Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock Returns

In this study we examine the association among confirming management forecasts, stock prices, and analyst expectations. Confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings. This study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations. Specifically, we find that the market's reaction to confirming forecasts is significantly positive, indicating that benefits accrue to firms that disclose such forecasts. In addition, although we find no significant change in the mean consensus forecasts (a proxy for earnings expectations) around the confirming forecast date, evidence indicates a significant reduction in the mean and median consensus analyst dispersion (a proxy for earnings uncertainty). Finally, we document a positive association between the reduction of dispersion of analysts' forecasts and the magnitude of the stock market response. Overall, the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty.     

Investment and the soft budget constraint in China

This paper examines the incentive effects of the soft budget constraint on the investment behavior of firms in general and on the investment-cash flow sensitivity in particular. To this end, we develop a simple model of moral hazard that takes the soft budget constraint into account. Within this moral hazard environment, we show that investment is positively related to the amount of internal funds. We further show that the presence of the soft budget constraint deteriorates the moral hazard problem, thereby making the investment level less sensitive to the amount of internal funds. This is the case irrespective of whether the soft budget constraint renders the firm more or less liquidity constrained. To test the model's empirical implications, we employ data of China's listed companies for the period from 1997 to 2003. We use the share of state ownership as a proxy for the severity of the soft budget constraint. We find strong evidence that firms with larger shares of state ownership exhibit lower investment-cash flow sensitivities than firms with smaller shares of state ownership.     

Socialising employees’ trust in the organisation: an exploration of apprentices’ socialisation in two highly trusted companies

We present here our investigation into how corporate employers deliberately seek to foster and build employees’ trust in the organisation through socialisation tactics. Interestingly enough, such deliberate development of employees’ trust in the organisation has hitherto rarely been addressed in academic research. Using qualitative case study research methods, we have closely observed the trust socialisation process experienced by entrant employees, namely apprentices in two separate and highly trusted German companies. Our findings are consistent with former trust socialisation research in that they indicate the importance of high levels of perceived organisational support and of a convincing communication of organisational values and principles. However, our research emphasises further aspects of trust socialisation, such as psychological empowerment, the efficacy of formal organisational rules and especially sensegiving activities.     

Firm Size and Performance of Manufacturing Enterprises in P.R. China: The Case of Shanghai's Manufacturing Industries

This paper studies the relationship between firm size and technical efficiency of manufacturing enterprises in Shanghai's manufacturing sector from 1989 to 1992. Although our empirical results show that technical efficiency is increasing in the firm size, the group of the smallest enterprises (0–99 workers) have very high technical efficiency. The group of enterprises with size of 100–249.9 workers have the lowest technical efficiency while the largest size (1000 workers or above) group usually have the highest technical efficiency. Finally, technical efficiency computed from net industrial product has large upward biases compared with that computed from gross industrial product.     

Profitability, Ownership Structure and Technical Efficiency of Enterprises in the People's Republic of China: A Case of Manufacturing Industries in Shanghai

This paper studies the relationship between accounting profits and technical efficiency of manufacturing enterprises in Shanghai during the period 1989–1992 and examines which factors affect the profitability of manufacturing enterprises. We first estimate the average technical efficiency of four major manufacturing industries in Shanghai. Then, we test for the presence of ownership effects of technical efficiency on profits of those enterprises in these four industries.     

Charts and demand: Empirical generalizations on social influence

Social influence on consumer behavior has long been a subject of academic research in various scientific fields. According to research by Salganik, Dodds, and Watts (2006), music demand is a function of social influence between consumers. Market concentration tends to increase when information on demand becomes publicly available. In addition, stochastic agglomeration caused by social influence decreases the predictability of market success. These heavily cited findings challenge traditional market research and provide important insights on the impact of social media and sales charts. We test the stability of their results by replicating the study on music demand in a slightly different setting. We further investigate the generalizability of findings by probing other product categories and different phases of purchase decisions, i.e., interest, consideration, and actual demand. Across all categories and across all dependent variables, we are able to replicate the direction of the effects. We do, however, consistently obtain smaller effect sizes than reported in the original paper.     

Pricing Network Interconnection: Advantages Held by Integrated Telecom Carriers

A recurring telecommunications policy debate centers on whether incumbent, vertically integrated local exchange carriers have an incentive to discriminate in price against down-stage service rivals who interconnect to their network (a price squeeze). The concern is typically voiced in one of two claims: (1) there is an incentive for an incumbent to use a price squeeze when access prices are set above long-run incremental cost; or (2) prices set at that cost are preferred for interconnection because they eliminate incentives for a price squeeze. In principle, form (1) is generally true (Proposition 1), but form (2) is generally not (Proposition 2), The proof of these Propositions reveals why pricing access at long-run incremental cost coupled with appropriate price floors in the down-stage market does eliminate the incentive to squeeze.     

Shipping fee schedules and return behavior

Marketing Letters - We study the influence of shipping fee schedules on the return behavior of customers. Based on a randomized field experiment, we analyze the behavior of visitors of an online...