Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence

We develop a profit-maximizing neoclassical model of optimal firm size and growth across different industries based on differences in industry fundamentals and firm productivity. In the model, a conglomerate discount is consistent with profit maximization. The model predicts how conglomerate firms will allocate resources across divisions over the business cycle and how their responses to industry shocks will differ from those of single-segment firms. Using plant level data, we find that growth and investment of conglomerate and single-segment firms is related to fundamental industry factors and individual segment level productivity. The majority of conglomerate firms exhibit growth across industry segments that is consistent with optimal behavior.     

The probability of fixed- and adjustable-rate mortgage termination

This article analyzes mortgage terminations using a national individual loan data set for the 1986–1992 period. The standard option-choice-theoretic framework is supplemented with variables to proxy for non-option-related termination determinants. Separate multinominal logit models are estimated for three mortgage types: 30-year FRMs, 15-year FRMs, and 30-year ARMs. The results indicate substantial differences in the response of the mortgage types to variables included in the model. FRM15 prepayments are the most responsive to prepayment option values; FRM30 prepayments are less responsive to option values and are dirven by local area housing market and economic conditions; ARM prepayment rates are higher but defeult rates are lower relative to the FRMs. A noteworthy finding is that teaser discounts reduce the likelihood of ARM defaults.     

Optimal estimation under nonstandard conditions

We analyze optimality properties of maximum likelihood (ML) and other estimators when the problem does not necessarily fall within the locally asymptotically normal (LAN) class, therefore covering cases that are excluded from conventional LAN theory such as unit root nonstationary time series. The classical Hájek–Le Cam optimality theory is adapted to cover this situation. We show that the expectation of certain monotone “bowl-shaped” functions of the squared estimation error are minimized by the ML estimator in locally asymptotically quadratic situations, which often occur in nonstationary time series analysis when the LAN property fails. Moreover, we demonstrate a direct connection between the (Bayesian property of) asymptotic normality of the posterior and the classical optimality properties of ML estimators.     

Laboratory Behavior in Spot and Forward Auction Markets

Auctions that require advance production increase seller costs because inventories must be held. This cost does not exist in production-to-demand markets for which production follows trading, and sales exactly match quantities produced. Data from laboratory computerized double auction markets show that advance-production prices are significantly higher and quantities traded are significantly lower than they are in production-to-demand auctions. Price convergence patterns show advance-production sellers moving toward 9% higher prices and 22% greater earnings.     

The personal selling process: A critical review and model

Although personal selling is a critical element in the marketing mix of most industrial firms, research progress in this area has been hindered by the lack of a comprehensive and integrative conceptual model of the personal selling process. This article proposes such a model.     

The contingency theory of management: A path out of the jungle

Management theory has taken divergent paths in recent years. The author discusses each of these as well as the movement to unify existing schools of thought. The process approach, traditional and classical, has been supplanted by the quantitative, the behavioral, and the systems approaches. The author defines these and explains their role in management theory and their function in actual practice. Singly, none of these theories can be applied to every organization and management problem, and currently a theory is emerging that can be used to draw the disparate elements together. This new approach is the contingency theory of management, which can be applied situationally.     

Marketing cost controls: A survey of industry practices

The use of marketing control systems is examined across a variety of industries. Survey results indicate that, for those companies that attempt to identify problem areas, few actually proceed to determine specific causes of the problem.