The impact of foreign direct investment on UK manufacturing: is there a profit squeeze in domestic firms?

This paper examines the extent to which foreign direct investment (FDI) in selected UK manufacturing sectors has an impact on reported profits in domestic firms. Foreign manufacturing firms are characterized by relatively high labour productivity and low wage shares. Entry by foreign firms not only impacts on domestic market shares, but also on domestic cost conditions. As a result, profitability in the indigenous sector may be reduced. There are a number of policy implications of this analysis which are explored.     

Airline Codeshare Alliances

The paper juxtaposes the challenges that airline codeshare alliances create for analytical information systems on the one hand and their motivation from a marketing perspective on the other. The authors review the state-of-the-art literature on potential marketing benefits and analyze the impact on airline planning systems. In this regard, revenue management systems are of particular interest. Based on a simulation study, the authors infer a severe impact of decentralized codeshare controls as currently widely implemented in the industry on revenue management performance. In the scenarios examined, complementary codesharing reduces alliance-wide revenues by up to 1 %. Losses increase when a carrier experiences high local demand or a high degree of codeshare demand, and disseminate over the whole network. Virtual codeshares also cause losses of 0.3 % to 1.5 % depending on the discount level offered by the marketing carrier and on the demand structure. Finally, the authors formulate a set of managerial implications based on these findings.     

Qualitatively Rational Expectations and Adjustment in the Specific-Factors Model

This paper considers adjustment in a dynamic specific-factors model with endogenous capital stocks. Investment is analyzed under the assumption that expectations are rational with respect to qualitative aspects of the adjustment process (qualitatively rational expectations, QRE). QRE leave considerable scope for systematic errors in expectations formation. Adjustment under rational expectations is similar to QRE adjustment; however, only in the former case is the speed of adjustment optimal. Overshooting of capital stocks is possible and may be optimal. Comparative-static analysis shows an asymmetry between inflows of labor and capital: only capital inflows may cause a Rybczynski effect.     

The determinants of inward investment: a Welsh analysis

Inward foreign direct investment is becoming increasingly important to the UK economy and the regions. This paper examines the motivation behind inward investment into the UK generally, before considering the success of Wales in attracting relatively high levels of new inward investment during the eighties. The paper then examines key factors which influence foreign direct investment into Wales, and the associated policy implications.     

Size effects and audit pricing: Evidence from Germany

Previous research into audit pricing has focused on the US and Australasian markets. This study aims to elaborate on the role played by various size effects on audit pricing using data from the German market.As previous research has shown, audit firms that provide additional non-audit services are able to charge higher fees for auditing. By contrast, our results show that only Big 4 auditors can earn an audit fee premium by providing non-audit services.Our findings also show that the Big 4 premium shown by previous German research is strongly affected by the premium for overall market leadership. Furthermore, we find that the influence of risk variables such as leverage or past losses is significant only for small auditees, while for large auditees size is the determining factor.Finally, this study proposes that using the logarithm of the number of employees is a better proxy for company size than is the more commonly used logarithm of total assets because it is more constant over time and does not bear the risk of interdependencies with other financial statement-based variables. Therefore, its further use in audit pricing research is strongly recommended.     

Deposit insurance and money market freezes

In the presence of deposit insurance, a rise in counterparty risk may cause a freeze in interbank money markets. We show this in a general equilibrium model with regionally segmented bank-based retail financial markets, in which money markets facilitate the reallocation of funds across banks from different regions. Counterparty risk creates an asymmetry between banks in savings-rich regions, which remain marginally financed by the abundant regional insured deposits, and in savings-poor regions, which have to pay large spreads in money markets. This asymmetry distorts the aggregate allocation of credit and, in the presence of demand externalities, can cause large output losses.