Earnings guidance and market uncertainty

We study the effect of disclosure on uncertainty by examining how management earnings forecasts affect stock market volatility. Using implied volatilities from exchange-traded options prices, we find that management earnings forecasts increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically rather than on a routine basis. In the longer run, market uncertainty declines after earnings are announced, regardless of whether there is a preceding earnings forecast. This decline is mitigated when the firm issues a forecast that conveys negative news, implying that these forecasts are associated with increased uncertainty.     

Interacting particle systems for the computation of rare credit portfolio losses

In this paper, we introduce the use of interacting particle systems in the computation of probabilities of simultaneous defaults in large credit portfolios. The method can be applied to compute small historical as well as risk-neutral probabilities. It only requires that the model be based on a background Markov chain for which a simulation algorithm is available. We use the strategy developed by Del Moral and Garnier in (Ann. Appl. Probab. 15:2496–2534, 2005) for the estimation of random walk rare events probabilities. For the purpose of illustration, we consider a discrete-time version of a first passage model for default. We use a structural model with stochastic volatility, and we demonstrate the efficiency of our method in situations where importance sampling is not possible or numerically unstable.      

The 100 plus corporate environmental report study: A survey of an evolving environmental management tool

An emerging environmental management tool is the corporate environmental report, a free-standing document, analogous to the corporate annual report, but which covers environmental and often health and safety issues. This study examines the nature of the corporate environmental reports of large, public, US companies to determine which companies produce reports, what type of information is reported, how this information is presented, and who might be the audiences for this information. This study also seeks to identify state of the art practice in corporate environmental reports, drawing on the US reports and leading environmental reports from Europe and Canada. Over 100 US companies now publish corporate environmental reports. These companies are primarily from the manufacturing sector, although they are increasingly part of the service sector. Report issuers identified employees and shareholders as their primary audiences. Both overall report organization and composition as well as report distribution, including the use of the Internet for environmental reporting, were examined. Topics which reflect leading edge environmental practice are identified and examples from reports are given. These topics include integrating business and environmental performance, environmental policy, goals and measurement, management and organizational structure, environmental and resource data presentation, third-party verification, disclosure of negative information, and sustainability. The paper discusses trends in reporting and makes recommendations to improve reports.© 1997 John Wiley & Sons, Ltd and ERP Environment.     

The travel cost method and the economic value of leisure time

Recent estimates of high values for tourist related recreation USA amenity values indicate that allocation of basic water and terrestrial resources to recreation activities should be given precedence over conventional market oriented activities that often degrade or even extirpate the resource. We discuss at length the travel cost method (TCM), a survey based technique that quantifies the non‐market benefits of trips to recreation sites. The TCM has been cast in the role of an ‘umpire’ in recent resource allocation debates. Understanding the key role of the TCM in the debate will aid tourist agency officials throughout the world. This article is a U.S. Government work and is in the public domain in the U.S.A.     

The Ethics of Speculation

Recently there has been an outpouring of consumer frustration over rising food and energy prices. Many politicians railed against “speculators” who allegedly drove up the prices of key necessities. Is speculation unethical? This article reviews the traditional arguments against speculation. Many of the standard criticisms confuse speculation with gambling. In much the same way as ethicists now draw distinctions between usury and normal business interest, we draw a distinction between socially useful speculation and gambling. Gambling involves taking on risk with no plausible expectation of making a profit. Gambling may provide entertainment value to some people, but like other addictive activities causes grave harm to a subset of users. Speculation involves taking on a business risk with a plausible expectation that a profit will result. Speculators provide an important risk bearing service by taking on risks that others do not want. They help markets to function better by helping to incorporate information into prices as well as providing liquidity. Speculators may actually reduce shortages by causing quicker price increases that motivate producers to increase production and consumers to conserve. But even socially useful speculation may have an ethical dark side. Does such speculation cause damage by adding excess volatility to prices? Speculators may contribute to price bubbles. At what point does legitimate speculation become odious “price gouging?” We also draw an ethical distinction between speculation, which seeks to benefit from changing prices, and manipulation, actions taken to push prices away from their economically appropriate levels.     

Pure numbers effects, market power, and tacit collusion in posted offer markets

This paper studies the effects of seller concentration and static market power on tacit collusion in extensively repeated laboratory posted-offer markets. Contrary to the implications of some earlier research, we find that tacit collusion does not become pervasive with extensive repetition. In a ‘strong no-power’ design persistently competitive outcomes are observed in markets with three or four sellers. Even duopolies are frequently competitive in this design. Unilateral market power raises prices, as predicted. However, static Nash predictions fail to organize outcomes across power treatments, because tacit collusion moves inversely with concentration. Excess capacity appears to explain observed tacit collusion levels.     

Better together: Trait competitiveness and competitive psychological climate as antecedents of salesperson organizational commitment and sales performance

This study assesses the direct and interactive effects of trait competitiveness and competitive psychological climate on organizational commitment and sales performance using data collected from industrial salespeople and company records. Findings indicate that the positive impact of trait competitiveness on sales performance is contingent upon a highly competitive psychological climate, helping to explain inconsistent findings in the literature and underscoring the need for firms to manage the fit between salespeople and organizational culture. Additionally, the study reveals continuance commitment’s negative moderation of the affective commitment–sales performance relationship. Taken together, the model reveals an interesting process such that managers should recruit salespeople with high trait competitiveness and foster a competitive climate internally to generate the best sales performance outcomes.     

Venture Capital Investment Duration

This paper examines cross‐country evidence on the duration of venture capital (VC) investment. We formulate a theory of VC investment duration based on the idea that venture capitalists exit when the expected marginal cost of maintaining the investment is greater than the expected marginal benefit, and thereby relate VC investment duration to entrepreneurial firm characteristics, investor characteristics, deal characteristics, and institutional and market conditions. VC investment duration data in Canada and the United States lend strong support to the theoretical predictions developed herein.