Your community gets a B- : analysis of the specific and curious realm of airport bond ratings

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2019-01-01
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Hawkins, Richard
LeMay, Stephen
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Ralston, Peter
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Supply Chain Management
Supply chain management is an integrated program of study concerned with the efficient flow of materials, products, and information within and among organizations. It involves the integration of business processes across organizations, from material sources and suppliers through manufacturing, and processing to the final customer. The program provides you with the core knowledge related to a wide variety of supply chain activities, including demand planning, purchasing, transportation management, warehouse management, inventory control, material handling, product and service support, information technology, and strategic supply chain management.
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Commercial airports are publicly-owned transportation infrastructure, usually funded with bonds. The bond rating decision for these entities thus has important ramifications for bond investors, issuers, airport managers, and even the communities the airports serve, but the rating decision process is not well understood. This paper discusses a simulation of the rating process in two decision environments, including a downgrade. The effect of information framing in an environment of incomplete data is examined using amateur evaluators. Amateur evaluators were utilized to understand how people with limited financial analysis skills would respond when presented with incomplete information and a primed scenario. The results indicate that amateur evaluators were more likely to downgrade a bond grade than a rating agency, but this effect was moderated for amateur evaluators with more work experience. Implications for airport and supply chain infrastructure and discussed.

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This article is published as Hawkins, R.R., LeMay, S.A., and P.M. Ralston (2019) “Your Community Gets a “B-“: Analysis of the Specific and Curious Realm of Airport Bond Ratings”, Journal of Transportation Management. 29 (2) 37-52. Posted with permission.

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Tue Jan 01 00:00:00 UTC 2019
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