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1 – 10 of 216In the literature on the relationship between class of origin and educational attainment, the typical conclusion is that class inequality was stable over the last century, and the…
Abstract
In the literature on the relationship between class of origin and educational attainment, the typical conclusion is that class inequality was stable over the last century, and the attempts at egalitarian reform thus proven ineffective. The conclusion turns out to depend on the choice of statistical measure, in this case loglinear measures of association. Also linear measures of association give similar results. If instead, measures of inequality are used, the contrasting conclusion of a strong reduction in the class bias in recruitment to higher education emerges.
As the provision of higher education has increased over time, the trends in the results of these three measures differ. It is argued that it is measures of inequality that capture inequality in the allocation of higher education or bias in the allocation mechanisms. The argument in favor of using loglinear measures has been the special property of “margin insensitivity” attributed to them. It has also been suggested that they capture bias in the allocation mechanism, which may develop in a way different from the trend in the inequality of the allocation outcome. It is argued that neither claim is tenable.
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Judith A Chevalier and Austan Goolsbee
Many Internet retailers must raise margins in the future if they are to survive. This raises the important issues of whether they will be able to raise margins as well as how…
Abstract
Many Internet retailers must raise margins in the future if they are to survive. This raises the important issues of whether they will be able to raise margins as well as how valuation estimates made today should evaluate projected changes to margins in the future. In this paper, we describe retail strategies of pricing for market share in growing markets and show how measures of the price elasticity of demand facing retailers in the current year can be combined with standard accounting variables to inform calculations about future margins. Our analysis suggests that the capital market projects greater future margin improvements for Amazon.com than for BN.com and that this may be due to Amazon benefiting from network effects.
Elyas Elyasiani and Iqbal Mansur
This study employs a multivariate GARCH model to investigate the relative sensitivities of the first and the second moment of bank stock return distribution to the short‐term and…
Abstract
This study employs a multivariate GARCH model to investigate the relative sensitivities of the first and the second moment of bank stock return distribution to the short‐term and long‐term interest rates and their respective volatilities. Three portfolios are formed representing the money center banks, large banks, and small banks, respectively. Estimation and testing of hypotheses are carried out for each of the three portfolios separately. The sample includes daily data over the 1988‐2000 period. Several hypotheses are tested within the multivariate GARCH specification. These include the hypotheses of: (i) insensitivity of bank stock return to the changes in the short‐term and long‐term interest rates, (ii) insensitivity of bank stock returns to the changes in the volatilities of short‐term and long‐term interest rates, and (iii) insensitivity of bank stock return volatility to the changes in the short‐term and long‐term interest rate volatilities. The findings indicate that short‐term and long‐term interest rates and their volatilities do exert significant and differential impacts on the return generation process of the three bank portfolios. The magnitudes and the direction of the effect are model‐specific namely that they depend on whether the short‐term or the long‐term interest rate level is included in the mean return equation. These findings have implications on bank hedging strategies against the interest rate risk, regulatory decisions concerning risk‐based capital requirement, and investor’s choice of a portfolio mix.
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Yoon K. Choi and Stanley D. Smith
We extend existing real‐option theories by incorporating the stochastic interaction between unit price and cost, applied in commercial bank lending. We further empirically examine…
Abstract
We extend existing real‐option theories by incorporating the stochastic interaction between unit price and cost, applied in commercial bank lending. We further empirically examine an implication derived from the model as to the relationship between lending practices in the banking industry and future uncertainties. We focus on lending institutions to analyze the effect of uncertainties on lending (investment) decisions for several reasons. First, it is easy to identify the main sources of uncertainties for the assets and liabilities of the financial institutions – default risk and interest rate changes. Second, the commercial lending institution provides a unique environment in which the correlation between investment costs (liabilities) and output (loans) price is quite high and positive since both depend heavily on interest rates. Finally, bank loans may be subject to a high degree of irreversibility (e.g., substantial loss in defaults). The real option model explains the relationship between levels of lending, loan‐toassets, and the uncertainties regarding interest income and expenses. The correlation between interest income and loan expenses, in particular, explains cross‐sectional loan activities, which confirms the importance of risk management. These results also show that as banks increase one type of risk, e.g., interest rate risk, they decrease another type of risk, e.g., lending risk as measured by loans/assets.
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Wouter Thierie and Lieven De Moor
The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in…
Abstract
Purpose
The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project.
Design/methodology/approach
First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016.
Findings
The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself.
Practical implications
The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way.
Originality/value
One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.
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Bruce C. Payne, Janet D. Payne and Nancy C. Rumore
Contrary to theory, financial managers constantly attempt to exploit timing to offer securities that are the least costly to existing shareholders. The purpose of this study is to…
Abstract
Contrary to theory, financial managers constantly attempt to exploit timing to offer securities that are the least costly to existing shareholders. The purpose of this study is to illustrate the difference between theory and practice and to offer some rationale for this difference.
Kristoffer J. Glover and Gerhard Hambusch
The purpose of this paper is to investigate the effect of operating leverage, and the subsequent abandonment option available to managers, on the relationship between corporate…
Abstract
Purpose
The purpose of this paper is to investigate the effect of operating leverage, and the subsequent abandonment option available to managers, on the relationship between corporate earnings and optimal financial leverage, thereby providing an alternative (rational) explanation for the observed negative relationship between these two quantities.
Design/methodology/approach
Working in a dynamic capital structure setting, where corporate earnings are modelled as an exogenous stochastic process, the paper explicitly adds fixed operating costs to the firm's value optimisation. This introduces a degree of operating leverage (DOL) and a non-zero value to the implicit abandonment option of the firm's manager. Solving for the firm's optimal timing and financing decisions the paper is able to derive the relationship between current corporate earnings and optimal financial leverage for a large class of earnings uncertainty assumptions. The theoretical implications are then tested empirically using a large selection of S&P 500 firms.
Findings
The analysis reveals that the manager's flexibility to abandon the project introduces nonlinearities into the valuation that are sufficient to reconcile the trade-off theory with the empirically observed negative earnings/financial leverage relationship. The paper further finds theoretical and empirical evidence of a positive relationship between operating and financial leverage.
Originality/value
Previous studies have used mean-reverting earnings as an explanation for the observed negative earnings/financial leverage relationship in a trade-off theory setting. The paper shows that the relationship does not need to be process specific. Instead, it is a direct result of the financial flexibility of managers.
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Howard Thomas, Helen Ougham and Dawn Sanders
The present paper aims to examine the concept of “plant blindness” in the context of current sustainability debates. “Plant blindness” was the term introduced in 1999 by the…
Abstract
Purpose
The present paper aims to examine the concept of “plant blindness” in the context of current sustainability debates. “Plant blindness” was the term introduced in 1999 by the botanists and educators James H Wandersee and Elisabeth E Schussler to describe what they saw as a pervasive insensitivity to the green environment and a general neglect of plants on the part of biology education.
Design/methodology/approach
The fundamental importance of plants for life on Earth and the socio-educational challenges of redacted awareness of this importance are considered. Also, the diverse physiological, psychological, philosophical, cultural and geopolitical origins and consequences of indifference to plants in relation to aspects of sustainability agendas are examined with special reference to education.
Findings
An examination of the outcomes of a range of research and practical initiatives reveals how multidisciplinary approaches to education and public engagement have the potential to address the challenge of “plant blindness”. The need for these opportunities to be reflected in curriculums is not widely appreciated, and the socio-economic forces of resistance to confronting plant neglect continue to be formidable.
Originality/value
Plant blindness is a relatively new field of research, and the full breadth of its implications are only gradually becoming apparent. If the present paper contributes to positioning plants as an essential element in sustainability education and practice, it will have met its objective.
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Sanjay Kumar Prasad and Ravi Shankar
The purpose of this paper is to investigate capacity coordination in services supply chain (SSC). It provides discussion and application of various contracts in a two-stage single…
Abstract
Purpose
The purpose of this paper is to investigate capacity coordination in services supply chain (SSC). It provides discussion and application of various contracts in a two-stage single period SSC.
Design/methodology/approach
This paper considers a two-stage serial supply chain with demand uncertainty and price insensitivity. A model is developed to represent a global IT SSC incorporating services specific factors like over-capacity cost and higher degree of substitution resulting in flexibility to meet unplanned demand. At first, centralized and competitive solutions of the model are studied. Then, the paper studies coordination in this supply chain using some of widely used contract templates.
Findings
This paper finds several key insights for the researchers and practitioners in this area around adverse impact of over-capacity cost on demand, positive effect of delivery team’s exposure to market on contracting terms and better understanding of efficient frontiers for selected contracting mechanism.
Research limitations/implications
This paper has limited its analysis to three key and most widely used contracts and made assumptions about risk-neutrality of the firms. Future research can study other contracting templates and/or relax for the model as laid out in this paper.
Practical implications
An automated software agent can be built leveraging the closed form equations developed here to help decide on optimal capacity investment and devise coordinating contracts.
Originality/value
This paper established that because of higher degree of substitution, perishability and non-trivial over-capacity cost, SSC behave bit differently than the physical goods supply chain and coordination of participating firms needs to be studied in a services specific context for improving system-wide performance.
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Iain Watson, Steve Wood and John Fernie
This paper aims to explore the applied context of grocery retail pricing practice to understand how pricing executives approach “regular price” decision-making (as opposed to…
Abstract
Purpose
This paper aims to explore the applied context of grocery retail pricing practice to understand how pricing executives approach “regular price” decision-making (as opposed to promotional pricing). The study seeks to inductively develop a model of regular price decision-making in grocery retailing.
Design/methodology/approach
The research uses an inductive methodology involving interviews with pricing executives working for grocery retailers that account for approximately 85 per cent of the UK, and 64 per cent of USA, grocery market retail sales. The approach is appropriate given the underdeveloped research insights into regular pricing within food retailers.
Findings
It is found that regular pricing is undertaken with little sophistication, typically, on the basis of simple, inflexible rules that result in conflicting goals. A typology of three pricing roles was identified, although all share an underdeveloped understanding of the effects of price changes on customer demand and the implications of competitor reactions. These contexts, causes and conditions lead to a range of consequences; notably, a degree of pricing inertia, “customer-less” pricing and “enforced symbiosis” – coping outcomes. Taken together, a theory of “passivity” pricing is identified.
Originality/value
The research presents a contribution to new knowledge in the field of retail marketing by developing theory in retail pricing. In contrast to much extant research on grocery pricing, this paper accesses the insights and opinions of the pricing executives themselves. It exposes the realities of regular price decision-making across two developed retail markets and offers managerial insights.