Market Implied Ratings and Financing Constraints: Evidence from US Firms

Financing constraints have been found to play an important role in several aspects of firm behavior, but no attention has been given to their effects on credit ratings. In this paper we analyze a unique and comprehensive data set for US firms rated by Fitch over the period 2001–07. We employ Fitch's market implied ratings derived from bond and equity prices. The analysis finds evidence that financial variables are more important in predicting credit ratings for firms likely to face financing constraints. We conclude that the financing constraint is an important dimension in the market implied ratings process. Our findings are of relevance to managers, investors and rating agencies seeking to understand the mechanism through which financing constraints affect credit ratings.     

Asset market games of survival: a synthesis of evolutionary and dynamic games

The paper examines a game-theoretic model of a financial market in which asset prices are determined endogenously in terms of a short-run equilibrium. Investors use general, adaptive strategies (portfolio rules) depending on the exogenous states of the world and the observed history of the game. The main goal is to identify portfolio rules, allowing an investor to “survive,” i.e., to possess a positive, bounded away from zero, share of market wealth over an infinite time horizon. The model under consideration combines a strategic framework characteristic for stochastic dynamic games with an evolutionary solution concept (survival strategies), thereby linking two fundamental paradigms of game theory.     

Regularity and Pareto improving on financial equilibria with price-dependent borrowing restrictions

We consider a pure exchange, general equilibrium model, with two periods and a finite number of states, commodities, numeraire assets, and households. Participation in the asset markets is restricted in a household specific manner, imposing upper bounds on the amounts of borrowing which can be obtained using assets. Those bounds are assumed to depend on asset and commodity prices. After establishing existence of equilibria, we show that, generically in the set of the economies, equilibria are finite and regular. Then, we restrict our attention to the significant set of economies in which some associated equilibria exhibit a sufficiently high number of strictly binding participation constraints. We prove that, generically in that set, those equilibria are Pareto improvable through a local change of the participation constraints.     

Innovations and Legacies in Russian Human Resource Management Practices: Surveys of 700 Chief Executive Officers

In 1998 we administered a survey to 740 Russian chief executive officers (CEOs), which enabled us to raise the question of the current human resource management (HRM) practices in Russian industrial companies. In October-December 2000 we administered another survey among 735 Russian CEOs. This time we observed a major drive towards some modern instruments of HRM policies. However, an additional survey, devoted to the source of innovations in HRM, revealed that most HRM innovations are implemented on a trial and error basis, without reference to international practices.     

Technological Innovativeness and Firm Performance in Slovenia and Romania

This study contributes to a better understanding of performance induced by technological innovativeness by developing and testing a model. The model clarifies the nature of the influence of technological innovativeness and its organisational and inter-organisational antecedents (organisational support for innovativeness and technological alliances) on firm growth, profitability and wealth creation. Survey data were collected from firms in two countries: Slovenia and Romania; structural equation modelling was employed to test the model and the hypothesised relationships. Support for most of the model hypotheses was found. Among the control elements in the model, country, industry technological opportunities and firm age were found to be the most influential.     

Finite additive utility representations for preferences over menus

I characterize a finite additive utility representation for preferences over menus. The numbers of both positive and negative components in this representation are expressed explicitly in terms of preference. These expressions can be used to characterize models of temptation, perfectionism, context effects, and other phenomena.     

Strategic complexity and global expansion: An empirical study of newcomer Multinational Corporations from small economies

The purpose of this paper is to analyse the determinants of global expansion strategies of newcomer Multinational Corporations (MNCs) by focusing on Iceland, Israel and Ireland. We argue that newcomer MNCs from small open economies pursue complex global expansion strategies (CGES). We distinguish four different types of global expansion strategies, namely, horizontal, vertical, lateral integration, and risk diversification. Building upon the traditions of Caves and Dunning and applying a multinomial logistic approach, we model CGES as a function of firm and country specific factors. The empirical evidence suggests that newcomer MNCs move away from simplistic dualities in the formulation of their strategic choices towards more complex options as a means of maintaining and enhancing their global competitiveness.     

Patterns of Aging-Related Changes on the Way to 100

Abstract

The objective of this paper is to investigate dynamic properties of age trajectories of physiological indices and their effects on mortality risk and longevity using longitudinal data on more than 5,000 individuals collected in biennial examinations of the Framingham Heart Study (FHS) original cohort during about 50 subsequent years of follow-up. We first performed empirical analyses of the FHS longitudinal data. We evaluated average age trajectories of indices describing physiological states for different groups of individuals and established their connections with mortality risk. These indices include body mass index, diastolic blood pressure, pulse pressure, pulse rate, level of blood glucose, hematocrit, and serum cholesterol. To be able to investigate dynamic mechanisms responsible for changes in the aging human organisms using available longitudinal data, we further developed a stochastic process model of human mortality and aging, by including in it the notions of “physiological norms,” “allostatic adaptation and allostatic load,” “stress resistance,” and other characteristics associated with the internal process of aging and the effects of external disturbances. In this model, the persistent deviation of physiological indices from their normal values contributes to an increase in morbidity and mortality risks. We used the stochastic process model in the statistical analyses of longitudinal FHS data. We found that different indices have different average age patterns and different dynamic properties. We also found that age trajectories of long-lived individuals differ from those of the shorter-lived members of the FHS original cohort for both sexes. Using methods of statistical modeling, we evaluated “normal” age trajectories of physiological indices and the dynamic effects of allostatic adaptation. The model allows for evaluating average patterns of aging-related decline in stress resistance. This effect is captured by the narrowing of the U-shaped mortality risk (considered a function of physiological state) with age. We showed that individual indices and their rates of change with age, as well as other measures of individual variability, manifested during the life course are important contributors to mortality risks. The advantages and limitations of the approach are discussed.