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Article
Publication date: 1 March 2006

Russel Poskitt and Peihong Yang

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks…

Abstract

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks. We employ two microstructure models and an intraday data set to measure information risk in a sample of 71 stocks. Our empirical results show that the reforms enacted in December 2002 had no significant effect on either the level of information‐based trading or the adverse selection component of market spreads in our sample of NZX‐listed stocks.

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Pacific Accounting Review, vol. 18 no. 1
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 13 February 2009

Arlise P. McKinney and Angela Miles

The purpose of this paper is to examine academic performance measures commonly used in personnel selection contexts and associated gender‐based differences in these…

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Abstract

Purpose

The purpose of this paper is to examine academic performance measures commonly used in personnel selection contexts and associated gender‐based differences in these measures. This work specifically examines the extent to which gender‐based group differences exist in these data that may influence employment outcomes differentially for men and women.

Design/methodology/approach

Drawing on data available from academic institutions with a sample of nearly 4,000 prospective applicants, gender‐based group differences were evaluated in academic performance measures commonly used in personnel selection. Group differences were evaluated with a commonly used metric of a d‐value to reflect the magnitude of these differences.

Findings

Women and men yield differential scores on standardized vs non‐standardized assessments. Women consistently scored lower on standardized assessments yet scored highest on academic performance outcomes. Women are more likely to experience adverse impact when standardized assessments are used in selection decisions; however men are more likely to have adverse impact when academic performance is used.

Practical implications

Organizations may inadvertently create entry barriers depending on the assessment and the format used and whether or not group differences exist in measures.

Originality/value

Academic performance measures are frequently used in personnel selection, yet have received little attention in selection research and this study seeks to address this gap.

Details

Equal Opportunities International, vol. 28 no. 2
Type: Research Article
ISSN: 0261-0159

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Article
Publication date: 15 June 2018

De-Graft Owusu-Manu, A.S. Kukah, David John Edwards, Erika Anneli Pärn, Hatem El-Gohary and Clinton Aigbavboa

The purpose of this paper was to assess the causal relationship(s) between moral hazard and adverse selection of public–private partnership (PPP) construction projects…

Abstract

Purpose

The purpose of this paper was to assess the causal relationship(s) between moral hazard and adverse selection of public–private partnership (PPP) construction projects. Structural equation modelling (SEM) was used to explore the cause and effect relationship between moral hazard and adverse selection problems in PPP construction projects in Ghana. The study produced a framework to predict, estimate and depict the complex causal relationships (i.e. the directionality) between moral hazard and adverse selection.

Design/methodology/approach

To test the proposed framework, a quantitative methodology was used, in which, data were collected using research questionnaires that targeted a sample of 280 PPP stakeholders in Ghana. In total, 210 useable questionnaires were retrieved, representing a response rate of 75 per cent.

Findings

The interrelationships between the eight causes and the nine effects of moral hazard and adverse selection were established using the model. The tested framework showed the degree of association and isolation of the unobserved variables on the indicator factors. Confirmatory factor analysis (CFA) was used to evaluate the fit of items to latent constructs. Because the fit of each model was good and the item loadings were adequate, it was assumed that the indicators of the different variables factors were fitting. Furthermore, a diagnostic fit analysis was conducted using the robust maximum likelihood method to test the statistical significance of the parameter estimates.

Practical implications

This novel research is one of the few studies investigating the causal relationships between moral hazard and adverse selection of PPP construction projects. The research concluded with future studies that seek to validate the model developed in other countries and/or other industries.

Originality/value

The research findings will serve as a guide for construction stakeholders in the PPP sector on the causes and effects of adverse selection and moral hazard and how to mitigate these.

Details

Journal of Engineering, Design and Technology, vol. 16 no. 3
Type: Research Article
ISSN: 1726-0531

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Book part
Publication date: 30 June 2004

Philip Bobko and Philip L Roth

Evidence for adverse impact in applied, organizational settings can often depend on application of the “four-fifths rule.” We analyze the arithmetic four-fifths rule, its…

Abstract

Evidence for adverse impact in applied, organizational settings can often depend on application of the “four-fifths rule.” We analyze the arithmetic four-fifths rule, its operationalization, and related statistical tests. We note that the rule has intuitive appeal and has arithmetic directness. On the other hand, the four-fifths rule contains many ambiguities because of the manner in which it is defined, as well as its use in practice. One purpose of this article is to discuss the arithmetic and statistical facets of the definition. A related purpose of this article is to demonstrate where the ambiguities (and possibly unintended consequences) with the four-fifths rule might arise when numerical interpretations are invoked. Implications for future research and academic dialogues are then noted.

Details

Research in Personnel and Human Resources Management
Type: Book
ISBN: 978-0-76231-103-3

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Article
Publication date: 20 February 2009

T. Shawn Strother, James W. Wansley and Phillip Daves

The purpose of this paper is to investigate how quotes originating via electronic communication networks (ECN)s affect trading costs.

Abstract

Purpose

The purpose of this paper is to investigate how quotes originating via electronic communication networks (ECN)s affect trading costs.

Design/methodology/approach

In order to investigate the relations between trading costs and quotation venue, the bid‐ask spread is decomposed into its theoretical cost components associated with adverse selection, inventory handling, and order processing.

Findings

Stoll's adverse selection costs of ECN‐originated quotes relate positively to effective spreads, while Lin et al.'s adverse selection costs relate negatively to effective spreads.

Originality/value

The paper shows how trading costs relate to trading venue choice by decomposing the bid‐ask spread.

Details

International Journal of Managerial Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 21 November 2016

Jin Xue and Yiwen Fei

In the practice of venture capital investment, the venture capital will not only claim the share of the enterprise’s future output, but also a certain amount of fixed…

Abstract

Purpose

In the practice of venture capital investment, the venture capital will not only claim the share of the enterprise’s future output, but also a certain amount of fixed income. The purpose of this paper is to examine the optimal contract which blends the variable ownership income and the fixed income theoretically so as to provide a keen insight into the venture capital practice.

Design/methodology/approach

This paper establishes an extended principal-agent model and researches on the design of optimal contract dominated by venture capital with double-sided moral hazard and information screening.

Findings

By establishing theoretical models, the main findings are: first, high-quality enterprise tends to relinquish less ownership but give more fixed return to the venture capital as compensation in order to obtain the venture capital financing; second, low-quality enterprise is willing to relinquish more ownership but give less fixed return to the venture capital for financing; third, due to the existence of double-sided moral hazard, neither of the venture capital and the enterprise will exert their best effort.

Originality/value

This paper furthers the application of principal-agent model in the field of venture capital investment and researches on the optimal contract, considering double-sided moral hazard and adverse selection at the same time originally.

Details

China Finance Review International, vol. 6 no. 4
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 1 January 1989

James W. Thacker, P. Nick Blanchard and Richaurd R. Camp

Evidence exists which suggests that organisations may havemisinterpreted the intent and letter of the current US law in personnelselection. The flawed response that many…

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297

Abstract

Evidence exists which suggests that organisations may have misinterpreted the intent and letter of the current US law in personnel selection. The flawed response that many organisations have taken as a result of this misinterpretation is described. While “unfair discrimination” is reprehensible, data and logic are presented which suggest that adverse impact in selection can be both acceptable and necessary in a responsible organisation.

Details

Journal of Managerial Psychology, vol. 4 no. 1
Type: Research Article
ISSN: 0268-3946

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Article
Publication date: 1 March 1999

Seow‐Eng Ong

This paper examines the adverse selection problem associated with the pre‐completion marketing of property developments. When developers choose to finance their projects…

Abstract

This paper examines the adverse selection problem associated with the pre‐completion marketing of property developments. When developers choose to finance their projects by pre‐selling in a pooling equilibrium, they pass on the risk of failure to the buyers and increase expected profits. Pre‐selling not only places buyers at a potential disadvantage if unexpected negative price shocks occur, but encourages more less‐profitable projects to be undertaken by bad developers. In addition, pre‐selling aggravates the building boom and bust cycle. However, the adverse selection problem can be eliminated if good developers choose to separate themselves by not pre‐selling under the appropriate conditions. This paper also examines interesting comparative statics and policy implications.

Details

Property Management, vol. 17 no. 1
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 27 January 2012

Lijian Qin, Suwen Pan, Chenggang Wang and Zhongyi Jiang

The purpose of this paper is to examine the adverse selection in participation in the New Rural Cooperative Medical Scheme (NRCMS), as well as in outpatient and inpatient…

Abstract

Purpose

The purpose of this paper is to examine the adverse selection in participation in the New Rural Cooperative Medical Scheme (NRCMS), as well as in outpatient and inpatient service utilization, in Chaoyang, Beijing, China.

Design/methodology/approach

Probit model is established to test whether the rural Hukou family member in Combined Household (CH) is statistically different from the Pure Rural Household (PRH) in enrollment in NRCMS. Seemingly Unrelated Regression (SUR) model is adopted to examine the difference in the utilization of outpatient and inpatient between the rural Hukou family members in the two kinds of households.

Findings

This paper finds that the rural Hukou family member in CH has more probability to enroll in NRCMS than the counterpart in PRH. In the period of six months, the rural Hukou family member in CH exceeds PRH by 0.73 times in outpatient visit number per capita. The former average spends yuan 157 more in outpatient service and is reimbursed yuan 53 more from NRCMS than the latter. Moreover, on average, rural Hukou family member has no difference in the inpatient service utilization between the two kinds of households in the period of 12 months.

Originality/value

This is the first study to empirically test the adverse selection in China's medical insurance market from the perspective of two different types of households, which are CH and PRH.

Details

China Agricultural Economic Review, vol. 4 no. 1
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 29 August 2019

Sijia Zhang and Andros Gregoriou

The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms.

Abstract

Purpose

The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms.

Design/methodology/approach

The authors use an event studies methodology in both a univariate and multivariate framework. The authors also use regression analysis.

Findings

Using a sample of 96 zero-leverage firms listed on the FTSE 350 index over the time period of 2000–2015, the authors find evidence of a significant and permanent stock price increase as a result of the initial debt announcement. The loan announcement results in a sustained increase in trading volume and liquidity. This improvement continues to persist once the authors control for stock price and trading volume effects in both the short and long run. Furthermore, the authors examine the spread decomposition around the same period, and discover the adverse selection of the bid–ask spread is significantly related to the initial bank loan announcement.

Research limitations/implications

The results can be attributed to the information cost/liquidity hypothesis, suggesting that investors demand a lower premium for trading stocks with more available information.

Originality/value

This is the first paper to look at multiple industries, more than one loan and information asymmetry effects.

Details

Journal of Economic Studies, vol. 46 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

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