Creditor protection,judicial enforcement and credit access

We investigate the impact of the legal system on whether firms obtain the credit they apply for or not. Data comprise unique information provided directly by 48,590 firms from 11 European countries. We look at the strength of creditor protection, the strength of property rights, the time taken to resolve a dispute, the dispute resolution process’s costs and the number of procedures the plaintiff faces using data provided by the World Bank and the Heritage Foundation. The results suggest that the more efficient the judicial enforcement system is, and the higher the creditor protection is, the lower the probability that the firms are partially or totally denied credit. Our results are robust to selection bias (Heckman selection) as well as different controls and different estimation techniques. We find that these variables have considerable economic impact: the probability of obtaining credit is up to 40% higher in countries with more robust legal systems.     

Impact of multiple curve dynamics in credit valuation adjustments under collateralization

We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework presented in Pallavicini et al. [Funding valuation adjustment: FVA consistent with CVA, DVA, WWR, collateral, netting and re-hyphotecation, 2011], and the related collateralized valuation measure, can be helpful in defining the key market rates underlying the multiple interest rate curves that characterize current interest rate markets. A key point is that spot Libor rates are to be treated as market primitives rather than being defined by no-arbitrage relationships. We formulate a consistent realistic dynamics for the different rates emerging from our analysis and compare the resulting model performances to simpler models used in the industry. We include the often neglected margin period of risk, showing how this feature may increase the impact of different rates dynamics on valuation. We point out limitations of multiple curve models with deterministic basis considering valuation of particularly sensitive products such as basis swaps. We stress that a proper wrong way risk analysis for such products requires a model with a stochastic basis and we show numerical results confirming this fact.     

The value of informational arbitrage

Finance and Stochastics - In the context of a general semimartingale model, we aim at determining how much an investor is willing to pay to learn additional information that allows achieving...     

Evaluation of land-use and transport network effects on cyclists' route choices in the Copenhagen Region in value-of-distance space

Growing interest in sustainable transportation systems has driven decision-makers toward policies and investments aimed at promoting cycling, but little to no effort has been made toward incorporating bicycle transport in transport planning models. This study contributes toward this direction by estimating a bicycle route choice model in value-of-distance space from a large sample of 3384 cycling trips that were traced with GPS devices in the Copenhagen Region. The novelty of this study lies in (i) observing cyclists' behavior in a cycling-oriented country, (ii) exploiting rich data about the cycling environment, (iii) estimating the model in value-of-distance rather than preference space, and (iv) not focusing only on preferences for traditional variables (e.g., distance, turns, hilliness, intersections, motorized road characteristics), but also on perceptions and preferences for bicycle facilities (e.g., bicycle lanes, bicycle paths, bicycle traces) and land-use designations (e.g., residential, industrial, sports, scenic areas). The findings from the model show that: (i) cyclists exhibit heterogeneous preferences for avoiding right and left turns, cycling the wrong way, using roundabouts and bridges, and cycling alongside residential and scenic areas; (ii) cyclists dislike cycling on unpaved and hilly surfaces and alongside larger roads; (iii) cyclists have clear perceptions about different types of bicycle facilities, with a preference for bicycle lanes and segregated paths; (iv) cyclists have clear perceptions about land-use designations, with a preference for cycling alongside sports and scenic areas; (v) time-of-day and air temperature contribute to the perceptions of cyclists and their preferences for bicycle facilities and land-use designations.     

Growing Pains: International Instability and Equity Market Returns

We use the ratio of growth in global military expenditures to gross domestic product (GDP) to capture ex ante expectations of political instability and explore the relation between this measure and returns. In a standard global asset pricing framework with 44 countries, this measure helps to explain cross‐country return differences. Furthermore, emerging countries have greater exposure to international political instability risk than developed countries. This partially explains the higher returns observed in emerging countries.     

Designing a public procurement strategy: lessons from local governments

Public sector procurement faces competing priorities, such as cost-efficiency, legal conformity, the advancement of environmental protection and the promotion of innovation. In addition, procurement departments are moving away from being mere organizational servants to having a strategic function. This paper looks at current public procurement strategy research, revealing neglected aspects. The authors propose a new analytical framework and suggest avenues for future research.     

Similarities and differences when building trust: the role of cultures

We run an experiment in which students of different European nationalities are matched in groups of five and repeatedly choose with whom within their group they want to play a trust game. Participants observe of each other age, gender, nationality and number of siblings. The region of origin, “North” or “South” is a major determinant of success in the experiment. Participants tend to trust those they trusted before and who trusted them. We do not find evidence of regional discrimination per se. It is only the underlying and significant differences in behavior that translate through repeated interactions into differences in payoffs between the two regions.     

Investigating Socialization,Work-Related Norms,and the Ethical Perceptions of Marketing Practitioners

This study examines the influence of socialization on work-related norms (WORKNORM). We tested the hypothesis that organizational (ORGSOC) and professional socialization (PROFSOC) are antecedent influences on WORKNORM, employing a sample of 339 marketing practitioners. The results of covariance structural analysis indicate that ORGSOC and PROFSOC and WORKNORM are discriminant constructs within the tested model. The study also reveals that the influence of ORGSOC on WORKNORM is stronger than the influence of PROFSOC on these same norms. Because this social learning occurs in work-related activities, in organizations, and in professional life, it is important that managers appreciate that these three separate domains influence decision making under ethical conditions. The limitations of the study and future research directions are discussed.     

Incentive regulation and investment: evidence from European energy utilities

This paper investigates the relationship between investment and regulatory regimes (incentive vs. rate-of-return regulation) for a sample of EU energy utilities from 1997 to 2007. We control for the effect of firm ownership and for cross-country differences in the underlying energy demand and energy supply. To deal with potential endogeneity of the regulatory regime, we apply instrumental variable methods (2SLS and GMM). Our results show that investment rate is higher under incentive regulation than under rate of return regulation. Using original data on the regulatory tools (X factor and WACC), we find that investment of incentive regulated firms appears highly sensitive to the X factor, consistent with efficiency- and profit-seeking motivations. Electric utilities investment is also sensitive to the level and change in the weighted average cost of capital (WACC). Finally, we find that the positive relationship between private control and investment is not robust to IV estimations, suggesting that in Europe regulation may have reduced the differences between private and public firms’ incentives to invest.     

Islamic,socially responsible,and conventional market comovements: Evidence from stock indices

This article extends the literature on ethical investment risks, correlations, and comovements. Through a sample of 17 Islamic, socially responsible investment (SRI), and conventional stock indices, we investigate cointegration and dynamic correlations for the period 2005–2015. We also examine these stock indices’ responses to two major economic factors, namely, oil prices and market volatility. Our results show cointegration between Islamic, SRI and conventional stock indices, and comovements with mutual causalities. During crises, dynamic correlations tend to spike; however, quite a different pattern emerges during postcrisis periods when there is more variability in conditional covariances. Finally, we provide evidence that all three types of stock indices react positively to oil price changes, but negatively to global equity market volatility, albeit with different magnitudes. Overall, investors can obtain portfolio diversification benefits through SRI and Islamic stock indices, particularly in postcrisis periods.