A geographic analysis of constituents’ formal participation in the process of international accounting standard setting: Do we have a level playing field?

As a private organization, input legitimacy, being achieved when inputs received reflect the opinions of all stakeholders involved, is a key issue for the IASB’s acceptance as global standard setter. To study this input legitimacy, this paper examines the evolution of constituent participation in international accounting standard setting in terms of geographic diversity over the period 1995–2007 and examines whether biases (due to differences in institutional regimes) or unequal access (due to differences in participation costs) are present in this process. Based on an analysis of 7442 comment letters we observe an increase in participation over time. However, we also find distortions in the geographic representation of constituents, due to differences in the institutional regimes of countries and due to differences in participation costs, proxied by the level of familiarity with the accounting values embedded in IFRS, with the system of private standard setting, and with the English language. These geographic biases in constituent participation might induce criticism in relation to the input legitimacy of the international accounting standard setting process.     

Optimal Risk Classification with an Application to Substandard Annuities

Abstract

Substandard annuities pay higher pensions to individuals with impaired health and thus require special underwriting of applicants. Although such risk classification can substantially increase a company's profitability, these products are uncommon except for the well-established U.K. market. In this paper we comprehensively analyze this issue and make several contributions to the literature. First, we describe enhanced, impaired life, and care annuities, and then we discuss the underwriting process and underwriting risk related thereto. Second, we propose a theoretical model to determine the optimal profit-maximizing risk classification system for substandard annuities. Based on the model framework and for given price-demand dependencies, we formally show the effect of classification costs and costs of underwriting risk on profitability for insurers. Risk classes are distinguished by the average mortality of contained insureds, whereby mortality heterogeneity is included by means of a frailty model. Third, we discuss key aspects regarding a practical implementation of our model as well as possible market entry barriers for substandard annuity providers.     

Investment guarantees in unit-linked life insurance from the customer perspective

Interest rate guarantees are a typical contract feature in unit-linked-life insurance products. As the financial crisis of 2007/2008 has shown, these guarantees can be of substantial value for policyholders since they ensure that at least a minimum amount will be paid back even if the mutual fund value falls below a specific guaranteed level. However, from the insurance company’s view, these guarantees can be costly—especially in highly volatile markets—due to the required risk management measures which must be undertaken to secure the guarantees promised to the customers. Thus, the aim of this paper is to investigate whether customers really value these guarantees and if their willingness to pay (WTP) is sufficient to cover the guarantee costs. To elicit customer WTP, we use an online questionnaire and compare these results to the actual guarantee costs calculated with the Black and Scholes option pricing formula. One main finding is that even though most of the participants in the online questionnaire work in the financial industry, subjective prices are difficult to derive and are lower, on average, than the prices obtained using a financial pricing model. However, many participants are still willing to pay a substantially higher price.     

The Role of Media Coverage in Explaining Stock Market Fluctuations: Insights for Strategic Financial Communication

This study investigates the reciprocal relationships between the fluctuation of the closing prices of three companies listed on the Amsterdam exchange index, namely ING, Philips and Shell and online media coverage related to these firms for a period of two years (2014–2015). Automated content analysis methods were employed to analyze sentiment and emotionality and to identify corporate topics related to the companies. A positive relation of the amount of coverage and emotionality with the fluctuation of stock prices was detected for Shell and Philips. In addition, corporate topics were found to positively Granger cause stock price fluctuation, particularly for Philips. The study advances past research in showing that the prediction of stock price fluctuation based on media coverage can be improved by including sentiment, emotionality, and corporate topics. The findings inform strategic communication, and particularly investor relations, in suggesting that media attention, sentiment, and certain corporate topics are crucial when managing media relations and with regard to securing a fair evaluation of listed companies. Furthermore, the innovative research methods are useful for researchers and practitioners alike in showcasing how media coverage related to firms and their stock fluctuations can be identified and analyzed in a reproducible, hands-on and efficient manner.     

From Birth through Transition to Maturation: The Evolution of Technology‐Based Alliance Networks

This article considers the evolution of interfirm networks within a context of technological change. More specifically, it studies the evolution of structural and positional embeddedness in a network of technology‐based alliances when it moves from an early period of invention creation to a subsequent period of new product development and commercialization. Empirically, we study the evolution of technology‐based alliance networks in the biopharmaceutical industry over a period of about 25 years, from 1975 until 1999. Examining interorganizational networks over such an extended time period allows us to move beyond more static approaches that have characterized most network studies until now, and consider network evolution along its various phases of birth, growth, and early maturation instead. Our findings indicate that the evolution of both structural and positional embeddedness does not follow the common idea of a path of linear progression, but instead strongly exhibits nonlinearity by resembling a sigmoid pattern. These findings have a number of implications. First, the break in the process of linear progression contrasts with the standing literature that (implicitly) assumes the informational and resource value of a network structure to remain constant over time or to evolve linearly from carrying low value to progressively higher value. Instead, our finding that the evolution of structural and positional embeddedness is nonlinear echoes the speculative idea, as expressed by Gulati and Garguilo, that network change may possibly be nonlinear when seen over the long run. A second implication concerns the validity of standing insights from the social network literature such as Coleman's theory of social capital and Burt's theory of structural holes. These theories may not apply to the extent that there are strong changes in environmental conditions like environmental uncertainty and/or munificence, such as during a transition phase as considered in this study.     

Dynamische Preissetzung — Wer profitiert?

In the context of digitalisation, recent approaches for automatic price adjustment are gaining importance. However, these approaches can affect consumer behaviour in a way which is disadvantageous for consumers, businesses and the state as a whole. In September 2016, consumer researchers met at the Heinrich Heine University in Düsseldorf in order to discuss the impact of dynamic pricing from the viewpoint of their research fields. As the articles make clear, the researchers found that dynamic pricing based on competitors’ prices is common, while personalised prices are extremely rare. The question arises as to what extent consumers consider dynamic prices unfair. The experts disagree about the necessity of a stricter legal regulatory framework. Furthermore, digital technology can be used to help consumers find their way through the complex online world. Ultimately, the question of who profits–the consumer or the trader–has not been settled. The discussants conclude that there is need for further research in many different research fields.     

Leveraging purchase regularity for predicting customer behavior the easy way

The valuation of future customer activity is a mainstay of any organization seeking to efficiently manage its customer portfolio. In the area of customer-base analytics, the ongoing race for predictive power has yielded a large corpus of research to assist managers in this respect. Approaches in the tradition of stochastic models have been particularly successful because they rely only on easy-to-compute key metrics and integrate them within a parsimonious probability-modeling framework. Recent advances in this field have demonstrated that incorporating the timing regularity of past purchases can improve predictive accuracy relative to purely recency/frequency-based approaches. This paper expands that idea and introduces generalizations of a well-established probability model, the BG/NBD (Fader et al., 2005a), by replacing the exponential with a more flexible Erlang-k interarrival timing process. The resulting model variants are capable of leveraging regularity while retaining almost the same level of data requirements and algorithmic efficiency. Using extensive simulation studies and six data sets covering a wide range of empirical settings the authors demonstrate substantial improvements in predictive accuracy against the baseline models and performance gains close to or on par with a more complex model alternative. The availability of efficient and easily accessible implementations of the new model variants in the R-package BTYDplus allows marketing analysts to apply them in large-scale scenarios of data-rich environments on a continuous basis.     

Threat appeals in social marketing: death as a ‘special case’

Death is commonly used as a threat, both by fear-appeal researchers and by social marketing and health promotion practitioners (eg ‘Quit smoking or you'll die’). Fear (or threat) appeal researchers have frequently used death to arouse fear, and particularly in the ‘high’ fear condition. It is argued here that death is a ‘special case’ threat, and that the introduction of death in high fear conditions is a confounder in that death is a qualitatively different negative outcome from the non-death negative outcomes used in low fear conditions. The use of death in threat appeals requires attention in its own right for a number of reasons. First, death will occur eventually regardless of the message recipient's behaviour. Hence, messages that threaten death may arouse defensive responses in the target audience (eg ‘you've got to go sometime’), and unresolvable anxiety in the general population. Secondly, death can vary on a number of attributes (eg age at death, sudden versus prolonged, etc), and, while most threat appeals imply premature death, few studies have made this point explicit. Thirdly, the fear of death is multidimensional and some dimensions are more readily acknowledged as fearful than others. For example, a threat specifying the effect of one's death on loved ones might have more impact than a threat of death to oneself. Fourthly, people may fear death differently, or, for religious or other reasons, may not fear death at all. Furthermore, there may be age and gender differences in response to threat appeals using death. It is concluded that systematic research is required to determine whether and for whom death threats are effective. Copyright © 1999 Henry Stewart Publications