Are Fundamentals Priced in the Bond Market?*

To date, the discussion of the Lev and Thiagarajan 1993 fundamentals in the prior literature has been exclusively in the context of the stock market. Our study is the first to examine the value‐relevance of these fundamentals for default risk. By focusing on the market for new bond issues, we examine the value‐relevance of the fundamental score using expected rather than realized returns. Also, by focusing on the bond market we provide a different perspective than that brought by prior studies relying solely on stock prices. We find the fundamentals to be priced in the market for new bond issues as indicators of expected future earnings and to be value‐relevant in enabling the market to discern differences in bond credit quality over and above the published bond ratings.     

Anonymous monotonic social welfare functions

This paper presents two results about preference domain conditions that deepen our understanding of anonymous and monotonic Arrovian social welfare functions (ASWFs). We characterize the class of anonymous and monotonic ASWFs on domains without Condorcet triples. This extends and generalizes an earlier characterization (as Generalized Majority Rules) by Moulin (Axioms of Cooperative Decision Making, Cambridge University Press, New York, 1988) for single-peaked domains. We also describe a domain where anonymous and monotonic ASWFs exist only when there are an odd number of agents. This is a counter-example to a claim by Muller (Int. Econ. Rev. 23 (1982) 609), who asserted that the existence of 3-person anonymous and monotonic ASWFs guaranteed the existence of n-person anonymous and monotonic ASWFs for any n>3. Both results build upon the integer programming approach to the study of ASWFs introduced in Sethuraman et al. (Math. Oper. Res. 28 (2003) 309).     

A sequential approach to cross-impact analysis

A knowledge of the likelihoods of future scenarios is needed for planning in industry and government. The approach in this article employs the knowledge and the experience of “experts”, in the form of subjective probabilities, to determine the likelihood of the events. The necessary and sufficient conditions that the elicited information from the experts must satisfy in order to consistently compute the likelihoods of the scenarios are derived. A sequential procedure is developed that uses this information in generating the probabilities of the scenarios. Approximation schemes and sensitivity analysis are recommended to implement the approach with less time, effort, and cost.     

The curse of the superstar CEO

When struggling companies look for a new chief executive today, the one quality they prize above all others is charisma. But once they've recruited a larger-than-life leader, they often find that their troubles only get worse. Indeed, as the author's new research painfully reveals, the widespread belief in the powers of charismatic CEOs can be problematic. Why? First, Khurana says, there's no conclusive evidence that charismatic leadership affects an organization's performance. And yet--as Kodak's story over the past decade reveals--when a company is faltering, boards feel compelled to oust the incumbent chief executive and bring in a corporate savior. Second, the insistence on finding a charismatic leader, combined with the undefinable nature of charisma, results in selection processes that are overly conservative and even irrational. Boards end up considering only candidates who have already achieved the rank of CEO or president at a high-performing, high-profile company, even if they are not right for the job. Third, charismatic leaders deliberately destabilize organizations. This can result in a more vibrant company, as it did at General Electric during Jack Welch's tenure, but it can also leave a troubled legacy for the organization to overcome, as GE, Ford, and Enron have all found. Faith in a company, a product, or an idea can unleash tremendous innovation and productivity. But the extravagant hopes invested in charismatic CEOs resemble not mature faith but a belief in magic. If we are willing to reconsider our notion of leadership, this age of faith can be followed by an era of faith and reason.     

Assessment of Consumer Behavior Towards Environmental Responsibility: A Structural Equations Modeling Approach

This paper analyses the factors impacting consumer environmental responsibility using a structural equation modeling approach. Consumer environmental responsibility is the intention of a person to act towards remediation of environmental problems not as an individual user with economic interests but as a responsible citizen having concerns about the social and environmental wellbeing of society. Therefore, awareness of environmental problems and knowledge of remedial alternatives will help individuals to pursue their chosen action and bolster a genuine desire to act and determine the measures for alleviation of environmental challenges. The four dimensions of an environmentally responsible consumer – opinion and beliefs, willingness, awareness, and an ability to act – are analysed. During the analysis, the dimension of ‘ability to move’ is found to be critical, because it has a direct influence on the capacity of the consumer to act. This research is intended to guide policy‐ and decision‐makers of regulatory bodies in understanding consumer behavior towards improving environmental performance index. It also helps organizational managers to make their supply chains green, and competitive, which in turn improves brand image and overall organizational performance. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Stock market interdependence between Australia and its trading partners: does trade intensity matter?

We investigate the extent and manner of stock market interdependence between Australia and its trading partners and examine whether this is affected by trade intensity. Based on trade intensity, we classify Australia’s trading partners into major, medium and minor partners. We hypothesize that markets with greater (lower) trade intensity will be more (less) interdependent with Australia. We perform correlation (unconditional and conditional) analyses between Australia and its trading partners. Our results indicate that most of the markets that are highly correlated with Australia are its major trading partners. We conduct panel regression analysis to investigate whether trade intensity has any impact on the stock market correlations between Australia and its trading partners. The results show that trade intensity significantly and positively affect the correlations of Australia with its major trading partners. Thus, the results confirm our hypothesis that trade intensity drives stock market interdependence between Australia and its trading partners.     

INNOVATIONS IN PARTITIONING A SHARE OF STOCK

This paper presents a synthesis of innovations in the slicing and dicing of cash flows of a share of a firm's common stock. It begins by discussing PRIMEs and SCOREs, then Unbundled Stock Units (USUs), and finally three proposed hybrid equity options called DIVS, OWLS, and RISKS.
Decomposing a share of stock into components that can be traded separately allows investors to choose between the different investment attributes constituting the underlying share. An investor who desires only cash dividend income may buy only DIVS, and another who values capital appreciation but not current income can purchase only the residual claim.
Derivatives seem to go through a developmental process that is analogous to the biological phenomenon of natural selection and adaptation. The engines that drive this evolutionary process are changing domestic and international market conditions, international tax and regulatory arbitrage, and, of course, the financial innovators who learn from their own mistakes, and from the experience of others. These innovators continually develop new products that represent improvements over the old, if only by their ability to adhere more closely to the guidelines laid down by the regulators. The histories of PRIMEs and SCOREs, of USUs, and, most recently, of DIVS, OWLS and RISKS together provide a nice illustration of this developmental process.     

Valuation of Landmass Degradation Using Fuzzy Hedonic Method: A Case Study of National Capital Region

A Hedonic model to determine the revealed willingness to pay for landmass of different suitability classes, based on landmass functional characteristics obtained through subjective assessments, is developed for the National Capital Region in India. The inherent non-specificity involved in subjective evaluation is minimized using fuzzy logic based regression technique. The proposed fuzzy regression involves regression using central values of triangular fuzzy number and minimization of non-specificity using linear programming. The revealed willingness-to-pay for landmass of different suitability classes is used for valuation of disbenefits due to urban expansion on landmass of different agricultural suitability classes in National Capital Territory of Delhi. Appropriate pricing policies to prevent the future inappropriate landuse practices are developed using the landmass valuation.     

Industry Distributional Characteristics of Financial Ratios: An Acquisition Theory Application

This study explores the importance of capturing industry‐specific distributional characteristies in analyses based on financial ratios. As a test case, the study replicates Palepu (1986), who employs financial ratios in logit models to investigate the usefulness of six acquisition hypotheses in predicting takeover targets. Without adjustment for industry‐specific distributional characteristics, this study's findings are only consistent with one of the six acquisition hypotheses. After adjusting for distributional properties, the results are consistent with four of the six acquisition hypotheses. Furthermore, the adjusted model produces a classification accuracy significantly greater than chance, as well as significantly greater than that observed for the unadjusted model.