Optimal clearing arrangements for financial trades

Clearinghouses support financial trades by keeping records of transactions and by providing liquidity through short-term credit that participants clear periodically. We study efficient clearing arrangements for exchanges, where traders must clear with a clearinghouse, and for over-the-counter (OTC) markets, where traders can clear bilaterally. When clearing is costly, it can be efficient to subsidize OTC clearing by charging a higher clearing price for transactions conducted on exchanges. The clearinghouse then operates across both markets. Since clearinghouses offer credit, intertemporal incentives are needed to ensure settlement. When liquidity costs increase, concerns about default lead to a tightening of liquidity provision.     

I am therefore I own: Implications of organization-based identity for employee stock ownership

Most research on employee stock plan participation investigates the effects of such forms of ownership on employee attitudes, leaving our understanding of the individual differences that contribute to employee ownership largely unknown. Drawing from the consumer behavior literature, our study explores the effect of organization-based identity on the decision to participate in an employee stock purchase plan. The study was conducted in a newly public firm where we examine the effect of organization-based identity on the purchase decision in two time periods. The first point in time was the initial public offering (IPO), when the employee has little information on how the firm's stock will perform in the market. The second point in time was the first quarter following the IPO, when employees have market data to help them with decision-making. Results indicate that, as predicted, organization-based identity is associated with participation in an employee stock purchase plan, at both points in time, above and beyond the influence of several economic and psychological predictors reported in prior studies.     

Project management infrastructure: The key to operational performance improvement

Process improvement programs such as Six Sigma, Lean, and Lean Sigma are very important and deserve serious academic research attention. However, definition problems make it difficult to study any specific type of process improvement program. Therefore, this study defines two organizational level program management factors, Strategic Project Selection (SPS) and Project Management Infrastructure (PMI), that are independent of any specific process improvement program. Drawing upon current literature, this study develops and tests theoretical models that relate SPS and PMI to operational performance improvement and to each other. Using empirical data collected from 53 supplier plants of one large high-tech firm, this study finds that at the plant level, SPS mediates the relationship between PMI and operational performance improvement. This insight contributes to both theory development and practice, suggesting that a viable strategy for a process improvement program’s success is to focus on PMI in order to enhance SPS and ultimately improve performance. Not to be reproduced or quoted without written permission from the authors.     

Patent Breadth, Patent Life, and the Pace of Technological Progress

In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a non-infringing innovation displaces its product in the market. We define the length of time until one of these happens as the effective patent life, and show how it depends on patent breadth. We distinguish lagging breadth, which protects against imitation, from leading breadth, which protects against new improved products. We compare two types of patent policy with leading breadth: (1) patents are finite but very broad, so that the effective life of a patent coincides with its statutory life, and (2) patents are long but narrow, so that the effective life of a patent ends when a better product replaces it. The former policy improves the diffusion of new products, but the latter has lower R&D costs.     

高盛与美国政府：谁要道德？谁要效率？

美国政府正在对美国几家世界顶尖的金融机构采取刑事调查。高盛有罪与否？我看高盛是做了令人厌恶的事情,但它的行为并不违法。我们赞同高盛,因为高盛发展了抵押业务,并将其设计成对冲基金中最赚钱的“噱头”。其次,高盛人也清楚,投资基金可能会给投资者带来巨大的损失。其实,高盛赢在其战略,它将盈利用在了冲抵投资的失败。     

The Economic Impact of SFAS NO. 157

Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS 157) defines fair value, establishes a three tiered framework for measuring fair value and expands the required disclosures about fair value measurements. The objective of this study is to examine and evaluate the benefits of the information disclosed by SFAS 157. The results of our study indicated that a large majority of the inputs are observable in that 93.5% of the sample financial assets and 93.1% of the sample financial liabilities were measured by level 1 or 2 criteria. However, we found a mismatch between assets and liabilities subject to the three tiers of fair value measurements. The companies in our sample disclosed $18.8 trillion in total assets, with 51%, or $18.8 trillion in total assets, with 51%, or 9.5 trillion reported at fair value. Whereas, sample company liabilities totaled 16.1 trillion with only16.1 trillion with only 3.7 trillion or 23% reported at fair value.     

Characterizing the Real Roots for P,A, and F with Applications to Environmental Remediation and Home Buying Problems

Historically, work on multiple roots for the internal rate of return (PW = 0) equation focuses on tests for the root's uniqueness and interpreting the meaningfulness of computed roots. Instead, this article starts with problems that consist of P, A, and F cash flows. Then for all possible values of these cash flows, this article develops the boundary conditions for no, single, and multiple real roots of either positive or negative sign.

The results of characterizing these roots are applied to two examples as a foundation for conclusions about those multiple root problems and hypotheses about other problems with multiple roots. The first example is an important class of resource development projects that may require significant expenditures for environmental remediation at the conclusion of operation. The second example of buying versus leasing a home is often used to demonstrate the value of economic analysis to students.     

Impacts of meat product recalls on consumer demand in the USA

The impact of meat product recall events on consumer demand (beef, pork, poultry, and other consumption goods) in the USA is tested empirically. Beef, pork, and poultry recall indices are constructed from both the Food Safety Inspection Service's meat recall events and from newspaper reports over the period 1982–1998. Following previous product recall studies, recall indices are incorporated as shift variables in consumers’ demand functions. Estimating an absolute price version of the Rotterdam demand model, findings indicate that Food Safety Inspection Service's meat recall events significantly impact demand, and newspaper reports do not. Moreover, although elasticities related to recall events are significant they are small in magnitude relative to price and income effects. Any favourable effects on the demands of meat substitutes for a recall are offset by a more general negative effect on meat demand. The general negative effect indicates a shift out of meat to non-meat consumption goods.     

Overriding consumer preferences with energy regulations

The recent wave of enacted and proposed U.S. energy regulations imposes energy efficiency standards on light bulbs, appliances, and motor vehicles based on the unsupported assumption that consumers and firms are irrational and that energy efficiency should be the paramount concern. The regulatory analyses do not document these purported failures in consumer choices or firms’ energy utilization decisions with any empirical evidence. The preponderance of the benefits that agencies claim for the regulations is derived from private benefits to consumers and firms attributable to lower energy costs. Without these benefits, the regulatory costs would greatly exceed the benefits. The regulatory analyses consider only mandates as a means of achieving energy-efficiency improvements and ignore other policy options.     

Consumer Valuation of Alternative Meat Origin Labels

Results from a split‐sample survey of the US population reveal consumers prefer meat products carrying origin information to unlabelled alternatives. Consumers are largely unaware of origin labelling laws and are indifferent to an important aspect of the implementation of current mandatory country of origin information rules in the US. In particular, consumers value meat products labelled ‘Product of North America’ approximately the same as ‘Product of United States’. Despite the similarity of these two labels, they have vastly different implications in terms of trade and segregation costs. Our results suggest that a transition from one label to the other is equally satisfying for the consumer while being less costly for processors and more acceptable to trade partners.