Pricing of Defaultable Bonds with Log-Normal Spread: Development of the Model and an Application to Argentinean and Brazilian Bonds During the Argentine Crisis

In this paper we describe a two-factor model for a defaultable discount bond, assuming log-normal dynamics with bounded volatility for the instantaneous short rate spread. Under some simplified hypothesis, we obtain an explicit barrier-type solution for zero recovery and constant recovery. We also present a numerical application for Argentinean and Brazilian Sovereign Bonds during the default crisis of Argentina.JEL Classification: G 13     

Using a Bootstrap Approach to Rate the Raters

This paper compares the accuracy of credit ratings of Moody's and Standard and Poor's. Based on 11,428 issuer ratings and 350 defaults in several datasets from 1999 to 2003 a slight advantage for the rating system of Moody's is detected. Compared to former research, the robustness of the results is increased by using nonparametric bootstrap approaches. Furthermore, robustness checks are made to control for the impact of watchlist entries, staleness of ratings, and the effect of unsolicited ratings on the results.     

Active Portfolio Management,Implied Expected Returns,and Analyst Optimism

This paper investigates whether implied expected returns based on the approach of CLAUS/THOMAS (2001) can be implemented in active portfolio management. This approach uses analysts' forecasts to derive return expectations by equating the present value of expected cash-flows to the current market price. It is found that active investment strategies which maximize implied expected returns significantly outperform a passive index investment. A significant part of this outperformance can be explained by the difference between the implied expected return and the return expectation justified by the CAPM. The empirical results suggest that a substantial part of this difference can be attributed to an optimism bias in analysts' forecasts.     

The Formation of Managerial Networks of Foreign Firms in China: The Effects of Strategic Orientations

This study investigates how firms' strategic orientations (i.e., market, technology, and entrepreneurship orientations) influence the formation of two types of managerial networks (top managers' ties with the business community and with government officials), as well as the impact of managerial networking on firm performance. On the basis of a survey of 181 foreign-invested enterprises (FIEs) operating in China, we find that a market orientation fosters both types of network building. Technology-oriented firms are more likely to cultivate managerial ties with top managers at other firms but less likely to establish networks with government officials. In contrast, entrepreneurial firms tend to develop vertical networks with government officials but have no intention to deepen their horizontal networks with other firms. Competitive intensity moderates the relationships between strategic orientations and managerial ties. Finally, managerial networking has a positive impact on FIE performance.     

Organizational Restructuring: Impact on Trust and Work Satisfaction

After the Asian financial crisis, companies are now contending with the current global economic slowdown. Whether it is at the national, industry or organizational levels, restructuring has gained currency as a strategic decision to realign internal structure with changing macro environmental factors. Faced with more competitive markets and greater demands on costs controls, organizations and businesses are taking the fast track to cost-cutting by downsizing, reorganizing their divisions, streamlining their operations, and closing down unprofitable divisions.Changes that are introduced in an organizational restructuring will affect the socio-psychological well-being of organization members given the potential for uncertainty that may accompany such changes. There is a need to better understand the consequences of organizational restructuring and consider some of its potential side effects on the work environment. Employees in a post-restructuring context are understandably wary about the future direction of the organization and their roles within it.This study is an attempt to examine the social-psychological impact of organizational restructuring on trust and work satisfaction. Additionally the inter-relationships between trust and work satisfaction, including their antecedents in the work environment are examined.Trust and work satisfaction levels were tracked before and three months after organizational restructuring for varying types of changes that were initiated during the restructuring. Both trust and satisfaction with working in the organization declined significantly when compared to pre-restructuring levels. Independent t-tests analysis indicated that there was a significant decline in trust for the work group which had a newly hired manager and a change in work processes. Results showed that there was a negative relationship between both work satisfaction and trust with the extent of change required of employees.The findings also showed that there was a positive relationship between trust and work satisfaction and that trust contributed to work satisfaction. Perception of colleagues willingness to help solve job-related problems contributed significantly to strengthening of trust relations among colleagues. Additionally, colleagues and supervisors willingness to listen to employee problems contributed significantly to work satisfaction.Results of the study highlighted the need for strategic decision-makers to consider the social impact of organizational restructuring. Top managers must realize that both trust and work satisfaction are important ingredients for the effective functioning of an organization and to actively ensure that support systems or structures are adequate and available to mitigate the negative impact, particularly if the changes to be implemented are extensive.     

Career Success Networks in China: Sex Differences in Network Composition and Social Exchange Practices

Through structured interviews with 108 senior and middle managers in China, we compared the composition and social exchange practices of Chinese male and female managers' career success networks (CSNs). The results indicated that most of the CSN ties formed by both male and female managers are with men, especially power ties. Male and female managers differed in the extent to which they engaged in instrumental and expressive transactions with same- and opposite-sex CSN alters, reciprocated the help provided by CSN alters, and socialized outside of the workplace with opposite-sex alters. The implications of these results for career success in China are discussed.     

Development of Trust: A Study of Interfirm Relationships in Vietnam

The radical political and economic reforms sweeping through former socialist countries during the last decade have opened rich opportunities for privately owned businesses to emerge and develop. Since the market institutions and infrastructures in these countries are largely underdeveloped, private firms in transition economies rely extensively on interfirm partnerships. This raises the question of how—in the absence of institutions that legitimate markets, contracts, and private property—managers of new business ventures develop new relationships. This paper addresses this issue through analysis of multiple subcontracting relationships formed at a private garment company in Vietnam. This analysis suggests that firms in transition economies develop interfirm trust in ways that are quite different from their counterparts in more highly developed economies.     

Perspectives—From China Strategy to Global Strategy

This article argues that starting with substantial divergence, China strategy research and global strategy research are now converging. This scholarly transformation is largely driven by the recent rise of the Chinese economy, which has emerged from being a peripheral member of the global economy to a core contributor. I trace some of the early roots of China research in our field, outline the beginning of my own China research, and discuss my more recent research which has become more global incorporating substantial China and non-China elements. In addition, I use the emergence of the institution-based view of strategy, which has been largely propelled by China research, to shed light on how China research may make more global theoretical contributions beyond the immediate context of this research. Finally, to further push China research to the center stage of global strategy research, I recommend that scholars “act local, think global.”     

Corporate Governance and Performance in Publicly Listed,Family-Controlled Firms: Evidence from Taiwan

Using a multi-industry dataset of 228 firms listed on the Taiwan Stock Exchange (TSE) this paper analyses the effects of ownership structure and board characteristics on performance in large, publicly traded firms that are controlled by founding families. After taking account of possible endogeneity problems, we do not find that family control is associated with performance measured in terms of accounting ratios, sales per issued capital, earnings per share and market-to-book value. However, share ownership by institutional investors, and foreign financial institutions in particular, is associated with better performance. Our results indicate that board independence from founding family and board members’ financial interests have a positive impact on performance.