Does freezing a defined benefit pension plan affect firm risk?

This paper examines the impact of a defined benefit (DB) pension plan freeze on the sponsoring firm's risk and risk-taking activities. Using a sample of firms declaring a hard freeze on their DB plans between 2002 and 2007, we observe an increase in total risk (proxied by the standard deviation of EBITDA and asset beta), equity risk (standard deviation of returns), and credit risk following a DB-plan freeze. The increase in credit risk is reflected in a decline in credit ratings and an increase in bond yields for freezing firms. When we examine investment strategies, we observe a shift in investment from capital expenditures before the freeze to more-risky R&D projects after the freeze, and an increase in leverage. These strategies (increased focus on R&D and higher leverage) increase the operating and financial risk the firm faces. Overall, we observe an increase in risk-taking following DB plan freezes, consistent with theories that DB plans act as “inside debt” that aligns managers’ interests with bondholders’.     

Economic integration,economic crises and economic cycles in Mexico

This article analyzes the peculiarity of the dynamics of economic fluctuations of the Mexican economy, within the framework of its integration with the US and Canada; the article demonstrates how the Mexican economy make endogenous the macroeconomic crises from the USA (2001 and 2007), and how the business cycles of both countries became more aligned to each other.Based on the heterodox economic theory of crises and cycles, we check the “empirical law of economic dynamics” of the Mexican capitalist system according to the logic of the multiplier–accelerator theory that allowed us to study the dynamics of business cycles for the period of the study (1993–2013). To do this, we construct and estimate a stationary VAR model and utilize the Granger causality tests and quarterly data.     

The ethical underpinnings of nonmaterialistic values and voluntary simplicity behavior in the United States

Many scholars agree overconsumption is a serious ethical problem because of its adverse effects on the environment. This multimethod article uses two studies to explore the ethical underpinnings of two related consumer expressions of anticonsumption: nonmaterialism, which refers to not placing importance on material goods, and voluntary simplicity, which refers to reducing consumption behavior. Study 1 employs Structural Equation Models of secondary U.S. data and finds that nonmaterialism and voluntary simplicity have unique ethical underpinnings: Nonmaterialism is positively associated with an ethical ideology focused on universal rules and principles while voluntary simplicity is associated with an ethical ideology focused on the consequences of one's actions. Because engagement in voluntary simplicity can reduce overconsumption, Study 2 identifies which specific other-oriented environmental concerns increase voluntary simplicity and for whom. An online experiment indicates that concerns about contributing to landfill waste and depleting natural resources induce voluntary simplicity for those who base their decisions on consequentialist ethical ideologies and concerns about contributing to climate change increases voluntary simplicity across consumers. These findings contribute to the discussion on anticonsumption by delineating key anticonsumption constructs, identifying messages to effectively reduce consumption behavior, and identifying consumers who are most likely to respond to such appeals.     

Improving road transport operations through lean thinking: a case study

Traditionally, logistics and transportation problems have been addressed through mathematical modelling, operations research, and simulation, but criticism has emerged about their effectiveness to actually address real-life problems. This paper documents a case study whereby the road transport operations of a leading Mexican brewery were improved through lean thinking and waste reduction. Two lean-based principles and tools were combined: the Seven Transportation Extended Wastes and Transportation Value Stream Mapping. Three systematic steps were proposed to facilitate the implementation of improvement. Feasibility studies conducted in this research suggested that lean thinking is an effective alternative for the improvement of road transport operations. The findings of this research could be used as guidance for transport managers to improve road transport operations. This paper also expands the limited evidence of the application of lean thinking in road transport logistics and highlights the research areas where its application has been concentrated in this sector.     

Technology transfer in Mexico: Past patterns and new problems related to the North American free trade agreement

As the Mexican economy prepares to transition from a relatively closed and protected market to a regionally integrated free market which is part of the proposed North American Free Trade Agreement (NAFTA), a change in its technology licensing environment will be needed to enable Mexican companies to compete for technology with firms from the other member countries of the NAFTA. This study identifies the national sources which have provided Mexico with technology and the Mexican industrial sectors which have been able to attract this technology in the 1980s. It further evaluates the current licensing environments in Canada, Mexico, and the U.S.A. as well as in the Latin American Integration Association (LAIA). The study provides recommendations for changes to the Mexican licensing environment and proposes strategies for attracting technology to Mexican industry under the changed conditions which would be introduced by the NAFTA. © 1993 John Wiley & Sons, Inc.     

Household composition and food expenditures: a cross-country comparison

In the analysis of food expenditures, use of household member counts as an explanatory variable assumes each member has the same marginal food expenditure impact. In our analysis of Latin American food expenditures we reject this assumption via the estimation of endogenously determined adult equivalence scales that vary by household member gender and age. A series of hypothesis tests indicate significant differences not only in the male versus female equivalence scales but also across country. With the use of such equivalence scales in the definition of per capita expenditures we find significant differences in the distributions implying substantially different poverty rankings.     

Why do diplomas pay? An expanded Mincerian framework applied to Mexico

We compare four explanations for the value of diplomas, each of which has implications for unemployment and wage variation amongst graduates, most of which have not previously been tested for when seeking to explain the effects of diplomas. We test for these implications using a refined econometric framework, exploiting idiosyncrasies in Mexican labour market and educational institutions. Premiums in Mexico appear to result from diplomas tied to jobs with downwards rigid wages?–?an uncommon but simple explanation. The standard explanations, including screening, are not suggested by Mexican data. Our results illuminate how labour markets segmented by diplomas clear. This depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory.     

Adult equivalence scales and food expenditures: an application to Mexican beef and pork purchases

In the analysis of food expenditures, the use of a simple count of household members as an estimate of household size implicitly assumes each household member has the same marginal impact. In this analysis of Mexican food expenditures, endogenously determined adult equivalence scales are estimated in such a way that these marginal impacts are allowed to vary by household member age and gender. The results of a series of hypothesis tests indicate a rejection of the implied null hypothesis of equal marginal expenditure impacts associated with the use of the traditional count based household size variable. This study also rejects the null hypothesis of the equality of adult equivalent scales across the commodities included in this analysis.     

Directors' and officers' liability insurance and acquisition outcomes

We examine the effect of directors' and officers' liability insurance (D&O insurance) on the outcomes of merger and acquisition (M&A) decisions. We find that acquirers whose executives have a higher level of D&O insurance coverage experience significantly lower announcement-period abnormal stock returns. Further analyses suggest that acquirers with a higher level of D&O insurance protection tend to pay higher acquisition premiums and their acquisitions appear to exhibit lower synergies. The evidence provides support for the notion that the provision of D&O insurance can induce unintended moral hazard by shielding directors and officers from the discipline of shareholder litigation.     

The price of corporate liquidity: Acquisition discounts for unlisted targets

This paper documents average acquisition discounts for stand-alone private firms and subsidiaries of other firms (unlisted targets) of 15% to 30% relative to acquisition multiples for comparable publicly traded targets. My results are strongly consistent with the notion that sale prices for unlisted targets are affected by both the need for, and availability of, the liquidity provided by the buyer. Corporate parents are significantly liquidity-constrained prior to the sale of a subsidiary, particularly when the subsidiary is being sold for cash. Furthermore, acquisition discounts are significantly greater when debt capital is relatively more expensive to obtain, and when the parent firm has below-market stock returns in the 12 months prior to the sale.