: an empirical investigation of the biotechnology industry

The knowledge‐based view of the firm is a recent approach to understanding the relationship between firm capabilities and firm performance. Specifically, this approach suggests that knowledge generation, accumulation and application may be the source of superior performance. Other research has conceptualized organizational knowledge in terms of stocks of accumulated knowledge in the firm and flows of knowledge into the firm. This paper tests the relationship between stocks and flows of organizational knowledge and firm performance in the biotechnology industry. We suggest that a firm’s geographic location, alliances with other institutions and organizations and R&D expenditures are representative of knowledge flows, while products in the pipeline, firm citations and patents are indicative of knowledge stocks. Through factor analysis, we develop an aggregated measure of location from several variables. A regression model suggests that location is a significant predictor of firm performance as are products in the pipeline and firm citations. A major contribution of this investigation is the operationalization of geographic location and its statistically significant link to firm performance. Copyright © 1999 John Wiley & Sons, Ltd.     

GHG Registries: Participation and Performance Under the Canadian Voluntary Climate Challenge Program

Between 1994 and 2004, the Voluntary Challenge and Registry (VCR) played an important role in Canadian climate change policy. In this paper, we examine the decision of firms to participate in the VCR, the extent of their involvement, and then ask if greenhouse gas emissions are related to past VCR participation. As an information provision program, we find evidence that firms may participate in VCR to signal their environmental responsibility to regulators and to some extent investors, but not to consumers. We also find that past involvement in the VCR is a strong and significant determinant of current involvement in the registry. Greenhouse gas emissions reported to the Mandatory Greenhouse Gas Reporting Program in 2004, however, do not appear to be different between VCR reporters and non-reporters. GHG emissions are observed to be significantly lower among firms that are smaller, emit fewer toxic releases, use more renewable energy sources, are intermediate good producers, and are located in Quebec, Ontario, and Manitoba.     

Fear, guilt, and shame appeals in social marketing

This paper presents the results from a qualitative study of income support recipients with regard to how they feel about advertising which overtly appeals to their sense of fear, guilt and shame. The motivation of the study was to provide formative research for a social marketing campaign designed to increase compliance with income reporting requirements. This study shows that negative appeals with this group of people are more likely to invoke self-protection and inaction rather than an active response such as volunteering to comply. Social marketers need to consider the use of fear, guilt and shame to gain voluntary compliance as the study suggests an overuse of these negative appeals. While more formative research is required, the future research direction aim would be to develop an instrument to measure the impact of shame on pro-social decision-making; particularly in the context of close social networks rather than the wider society.     

The Power Underpinnings,and Some Distributional Consequences,of Trade and Investment Liberalisation in Canada

Criticism of trade and investment liberalisation (TAIL) in North America has drawn attention to weak economic performance, wage-profit redistribution, social dumping and fiscal pressure on government programmes as evidence that the TAIL regime has failed to deliver on some of its key promises. This criticism has been unable, however, to establish satisfactory conceptual and empirical connections between the dramatic distributional changes witnessed in the TAIL era and the institutional reorganisation of power that the TAIL regime entrenched. This article will undertake a quantitative assessment of the Canadian political economy to see who the main beneficiaries of the TAIL era have been, contrasting returns to labour and to capital in the pre-TAIL and TAIL eras. Employing tools from the capital as power framework, two pictures are painted: the first picture examines broad changes in the distribution of income and the second examines differential business performance. The evidence from this inquiry suggests that although the official purpose of TAIL was to enhance the prosperity of all Canadians, this trade deal actually represented – both in its intentions and consequences – a political-economic transformation written by dominant capital for dominant capital.     

The Marketisation of Early Childhood Education and Care (ECEC) in Australia: A Structured Response

The marketisation of early childhood education and care (ECEC) offers opportunities to test assumptions about the benefits of a market framework. In Australia, where marketisation included reshaping, extending, and increasing government subsidies, one major listed company (ABC Learning Limited) emerged to dominate child care. Child care prices increased rapidly to become an election issue, and government subsidies increased. ABC acknowledged its economic dependence on government policy and subsidies. Until its collapse in 2008, ABC was the world's largest listed child care operator, and operating internationally. ABC's structured business model separated child care properties (propco) from child care operations (opco). ABC was the opco and leased the child care properties from propcos. As ABC grew and replicated its structured model to other forms of property including intangible assets, the rising child care prices and government subsidies supported a growing array of other enterprises all seeking profitable operations. This paper explains the structured opco‐propco model, identifies its interaction with accounting and lessons to be learned from marketisation.     

Rushing to Overpay: Modeling and Measuring the REIT Premium

We explore the questions of why Real Estate Investment Trusts (REITs) pay more for real estate than non-REIT buyers and by how much. First, we develop a search model where REITs optimally pay more for property because (1) they are willing, due to cost of capital advantages and, (2) they are occasionally rushed, due to external regulatory time constraints and internal incentives to deploy capital quickly. Second, using commercial real estate transactions, we find that the extant hedonic pricing models contain an unobserved explanatory variables bias leading to inflated estimates of the REIT premium. Third, using a repeat-sales methodology that controls for unobserved property characteristics, we derive more plausible estimates of the REIT premium. Consistent with our model, we also find the REIT-buyer premium depends on the size of the REIT advantage, the rush to deploy, and the relative presence of REITs in the market.