Social Justice and Affirmative Action in Malaysia: The New Economic Policy after 50 Years

Malaysia's New Economic Policy (NEP), promulgated in 1971, established a two-pronged national social justice agenda of poverty reduction, and social restructuring or pro-Bumiputera affirmative action. This distinction of these policy objectives must be appreciated, but various misconceptions, especially regarding affirmative action, have resulted in polarization and stalemate after 50 years of the NEP. Social justice and affirmative action must be conceptualized and evaluated with clarity and rigor, with policy objectives, mechanisms and outcomes aligned. Malaysia needs to systematically formulate a new social justice paradigm, building on the NEP and anchored on the principles of equality and fairness. In the affirmative action sphere, this framework must focus on developing capability and competitiveness, and balance identity, need and merit in the allocation of opportunity.     

Adverse selection as an explanation of credit rationing and different lender types

An adverse selection model is utilized to demonstrate that informational asymmetry may make it wealth optimal for the financial intermediary (FI) to credit ration and to rationalize the existence of different lenders in the credit market. The crucial assumption is that borrowers differ in their tolerance for a lender-imposed default penalty, the severity of which also varies with the lender. The credit rationing portion proves that the FI will: 1) be forced by a binding regulatory constraint to overinvest in capital; 2) ration its worst risk class borrowers; 3) establish its optimal loan interest rate on the basis of the average quality of its loans and the interest rate elasticity of the borrower demand in its best risk category; and 4) decrease the total loan volume and increase the loan interest rate due to an increase in the capital requirement, but the effect on the default risk quality of its loan portfolio is ambiguous. The existence result is that if a lender has a high default penalty, he can charge a lower rate and attract only “good” borrowers, i.e., heterogeneous lender types encourage the screening of borrowers and vice versa.     

A pre-diffusion growth model of intentions and purchase

In this paper, we investigate whether information on the history of purchase intentions is useful in predicting actual purchase behavior. The research is motivated by two factors. The first factor is the empirical finding in the literature that measuring intentions just prior to purchase provides better predictions of actual purchase as compared to when these intentions are measured earlier. The second factor is the role of the timing of the formation of intentions prior to purchase. While one stream of literature based on preference fluency predicts that early formation of intentions is more likely to lead to actual purchase, the other stream based on the memory-based “recency” effect predicts that formation of intentions just prior to purchase is more likely to lead to actual purchase. Together, these two factors motivate the potential need to account for the entire history of intentions prior to purchase. A canonical example of a market where intention histories are tracked is the movie industry, where “first choice” movie watching intentions are tracked up to (and in some cases beyond) the time of release. Accommodating the history of intentions in an econometric model that predicts actual box office performance is challenging due to the differing numbers of observations for the movies, the large numbers of observations for certain movies, as well as the role of various time-invariant and time-varying covariates influencing intentions. We propose a two-part model where the first part involves a hierarchical growth model that summarizes the trajectories of intentions via “growth factors.” These growth factors also reflect the role of the various covariates. The second part is a regression of the box office performance on the growth factors and other covariates. The models are simultaneously estimated within a Bayesian framework. Consistent with the previous literature, we find that including information on intentions improves our ability to predict behavior, with the recent intentions being the most informative. Importantly, when the history of intentions is accounted for, our results indicate that the data support the “recency” literature—intentions grow over time leading up to purchase, and this growth has a positive impact on opening box office performance. While a linear growth model performs best for most movies, there exists a subset of movies for which the quadratic growth model better captures the “spike” in intentions just prior to purchase. Further, accounting for information on the history of intentions dramatically improves model fit and forecasting performance relative to when only the intentions at one point in time (e.g., the ones just prior to purchase) are accounted for.     

Achieving brand loyalty through sponsorship: the role of fit and self-congruity

Managers increasingly seek to develop brand loyalty through sponsorship activities, though this relationship has not been solidly established. This article models and demonstrates the impact of sponsorship on brand loyalty. The studied concepts and relationships emerge from both the sponsorship and consumer-brand relationship literature. The experimental design relies on before and after measurements and multiple exposures to the sponsorship. Thus this study demonstrates that sponsorship exposure has a positive impact on brand affect, brand trust, and brand loyalty. The change in brand loyalty from before to after sponsorship exposure reflects two persuasion processes. First, self-congruity with an event enhances brand loyalty through event and brand affect. Second, perceived fit between the event and the brand has a positive effect on brand affect, through attitude toward the sponsorship, and on brand trust, such that it ultimately influences brand loyalty. Brand affect is identified as an important mediator of sponsorship effects.     

The consequences to managers for financial misrepresentation

We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1, 1978 through September 30, 2006. Fully 93% lose their jobs by the end of the regulatory enforcement period. Most are explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the firm's governance. Culpable managers also bear substantial financial losses through restrictions on their future employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28%) face criminal charges and penalties, including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial misconduct face significant disciplinary action.     

Dynamic employment adjustments over business cycles

This paper uses U.S. monthly industrial production employment data between 1964 and 2000 to examine the dynamic labor adjustments of production workers and nonproduction workers in both the short and long-run. The results from the short-run analysis show that the dynamic adjustment of production workers is consistent with business cycles. However, the adjustment of nonproduction workers is relatively fixed, lags behind the shocks over business cycle changes, and exhibits the quasi-fixed factor property. In the long-run, we found that nonproduction workers and production workers are cointegrated indicating that the two series are in long-run equilibrium.First version received: March 2002/Final version received: November 2003We would like to thank James McClure, participants in the Economics Department seminar series at Ball State University, and an anonymous referee for their comments and suggestions.     

Avoiding arbitrary exclusion restrictions using ratios of reduced-form estimates

We show how to obtain coherent structural-form (SF) exclusion restrictions using the reduced-form (RF) parameter ratios. It will be shown that an over-identified SF corresponds to a group of regressors sharing the same RF ratio value; those regressors should be excluded jointly from the SF. If there is no group structure, then the SF is just-identified; in this case, however, it is no longer clear which regressor should be excluded. Hence, just-identified SF’s are more arbitrary than over-identified SF’s in terms of exclusion restrictions. This is in stark contrast to the notion that the former is less arbitrary than the latter, because the former excludes fewer regressors. We formalize these points, and then suggest to find the number of modes in the estimated RF ratios as a way to find groups in the ratios. For this purpose, an informal graphical method using a kernel nonparametric method and a formal modality test are employed. An empirical example with selling price in a residential real estate market and duration on the market as two endogenous variables is provided. The authors are grateful to the editor and two anonymous referees for their comments