The information content of a convertible debt offer announcement

We develop a model of convertible debt financing that combines issue and call decisions into a common framework. The model suggests a role for refinancing costs in a manager's efforts to signal firm productivity to investors by an appropriate choice of debt issue terms. A cross section of convertible debt offers can be divided into two groups: a high conversion ratio group and a low conversion ratio group. The model predicts that high conversion ratios are negatively correlated with offer announcement stock returns and low conversion ratios are uncorrelated with offer announcement stock returns. The model is tested on a sample of 124 convertible debt offer announcements. Test results support model accuracy.     

An elasticity approach to equilibrium and preference concentration in the Hotelling game

We consider the standard Hotelling price-and-location game with two firms, and show how equilibrium is affected by the shape of the consumers’ density. By describing the latter in terms of elasticity (Esteban in Int Econ Rev 27:439–444, 1986), we develop a framework which enables us to prove a sufficient condition for the existence of multiple asymmetric equilibria when the density is symmetric, in terms of a lower bound on the Gini coefficient of the distribution of preferences.      

Raising the bar (8)

This editorial summarizes the papers published in issue 13(3) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper challenges the home market hypothesis that large countries host more firms relative to their size than small countries by considering the lobbying activities of multinational firms. The second paper analyzes the implications of a spatial weight matrix used to estimate a spatial econometric model that depends on an endogenous economic variable. By adding a spatial context, the third paper provides a novel contribution to the literature on international norms in de facto measures of human rights performance. The fourth paper examines the determinants of accepting informal work in Poland. The fifth paper deals with non-stationarity and cointegration in a dynamic spatial econometric panel data model when the number of observations in the time – rather than in the cross-sectional– domain tends to infinity.     

Raising the bar (10)

This editorial summarizes the papers published in issue 14(1) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper applies the Shapley-based decomposition approach to determine the impact of firm-, linkage- and location-specific factors to the survival probability of enterprises. The second paper applies Bayesian comparison methods to identify simultaneously the most likely spatial econometric model and spatial weight matrix explaining new business creation. The third paper compares the performance of continuous and discrete approaches to explain subjective well-being across space. The fourth paper applies a multiple imputation approach to determine regional purchasing power parities at the NUTS-3 level using data available at the NUTS-2 level. Finally, the last paper constructs a regional input–output table for Japan from its national counterpart using and comparing the performance of four non-survey techniques.     

SHEDDING LIGHT ON THE LIGHT BULB PUZZLE: THE ROLE OF ATTITUDES AND PERCEPTIONS IN THE ADOPTION OF ENERGY EFFICIENT LIGHT BULBS

Despite the potential energy savings and economic benefits associated with compact fluorescent light bulbs, their adoption by the residential sector has been limited to date. In this paper, we present a theoretical model that focuses on the agents' ability to perceive the correct cost of lighting and on the role of environmental attitudes as key determinants of the adoption decision. We use original data from Ireland to test our theoretical predictions. Our results emphasize the importance of education, information and environmental awareness in the adoption decision.     

New challenges for services quality evaluation

Quality & Quantity -     

The options market response to accounting earnings announcements

We examine the reaction of the equity options market to accounting earnings announcements over the period 1996–2008 using changes in implied volatility to measure the options market response to earnings news. We find that positive earnings surprises and positive profit announcements produce a larger uncertainty resolution than negative earnings surprises and loss announcements. We demonstrate an inverse relation between the change in implied volatility and earnings news in a three-day window immediately after an earnings announcement. We refer to the magnitude of this relation as the ‘options market earnings response coefficient’. This ‘options market earnings response coefficient’ is stronger for both bad news announcements and positive profit announcements. We do not find any significant relation between changes in implied volatility and earnings news in the pre- or post-announcement periods. We conclude that the options market efficiently absorbs earnings information.     

Food safety issues: From Enlightened Elitism towards Deliberative Democracy? An overview of EFSA’s “Public Consultation” instrument

Following the BSE crisis, the importance of reassuring European consumers and involving them in debate about food safety management issues is generally recognised. Indeed, consulting stakeholders is one of the European Food Safety Authority’s (EFSA) main duties, as stated in its founding regulation (art. 42, whereas 56), where EFSA must have “effective contacts with consumer representatives, producer representatives, processors and any other interested parties”. Even if not clearly obliged to, EFSA has also opted to consider lay citizens’ opinion (under an interpretation of art. 42, wh. 40 of the 178 Reg.) in order to enhance “trust” in food safety. Beyond having formally established meetings with restricted access for participants – like the Stakeholders’ Consultative Platform and the Annual Colloquium, – EFSA engages in its “Public Consultation” web-based Window (PCW). It allows listening to anybody who wishes to submit comments on technical issues.     

Merger simulation using average market share: An application to the Optimus-TMN mobile merger case

This paper develops a new merger simulation methodology based on the analysis of the performance change of a hypothetical firm with average market share. It applies the methodology to the Optimus-TMN mobile telecom merger case in Portugal, within the context of the December 2006 decision by the Portuguese Competition Authority to authorize the merger between their respective parent companies, Sonaecom and Portugal Telecom. The results suggest that the Optimus-TMN merger would have resulted in 3.8% higher prices and 14.9% lower marginal costs, and would have been welfare-enhancing. These findings attest to the importance of the “efficiency defense” hypothesis of mergers. They suggest that competition authorities are warranted in allowing further consolidation in the telecom sector, but that consolidation should be accompanied by strict retail price-cap regulation.     

The construction of choice: a computational voting model

Social choice models usually assume that choice occurs among exogenously given and non-decomposable alternatives. On the contrary, choice is often among objects that are constructed by individuals or institutions as complex bundles made up of many interdependent components. In this paper we present a model of object construction in majority voting and show that, in general, by appropriately changing these bundles, different social outcomes may be obtained, depending upon initial conditions and agenda; that intransitive cycles and median voter dominance may be made to appear or disappear; and that decidability may be ensured by increasing manipulability or viceversa.