Optimal investment with fixed financing costs

Models with a premium on external finance produce counterfactual predictions about liquidity management. We address this shortcoming by introducing a fixed cost of increasing external finance into an otherwise standard investment/financing problem. This additional financial friction is well-motivated by case studies and our analysis shows that it generates more realistic predictions about liquidity management: firms hold external finance and idle cash simultaneously, and may invest an additional dollar of cash flow in liquidity rather than repaying external funds or investing in productive capital. In addition to better fitting the stylized facts about the time-series and cross-sectional pattern of liquidity holding, these results may help shed light on the fragility of estimates of investment–cash flow sensitivities.     

Talent or Not? Employee Reactions to Talent Identification

In this article, we examine the effect of talent identification on employee attitudes. Building on social exchange theory, we analyze the association between employees' perceptions about whether or not they have been formally identified as “talent” and the following attitudinal outcomes: commitment to increasing performance demands, building skills, and supporting strategic priorities; identification with the unit and the multinational enterprise; and turnover intentions. Our analyses of 769 managers and professionals in nine Nordic multinational corporations reveal a number of differences between employees who perceive that they have been identified as “talent” and those who either perceive that they have not been identified or do not know whether they have been identified. We found only limited differences between the two latter categories.     

Factors influencing processes of radical change in organizational belief systems

The recent development of a cognitive, interpretive approach to organizational analysis has helped to increase our understanding of organizational action. This paper discusses the relationship between organizational beliefs and organizational change. Based upon a review of empirical studies of strategic reorientations, the article presents a model of factors that influence processes which lead to changes in organizational belief systems. It is argued that radical changes in organizational belief systems are influenced by organizational results, by characteristics of the organizational environment, by intra-organizational factors, and by characteristics of the current organizational belief systems. These factors are discussed and some ways to further augment our knowledge of this phenomenon are indicated.     

Framing the field of international human resource management research

This article presents an overarching framework of the international human resource management field. The framework has four different levels: Macro (encompassing countries, regions and industries), the Multinational Corporation, Unit (typically subsidiary) and Individual (including teams, employees and their family members). At each level, we make a distinction between Influencing Factors, the HRM Function (encompassing both the HR department and HR policies and practices), Proximal Outcomes and Distant Outcomes of HRM. The framework allows us to examine existing research and suggest avenues for future work.     

Academic models and realworld problems

Commentary on “A Performance‐Based, Minimalist Human Resource Management Approach in Business Schools”     

Cross hedging under multiplicative basis risk

Cross hedging price risk in an incomplete financial market creates basis risk. We propose a new way of modeling basis risk where price risk and basis risk are combined in a multiplicative way. Under this specification, positive prudence is a necessary and sufficient condition for underhedging in an unbiased market. Using the example of cross hedging jet fuel price risk with crude oil futures, we show that the new specification is superior in describing the price series and that optimal cross hedges differ significantly from those derived under the traditional additive cross hedging model.     

2SLS and OLS in a spatial autoregressive model with equal spatial weights

The paper considers a Cliff–Ord type spatial model with a spatially lagged dependent variable and a row normalized weighting matrix with equal weights. We show that the 2SLS and OLS estimators are inconsistent unless panel data are available. The weighting matrix in question is one which would naturally be considered if all units are neighbors to each other, and there is no other reasonable or observable measure of distance between them.     

Program of the 1995 Meeting of the Society for the Advancement of Economic Theory

Program of the 1995 Meeting of the Society for the Advancement of Economic Theory     

Ethical Decision Making: The Effects of Escalating Commitment

Despite the recent emergence of many new ethical decision making models, there has been minimal emphasis placed on the impact of escalating commitment on the ethical decision making process. In this paper a new variable is introduced into the ethical decision making literature. This variable, exposure to escalation situations, is posited to increase the likelihood that individuals will choose unethical decision alternatives. Further, it is proposed that escalation situations should be included as a variable in Jones's (1991) comprehensive model of ethical decision making. Finally, research propositions are provided based on the relationship between escalating commitment and the ethical decision making process.