Is enterprise risk management real?

Moving from the growing relevance of the enterprise risk management (ERM) concept, this paper provides empirical evidence of ERM in practice. The paper presents ERM actual uses in a panel of nine Italian companies from different industrial fields and legislative settings and analyses the relationship between the uses and the characteristics of the ERM tool implemented in each case. The data analysis highlights the existence of different activities that are supported by the ERM tool and also different types of use (i.e. responsive, discoursive and prospective) corresponding to a different contribution of ERM to managerial action. These uses related to the specific characteristics of the tools generally indicated with the label ‘ERM’.     

Supervisors as information producers: Do stress tests reduce bank opaqueness?

Supervisory stress tests assess the impact of an adverse macroeconomic scenario on the profitability and capitalisation of a large number of banks. The results of such stress test exercises have recently been disclosed to the public in an attempt to restore confidence and to curb bank opaqueness by helping investors distinguish between sound and fragile institutions. In an unprecedented effort for transparency, the 2011 European Union stress test lead to the release of some 3400 data points for each of the 90 participating banks. This makes it an ideal setting to investigate a number of hypotheses on the information role of the stress tests.     

Filling vacancies: an empirical analysis of the cost and benefit of search in the labour market

This paper investigates empirically the factors that affect the cost–benefit ratio of employers’ search. The empirical analysis is based on a small Dutch data set containing individual information on filled vacancies. It is found that firms that use advertisements during recruitment are sensitive to labour market conditions; their search cost per applicant rises (drops) in tight (slack) labour markets because of the diminished ability of advertisements to generate applicants in tight labour markets. Furthermore, it is found that the high search cost incurred by posting identical vacancies is more than compensated for by the benefits from having a larger flow of applicants.     

Foreign ownership and the credibility of national rating agencies: Evidence from Korea

By analyzing bond price reactions to rating changes in Korea, this study adds a new angle to the existing literature on Global Rating Agencies (GRAs, i.e. Moody’s, S&P’s, Fitch) with higher reputation/independence vs. National Rating Agencies (NRAs) with more in-depth local knowledge. Faced with substantial regulatory burdens, GRAs have chosen to operate indirectly in the Korean domestic market by acquiring local NRAs. In our event study, cumulative abnormal returns following downgrades by a wholly domestically owned NRA tend to dominate those from downgrades by two affiliates of GRAs. This casts doubt on the additional information value of reputation capital acquired through GRA ownership as perceived by emerging markets.     

SME financing and the choice of lending technology in Italy: Complementarity or substitutability?

This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that the use of soft information decreases the probability of firms being credit rationed. Finally, we find that more soft information is produced when the bank uses relationship LT as primary technology individually or coupled with transactional LT. Our results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.     

Did the 2008–2009 Food and Financial Crises Affect Child Mortality? The Case of Sub-Saharan Africa

We estimate an aggregate model of child mortality on a panel of 40 African countries over the period 1995–2007. This model is then used to assess the impact of the 2008–2009 food and financial crises on child mortality, by comparing the number of child deaths computed under a “business-as-usual scenario” with those computed under the actual 2008–2009 “crisis scenario”. According to the simulation results, the 2008–2009 food price rise and recession caused a statistically non-significant additional 27,000 child deaths. However, if the 2008–2009 changes in other determinants of child mortality are factored in, the number of child deaths declined by 15,000. This unexpected result is explained by the fact that the effects of the rise in domestic food prices and the recession were offset in most of the region by the protective effect on the under-five mortality rate of a surge in food production, and by a rise in public expenditure on and foreign aid to the health sector.     

An agent-based model of innovation diffusion: network structure and coexistence under different information regimes

The paper analyzes how the structure of social networks affects innovation diffusion and competition under different information regimes. Diffusion is modeled as the result of idiosyncratic adoption thresholds, local network effects and information diffusion (broadcasting and demonstration effect from previous adopters). A high social cohesion decreases the probability of one innovation cornering the market. Nonetheless, with imperfect information, in small-world networks the higher speed of diffusion produced by the low average distance increases this probability. A low social cohesion also increases the probability of falling into traps of under-adoption. However, such probability is significantly lower with imperfect information, because such regime is characterized by higher levels of market concentrations and this reduces the frictions due to the coexistence of non-compatible product innovations.     

The effect of organizational culture on deviant behaviors in the workplace

Abstract

This study investigated the impact of organizational culture (OC) on deviant behaviors in the workplace (workplace deviant behaviors: WDB). We tested the hypothesis that different types of OC (according to the Competing Values Framework model) had an impact on WDB, in addition to the effect of Big Five personality traits. Survey research was undertaken with 954 employees of 30 enterprises in the public and private field, using a hierarchical model approach (HLM) to test the effects of four types of OC (Clan; Adhocracy; Market, Hierarchy) on WDB, over and above the effect of Five Personality traits. The HLM results partially supported our hypotheses, showing that the OC had a significant effect on WDB, with the adhocracy and clan cultures characterized by lower levels of WDB. Managerial implications about the importance of managing the OC are discussed.     

Cultural differences,insecure property rights and the mode of entry decision

We develop a theory of a multinational corporation’s optimal mode of entry in a new market. The foreign firm can choose between a licensing agreement, a wholly owned subsidiary or shared control (joint venture). In an environment in which property rights are insecure, opportunism is possible, and the identification of new business opportunities is costly, we show that the relationship between the quality of the institutional environment and the mode of entry decision is non-monotonic. Licensing is preferred if property rights are strictly enforced, while a joint venture is chosen when property rights are poorly enforced. For intermediate situations, the better use of local knowledge made possible by shared control under a joint venture works as a double edged sword. On the one hand, it makes the monitoring activity of the multinational more credible, on the other it offers insurance to both parties, potentially compromising the incentives faced by the local partner. We are grateful to the Centro Studi Luca d’Agliano for providing financial support. For useful comments we would like to thank Klaus Desmet, Cecilia Testa, Henry Wan and Gerald Willmann and seminar participants at Cornell, Ente Luigi Einaudi, Fundacao Getulio Vargas, Kiel, Milano, Universidad de Sao Paolo, the Midwest International Economics Meetings in Indianapolis, SAET VI conference in Rhodes, and the City University of Hong Kong Conference on Intellectual Property Rights.     

An application of dynamic specifications of factor demand equations to interfuel substitution in US industrial energy demand

In a recent paper, Jones (1995) [A dynamic analysis of the interfuel substitution in US industrial energy demand. J. Bus. Econ. Stat. 13 (4), 459–465] presents a dynamic analysis of interfuel substitution in US industry energy demand. The author concludes that a dynamic linear logit model is ‘superior' to a comparable dynamic translog model. The latter in fact violates concavity conditions whilst the logit formulation does not. This paper shows first of all that the dynamic formulation of the translog used in Jones (1995) is mis-specified. In fact, a parsimonious error-correction model (ECM) ‘dominates' alternative dynamic formulations, amongst which the partial adjustment mechanism used by the author. The ECM is able to generate optimal estimates of long-run and short-run elasticities, and it satisfies the concavity conditions of the cost function. Further, the theoretical framework used in this paper is the one recently proposed by Urga (1996) [On the identification problem in testing dynamic specification of factor demand equations. Econ. Lett. 52, 205–210] and Allen and Urga (1998) [Derivation and estimation of interrelated factor demands from dynamic cost function. Forthcoming in Economica]. It allows one to identify all coefficients (long-run and short-run) of the dynamic formulation via the joint estimation of the ‘effective' (short-run) cost function and the set of factor demand equations. This strategy solves, amongst other things, the parameter identification problem within the set of demand equations themselves, an issue which was originally noted by Anderson and Blundell (1982) [Estimation and hypothesis testing in dynamic singular equation systems. Econometrica, 1559–1571], re-addressed by Friesen (1992) [Testing dynamic specification of factor demand equations for US manufacturing. Rev. Econ. Stat. LXXIV (2), 240–250] and, more recently, by Urga (1996) and Allen and Urga (1998).