Recent Issues

Vol.19/1 (2013, June)
Dynamic Heterogeneous Choice Heuristics: A Bayesian Hidden Markov Mixture Model Approach
Author Jin Gyo Kim
Keywords Choice Heuristics, Choice Models, Hidden Markov Model, Heterogeneity, Dynamics, Bayesian Methods, Markov chain Monte Carlo
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Standard choice models implicitly assume that consumers, in order to maximize their expected utilities, compare each of the alternatives in their choice sets in terms of all available attributes. Consumer-level utility functions are frequently taken as linear, and overwhelmingly so as compensatory. However, due to limitations in information process capacity, characteristics of choice task environment and other internal or external constraints, consumers may search for satisfying alternatives rather than optimal ones by invoking other non-compensatory heuristics which free them from arduous attribute-by-attribute comparison. The question arises as to how often these non-compensatory rules are applied, and whether researchers can detect them using only standard data sources. This study aims to address two main issues regarding consumers’ use of decision-rules and heuristics in the real world: (1) whether they are heterogeneous across consumers and (2) whether they are changing for individual consumers over time. To these ends, we extend the standard linear compensatory rule assumption to more faithfully capture dynamic heuristic usage for each consumer. There are three reference heuristics studied in this paper, the well-known linear compensatory, disjunctive and conjunctive rules. Conditional on this known set of possible heuristics, a dynamic heterogeneous hidden Markov mixture choice model is developed to capture heuristic dynamics at the individual-level. When estimated on detergent scanner data, the proposed model offers strong evidence supporting both heterogeneity and dynamics in heuristics usage.
Vol.19/1 (2013, June)
Identifying Subject-Specific Relevant Explanatory Variables in Choice-Based Conjoint Studies
Author Jin Gyo Kim
Keywords Model Specification, Variable Selection, Model Selection, Conjoint, Choice Models, Heterogeneity, Bayesian Methods, Markov chain Monte Carlo
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It is customary in conjoint studies to introduce the same set of potential explanatory variables for each subject, so as best to allow any possible trade-offs to be made. However, this presumption can mask the possibility of some subjects’ considering only a subset of the presented attributes. Moreover, such subsets of relevant attributes can vary considerably across the population. This paper presents a model which allows researchers to identify relevant explanatory variables for each subject separately. This is accomplished via a solution to the well-known variable selection problem in the context of discrete choice models; the proposed solution can be widely applied throughout choice studies and in fact to other response types, such as ratings, direct paired comparisons, and ranks, with appropriate changes in likelihood function. When estimated on a choice-based conjoint data for dial-readout scale products, the proposed model is strongly preferred to the traditional random-effect specification for choice-based conjoint. A sizeable group of subjects, approximately 63%, were found to consider proper subsets of all attributes presented. There was a great deal of heterogeneity in attributes deemed relevant across subjects: the proportion of subjects who did not consider a given attribute among the six used in the study ranged from 17.4% to 41.3%. For those who did consider a given attribute, estimated attribute level part-worths were essentially identical for the proposed model and the traditional random-effect conjoint model; but this was not the case for non-considered attributes. In fact, the traditional model was found to suffer from systematic biases in aggregate part-worth magnitudes. Finally, and most important for marketing practice, allowing for the possibility that some subject may not consider particular attributes can lead to substantial design and revenue differences in supposedly ‘optimal’ products, at both the individual- and the aggregate-level.
Vol.19/1 (2013, June)
Reexamining the Pay Differentials-Organizational Outcomes Relationship in Korea: The Role of Organizational Identification
Author Jisung Park, Seongsu Kim, Hyunjoong Yoon
Keywords Pay Differentials, Turnover, Organizational Identification, Financial Performance, and Korea
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This research examines the effects of pay differentials on financial performance and employee turnover in Korea by considering a critical employee-based factor: organizational identification. Incorporating tournament theory and social identity theory, authors theorize that pay differentials increase financial performance and employee turnover without considering employees’ organizational identification. If considered, however, whereas the positive effects of pay differentials on financial performance will be weaker, the effects on turnover will be stronger. Using a sample of Korean cross-industry firms, results show pay differentials have a positive influence on only financial performance. Also, as predicted, while the positive relationship between pay differentials and financial performance became weaker, the relationship with turnover became stronger when employees’ organizational identification is high. Theoretical and practical implications for strategic pay structures are discussed.
Vol.19/1 (2013, June)
Behavioral Finance: A Survey of the Literature and Recent Development
Author Hyoyoun Park, Wook Sohn
Keywords Behavioral finance, Market anomalies, Market efficiency, Survey of literature
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This paper summarizes recent studies in behavioral finance—particularly regarding market anomalies and investor behavior—that are not reconciled with the traditional finance paradigms. This paper differs from previous survey literature in several aspects. We introduce more recent papers in the field, more literature on behavioral corporate finance, and provide statistics on the recent trends that are explored in behavioral finance papers. We expand the research scope to studies on Korean financial markets, introduce specific funds using behavioral finance techniques, and discuss the challenges facing behavioral finance.
Vol.18/2 (2012, December)
The Hazards of Leapfrog: Search Routines for Alliance Partner and Evolution of Organizational Capabilities
Author Jonghoon Bae
Keywords Exploration, Search, Capability Development, and Co-evolution
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This study presents an evolutionary model of capability development and examines the role of strategic alliance in the evolution of organizational capabilities. In particular, this study begins with the observation that each alliance partner’s capability development co-evolves. This study contributes to the literature on capability development by showing the following: (1) a firm’s strategic alliance is ‘fitness-enhancing’ when its partners’ learning is ‘ineffective’; (2) without making additional efforts (i.e., in-house development), a firm is able to employ strategic alliances and to balance between exploitation and exploration to the extent that its (potential) partners are not effective learners; and (3) a firm is unlikely to balance between exploitation and exploration to the extent that its (potential) partners are effective learners.
Vol.18/2 (2012, December)
Has Regulation G Improved the Information Quality of Non-GAAP Earnings Disclosures?
Author HAN YI
Keywords Non-GAAP (Pro-forma) Earnings; Regulation G; Sarbanes-Oxley Act of 2002; Strategic Disclosures; Earnings Informativeness
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Based on hand-collected non-GAAP earnings disclosures from 2001 to mid 2004, this paper finds that firms with communication motives, proxied by historically low returns-GAAP earnings relation, are more likely to disclose non-GAAP earnings in the post-Reg G period than in the pre- Reg G period. In contrast, firms with opportunistic motives, proxied by GAAP loss and negative GAAP EPS changes, are less likely to disclose non- GAAP earnings in the post-Reg G period than in the pre-Reg G period. With additional test results, the findings of this paper appear consistent with Congress’ and the SEC’s intervention in pro-forma reporting practices resulting in improvements in the quality of information provided in non- GAAP earnings disclosures.
Vol.18/2 (2012, December)
Honesty and Intermediation: Corporate Cheating, Auditor Involvement and the Implications for Takeoff
Author BRISHTI GUHA
Keywords Corporate governance, auditing, disclosure, inequality and takeoff, general equilibrium, repeated games
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We examine honesty and credible auditing in firm-investor relations in a repeated game of imperfect information, embedded in a general equilibrium framework. Informed auditors enhance credibility over a range of audit fees – despite the auditor’s incentive to collude – provided the probability of detection is imperfectly correlated across clients. Auditing can enhance growth especially for a relatively egalitarian distribution of wealth. We show that audit fees must be neither too high nor too low to enhance client credibility, highlight the role of mandatory audit fee disclosure, interpret international differences in shareholding patterns and uncover a possible rationale for audit industry concentration.
Vol.18/2 (2012, December)
Default Prediction for Small-Medium Enterprises in Emerging Market: Evidence from Thailand
Author WANIDA SIRIRATTANAPHONKUN,SULUCK PATTARATHAMMAS
Keywords credit risk model, SMEs, Thailand, MDA, Logit model
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Small-medium enterprises (SMEs) play an important role in the economy worldwide and they normally need to borrow funds from financial institutions. Thus, an accurate credit risk model to predict the probability that these firms might be bankrupt and cannot pay back the loans on time is very crucial. However, the studies based on SME data are very rare especially for those in emerging markets. This study develops the SME models by employing both the Multivariate Discriminant Analysis (MDA) and Logistic Regression Analysis (Logit) model in predicting bankruptcy of SMEs in Thailand. The samples cover the period 2000 – 2010. The result shows that the Logit model gives higher predictive accuracy level at 85.5 percent for out-of-sample test. Moreover, the combined forecasts of bankruptcy firms from both MDA and Logit models could help achieve even higher predictive accuracy level.
Vol.18/2 (2012, December)
An Exploratory Meta-Analysis of Gender Differences in the Evaluation of Advertisements
Author JUNG-CHAE SUH
Keywords Gender Differences, Self vs Others, Visual vs. Verbal, Meta- Analytic Test, Advertising, Brand Attitude, Purchase Intention, Cognitive Resource Matching
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Although some studies have shown gender differences in the evaluation of messages in advertisements, these differences have not been strongly supported by empirical evidence. Using a meta-analytic technique, this study analyzes the effect sizes of the existing studies on this topic to determine which factors vary the results of the studies.. The results of the exploratory analysis for brand attitudes toward advertisements support both the vividness theory and the sex-role and social dominance theories. However, for purchase intentions, the results do not support both theories. Women show more purchase intentions than men in the evaluation of advertisements, regardless of the message type.
Vol.18/1 (2012, June)
The Impact of Horizontal Merger Between Manufacturers on Channel Pricing Behaviors
Author KYUNG JIN KIM, INSEONG SONG
Keywords pricing, channel interaction, horizontal merger, new empirical industrial organization
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This paper studies the impact of a horizontal merger between two manufacturers on channel pricing behaviors. We utilize the new empirical industrial organization approach in which demand and supply side behaviors are derived from economic theories. We apply our model to a market data set obtained from the toilette paper category in which a major merger between Kimberly Clark and Scott happened. We find the impact of the merger on retailer-manufacturer interaction is heterogeneous across manufacturers. The merged manufacturer turns out to become tougher in its pricing. However, we do not find any evidence that the merge makes other manufacturers tougher.
Seoul Journal of Business
ISSN 1226-9816 (Print)
ISSN 2713-6213 (Online)