Business Commons^™

Is A Bond Rating Downgrade Bad News, Good News, Or No News For Stockholders?, Choo Yong, Jeremy Goh, Louis H. Ederington

Research Collection Lee Kong Chian School Of Business

We examine the reaction of common stock returns to bond rating changes. While recent studies find a significant negative stock response to downgrades, we argue that this reaction should not be expected for all downgrades because: (1) some rating changes are anticipated by market participants and (2) downgrades because of an anticipated move to transfer wealth from bondholders to stockholders should be good news for stockholders. We find that downgrades associated with deteriorating financial prospects convey new negative information to the capital market, but that downgrades due to changes in firms' leverage do not.

Managing The Cost Of Federally Sponsored Research At Educational Institutions, Mary J. Brown, Kenneth Yale Rosenzweig

Accounting Faculty Publications

In an era of weak economic ·growth, budget deficits and government spending reductions, limited government resources must be utilized in a manner that maximizes the public welfare. One major use of such resources in recent years has been to fund research and other activities at universities. To shed light on this important area, this article examines current practice in government contracting with educational institutions, reviews recent governmental efforts to control contract costs and investigates ramifications for the affected educational institutions.

Ua12/2/1 Special Budget Edition, Wku Student Affairs

WKU Archives Records

Special edition of the College Heights Herald reporting on budget cuts.

• Western Tightens Its Belt at Board of Regents Meeting
• Poynter, Chris. Thomas Meredith: His Personal Account Will Be Restored
• Armes, Anya. Loss of Job Hits Employees Hard – Layoffs
• Varney, Dennis. Talisman: Yearbook Safe One More Year
• Martin, John. Student Fees Will Increase – Again
• Hannah, Jim. College Heights Herald: Thomas Meredith Delays Independency Proposal
• Cassady, Pam. Western Considering Selling Reserved Parking to Faculty
• Bunnell, David. Academics: Cuts Hit Classroom Indirectly
• Brewer, Mike. Little By Little, Budget Cuts Crumbling Hill
• Anna, Cara. Football Gets More Money
• Batters, Tom. Mark …

Nashville's Printing And Publishing Sector: A Historical And Empirical Study And Its Impact Upon The Region, David Carr

Mahurin Honors College Capstone Experience/Thesis Projects

Urban economics, like all other fields of economics, is a science. A region must be identified, then dissected and analyzed, if one is to determine what gives it life. A study of Nashville, for example. reveals that it depends upon far more than country music for its economic survival. Indeed, the city is a complex organism made of components that must complement each other to insure their existence. One of the most important aspects of Nashville's stability is its locale. Its centralized location, much like a heart, is serviced by arteries of railroads, highways, airways, and river routes. Because of …

Journal Of Actuarial Practice, Volume 1, No.1, 1993, Colin Ramsay , Editor

Journal of Actuarial Practice (1993-2006)

ARTICLES

Global Social Security: How the Rules are Changing in Certain Countries • Robert J. Myers

On Becoming a Cost Effective Company • Robert D. Shapiro and Barton H. Clennon

The Process of Pension Forecasting • Michael Sze

Cost-Based Pricing of Individual Automobile Risk Transfer: Car-Mile Exposure Unit Analysis • Patrick Butler

Discussion • Ruy A. Cardoso & Richard G. WolI & Patrick Butler's Reply

A New Approach to Modeling Excess Mortality • Peter D. England and Steven Haberman

The Small Plan Audit Program: The Opinions of the Court • Arnold F. Shapiro

BOOK REVIEWS

A. Hoque Sharif reviews "Options …

Ethical Issues, Helps, And Challenges: Perceptions Of U.S. Actuaries, Therese M. Vaughan, Robert W. Cooper, Garry L. Frank

Journal of Actuarial Practice (1993-2006)

This paper reports the findings of a survey of Fellows of the Casualty Actuarial Society (FCAS) to determine their perceptions of the key ethical issues and dilemmas facing the industry today and the factors they view as most helpful and challenging in resolving these dilemmas. The responses are compared to a previous survey of Fellows of the Society of Actuaries (FSA). The study finds that FSAs and FCASs tend to rank key ethical issues similarly and that both groups of actuaries tend to look first to their own personal values, second to certain factors in their business environment, and last …

The Process Of Pension Forecasting, Michael Sze

Journal of Actuarial Practice (1993-2006)

This paper explains the process of pension forecasting. It discusses the common purposes and uses of pension forecasts, the major steps involved, and the principal limitations of these forecasts. Some insights into each stage of the forecasting process are provided. Among the stages discussed are: the background research to be performed; the selection of scenario assumptions; shortcuts used in the actual performance of the forecast; review of the forecast results; and communication of the forecast findings.

Funding Methods And Pension Plan Amendments, Keith P. Sharp

Journal of Actuarial Practice (1993-2006)

This paper considers the treatment of plan amendments under the individual entry age normal and projected unit credit methods. Alternative treatments are considered, and comments are made about their acceptability.

On Becoming A Cost Effective Company, Robert D. Shapiro, Barton H. Clennon

Journal of Actuarial Practice (1993-2006)

The 1990s financial services environment requires each life company to identify its distinct capabilities and competitive strengths and to build its future direction from these features. This demands a fundamental rethinking of traditional approaches to planning, organization, and financial management.

The Small Plan Audit Program: The Opinions Of The Court, Arnold F. Shapiro

Journal of Actuarial Practice (1993-2006)

One of the most important issues of recent years from the perspective of many pension actuaries is the IRS's small plan audit program. The program initially was expected to raise two-thirds of a billion dollars by targeting well-funded defined benefit plans with five or fewer participants. The focus of the audit was the assumed interest rate and the normal retirement age, both of which the IRS generally regarded as too low. While the focus of the audit was relatively narrow, the issue it raised was a funda mental one. The basic question was the extent to which the IRS could …

Global Social Security: How The Rules Are Changing In Certain Countries, Robert J. Myers

Journal of Actuarial Practice (1993-2006)

Social security programs (i.e., national pension systems) differ widely between countries. This is only natural, and desirable, because of varying social and economic conditions and philosophies. This paper discusses some of the general worldwide trends, such as the equal treatment of men and women, increases in the normal retirement age, projection of future costs, and the different philosophies of social security. Some of the interesting and unique changes recently made in selected countries-Canada, Chile, Eastern European countries, Germany, Japan, People's Republic of China, Saudi Arabia, Union of Soviet Socialist Republics, United Kingdom, and United States-are described.

A Critique Of Defined Contribution Plans Using A Simulation Approach, David M. Knox

Journal of Actuarial Practice (1993-2006)

During the 1980s there was a trend in many countries away from defined benefit plans toward defined contribution plans. This development means that the individual member bears the full investment risk in the preretirement period and the annuity rate risk at retirement, as no pension benefit (expressed as a percentage of salary) is provided. This paper, through the use of a stochastic model for both inflation and a range of investment returns, analyses the distribution of retirement incomes that will be produced from a defined contribution plan. The impacts of changing entry and exit ages, different investment strategies, alternative career …

A New Approach To Modeling Excess Mortality, Peter D. England, Steven Haberman

Journal of Actuarial Practice (1993-2006)

This paper describes a complete framework for the statistical modeling of excess mortality, with particular reference to the experience of insured, impaired lives. The principal measure of excess mortality considered is the standardized mortality ratio. The modeling approach, based on the theory of generalized linear models, allows us to build models containing several explanatory variables. The statistical significance of these variables can be tested, and the effect of interactions between the variables can be assessed rigorously. The paper uses data drawn from the extensive, continuing investigation into the mortality of insured, impaired lives conducted by the Prudential Assurance Company (UK). …

Estimating The Effect Of Statutory Changes On Insured Casualty Losses Using Generalized Indicator Variables, Ruy A. Cardoso

Journal of Actuarial Practice (1993-2006)

Techniques for estimating future insured losses in casualty insurance typically assume consistency in the insurance environment over time. Statutory changes, however, can create sharp discontinuities in the loss-generating process, complicating the estimation of those losses. Using indicator variables and dummy variables allows for quantification of the effect of such discontinuities. Three examples from private passenger automobile insurance are presented to illustrate how these variables can be used.

Cost-Based Pricing Of Individual Automobile Risk Transfer: Car-Mile Exposure Unit Analysis, Patrick Butler

Journal of Actuarial Practice (1993-2006)

Every mile traveled by a car transfers risk to its insurer. This paper posits that the product of a cents-per-mile rate based on class experience and the miles recorded on the car's odometer appropriately earns prepaid premium while the car is driven. Operation of a practical car-mile system is described briefly. To test the competing idea that driver-record pricing responds to known large differences in risk transfer, a model used to validate claim free discounts is reexamined with the car-mile as the measure of individual cost. Driver-record pricing is found to inflate car-year price-to-cost differences. Consequences of accident rate variability …

Labor Law Successorship: A Corporate Law Approach, Edward B. Rock, Michael L. Wachter

All Faculty Scholarship

No abstract provided.

Taxing Prometheus: How The Corporate Interest Deduction Discourages Innovation And Risk-Taking, Michael S. Knoll

All Faculty Scholarship

This paper uses recent developments in the theory of optimal capital structure to demonstrate how the federal corporate income tax with an interest deduction, but without a corresponding dividend deduction, misallocates capital within the corporate sector by encouraging investment in low-risk, low-growth projects employing tangible assets over high-risk, high-growth projects employing intangible assets.

Journal Of Actuarial Practice, Volume 1, No. 2, 1993, Colin Ramsay , Editor

Journal of Actuarial Practice (1993-2006)

ARTICLES

Ethical Issues, Helps, and Challenges: Perceptions of U.S. Actuaries • Therese M. Vaughan, Robert W. Cooper, and Garry L. Frank

Managing the Relative Volumes of Participating and Nonparticipating Business in a Mutual Life Company • Robert G. Chadburn

A Critique of Defined Contribution Plans Using a Simulation Approach • David M. Knox

Discussion • Michael Sze & David M. Knox's Reply

The Definition of Insurance: Implications for a Health Insurance Demand Model • Mark J. Browne

Discussion • Charles S. Fuhrer & Mark J. Browne's Reply

On the Equivalence of the Loss Ratio and Pure Premium Methods of Determining …

Book Reviews, Hoque A. Sharif

Journal of Actuarial Practice (1993-2006)

No abstract provided.

Discussion Of David Knox's "A Critique Of Defined Contribution Plans Using A Simulation Approach", Michael Sze

Journal of Actuarial Practice (1993-2006)

No abstract provided.

Life Insurance Applications Of Recursive Formulas, Timothy L. Giles

Journal of Actuarial Practice (1993-2006)

This paper discusses several practical applications of recursive formulas:

a) Traditional whole life-As an introduction, the well-known relationship between successive terminal reserves is reviewed. Recursive formulas are developed to calculate the reserves and the premiums;

b) Universal life-Recursive formulas are used both for the calculation of target premiums and reserves. Consideration is given to the TEFRA corridor;

c) Paid-up rider-A participating single premium rider that provides a level death benefit can be devised using an inherent one year term benefit. Recursive functions are used to determine the premium that precisely matures the rider.

Because the APL programming language is particularly …

Discussion Of Mark J. Browne's "The Definition Of Insurance: Implications For A Health Insurance Demand Model", Charles Fuhrer

Journal of Actuarial Practice (1993-2006)

No abstract provided.

Group Insurance, Charles Fuhrer

Journal of Actuarial Practice (1993-2006)

No abstract provided.

Managing The Relative Volumes Of Participating And Nonparticipating Business In A Mutual Life Company, Robert G. Chadburn

Journal of Actuarial Practice (1993-2006)

Management decisions of a mutual life company involving the amounts and relative proportions of participating (with profits) and nonparticipating (without profits) business and the level of expenses are examined in relation to their effect on participating policyholders' returns. A particular expense ratio is defined that plays a key role in a framework for making such decisions. The sensitivity of participating policy returns to changes in each factor are analyzed. Companies with expense ratios (as defined) of less than 2 are shown to prefer a different strategy from companies with higher ratios. There is an incomplete tendency for the ratio to …

On The Equivalence Of The Loss Ratio And Pure Premium Methods Of Determining Property And Casualty Rating Relativities, Robert L. Brown

Journal of Actuarial Practice (1993-2006)

There are two distinct stages in the property and casualty ratemaking process. First, there is the portfolio average rate change. Second, there is the adjustment of classification relativities. It is well known that the loss ratio and pure premium (also called the loss cost) methods are algebraically equivalent in the stage called the portfolio average rate change. This paper reviews the proof of this equivalence. Further, it is proved algebraically that the loss ratio and pure premium methods are also equivalent in calculating classification relativities (or differentials) if certain data requirements can be met. A short numerical example of this …

Discussion Of Patrick Butler's "Cost-Based Pricing Of Individual Automobile Risk Transfer: Car-Mile Exposure Unit Analysis", Ruy A. Cardoso

Journal of Actuarial Practice (1993-2006)

No abstract provided.

The Definition Of Insurance: Implications For A Health Insurance Demand Model, Mark J. Browne

Journal of Actuarial Practice (1993-2006)

This paper uses data from the 1977-78 National Medical Care Expenditures Survey to evaluate five different measures of insurance: a family's expected out-of-pocket payment for medical care, the expected value of the indemnity (fee-for-service) benefits from an insurance policy for a family, the percentage of the expected loss that the insured pays, the policy premium, and the policy limit of coverage. The study provides information that can help us understand whose insurance coverage will change significantly as a result of health care reform. For example, it shows that those with low income (such as minorities, families headed by females, and …

From Legitimacy To Logic: Reconstructing Proxy Regulation, Jill E. Fisch

All Faculty Scholarship

On October 16, 1992, after a comprehensive review of its system of proxy regulation and after two separate amendment proposals that drew more than 1700 letters of comment from the public, the Securities and Exchange Commission (the "Commission" or the "SEC") voted to reform the federal proxy rules. The reforms were "intended to facilitate shareholder communications and to enhance informed proxy voting, and to reduce the cost of compliance with the proxy rules for all persons engaged in a proxy solicitation.' The SEC explained the amendments by stating that the rules were "impeding shareholder communication and participation in the corporate …

Markets, Courts, And The Brave New World Of Bankruptcy Theory, David A. Skeel Jr.

All Faculty Scholarship

No abstract provided.

Lawyer Liability In Third Party Situations: The Meaning Of The Kaye Scholar Case, Geoffrey C. Hazard Jr.

All Faculty Scholarship

The Kaye Scholer I case has excited much attention and alarm within the legal profession. 2 It is interpreted as greatly expanding the scope of lawyer liability to third parties and heralding much greater regulatory intervention into the relationship between lawyer and client. In some respects this interpretation is accurate. The Kaye Scholer proceeding is at least a "wake up call" to the legal profession, signalling that lawyers should be much more attentive to their legal and ethical obligations in transactional and regulatory matters. However, there is also much misunderstanding about Kaye Scholer, particularly the supposition that it created novel …