Indian Convertible Bonds with Unspecified Terms: An Empirical Study

Indian convertible bonds have two peculiar features that make them possibly unique in the world: a) the bonds are compulsorily converted into equity without any option, and b) the conversion terms are not specified at the time of issue but are left to be determined subsequently by the Controller of Capital Issues (CCI) who is the government functionary regulating capital issues in India. A naive model would say that the market simply forms an estimate of the likely conversion terms and then values the bond as if these terms were prespecified. This paper examines the market prices of one of the largest issues of Indian convertible bonds with unspecified terms. The empirical investigation convincingly rejects the naive model and demonstrates that changes in the markets expectation of the conversion terms are a significant factor affecting the pricing relationship. These changes are significantly correlated with the stock price itself. We do not, however, find any evidence that the market expects the CCI to adjust the conversion terms on the basis of the actual market price to protect the bondholder. But, there is strong evidence that changes in expected conversion terms affect the share price through the dilution effect. Since the unspecified terms have only added to the uncertainty of the bondholders without giving them any perceived benefits we recommend that this system should be abolished. In a companion paper, Barua and Varma (1991) present a theoretical valuation model for the Indian convertible bonds with unspecified terms. The empirical results in this paper confirm the predictions of that model.

Distress — Cause and Effect: A Diagnostic Study

Detailed site investigation, rigorous analysis and smart design of any engineering project prove to offer a successful product provided Quality Control and Quality Assurance are enforced during the construction phase. Failure to comply with QA/QC led to premature distress and extensive damage. A typical case, where negligence to address extenuating problems that arose during the construction stage resulted in severe damage is investigated and reported. Post-construction diagnostic study to unravel the cause and effect is presented

The Price Impact of Order Book Events

We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow imbalance, defined as the imbalance between supply and demand at the best bid and ask prices. Our study reveals a linear relation between order flow imbalance and price changes, with a slope inversely proportional to the market depth. These results are shown to be robust to seasonality effects, and stable across time scales and across stocks. We argue that this linear price impact model, together with a scaling argument, implies the empirically observed "square-root" relation between price changes and trading volume. However, the relation between price changes and trade volume is found to be noisy and less robust than the one based on order flow imbalance

Steel industry restructuring and location

In this paper, we link technology-based competition, demand patterns, and managerial agency to describe and explain the process of restructuring in the American steel industry in terms of its economic geography and in the context of sweeping changes in the industry’s global structure. Between World War II and the end of the1960’s, the American steel industry was dominated by large integrated steel producers. During this period, competition was primarily among integrated firms and the location decisions taken during the period concerned individual production units within those firms. Between the 1970’s and the 1990’s, a new kind of competition re-shaped the economic geography of the American steel industry: employing scrap-based production methods, minimills emerged to challenge the integrated producers. Shifts in demand away from the previous geographical core combined with aggressive investments by minimill managers in production capacity and in capability upgrading to drive home the minimill advantage. Finally, with the turn of the century, world steel markets began to reshape based on globalization. Energized by liberalization and privatization in many parts of the world, and supported by information technology and managerial innovations that increased spans of control, steel firm managers employed aggressive mergers & acquisitions to create the first large-scale steel multinational corporations. During this period, consolidation redrew the boundaries of firm competition, and foreign steel firms emerged as owners of a major share of American steelmaking capacity. Moreover, increases in the world demand for steel and world steelmaking capacity had profound effect in reshaping the economic geography of the competitive landscape. By examining these critical periods of restructuring in the steel industry, the role of economic geography as a competitive factor is exposed, and context is provided for understanding the regional and spatial implications of competitive adjustment

Examining Passenger Flow Choke Points at Airports Using Discrete Event Simulation

The movement of passengers through an airport quickly, safely, and efficiently is the main function of the various checkpoints (check-in, security. etc) found in airports. Human error combined with other breakdowns in the complex system of the airport can disrupt passenger flow through the airport leading to lengthy waiting times, missing luggage and missed flights. In this paper we present a model of passenger flow through an airport using discrete event simulation that will provide a closer look into the possible reasons for breakdowns and their implications for passenger flow. The simulation is based on data collected at Norfolk International Airport (ORF). The primary goal of this simulation is to present ways to optimize the work force to keep passenger flow smooth even during peak travel times and for emergency preparedness at ORF in case of adverse events. In this simulation we ran three different scenarios: real world, increased check-in stations, and multiple waiting lines. Increased check-in stations increased waiting time and instantaneous utilization. while the multiple waiting lines decreased both the waiting time and instantaneous utilization. This simulation was able to show how different changes affected the passenger flow through the airport

Social-Cognitive Biases in Simulated Airline Luggage Screening

This study illustrated how social cognitive biases affect the decision making process of air1ine luggage screeners. Participants (n = 96) performed a computer simulated task to detect hidden weapons in 200 x-ray images of passenger luggage. Participants saw each image for two (high time pressure) or six seconds (low time pressure). Participants observed pictures of the "passenger" who owns the luggage . The "pre-anchor group" answered questions about the passenger before the luggage image appeared, the "post-snchor" group answered questions after the luggage appeared, and the "no-anchor group" answered no questions. Participants either stopped or did not stop the bag. and rated their confidence in their decision. Participants under high time pressure had lower hit rates and higher false alarms, Significant differences between the pre-, no-, and post-anchor groups were based on the gender and race of the passengers. Participants had higher false alarm rates in response to male than female passengers