The role of corporate governance in meeting or beating analysts’ forecast

Meeting or beating analysts’ forecasts is a topic of considerable interest in the academic and business communities. Some studies indicate a favorable market response when firms meet or beat analysts’ earnings forecasts, but others suggest managers opportunistically manage earnings to achieve earnings targets. We investigate the relation between corporate governance mechanisms and meeting or exceeding analysts’ expectations and find that attributes of corporate governance are related to the likelihood of consistently meeting or exceeding consensus forecasts. We extend current literature by showing that some attributes of strong corporate governance mechanisms lower agency costs associated with consistently meeting or beating analysts’ expectations. We also find that compensation committees reward managers for consistently meeting or beating analysts’ forecasts.     

Consolidation and commercial bank net interest margins: Evidence from the old and new European Union members and candidate countries

This paper examines the effects of financial reforms on the determinants of commercial bank net interest margin in the banking systems of the new EU member countries and candidate countries by dividing the sample period (1995–2006) into two sub-periods: consolidation period (1995–2000) and post-consolidation period (2001–2006). The paper also compares the new and old EU members to check whether differences with respect to the determinants of net interest margins between these two groups of countries exist within the same time period. The results indicate that size and managerial efficiency are negatively and significantly related to net interest margins in the two sub-periods. Regulators should promote merger and acquisition and market entry in order to increase the scale and efficiency of banks operating in the sector. Exploitation of the scale economies seems to be important in decreasing the interest rate spread in the sampled banking sectors. The results further indicate that all macroeconomic variables are statistically insignificant in the second sub-period, suggesting that differences in macroeconomic fundamentals have decreased among the sampled countries due to the increased convergence process in recent years. As for the comparison of the new and old EU members, the results suggest that the financial and economic convergence between the new and old members has not been completed. Macroeconomic differences within the group and between the groups still exist.     

Equilibria in second price auctions with participation costs

We investigate equilibria of sealed-bid second price auctions with bidder participation costs in the independent private values environment. We focus on equilibria in cutoff strategies (participate and bid the valuation iff it is greater than the cutoff), since if a bidder finds it optimal to participate, she cannot do better than bidding her valuation. When bidders are symmetric, concavity (strict convexity) of the cumulative distribution function from which the valuations are drawn is a sufficient condition for uniqueness (multiplicity) within this class. We also study a special case with asymmetric bidders and show that concavity/convexity plays a similar role.     

Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs

We investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders' decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey [Cramton, P.C., Palfrey, T.R., 1995, Ratifiable mechanisms: Learning from disagreement, Games Econ. Behav. 10 (2), 255–283] and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as pre-auction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from participating in the seller's auction.     

The prioritisation of service dimensions in logistics centres: a fuzzy quality function deployment methodology

This study takes a customer focus that prioritises the service-offering dimensions of logistics centres (LCs) by considering potential LC customer expectations. Applying a survey and a quality function deployment methodology to logistics service providers, the study explores, categorises and prioritises LC customer expectations and LC service characteristics. The results indicate that customer preferences mainly prioritise infrastructure, and warehouse and intermodal dimensions. However, when the cost dimension is included, higher utility values are delivered through soft service dimensions like value-added or standard services. LC investors or undertakers can use these results to guide their design of market offerings by using the same methodology to assess expectations in their target markets.     

A pre-topological analysis of the input-output model

The letter proposes a new method for analyzing the industrial structures. This method is founded on the pre-topological properties of the set of activities.     

The hidden cost of smoking: Rent premia in the housing market

In this article, we provide novel evidence on the additional costs associated with smoking. While it may not be surprising that smokers pay a rent premium, we are the first to quantify the size of this premium. Our approach is innovative in that we use text mining methods that extract implicit information on landlords’ attitudes to smoking directly from Zoopla UK rental listings. Applying hedonic, matching, and machine-learning methods to the text-mined data, we find a positive smoking rent premium of around 6%. This translates into £14.40 of indirect costs, in addition to £40 of weekly spending on cigarettes estimated for an average smoker in the United Kingdom.     

Policy Responses to Balance-of-Payments Crises: The Role of Elections

Governments have a number of policy tools that can be used to address pressure on the balance of payments, threatening an undesirable decline in the relative value of the national currency. They can: (1) sell reserves, (2) raise interest rates, (3) impose capital controls, (4) apply trade restrictions, or (5) depreciate the currency. While researchers typically analyze these policies in isolation from one another, we treat them as a menu of options available to election-minded politicians. We analyze the use of these five policy responses to payments difficulties for a large sample of countries since the early 1970s. We argue that governments try to minimize political costs by adopting less transparent policies first and only moving to more visible policies as necessary, delaying the most visible and politically costly policies until after elections. The evidence is consistent with these claims: governments are more likely to draw down reserves and impose capital controls before other options. If these policies do not succeed, they tend to raise interest rates. If further action is needed, they delay devaluations and trade protection until after elections.     

Founders,heirs, and corporate opacity in the United States

We argue that information about firm activities can vary substantially in the presence of founder or heir ownership, thereby influencing the risks borne by minority investors. We explore two hypotheses with regard to these controlling shareholders and corporate transparency, focusing on their role as monitor in-place and their potential to exploit firm opacity to accrue private benefits of control. To test these notions, we create an opacity index that ranks the relative transparency of the two thousand largest industrial US firms and find founder and heir ownership in 22% and 25% of these firms, respectively. Our analysis indicates that, in large, publicly traded companies, both founder and heir firms are significantly more opaque than diffuse shareholder firms. We also find that founder and heir-controlled firms exhibit a negative relation to performance in all but the most transparent firms. Surprisingly, additional tests reveal that concerns about divergences in ownership versus control (management type, dual class shares, and board influence) appear to be substantially less important than corporate opacity in explaining the performance impacts of founder and heir control. Finally, we decompose corporate opacity into disclosure and market scrutiny components, finding that the disclosure quality component appears to be of greater importance to investors. However, irrespective of whether these controlling shareholders create or stay in the firm because of corporate opacity, our analysis suggests that founders and heirs in large, publicly traded firms exploit opacity to extract private benefits at the expense of minority investors.