Is silence golden? An inquiry into the meaning of silence in professional product evaluations

The world today is rife with product recommendations from professional critics and experts that are available from numerous sources—television, magazines, radio, internet, etc. Very often these recommendations shape our decisions and choices. In this study, we investigate two main issues regarding expert opinions. First, we present an approach that uses information available from every expert, including those who are silent about the product, to obtain a consensus measure of expert opinion. Our model also allows us to obtain a measure of how informative each expert is and how their information content may vary by type of review. More importantly, our overall measure of expert opinion weights the opinion of each expert based on how informative they are at the particular quality level of the product being evaluated. In other words, we provide consumers with a method that reconciles conflicting expert opinions into a summary measure. The second issue we investigate in this paper is the meaning of “silence” in expert opinions. Our model demonstrates that the fact that an expert is silent about a product may imply a positive or a negative review, depending on the expert. We use data from the motion pictures industry to illustrate our approach. JEL Classification M31     

Crushed by a rational stampede: Strategic share dumping and shareholder insurrections

In this paper, we develop a dynamic model of institutional share dumping surrounding control events. Institutional investors sometimes dump shares, despite trading losses, in order to manipulate share prices and trigger activism by “relationship” investors. These institutional investors are motivated to trade not only by trading profits but also by a desire to protect the value of their inventory and to disguise the quality of their own information. Relationship investor profit from targeting firms both by improving firm performance and by generating private information.     

Fast and frequent: Investigating box office revenues of motion picture sequels

This paper conceptualizes film sequels as brand extensions of a hedonic product and tests (1) how their box office revenues compare to that of their parent films, and (2) if the time interval between the sequel and the parent, and the number of intervening sequels, affect the revenues earned by the sequels at the box office. Using a random sample of 167 films released between 1991 and 1993, we find that sequels do not match the box office revenues of the parent films. However, they do better than their contemporaneous non-sequels, more so when they are released sooner (rather than later) after their parents, and when more (rather than fewer) intervening sequels come before them. Like other extensions of hedonic products, sequels exhibit satiation to the extent that their weekly box office collections fall faster over time relative to contemporaneous non-sequels. Managerial implications of the results are discussed.     

Tourism,Real Effective Exchange Rate and Economic Growth: Empirical Evidence for Croatia

The aim of this paper is to examine the long‐run and short‐run relationship between tourism, real effective exchange rate and economic growth in Croatia. The econometric framework used for analysis is the Johansen Maximum Likelihood cointegration technique. For testing the stability of long‐run equilibrium relationship vector error correction model technique has been applied on a quarterly data set covering the period 1996–2013. The main findings of the paper confirm the stability of the long‐run equilibrium relationship between tourist arrivals (ARRIVAL), openness of the economy (OPEN) and real effective exchange rate as independent variable and gross domestic product (GDP) as dependent variable in Croatia. Furthermore, the results indicate short‐run causality between OPEN and GDP, as well as between real effective exchange rate and GDP. Copyright © 2014 John Wiley & Sons, Ltd.     

Category management,product assortment,and consumer welfare

In this article, we endogenize product assortment decisions under a category management (CM) framework in a channel setup. We find that (1) product assortment is polarized more under CM than under a non-CM regime; (2) the price of a high-end (low-end) product in an assortment increases (decreases) under CM than under a non-CM regime; and (3) a high-quality manufacturer makes more profit than a low-quality manufacturer. In our model, the manufacturer’s choice of quality and its polarization is driven by the existence and the decisions of the retailer (CM or non-CM). Finally, we have an interesting result on consumer welfare. We find that the total consumer welfare, as measured by consumer surplus, worsens under CM only when there is sufficient heterogeneity in consumers’ tastes.     

Foreign ownership and the enforcement of corporate governance reforms

This study examines whether a stronger corporate governance enforcement regime influences the investment decisions of foreign portfolio investors in an emerging market context. Using a natural experiment provided by an Indian corporate governance regulatory reform introduced in 2000, but for which stricter sanctions for non-compliance were imposed in 2004 our results provide strong evidence that governance reforms that include stricter sanctions for non-compliance lead to higher foreign ownership. Depending on specifications, the difference-in-differences estimates show that, on average, the effect is up to 2.8% increased foreign ownership post regulatory reform of 2004. The paper adds to the debate on simultaneity between foreign ownership and corporate governance as we show that in the context of an emerging market corporate governance regulations are extremely important in attracting foreign investors. In the context of prevalence of weak enforcement (of existing regulations) in emerging markets, this study provides empirical support to the notion that strictly enforcing the existing governance regulations has the potential to attract higher level of foreign investment. The results suggest that policy measures aimed at attracting foreign investors in emerging markets should not only concentrate on adopting the best international corporate governance practices but should also signal strong enforcement of these regulations by assigning significant penalties for non-compliance.