Estimation of physical intensity models for default risk

The estimation of physical intensity processes in the context of default risk is investigated here. Using data from Moody's Corporate Bond Default Database, a term structure of default probabilities for different rating classes is constructed each year from 1970 to 2001. Two specifications used for modeling the dynamics of the (risk‐neutral) intensity process in the bond‐pricing literature are then examined empirically: the Ornstein–Uhlenbeck and square‐root cases. The results reveal that the Ornstein–Uhlenbeck case is not an adequate modeling alternative with a rejection of this specification in five out of seven credit classes and nonsignificant mean reverting behavior for all credit classes. The square‐root case obtains better results with four credit classes out of seven for which this specification cannot be rejected and significant mean reversion parameters in many cases. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:95–113, 2009     

Boarding the Aircraft: Trust Development Amongst Negotiators of a Complex Merger

We explore trust development in the context of an international merger negotiation. Based on in‐depth interviews with chief negotiators of the Air France–KLM merger, we contribute to existing theory by showing that trust develops in three interrelated domains: personal, process, and outcome. Progressively, trust develops in all domains on the basis of antecedents that differ between phases and domains. Distinguishing between different domains facilitates analysis of trust asymmetry and the coexistence of trust and distrust, as well as the influence of trust in interorganizational relationships.     

The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures

We analyze the role of knowhow acquisition in the formationand duration of joint ventures. Two parties become partnersin a joint venture to benefit from each other’s knowhow.Joint operations provide each party with the opportunity toacquire part of its partner’s knowhow. A party’sincreased knowhow provides the impetus for the dissolution ofthe joint venture. We characterize the conditions under whichdissolution takes place, identify the party that buys out itspartner, determine the time to dissolution, establish its comparativestatics, and examine the implications of knowledge acquisitionfor the desirability of joint venture formation. (JEL code:G34)     

House prices, money, credit, and the macroeconomy

This paper assesses the links between money, credit, house prices,and economic activity in industrialized countries over the lastthree decades. The analysis is based on a fixed-effects panelvector autoregression, estimated using quarterly data for 17industrialized countries spanning the period 1970–2006.The main results of the analysis are the following. (i) Thereis evidence of a significant multidirectional link between houseprices, monetary variables, and the macroeconomy. (ii) The linkbetween house prices and monetary variables is found to be strongerover a more recent sub-sample from 1985 to 2006. (iii) The effectsof shocks to money and credit are found to be stronger whenhouse prices are booming.     

Sustainable development. With or without mankind?

The author challenges the conventional wisdom that the main risk to Western development is environmental degradation caused by mankind. Concern over the greenhouse effect and global warming have more to do with millenium fever than reality. There is still very little evidence to suggest that these environmental phenomena result from human activity. What we do know is that there have been major cyclical fluctuations throughout history. The author cautions against implementing ‘scientistic’ policies in the face of such doubts, just because it is trendy to do so.     

Pareto-Improving Social Security Reform

It is generally accepted that moving from an unfunded to a funded social security system implies a welfare loss for the transition generation—that is, the generation that has to pay twice: first, saving for its own retirement and, second, contributing to the pensions of the then retired generation. This article shows that in a setting of endogenous growth with positive externality such a transition can be Pareto improving. But it argues also that social security reform is more a pretext than a requirement for internalizing such a positive externality.     

Corporate hierarchy and vertical information flow inside the firm—a behavioral view

Little is known about how corporate hierarchies influence managers' propensity to pass information upward within the firm. Two streams of literature arrive at seemingly conflicting and untested predictions. Information economists maintain that middle managers pass more suggestions up the firm's line of command as the corporate hierarchy increases in order to avoid corporate omission errors. In contrast, scholars of organizational psychology suggest that hierarchies lead to evaluation apprehension and foster a perceived lack of control among mid‐level managers, leading to their reduced willingness to, and interest in, passing information up within the organization. Drawing on field data and model‐guided experimental studies, we provide original empirical evidence for the relevance of all the mechanisms above, and we delineate the conditions under which either mechanism prevails. Copyright © 2014 John Wiley & Sons, Ltd.