Stable Tariffs and Retaliations*

A two‐country, two‐commodity model of trade is considered to reformulate the tariff retaliations. It is known that tariff retaliations lead to a Nash‐equilibrium, a non‐free‐trade outcome. However, the negotiation process underlying the Nash equilibrium does not capture the notion of retaliation properly. We use the “contingent threat situation” to reformulate tariff retaliations. In this context, we show that the free trade is a stable outcome. More surprisingly, this interesting result is also valid for the “Johnson case,” where one country is better off under the tariff‐ridden Nash equilibrium compared to free trade.     

Does access to tutorial solutions enhance student performance? Evidence from an accounting course

Deciding whether to release tutorial solutions to students is quite often a dilemma for instructors. This paper provides empirical evidence on the effect of releasing tutorial solutions in a management accounting course at a large Australian university. For this purpose, this paper develops a base model for predicting performance in the course and expands the model to incorporate a variable capturing the release of tutorial solutions. Consistent with previous research (e.g. Doran et al., 1991; Danko‐McGhee and Duke, 1992; Kavanagh and Rohde, 1996), in the base model, although performances in an introductory accounting course and the mid‐semester test were found to be good predictors of performance in the final examination, evidence on the role of gender and age was weak. In the expanded model, there was no evidence that releasing tutorial solutions improved performance in the final examination. The findings of this paper have policy implications for educators and administrators in education in deciding whether to release tutorial solutions to students.     

The One.Tel Collapse: Lessons for Corporate Governance

One.Tel was a major corporate collapse in Australia in 2001. At the time of its collapse, it was the fourth largest telecommunications company in Australia with more than two million customers and operations in eight countries. Analyses of quantitative and qualitative data from diverse sources suggest that One.Tel's collapse is a classic case of failed expectations, strategic mistakes, wrong pricing policy, and unbridled growth. The company's meteoric rise and fall was associated with serious deficiencies in its corporate governance, including weaknesses in internal control, financial reporting, audit quality, board's scrutiny of management, management communication with the board, and poor executive pay‐to‐performance link. Thus, the collapse of One.Tel has several important lessons on the role of corporate governance in preventing corporate collapse.     

Merton Model and Capital Measurement in Commercial Banks: A Case Study of Selected Emerging Countries in Southeast Asia

Following the implementation of Basel III criteria concerning the supervision of banks capital, this paper attempts to examine the competence of Merton-type probability of default as an indicator for measuring optimal capital in commercial banks of five Southeast Asian emerging economies. The estimated default risk changes are consistent with the changes in market value of banks’ asset in countries studied. Using a forward-looking approach, the banks required capital has been measured to reach a hypothetical level of probability of default as an accepted level by policy makers. Empirical results show that the banks had to increase their current capital in order to reduce the risk of bankruptcy in crisis times. The findings of this study refer evidently to the efficiency of Merton-type default risk to estimate the adequate capital and to use in micro and macro-prudential studies or stress tests on commercial banks.     

Political institutions and government spending behavior: theory and evidence from Iran

This study examines how the quality of political institutions affects the distribution of the government budget in Iran. We first introduce a mechanism through which democracy can shift government expenditure from national defense (military) to productivity-enhancing public spending (e.g., education). Using impulse response functions and a variance decomposition analysis on the basis of a vector autoregressive (VAR) model, our results imply that the response of military spending to an improvement (a deterioration) of democratic institutions is negative (positive) and statistically significant, whereas that of education spending is positive (negative) and significant. Our results are robust to other indicators of political institutions, different orderings of variables in the VAR, and alternative specifications of government spending categories.     

Overreaction to stock market news and misevaluation of stock prices by unsophisticated investors: Evidence from the option market

This paper examines investors' option activity on value and growth stocks before earnings announcements. The main finding is that unsophisticated investors enter option positions that load up on growth stocks relative to value stocks in the days leading up to earnings announcements. This occurs despite the fact that at earnings announcements value stocks outperform growth stocks by a wide margin. The paper's results provide evidence that unsophisticated option market investors (1) overreact to past news on underlying stocks and (2) mistakenly believe that mispriced stocks will move even further away from fundamentals at impending scheduled news releases.     

Misalignment of the Baht and its Trade Balance Consequences for Thailand in the 1980s and 1990s

This paper examines Thailand's pre‐crisis exchange rate policy, focusing on the degree of the country's real exchange rate misalignment pre‐crisis and its consequent effects on Thailand's trade balance with its two large trading partners, the US and Japan, in the 1980s and 1990s. Defining misalignment as the difference between actual and ‘equilibrium’ exchange rates, we estimate three key ‘equilibrium’ exchange rates of the Thai baht: (a) the real effective equilibrium exchange rate of the Thai baht against its twenty‐two major trading partners; (b) the bilateral real equilibrium exchange rates of the baht against the US dollar; and (c) the bilateral real equilibrium exchange rate of the baht against the Japanese yen.     

Managers' Responses on EEI

The concept and practical implementation of EEI has been introduced in a series of papers and has been tested for feasibility. This paper explores the reactions of managers who acted as respondents to a questionnaire in a total of seven UK and Iranian companies in which the system was tested. It discusses the limitations of the case based research methodology available, the observatons from the study and the factors that might have influenced the responses made to a questionnaire. Although EEI was generally considered to be potentially useful for some purposes, there was a marked reluctance on the part of respondents to move from established historical cost accounting practice. Some of the identified constraints on the adoption of EEI seem likely to impede the introduction of any new accounting model.     

An analysis of reported driver behaviour in samples of domestic and expatriate Iranians

Objective: Few studies have examined the differences in self-reported driver behaviour between drivers of one nationality who live in their country of origin (domestic drivers) and those who live abroad (expatriate drivers). This study aimed to explore the differences in self-reported driver behaviour among domestic and expatriate Iranian drivers. In addition, we explore the factors associated with self-reported accident involvement including personal injuries in these groups. Methods: A web-based version of the Driver Behaviour Questionnaire (DBQ) measuring self-reported driver errors and violations was distributed to respondents by availability sampling in social networks and by bulk email services. About 1000 individuals living in all provinces in Iran were invited to participate in the survey. We also invited Iranians living in more than 20 countries. A total of 634 domestic Iranians and 135 expatriate Iranians responded to our enquiry. The measure of driving behaviour asked the respondents about violations and error conduct during the last two years on any kind of road. The sample of domestic and expatriate drivers did not differ significantly in gender, age, education and driving hours per day. Domestic drivers were more likely to have experienced an accident in their lifetime. Both samples were relatively young of age (Domestic M integer?=?28.53, SD?=?6.85; Expatriate M integer?=?29.21, SD?=?7.71). Results: The results suggested that emotional violations were more common among the drivers living in Iran. Emotional violations and driver errors were related to self-reported accident involvement among domestic drivers while ordinary rule violations were associated with such accidents in the expatriate group. Conclusions: Iranian expatriate drivers reported less emotional violations than domestic drivers. A potential reason is that road traffic infrastructure and regulation enforcement in high-income developed countries do not facilitate emotional violations. Implications for road traffic safety and methodological limitations of the study are discussed.     

Risk mitigation of post-earthquake fire in urban buildings

Post-earthquake fire (PEF) is considered one of the most high risk and complicated problems affecting buildings in urban areas and can cause even more damage than the earthquake itself. However, most standards and codes ignore the implications of PEF and so buildings are not normally designed with PEF in mind. What is needed is for PEF factors to be routinely scrutinized and codified as part of the design process. A systematic application is presented as a means of mitigating the risk of PEF in urban buildings. This covers both existing buildings, in terms of retrofit solutions, and those yet to be designed, where a PEF factor is proposed. To ensure the mitigation strategy meets the defined criteria, a minimum time is defined – the safety guaranteed time target – where the safety of the inhabitants in a building is guaranteed.