The Business Review Journal

(The Journal of American Business Review, Cambridge)

Vol. 1* Number 1 * December 2012

The Library of Congress, Washington, DC   *   ISSN 1553 - 5827

The Library of Congress, Washington, DC   *   ISSN 2167-0803

Online Computer Library Center, OH   *   OCLC: 940146916

National Library of Australia   *   NLA: 49026139

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Predicting the Aggregate Economic Impact of Rural Community Events

Dipak Subedi, Economist, U.S. Department of Labor, Bureau of Labor Statistics, Washington D.C.

Dr. Olga I. Murova, Texas Tech University, Lubbock, TX



Rural tourism is an important source of revenues for rural communities.  This study develops a model that can be used to predict aggregate economic impact of any rural community event on the local economy.  Event characteristics and community characteristics are used to explain and predict this impact.  Developed model explains 63 percent of total variation in aggregate economic impact of any rural event.  Results show that variables event days, number of years of event, community investment, miles driven to the event, and community population have a positive and significant impact in explaining aggregate economic impact.  Distance from major city and median family income have a negative and significant economic impact on a participating community.  Several dummies for weather and event type are used in the model.  Findings show that inclement weather adversely affects travel causing lesser turn out for the event; and among all types of events nature tourism brings most dollars to the community.  Availability of such model should be helpful in efforts to predict the outcome of a planned rural community event.  Rural economies held up better during the recent recession than their urban peers (Henderson, 2009). This is happened due to several reasons: housing crisis was less severe in most rural areas, rural areas had lesser exposure to investment bank activities, and rural economies were involved in the activities that did not experienced a great reduction in demand.  One of such activities is rural tourism.  According to Brown (2002) and Lewis (1998) rural tourism has become a popular destination for tourists because it is less expensive as compared to other popular destinations and equally fun and relaxing as well. Rural communities are isolated communities in open country with low population density.


Does DFI by MNCs Improve Income Distribution for Society in Latin American Countries?

Steven Blair, Sam Houston State University, Huntsville, TX

Dr. Balasundram Maniam, Sam Houston State University, Huntsville, TX



Direct Foreign Investment (hereafter DFI) by multinational corporations (hereafter MNCs) has developed rapidly in recent times, and unindustrialized countries such as those in Latin America (hereafter LA), have enticed an increasing share of it. The scale and especially the scheduling of increases in DFI into LA countries have changed greatly. The governments of LA countries have been required to revise the policy situation faced by MNCs within their country to increase both the magnitude and timing of these investment increases. Latin American governments who would seek to invite DFI must find ways to reassure MNCs that their funds can grow. MNCs’ investments are sensitive to changes in the comparative prices of factors of production (labor and capital) and commodities; movements of assets and labor across borders and within countries; the environment of technological transformation and technological diffusion; the impact of global expansion on volatility and susceptibility. Significant differences in these conditions for MNCs exist in many LA countries. These differences show up most prominently in the magnitude and price of human capital, the institutional framework, the quality of authority, as well as the internal dynamics of institutional and sociopolitical conditions. The quantity and quality of human capital or workforce probably has the broadest impact on a MNCs investment decision.  This study examines the key effects of globalization and how they impact the LA economy. This review looks at the impact on income distribution and poverty levels in several LA countries brought on by globalization through DFI. This study will reveal that the globalization of several LA countries has created winners and losers directly within their society, and this has severely affected vertical and horizontal inequalities within their society.


From Bankruptcy to the Stock Market

Dr. Gurdeep K. Chawla, National University, San Diego, CA



The recent economic downturn in the United States since 2008 has created a difficult environment for organizations.  As a result, some companies have been struggling to stay in business.  More specifically, these struggling companies were not able to operate with the credit crunch and limited consumer demand. Consequently, they filed for bankruptcy.   According to, 207 publicly traded companies filed for bankruptcy protection in the United States in 2009.  In comparison with previous years, 2009 ranks as the third busiest year for corporate bankruptcy filings in the United States. also determined that companies that filed for Chapter 11 bankruptcy protection in 2008 had a total of over $1 trillion in assets to their name.  It is very difficult for companies to reorganize, survive, turnaround, and be profitable again after filing for bankruptcy.  This paper focuses on some of the companies that filed for bankruptcy in 2008 or 2009 and they have been able to reorganize and reemerge as strong organizations.  To accomplish this goal, company financial statements were analyzed to determine whether the bankruptcies could have been predicted by market participants, based upon the financial information provided by the companies.  The paper also compares predecessor (pre-bankruptcy) and successor (post-bankruptcy) financial ratios to investigate the improvements made by the companies.  Finally, the paper reviews how the companies were able to turn their bankruptcies around and become financially strong organizations again.  It requires a great deal of planning and effort on the part of companies to file for bankruptcy under Chapter 11. 


Accounting Expert Systems and the Treatment of Uncertainty

Dr. Awni Zebda, Texas A&M University-Corpus Christi, Corpus Christi, Texas

Dr. Michelle McEacharn, University of Louisiana at Monroe, Monroe, Louisiana



Recent years have witnessed a rising growth pattern in the development and use of expert systems in accounting and auditing.  A very important consideration in expert system development is the treatment of uncertainty.  New approaches to handling uncertainty have been explored but, in accounting and auditing expert systems, probabilistic logic has been the typical solution method.  This paper will briefly describe the expert system environment within accounting and auditing, illustrate a major criticism in the design of these systems, and introduce fuzzy logic as a potential solution to the weakness.  In particular, this paper serves to encourage the use of fuzzy logic in accounting and auditing, arguing for its continued application to the discipline.  Expert system development has been experiencing a rising growth pattern.  The introduction of special programming languages and "shells" has contributed to the growing popularity of expert systems.  Advances in computer capabilities and declines in computing costs have also helped the growth.  The events have made expert system technology more accessible to users.  Though the technology arose from the research and development laboratories of medicine and the military, expert system development has experienced a significant involvement in the business world.  The design of XCON by the Digital Equipment Corporation provided evidence of the economic benefits in improved efficiency and quality associated with an expert system [Giarratano and Riley 1989].  Published reviews (e.g., Brown and Phillips [1990], O’Leary and Watkins [1995], Coakley and Brown [2000]) show that expert system research has been substantial in accounting and auditing context.  Many of the problems faced by accountants, auditors, and tax practitioners are ill-defined and unstructured problems which are well-suited for expert system application. 


Ex Ante Recognition of Bubble Stock Gauges and Forecasts of Their Bursting in the United States and Japan

Dr. Robert H. Parks, The Lubin School of Business, Pace University, New York, NY



Section I of this article summarizes the ex ante identification of four major stock gauges as bubbles fated to burst. Section II presents the pure theory of a fully integrated stock valuation model coupling the Gordon (1962) dividend model with the Miller-Modigliani dividend irrelevancy model (1961), hereafter the G-MM model.  Section III, the applied analysis, presents four matching valuation recipes I used to identify bubble stock gauges. Given its still current relevance, I devoted the core of this article in Section III (A) to the bursting of the S&P 500 in 2000. Section III (B) reviews the predicted collapse of the “megabubble” Nasdaq Composite. Section III (C) tracks, but briefly, my forecast of the bursting of the S&P 500 in 1987. Section III (D) also reviews briefly the predicted crash of the megabubble Nikkei 225 in 1990.  I stressed throughout the role of fiscal and monetary policy. A principal theme is that Federal Reserve policy 1997-2000 fueled and fired an overinvestment boom that collapsed and bubble stock gauges that crashed, predictably. A related thesis is the failure of the regulatory officials and the central bank to suppress systemic financial fraud.   Section IV sets forth my conclusions and suggestions for further research. The appendix lists all ex ante bubble recognition and forecasts. All forecasts there are press documented, and each bubble burst as forecasted. The footnotes include additional press documentation and further ex ante evidence of bubble gauges in published articles.  Defining and identifying bubbles ex ante are inseparable tasks.


The Effects of Shelf Registration on Cost of Debt

Dr. Debra Skaradzinski, Siena College, Albany, NY

Dr. Allan Graham, University of Rhode Island, RI

Dr. Pamela Stuerke, University of Rhode Island, RI



This paper examines publicly traded bonds that were issued from 1995 through 1998 to see whether shelf-registered debt is riskier than traditionally-issued debt, as measured by issuance prices.  Using a sample of new industrial issues, we find that the yield of a bond issue is not significantly influenced by whether the debt was shelf- or traditionally-registered.  We also find that any increased risk as a result of shelf registration is impounded in bond ratings, which do significantly influence yields.  We believe this implies that the choice of registration method (shelf vs. non-shelf) is most likely an indicator of firm size and capital structure rather than an indicator of firm risk, and that potential changes in risk due to the expectation of increased leverage are recognized by market participants prior to bond issuance.  This paper examines publicly traded bonds that were issued from 1995 through 1998 to see whether or not the higher risk identified in shelf-registrations of debt (Moerhle et. al., 2004) is priced at issuance.  Earlier research on shelf-registered debt (Allen, et al. 1990, Fung and Rudd 1986) found that the method of issue was not significantly associated with bond price at issue, so Moehrle et al.’s subsequent result was somewhat surprising.  Furthermore, Moehrle, et al.’s warning to regulators to consider reexamining the issue of shelf registration, and to investors that they should “beware of the inherent risks of shelf-registered securities,” emphasized that this result had considerable economic repercussions.  Shelf registration was originally intended to allow stable, highly visible firms additional flexibility in accessing capital markets.  The mechanism of shelf registration works like an option for the firms that utilize it.  Firms that shelf-register a specific amount of debt or equity securities are subsequently allowed, but are not required, to issue those securities within two years of registration. 


Twenty Years of Advances in Accounting—1984 - 2003

Dr. Jeffrey J. McMillan, Clemson University, Clemson, SC

Dr. Daryl M. Guffey, Clemson University, Clemson, SC



This paper provides a description and categorization of the topical content appearing and research methods employed in Advances in Accounting (AIA) since its inception in 1984.  AIA was established to provide an important forum for discourse among and between academic and practicing accountants. Its goal of being an outlet for quality research across a wide spectrum of topics based on varying research methodologies has resulted in a journal that arguably has the most unique mix of articles among quality accounting journals.  For twenty years Advances in Accounting (AIA) has provided researchers an outlet for disseminating new conceptual arguments, models, and proposals that enhance our existing knowledge base.   AIA was established to provide an important forum for discourse among and between academic and practicing accountants on issues of significance to the future of the discipline. Emphasis was placed, and still is, on original commentary, critical analysis and creative research that would substantively advance our understanding of financial markets, behavioral phenomenon, regulatory policy, and accounting education.  Over the years the trends in contributors, topical content, and research methods utilized in various research outlets has been examined (Hutchison and White 2003; Meyer and Rigsby 2001; Urbancic and Zimmerman 1994; Carnaghan et al. 1994; Mitchusson and Steinbart 1993; Heck and Bremser 1986; Dyckman and Zeff 1984). Periodic analyses of the content and methods used in an academic journal help identify the trends and the most prolific authors that have had significant influence on the evolution of accounting knowledge.  It also helps one to better appreciate and understand what the journal has been able to achieve over a time period.


Trade Liberalization and Relative Performance Contracts in Import Competing Industries

Dr. Ya-Chin Wang, Department of Finance and Banking, Kun Shan University, Taiwan



To foster economic growth, multilateral agreements within the WTO/FTA framework have inspired attention on the wave of trade liberalization. Although a tariff raises revenue and may earn profits from foreign firms, it sacrifices consumer surpluses and reduces the social welfare for both countries. This paper introduces relative performance contracts into a quality-differentiated market and examines how import policy responds to this mechanism. It found that in an import competing model with managerial delegation, free trade is optimal. Therefore, tariff imposing is not only a beggar-thy-neighbor policy, but also a “lose-lose” solution. The incentive contract plays a pivotal role on replacing trade intervention.  Along with the increasingly fierce competition in globalized market, many governments, both in less-developed and developed countries, protect domestic industries through adopting a variety of trade policies, and tariff and non-tariff barriers. Authorities could adopt import protection on the basis of quality of products to extract rent from foreign firms for increasing tariff revenue or domestic welfare. For example, a higher tariff rate is imposed on a luxurious car compared to a stock car. However, under the WTO (World Trade Organization) and FTA (Free Trade Agreement) between countries, import tariff or trade obstacles are not allowed. It explains why many countries alter their economic policies towards free trade by opening markets and reducing tariffs. Simply put, free tree enable foreign firms to trade as effectively and easily as domestic firms.


Modeling Market Adoption of a Retail Innovation over Time and Space

Dr. Arthur W. Allaway, The University of Alabama, Tuscaloosa, Alabama

Dr. David Berkowitz, The University of Alabama in Huntsville, Huntsville, AL



Although the adoption of innovations / diffusion of innovations literature is very rich, the spatial study of adoption and diffusion has been limited - even though a large number of innovations are launched into geographically defined markets. This paper explores and models the driving forces of consumer adoption of a new loyalty card program launched in a major U.S. metropolitan area. Event history modeling is used to parameterize the effects of distance from the diffusion propagator, the firm’s marketing efforts, the competitive environment, and the role of previous adopters in influencing later adopters.  The results yield new insights into the understanding of adoption and diffusion across space and time.  The spatial tradition is central to the study of marketing.  In retailing, in particular, but in other areas as well, most marketing decisions have to take into account their impact on the size, shape, depth, or dynamics of the existing (or potential) customer base of the firm, i.e., the market area.  One approach to the study of spatial phenomena in marketing has involved the modeling of consumer spatial behavior.  Building on Reilly (1931), Huff (1964), and McKay (1973), significant advances have been made in understanding how consumers make choice decisions among different competitors in a market Craig, Ghosh, and McLafferty 1984).  Extensions in this area have considered the effects of image, habit, loyalty, competitive strategies, variety-seeking, and misspecification error in models of consumer spatial behavior (see, for example: Stanley and Sewell 1976, Fischer, Nijkamp, and Papageorgiou 1990, Rust and Donthu 1995, Fotheringham and Curtis 1999).  A second approach to the study of spatial processes in marketing has treated the market area itself as the unit of analysis. 


The Price-Earnings Relation: The Case of Arthur Andersen

Dr. Kirk L. Philipich, University of Michigan, Dearborn, Dearborn, MI



The purpose of this study is to examine the impact of auditor reputation on the price-earnings relation. More specifically, this study examines annual earnings response coefficients (ERC) before (2001 year-ends) and after (2002 year ends) the September 11th through the primary Enron events (the shredding of audit documents on January 10, 2002, that substantially impaired Arthur Andersen’s reputation). Two possibilities exist. First, the market may perceive that Andersen’s shredding of audit documents, and its subsequent loss of reputation, may have caused auditors, in general, to take greater care, thus increasing the reliability of the reported earnings numbers. This would manifest itself by stronger reactions to reported earnings. Alternatively, the market’s confidence in the reliability of reported earnings may have eroded leading to smaller responses to reported earnings. In addition, any resulting change in the market’s response to reported earnings might be even more pronounced for Andersen clients. Statistical tests reveal a significant decrease in ERCs in the post-period.  However, upon further examination, it is found that the clients of Deloitte and Touche and PriceWaterhouseCoopers exhibited large declines in the market’s response to their earnings releases.  The clients of KPMG also saw declines, but not nearly as dramatic as those of Deloitte and Touche and PriceWaterhouseCoopers. However, the clients of Arthur Andersen and Ernst & Young saw their ERCs rise substantially.  This study investigates the impact of a decline in auditor reputation on the price-earnings relation.


The Unintended Effects of the HIPAA Privacy Protections on Health Care Treatment Team and Patient Outcomes

Dr. Kimberly Jarrell, SUNY Institute of Technology, Utica, NY

Dr. Jan Welker,  SUNY Institute of Technology, Utica, NY

Dr. Donna Silsbee, SUNY Institute of Technology, Utica, NY

Dr. Francis Tucker, Syracuse University, Syracuse, NY



This study looked for unintended consequences of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), legislation related to privacy of health care information. More specifically, the study examined effects of the legislation on health care teams and patient care outcomes.   Findings revealed that both the quality and flow of information between team members, including patients and their families as co-producers of health care services, declined following the implementation of the HIPAA Privacy Rules (Rules).  Change in information flow had significant negative effects on flow of services, patient satisfaction, team satisfaction and quality of care.  Change in information quality had no significant effects on any of the outcome variables.  Implications for policy and practice are discussed by the authors. Key words: health and hospital administration, teamwork, unintended consequences, public policy, co-production.  The United States Congress enacted the Health Insurance Portability and Accountability Act (HIPAA) August 21, 1996 with a threefold intent: provide better access to health insurance, limit insurance fraud and abuse, and administrative simplification (New York State Office for Technology 2004).  The latter intent included requirements for the standardization of information transactions, the privacy of individually identifiable health information, and the security of health information and electronic signatures.   The Rules actually took effect on April 14, 2003 (U.S. Department of Health & Human Services 2005) and the privacy portion of the Rules is the subject of this research.  


Corporate Governance: Theory and Practice

Dr. Malek Lashgari, CFA, University of Hartford, West Hartford, CT



Various theories and philosophies have provided the foundation for the development of alternative forms of corporate governance systems around the world. Furthermore, as economies have evolved through time it appears that corporate executives have deviated from the sole objective of maximizing shareholders’ wealth. Owners of the capital have responded to these forces for the purpose of preserving their wealth and earning a reasonable return on their invested capital. Whereas internal corporate control, external financial market forces, and institutional investors’ responses have been effective in securing shareholders’ wealth, legal protection needs to be provided for them.  As a legal entity, a corporation enters into contracts to produce goods and services and it has the right to own property. Furthermore, the firm can borrow from various lenders and raise cash by issuing shares of its ownership. Shareholders would not only benefit from the earnings generated by the corporation, but by electing members of the board of directors they could indirectly oversee actions undertaken by the managers. These managers, as agents of the shareholders, are expected to perform for the best interest of the owners of the corporation.  Corporate managers can add value to common stockholders without decreasing the welfare of the other corporate stakeholders. For example, borrowing a portion of the capital that is needed for financing activities of the firm, would lead to a higher return to common stockholders.


An Evaluation of State Income Tax Systems and their Impact on State Spending and Revenue - A Multi-State Study

Prof. Demetrios Giannaros, University of Hartford, CT



The primary objective of this study is to carry out a multi-state public finance behavioral impact comparative analysis, regarding the introduction of the income tax system in various states.  The emphasis of this multi-state study is to determine whether the introduction of an income tax system, a politically controversial issue, resulted in significantly higher levels of state spending or taxation after the introduction of such revenue system. We use econometric (such as interaction variable analysis) techniques to evaluate whether a significant structural change in state public policy on spending and taxation did materialize after the introduction of the income tax in ten states.  Our results do not show behavioral consistency for the ten states under study--subsequent to the introduction of the income tax.  In the last few years, about forty five state governments in the USA have struggled to cover unexpected large budget deficits.  The economic debate on the issue of state budget deficits revolved around the level of state government spending and taxing, the appropriate form of taxation, the impact of such forms of taxation on politicians’ behavior, and the relative stability (steady stream of revenue) of alternative tax systems.  Some of the discussion and debate turned to the system of taxation and its impact on the budget, spending, taxing and the state economy.  This study attempts to evaluate whether the introduction of the income tax system resulted in behavioral changes in terms of taxing and spending by the state legislatures.  For this purpose, we use econometric techniques to determine if there were structural changes after the introduction of the state income tax in ten different states. 


Muse Air: Management in Crisis

Toby Pratt, Embry-Riddle Aeronautical University

Dr. Marian Schultz, The University of West Florida

Dr. James Schultz, Embry-Riddle Aeronautical University



This paper details the variables which led to the incorporation, operation and eventual demise of Muse Air. The individuals involved with Muse Air, and its inexplicable ties to Southwest Airlines, make this story unique. After its launch bad timing, poor strategy, grueling competition, and unexpected obstacles plagued the fledgling airline. After four years of operation in a post-deregulation environment with no operating profits, Muse Air is sold to Southwest Airlines and eventually, liquidated. This paper not only includes historical facts regarding the organization of the airline, but also tells a story of a company, and the affect it had on customers, employees and the management team.  Lamar Muse is at the head of Southwest Airlines as the first flight takes to the skies in June 1971.  Muse is the company President and CEO. Years later, Muse finds himself at the helm of another airline, but this carrier bears his own name, Muse Air (Muse, 2002).   Lamar Muse is no stranger to the airline industry. His experience within commercial aviation is extensive, having worked in senior positions with Trans-Texas Airways, American Airlines, Southern Airways, Central Airlines and Universal Airlines (Leary, 1992).  During his 12 years at Trans-Texas Airways (TTA) as Secretary-Treasurer and Chief Financial Officer, Muse helps to transform the carrier into one of the most profitable in the industry. TTA becomes only one of two carriers to make a profit, and his success at TTA attracts the attention of American Airlines, where he is recruited as Assistant Vice-President for Corporate Planning (Leary, 2002).   At American Airlines (AA), one of Muse’s tasks includes the recommendation for a new airplane to replace AA’s aging Convair fleet. But despite his recommendation that the airline purchase the Boeing 737, AA selects the BAC One-Eleven, a decision the airline would later regret due to performance and maintenance problems.


Consumer Loyalty – A Synthesis, Conceptual Framework, and Research Propositions

Dr. Lance Gentry, Missouri University of Science and Technology, Rolla, MO

Dr. Morris Kalliny, Missouri University of Science and Technology, Rolla, MO



Numerous conceptual and empirical studies utilize the loyalty construct as a core part of their theoretical work.  These studies purport to explain if and why loyal consumers are more profitable for firms, mental models of satisfaction and loyalty, and guidelines for marketing strategies.  However an objective view of the literature shows little progress in approximately eighty years of research.  In this article, the authors propose a conceptual definition of consumer loyalty, synthesize and discuss the probable factors of loyalty within a framework that is useful to scholars and practitioners.  In 1923, Copeland wrote an article describing the theoretical relationship between brands and consumers’ buying habits.  Albeit with different terminology, he described a continuum of consumer loyalty that incorporated both behavior and attitude.  Throughout the next eight decades researchers have argued for measurements of loyalty that were strictly behaviorally based (e.g., Burford, Enis, and Paul, 1971; Cunningham, 1956; Passingham, 1998; Olsen, 2002; Tucker, 1964) or strictly attitudinal based (e.g., Bennett and Kassarijian, 1972; Guest, 1942; Jain, Pinson, and Malhotra, 1987; Perry, 1969).  Many others have echoed Copeland’s original thought and argued for a two-dimensional construct with both behavioral and attitudinal components (e.g., Backman, 1991; Chaudhuri & Holbrook, 2001; Day, 1969; Gahwiler and Havitz, 1988; Newman and Werbel, 1973; Oliver, 1999; Pritchard, Howard, and Havitz, 1992).  Tucker (1964) strongly advocated using a purely behavioral measure of loyalty, not because he dismissed the importance of attitudes, but because he predicted scholarly “chaos” would ensue if attitudes were included in the operationizations of loyalty. 


A Quantitative Review of Organizational Outcomes Related to Electronic Performance Monitoring

Dr. D. Scott Kiker, Auburn University Montgomery, AL

Dr. Mary Kiker, Auburn University Montgomery, AL



We employ meta-analysis to assess the relationships between electronic performance monitoring (EPM) and subordinate job performance, stress, and job satisfaction.  We found that EPM has a positive effect on performance quantity but a negative effect on performance quality.  However, the EPM-performance quality relationship was moderated by task difficulty such that EPM improves performance quality when the task is simple, but detracts from it when the task is complex.   EPM was also shown to be negatively correlated with employee job satisfaction and positively associated with job stress.  Implications of these findings, as well as recommendations for future research are discussed.  The widespread proliferation of computer technology has significantly altered many traditional business practices.  In the context of monitoring employee performance, the availability of these technologies has the potential to more accurately quantify indicators of employee performance without the inherent shortcomings of human processing.  In addition, there may be significant cost savings associated with assessing employee performance electronically.  Electronic performance monitoring (EPM) systems use electronic technologies to collect, store, analyze, or report the actions or performance of individuals on the job (Nebeker & Tatum, 1993).  A 2001 survey of U.S. corporations attests to the pervasiveness of EPM systems in today’s organizations.  Specifically, the American Management Association reported that 78% of mid- to large-sized companies in the U.S. were conducting electronic monitoring activities. 


Intertemporal Linkages Between Hong Kong and Shanghai Stock Markets Surrounding the Handover of Hong Kong

Dr. Joseph French, University of Northern Colorado, CO



The linkages between the stock markets of Hong Kong and Shanghai are examined in this paper for the period before, during and after the 1997 handover of Hong Kong.  Return relationships of the two markets are shown to have changed after the handover.  Variance decomposition and Granger Causality indicate an increasingly important role of the Shanghai stock market relative to that of the Hong Kong stock market.  The two markets are shown to be cointegrated and results indicate that this cointegration has increased after the handover.  The existence of linkages across different national stock markets has important implications for investors who are seeking diversification opportunities internationally.  When linkages suggest co-movement between different markets, any one market would be representative of the behavior of the group of markets.  This would effectively reduce the scope for portfolio diversification possibilities.  This implication has increased interest in the topic of market linkages and led many researchers to investigate whether different markets are interrelated.  This paper looks at the intemporal linkages between the Shanghai and Hong Kong stock markets for the periods before, during and after the handover of Hong Kong.  The linkages across markets that will be examined include contemporaneous co-movements, causal relationships, responses to cross-market shocks, and long-run interdependence. 


Microfinance: Effects of Contingent Incentive Programs on the Performance & Productivity of Loan Officers

Dr. Jamaluddin Husain, Purdue University Calumet

Dr. Jay Jiwani, Roosevelt University Chicago



Global interest in alleviating poverty and assisting the poor through microfinance institutions (MFI) continues to grow. Since the operation of microfinance services is essentially labor extensive, the MFI industry is continuing to strive to identify productivity improvement strategies for achieving cost-reduction. Incentives are the best tools to motivate MFI employees and staff to align with their organizations’ objectives. The purpose of the study is to provide an overview of the incentive strategies available for and used by MFIs and its impact on their outcomes, with a focus on the financial motivation of extrinsic incentives to stimulate the productivity and performance of loan officers in MFIs.  The Central Intelligence Agency fact book (2007) reports there are over 6.5 billion people on this planet ( of which approximately 1.2 billion people live on less than one dollar a day, and 2.8 billion people live on less than two dollars a day (Holvoet, 2004; Stiglitz, 2002). The seminal work of Stiglitz (2002), the winner of the 2001 Nobel Prize in economics, notes that the greatest challenge to address is the growing problem of world poverty. According to a Harvard Business School case study by Prahalad and Hammond (2002), the vast majority of the world’s population is at the bottom of the world pyramid. More than 62% (4 billion people out of 6.5 billion) of the world population is thus classified as poor, and thus the potential of microfinance institutions (MFIs) is enormous. Already there are over 10,000 MFIs internationally and the number is growing. However, experts agree that less than 200 MFIs worldwide are self-sustaining while the remaining survive on donations, grants and subsidies (as cited in Koveos, 2004). 


A Geopolitical Issue: Energy at a Turning Point

Dr. Flory Anette Dieck-Assad, Instituto Tecnológico y de Estudios Superiores de Monterrey, Monterrey, N.L., Mexico



Petróleos Mexicanos (PEMEX), a Mexican state-owned company, is the only authorized by law to produce oil and gas in Mexico. PEMEX can neither issue equity nor borrow money by selling bonds; however, it finances one-third of the Federal Government expenses, leaving scarce money for drilling activities and, thus, restricting its ability to develop new reserves. PEMEX requires huge flows of investment in order to avoid its financial bankruptcy and secure the energy supply for Mexico’s sustainable development. The objective of the case is to place the student in the debate about sustainable development that encompasses political, economic, financial, and ethical decisions, in a geopolitical changing scenario where the “global warming” issue is presenting a new challenge for doing business in the future. A detailed Teaching Note is available from the author.  In the foggy morning of April 7, 2006, Elba Esther Gordillo Morales, national president of the Education Syndicate—Sindicato Nacional de Trabajadores de la Educación (SNTE)—was staring through the window. Suddenly, she decided to call for a reunion in her office with Expert Consultants, Inc. (EC, Inc.). She needed their evaluation to know if what she did in 2003 to support the energy reform was the right decision. As a member of the Mexican Congress, she had supported the energy reform even though the rest of the members of her political party, the PRI, decided not to support it. As a result, she was expelled from her political party. She worried about the repercussions that her decisions had caused.  When she read the statement of José Ramón Ardavín, undersecretary of Natural Resources and Environment—Secretaría del Medio Ambiente y Recursos Naturales (Semarnat)—on April 1, 2006, she was reminded of the effects her decision would have on Mexico’s energy future.


Large Firms & Small Firms: Job Quality, Innovation and Economic Development

Dr. Richard Judd, University of Illinois at Springfield, IL

Dr. Ronald D. McNeil, University of Illinois at Springfield, IL



Economic development strategies and methods must change.  Why?  Competition for new plants or companies to locate in communities no longer comes from other communities, counties or states.  Competition for plants and companies has become global in today’s flat economic landscape.  Globalization of services and production along with markets for goods, capital, services and currencies impacts decision-making for all companies.  However, within the United States, most federal programs for economic development are written for the economy of the 20th century, not that of the 21st century.  In order to successfully compete in the global environment, some experts are abandoning traditional approaches to economic development.  Rather than relying solely on recruiting large firms with tax breaks, financial incentives and other inducements, more progressive economic development experts are beginning to extend efforts to support the growth of existing enterprises and to promote the practice of building businesses from the ground up.  The 21st Century Economic Development Model has three complementary features which were not part of the 20th century approach to economic development.  The three features of the 21st Century Economic Development Model are:  (1) development and support of entrepreneurs and small businesses; (2) expansion and improvement of the infrastructure; and (3) development or recruitment of a skilled and educated workforce. 


The 3D Transformational Leadership Model

Dr. Eli Konorti, P. Eng., University of British Columbia, Canada



One of the most interesting topics of all times is leadership. Bass (1990) stated, “The study of history has been the study of leaders–what they did and why they did it” (p. 3). The first studies of leadership centered on theory. Researchers and scholars sought to identify leaders’ styles and compare them to the demands or conditions of society. In later years, as leadership became a topic of empirical study, researchers, academics, and scholars alike attempted to understand and define leadership. Definitions such as process, power, initiation of structure, influence, and others began to emerge.  Bass (1990) postulated that scholars and researchers have debated and deliberated the definition of leadership for many years. Bass wrote that there are as many definitions of leadership as there are people attempting to define leadership. However, as one looks at the evolution of the leadership field, a trend emerges. The earlier definitions identified leadership as a movement and one that consisted of individual traits and physical characteristics (Bass, 1990). In later years, scholars used the term inducing compliance to describe the role of the leader. More recently, the view of leadership has become one of influencing relationships, initiating structure, and achieving goals (Friedman & Langbert, 2000).  Starting in the early 1930s, theorists used pictorial models to explain their theories. The first few theories on leadership centered on types of leadership such as autocratic, democratic, and laissez-faire (Wren, 1990). Theorists later expanded the field of leadership to include human attributes such as ability and intellect. The leadership continuum started with the study of traits and proceeded to behavioral, situational, and eventually, contingency theories. Leadership models shifted their focus to leader traits and personality.


An Analysis of Perceptions of Managers in Manufacturing Operations of Personal Engagement in

Pre-Event Natural Disaster Planning

Dr. James L. Morrison, University of Delaware, Newark, DE

Dr. G. Titi Oladunjouye, Albany State University, Albany, GA



The findings of this study suggest that managers in the manufacturing sector appear to be bystanders in natural disaster preparedness planning.  While they feel fairly confident themselves about being able to contend with a natural disaster, they are generally not actively engaged in planning process.   Ironically, even though they exhibit a self-confidence in their individual ability to take care of themselves if a natural disaster struck, they are not satisfied with the thoroughness of their current natural disaster pre-event planning process.  Natural disasters pose challenges for leaders, employees, customers, and suppliers, among others, in both the short-term and long-term.  In the face of great uncertainty, there is generally little time in which to respond, and employee decisions on how to proceed during a natural disaster can become  life/death issues.  Therefore, the degree to which an organization undergoes planning in anticipation of enduring a natural disaster is likely to affect the success or failure of outcomes.   Being involved in the planning process is critical since policies and practices in place will likely have limited effect if individuals are unaware of them or have  little confidence in their effect.  Personal  involvement in pre-event planning for eliminating situations or conditions that  interfere with an individual’s  capacity  to survive a natural disaster may be critical in generating  practices that are meaningful and purposeful to the employees themselves.  Perceiving a natural disaster as a personal opportunity to get involved is also  an act of engaging in a learning process.  By creating a mindset that participation is important, managers will likely become more responsible for  the success of their organization’s preparedness. 


The Effect of Extending the Trading Hours on Volume and Volatility:

The Case of Euronext Paris and Deutsche Boerse

Dr. Deniz Ozenbas, Montclair State University, NJ



There is interest in both academic literature and the finance industry about how extending the trading hours in stock markets affect the trading volume and volatility in that market. This study compares the extension of trading hours in Euronext Paris and Deutsche Boerse that took place within a few months of each other. We show that Euronext Paris was more successful in implementing the rule change in terms of the trading volume and volatility patterns compared to Deutsche Boerse . How extending the trading hours in stock markets affect the trading volume and volatility in that market is an interesting question for both finance practitioners and academics. In this study we compare the extension of trading hours in Euronext Paris and Deutsche Boerse that took place within a few months of each other. We investigate the trading volume and intra-day volatility patterns in these markets and show that Euronext Paris was more successful in implementing the rule change in  terms of trading volume and volatility patterns compared to Deutsche Boerse.  For both Euronext Paris (Paris Bourse) and the Deutsche Boerse we study the transaction records, during the year 2000, of stocks that make up a major index. We use the BDM database of the Paris Bourse for the transactions of the stocks that make up the CAC 40 index. The transactions database of the stocks that make up the DAX 30 index was obtained from the Deutsche Boerse.  Trading hours at the Paris Bourse at the beginning of 2000 were 9:00 am to 5:00 pm. The hours were extended on April 1st to 9:00 am to 5:30 pm.


A Review of Employee Motivation Theories and their Implications for Employee Retention within Organizations

Dr. Sunil Ramlall, University of St. Thomas, Minneapolis, MN



The article provides a synthesis of employee motivation theories and offers an explanation of how employee motivation affects employee retention and other behaviors within organizations.  In addition to explaining why it is important to retain critical employees, the author described the relevant motivation theories and explained the implications of employee motivation theories on developing and implementing employee retention practices.  The final segment of the paper provides an illustration with explanation on how effective employee retention practices can be explained through motivation theories and how these efforts serve as a strategy to increasing organizational performance.  In today’s highly competitive labor market, there is extensive evidence that organizations regardless of size, technological advances, market focus and other factors are facing retention challenges.  Prior to the September 11 terrorist attacks, a report by the Bureau of National Affairs (1998) showed that turnover rates were soaring to their highest levels over the last decade at 1.3 % per month.  There are indeed many employee retention practices within organizations, but they are seldom developed from sound theories.  Swanson (2001) emphasized that theory is required to be both scholarly in itself and validated in practice, and can be the basis of significant advances.  Given the large investments in employee retention efforts within organizations, it is rational to identify, analyze and critique the motivation theories underlying employee retention in organizations.  Low unemployment levels can force many organizations to re-examine employee retention strategies as part of their efforts to maintain and increase their competitiveness but rarely develop these strategies from existing theories. 


Determinants of Consumer Trust of Virtual Word-of-Mouth: An Observation Study from a Retail Website

Dr. Shahana Sen, Fairleigh Dickinson University, Teaneck, NJ



Research in communication has found that audiences establish a speaker’s credibility by his or her reputation, experiences and knowledge, as well as how much he or she can be trusted in a given situation. Extending this research, consumer psychologists have found that the persuasive power of person-to-person word-of-mouth communication is higher than marketer-generated communication, such as advertising and promotion. In this paper, we study consumers’ trust and consequently their perceptions of the helpfulness of virtual word-of-mouth, in the form of consumer reviews on the Web, that consumers have been increasingly relying upon, and test our propositions using observation data from an e-retail Website.  Enabled by new information technologies, today’s consumers have real-time access to information, insight and analysis, giving them an unprecedented arsenal to help make purchase decisions (Delloitte, 2007). According to the Delloitte study, to build their knowledge arsenals, consumers are turning to virtual word-of-mouth (or e-WOM) in the form of online consumer reviews in large numbers, and these reviews are having a considerable impact on their purchase decisions. According to the Deloitte Consumer Products Group survey, almost two-thirds (62 percent) of consumers read consumer-written product reviews on the Internet. Of these, more than eight in 10 (82 percent) say their purchase decisions have been directly influenced by the reviews, either influencing them to buy a different product than the one they had originally been thinking about purchasing, or confirming the original purchase intention. The impact of word-of-mouth (WOM) on consumer decision-making has long been established by consumer psychologists (Brown and Reingen 1987; Feldman and Spencer 1965; Herr, Kardes and Kim 1991; among others). WOM information has been described as the most powerful form of marketing communication, and studies have shown that users find WOM more believable than commercially generated information (Hutton and Mulhern 2002). 


The Hewlett Packard – Compaq Computers Merger: Insight from the Resource-Based

View and the Dynamic Capabilities Perspective

Preeta Roy, The Wharton School, University of Pennsylvania, Philadelphia, PA

Probir Roy, University of Missouri-Kansas City, Kansas City, MO



In this paper, we investigate the ongoing challenges faced by consolidation in the technology industry. We focus on two different paradigms to explore value creation in acquisition events: the resource-based view (RBV) and the dynamic capabilities perspective.  We utilize the RBV perspective and Dynamic capability perspective to analyze the potential of technology mergers by focusing specifically on the merger of HP and Compaq. The HP-Compaq merger presents an interesting case in which these two paradigms can be used to gain insight on potential outcomes.  We begin with an overview of relevant literature.  We then analyze HP and Compaq in terms of resource mix and the combined synergies that might arise from related resources.  This is followed by an analysis of each company’s acquisition experience to determine if there exists the (dynamic) capability to integrate.  Mergers and acquisitions have been, and continue to be, a topic of great interest to researchers trying to understand the factors explaining why some firms perform better in managing the acquisition process than others.  In managerial practice as well as in academic writings, the management of the post-acquisition integration phase is established as the single most important determinant of shareholder’s value creation (or value destruction) in the acquisition process (Zollo, 2001).  As Zollo and Singh (2001) find, the type of acquisition (horizontal or market extension) is an important variable to understanding performance implications.  In horizontal acquisitions, there exists a higher potential for efficiency-driven costs reductions.  This position pertains to the resource-based view of the firm and the impact of resource (and market) relatedness between the two firms.  On the other hand, such acquisitions require a more complex integration process.  There are a greater number of potential overlaps of resources and activities across the organizations and the consequently large array of simultaneous, independent decisions and action steps necessary to accomplish this integration. 


Identifying Global Leadership Competencies: An Exploratory Study

Cristina Moro Bueno, Grupo Antolin, North America

Dr. Stewart L. Tubbs, Eastern Michigan University, Michigan



The influence of globalization and technology requires new business paradigms and new leadership competencies. The goal of this study was two-fold. First, to test the Global Leadership Competencies Model developed by Chin, Gu, and Tubbs (2001) and secondly to identify Global Leadership Competencies. The model consists of a pyramidal hierarchy that represents developmental phases analogous to Maslow’s need hierarchy. The phases are (1) ignorance, (2) awareness, (3) understanding, (4) appreciation, (5) acceptance/internalization, and (6) transformation as leaders mature as a result of their international experiences.  For this qualitative study, 26 interviews were conducted with international leaders from several countries whose average international expatriate experience was 48 months. Results obtained demonstrated that the model was predictive.  The results presented also indicate that leaders consider the following to be some of  the most important global leadership competencies: (1) communication skills, (2) motivation to learn, (3) flexibility, (4) open-mindedness (5) respect for others, and (6) sensitivity.  For the full text see; Cristina Bueno. Global Leadership Competencies (GLC) Model. MBA Thesis, Eastern Michigan University, Ypsilanti, Michigan, 2003.  The research in leadership development has recently turned toward identifying leadership competencies (knowledge, skills, abilities and behaviors); Charan, Drotter and Noel, (2001); Fulmer and Goldsmith, (2001); Goleman, Boyatzis and McKee, (2002); Tubbs and Moss, (2003); Tubbs, (2004); Vicere and Fulmer, (1997).


A Conceptual Model for Operations-Analytics Convergence

Dr. Joseph O. Chan, Roosevelt University, Schaumburg, IL



As businesses are trying to differentiate themselves in a competitive market, leveraging business intelligence to enhance business operations has become a top priority in business strategies. In spite of huge investments in technologies, companies are often not reaping the anticipated benefits. The disconnection between analytics and operations prohibits the effective execution of business strategies. A critical success factor in gaining competitive advantage is the ability to apply the right analytics at the right time, to the right people, at the right place and under the right situation. This paper proposes a conceptual framework for the convergence of operations and analytics through the construct of the operational-analytic classes for an enterprise. It further describes an enterprise model for operations-analytics convergence. Applications of the model to customer relationship management and supply chain management are explored.  The capability to adapt and respond to changes quickly is a necessary condition for businesses to compete in the global economy. Making the right decision at the right time has taken special meaning in the world driven by real-time processing of information where the right time is typically now. The traditional planning-execution cycle is getting shorter and the line between analytics and operations is becoming blurred. Sub-optimal performance may result from not being able to apply the right analytical results in real-time operational situations. In today’s crowded market, traditional strategies in operational efficiencies, product excellence and price may not by themselves provide the necessary competitive advantage. Businesses are extending their value chain to include their customers, suppliers and alliance partners.


An Analysis of the Incentives to Licensing in U.S. Information Technology

Dr. YoungJun Kim, The George Washington University, Washington D.C.



This paper investigates the validity of the potential factors that might affect the incentives of companies to license out their technology. Empirical analysis is provided with the help of a panel data set of observed licensing transactions worldwide involving information technology (IT) companies publicly traded in the United States. Our results show that transaction cost, market competition, and knowledge appropriability considerations weigh in heavily in explaining the licensing behavior. The important explanatory factors relate to the firm’s prior involvement in technology licensing, the industry concentration, the sales growth and the propensity to receive patents in the primary industry of the company. Company’s stock of technological knowledge (patent), the company size and R&D intensity also play a key role in determining manager’s licensing incentive.  There is anecdotal evidence that market for technology is less developed than socially desirable and not well functioned. For example, a study by British Technology Group found that large companies in the United States, Western Europe, and Japan ignore a large amount of their patented technologies, which could be licensed or profitably sold (British Technology Group, 1998). The inefficiency of market for technology is caused by a number of impediments it faces. The best-known obstacle to the efficient market for technology is the “appropriability problem”. In his early paper, Arrow (1962) argues that once an idea is disclosed to a potential buyer, it is possible for that buyer to use the information without paying for it.


Global Terrorism:  Past Present & Future

Dr. Jack N. Kondrasuk, University of Portland, Portland, OR

Dan Bailey, University of Portland, Portland, OR

Matt Sheeks, University of Portland, Portland, OR



Terrorism has a deep history with instances of terrorist-type activities being recorded in the Bible, presently involving many of the world’s countries with all continents but Antarctica recording one or more terrorist attacks in the last year, and has many facets to examine. Those facets include knowing about the perpetrators and their goals, the targets, the weapons, the events, and the effects of those events. Presently, the United States is the top target in the World and is likely to be so for the foreseeable future. Al Qaeda is probably the top terrorist organization aiming at the U.S. with intentions of using more lethal weapons and producing severe damage. The future will probably see a significant reduction in ideological terrorism and increases in single-issue terrorist groups attacking major cities with weapons of mass destruction.  To better prevent and respond to terrorism in the world it is necessary to understand its origins. For the U.S. September 11, 2001, when the Twin Towers in New York were destroyed by terrorists and over 3,000 people were killed, marked a rude awakening to terrorism. In Spain the bombings in Madrid significantly changed political policies. Australians found how terrorism could impact them from a bombing of a tourist restaurant in Bali. Russians were reminded of terrorism in their midst when hundreds were killed at a school in Beslan. Israel was reminded of terrorism every time a suicide bomber blew up a restaurant in Israel while Palestinians thought of terrorism when one of their leaders was assassinated. People throughout the world need to understand terrorism. The purpose of this paper is to enable us to understand terrorism so as to be better able to deal with it. To this end, this paper will look at the origins of terrorism in the world and how they have led to present day terrorism. . . and very importantly, what can we expect regarding terrorism in the future?  Before we can answer questions about origin, prevalence and future, we must define our topic—“terrorism.”


The Impact of Internal Control to E-commerce Activities on the Quality of Accounting

Information in the Banks Operating in Jordan

Dr. Jamal Adel Al-Sharairi, Al Al-Bayt University, Amman, Jordan



The study aims to identify the impact of Security and protection, legislation and laws on the quality of accounting information in banks operating in Jordan, which are (22) banks. A questionnaire was designed by the two researchers and distributed for this purpose on the internal auditors in banks and non-executive committees emanating from the Board of Directors who have direct contact with internal audit in each bank, the number of questionnaires distributed were (150) questionnaires, (120) suitable questionnaires were recovered for analysis, with the rate of recovery reached (80%). The questionnaire data was analyzed using the (SPSS) and a number of statistical techniques through descriptive statistics, arithmetic means, standard deviations and percentages, the study hypotheses were tested by multiple regression tests. The study found that there was no significant impact for the combined independent variables (Security and  protection , legislation and laws) on the quality of accounting information, but there is a statistically significant impact of Security and  protection on the quality of its own accounting information. The study recommends the interest of existing and decision-makers in banks operating in Jordan to raise the level of legislation and laws in order to positively affect the quality of accounting information in those banks.  Due to the need for accounting information which is constantly growing, especially after the emergence of companies diversified large, thus increasing the burden of information on banks, so that the assembly, operation and data processing methods can produce different information that meets the needs of its users from outside and within the economic units, and this requires a system of internal control to e-commerce activities with high efficiency, especially in the commercial banks as the incubator for companies  capital sectors, and the leading commercial banks in the use of electronic commerce and assumed a lot of business.


The Metaphor Matrix: Improving Metaphor Usage in Management Education

Dr. John P. Meyer, Iona College, New Rochelle, NY

Dr. Theodore Schwartz, Iona College, New Rochelle, NY



In this article, we review the use of metaphor in management education, explore the shifting boundaries between metaphorical and literal language, and suggest some improvements that can be made to the use of metaphors in the management classroom. To that end, we demonstrate how the use of any single metaphor is insufficient and potentially misleading. It is better to introduce students to a wide range of metaphors – juxtaposing their strengths and weaknesses in a metaphor matrix – in order to present a more accurate picture.  While the use of metaphors in management education is both widespread and ultimately very beneficial to understanding the abstract elements of organizations and illuminating the practice of management, there are dangers and consequences related to their application and misapplication. Based upon three approaches to dealing with the dichotomy between metaphorical language and literal language in management education – a “black and white” approach, a “shades of gray” approach, and a newly proposed “metaphor drift” approach – we suggest that it is possible to understand some of the common hazards of organizational metaphors and make even better use of the ever-expanding range of vivid organizational images in our teaching through the use of a metaphor matrix.  When teaching in the field of management, figurative organizational representations such as metaphors are inevitable, given the complexity of the subject matter (Weick, 1989). There are boundaries of experience that literal language cannot easily cross, but that metaphorical language can breach (Hatch, 1999: 96). Dramatic descriptions of organizations as a living organism (e.g., Cafferata, 1982; Morgan, 1981) that grow and change give life to the subject of management.


On Calling Convertible Securities – New Empirical Evidence

Dr. Camelia S. Rotaru, St. Edward’s University, Austin TX



This study shows that cash redemptions of convertible securities are associated with a positive abnormal market reaction on the day following the announcement. I am attributing this positive reaction to the coupon savings resulting from the redeeming the convertible security for cash. Results also show that companies do not force conversion of their securities in order to avoid financial distress. Rather, it appears that companies choose to force conversion even though the average amount of dividends paid on the common shares to be issued as a result of the conversion is higher than the amount of coupons saved through forced conversion. Moreover, results show no relationship between the abnormal return to a forced conversion announcement and the company’s probability of bankruptcy.  The call provision allows the issuer to repurchase a bond at a specified call price before the maturity date. In most cases, the redemption price of a callable bond is initially set equal to the public offering price plus one year’s interest on the bond. However, the call price usually decreases over the life of the bond. The schedule of call prices typically scales the call premium to zero by a date up to one year prior to the maturity of the bonds.  Previous studies look at the call feature of convertible securities. Some studies attempt to explain the role of call protection on convertible securities. Other studies analyze the stock price reaction to announcements of redemptions of convertible securities.


Momentum Strategies on Optioned and Non-Optioned Stocks

Dr. Keh-Yiing Chern, HedgeIQ Inc.

Dr. Susana Yu, Montclair State University

Dr. Kishore Tandon, Baruch College / CUNY



As implied by Mayhew and Mihov (2004), an ideal control sample of non-optioned stocks used in comparing or contrasting to optioned stocks must consider the liquidity and the volatility of these stocks. Following this and the study by Chan, Jegadeesh, and Lakonishok (1996), we study price and earnings momentum strategies on both optioned stocks and selected non-optioned stocks over 1983 to 2002. The purpose is to examine whether information issued by or related to non-optioned stocks have more information contents than similar information regarding optioned stocks. We find that both price and earnings momentum strategies can be applied more successfully in the sample of non-optioned stocks than in the sample of optioned stocks. This better performance in the sample of non-optioned stocks is associated with the wider spread of earnings estimate revisions between the winning portfolio and the losing portfolio, an indication of a richer information content regarding the sample of non-optioned stocks than that of the sample of optioned stocks.  The evidence of return predictability constitutes a controversial aspect of the debate on market efficiency. Jegadeesh and Titman (1993) added a new twist to the literature by documenting that over an intermediate horizon of three to twelve months, past winners on average continue to outperform past losers, concluding that there is “momentum” in stock prices. Investment strategies that exploit such momentum, by buying past winning stocks and selling past losing stocks, predate the scientific evidence and have been implemented by many professional investors.  One explanation for the success of momentum strategies is that the market responds only gradually to new information and that previous information provides an ongoing source of information about a firm’s prospects.

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