Stock markets and terrorist attacks: Comparative evidence from a large and a small capitalization market

An expanding body of literature has investigated the economic impact of terrorist attacks. A part of this literature has focused on financial markets. We examine three research questions: whether markets' reactions to terrorism have changed through time; whether market size and maturity determine reactions, and whether reactions depends upon either the type of targets or the perpetrators of the attack. To this effect, a large – the London stock exchange – and a small – the Athens stock exchange – capitalization markets are used as the vehicles for the empirical investigation. Results from an event study methodology as well as from conditional volatility models suggest that size and maturity as well as specific attributes of terrorist incidents are possible determinants of markets' reactions.     

The Monetary Transmission Mechanism: Evidence from Eight Economies in Transition

Abstract

We examine in this paper the importance of banks’ behavior in the transmission of the monetary policy to the real economy. Monthly data from eight economies in transition that recently became members of the European Union and the techniques of cointegration and Error Correction models are used, in order to investigate the relationship between intermediation margin spread (IMS, official lending rate minus deposit rate) and industrial production. Given the low development of corporate bond market and the dependence of non-financial agents on banking credits, we find that in many countries the IMS is an important leading indicator of industrial production. However, in countries characterized by credit access constraints (Estonia and Latvia) evidence for the traditional money channel is found. Evidence for both money and credit channels is found in Poland and Hungary. These results imply that a common monetary policy implemented by the European Central Bank may be transmitted in different ways across the new members of the enlarged European Union with different effects on real output in each country.     

Whistleblowers in Organisations: Prophets at Work?

This article argues that the study of biblical prophets offers a profound contribution to understanding the experience, role and attributes of whistleblowers. Little is known in the literature about the moral triggers that lead individuals to blow the whistle in organisations or why whistleblowers may show persistence against the harshness experienced as a result of their actions. This article argues that our understanding of the whistleblower??s work is highly informed by appreciating how moral values and norms are exercised by prophets in seeking to become agents for change. This article identifies three core implications that have practical and theoretical relevance. The first concerns how the whistleblowing activity challenges the established order of an organisation as this is comprised of institutional structures, policies and procedures. Institutions display an unusual fragility against the seemingly powerless individual who helps reveal the wrongdoing. By disclosing ??hidden?? knowledge concerning illegitimate intentions and actions, the seemingly powerless individual creates tension that has implications for the stability and order of the organisation. The second implication concerns the degree of social concern and the individual??s interpretation of morality. Whistleblowers, like prophets, display concern for moral values that have implications for the welfare of others, and which they seek to promote through their whistleblowing act. The third implication concerns the importance of agency. By taking a moral stance, the whistleblower assumes an important agentic role facilitating change through his/her intervention. Although such change is sudden and unpredictable it brings about new conditions for the organisation and its members.     

Investigating Intraday Interdependence Between Gold,Silver and Three Major Currencies: the Euro,British Pound and Japanese Yen

In this study, the interrelationship between major exchange rate returns (namely EUR/USD, GBP/USD, JPY/USD) and precious metal returns (gold and silver) is examined using a vector autoregressive model in a multivariate asymmetric GARCH framework on the intraday frequency. Our findings indicate a unidirectional volatility transmission from the majority of our currencies (EUR/USD, GBP/USD) to precious metals. The sluggish response of silver volatility to currency volatility shocks permits implementation of intraday profitable strategies, providing implications against market efficiency when analyzing intraday data. In the case of the British pound and Japanese yen, a volatility shock affects silver volatility more than gold volatility. Crisis events such as the Greek default and US credit rating downgrade reduce significantly the correlation of EUR/USD and gold/silver. The covariance between EUR/USD and silver increases after a volatility shock in EUR/USD. The same happens with JPY/USD and silver. These findings are important for portfolio managers and monetary authorities.     

The Monetary Approach to the Exchange Rate Determination for a “Petrocurrency”: The Case of Norwegian Krone

This paper, by following vector error correction modeling, empirically investigates some of the popular monetary models of the NOK/USD rate. The empirical results suggest that there is some scope for the monetary approach to explain the development of the NOK/USD during the period from 1997 to 2008. The coefficients in the co-integration equation of both money and output differentials are statistically significant and consistent with any of the forms of the monetary models. Moreover, empirical evidence for the proportionality between the exchange rate and relative money is provided. Our findings are robust across different measures of inflation expectations. Although there is no clear evidence regarding the exact version of the monetary model, the estimated unrestricted error correction models can fit the actual NOK/USD exchange rate. Finally, the short-term dynamics of the exchange rate are significantly affected by changes in crude oil prices.     

Banks’ lending behavior and monetary policy: evidence from Sweden

The main purpose of this paper is to investigate the aggregate data about bank loans which may hide significant information about the monetary transmission mechanism. This study, by disaggregating bank loans data and using the relevant interest rates in Sweden, investigates the behaviour of banks after a monetary policy tightening. By using an unrestricted VAR model and impulse response analysis, our results show that a shock on the policy rate affects the main components of the banks’ loan portfolios differently. Initially, banks do not reduce lending to firms and households and they present a sluggish reaction concerning the relevant interest rates. On the contrary, they reduce lending to mortgage credit institutions significantly since real estate lending can be considered as a risky long-term investment. Moreover mortgage credit institutions reduce lending for housing purposes to non-bank public. This reduction is mainly driven by flexible rate loans and loans secured on tenant owned apartments. Consequently, theses actions have a significant effect on real economic activity, by amplifying the initial shock from the tightening monetary policy. The latter result provides evidence of the bank lending channel in Sweden working via mortgage lending and could be very important for policy makers.     

Lobbying and the responsible firm: Agenda‐setting for a freshly conceptualized field

“Responsible lobbying” is an increasingly salient topic within business and management. We make a contribution to the literature on “responsible lobbying” in three ways. First, we provide novel definitions and, thereby, make a clear distinction between lobbying and corporate political activity. We then define responsible lobbying with respect to its content, process, organization, and environment, resulting in a typology of responsible lobbying, a conceptual model that informs the rest of the paper. Second, the paper provides a thematic overview of the current literature underpinning lobbying and the responsible firm, and the underlying paradigms informing this literature. Third, the paper makes specific suggestions for a future research agenda, ending with a consideration of methodological implications of such research.     

Environmentally Responsible and Conventional Market Indices’ Reaction to Natural and Anthropogenic Adversity: A Comparative Analysis

Using data collected at two phases, this study examines why and how ethical leadership behavior influences employees’ evaluations of organization-focused justice, i.e., procedural justice and distributive justice. By proposing ethical leaders as moral agents of the organization, we build up the linkage between ethical leadership behavior and the above two types of organization-focused justice. We further suggest trust in organization as a key mediating mechanism in the linkage. Our findings indicate that ethical leadership behavior engenders employees’ trust in their employing organization, which in turn promotes their justice perceptions toward the organization. The theoretical and practical implications of these findings are discussed, and some directions for future research are suggested.     

Does Terrorism Affect the Stock‐Bond Covariance? Evidence from European Countries

Using daily stock and bond returns data from four European countries—France, Germany, Spain, and Great Britain—that have been the victims of significant terrorist activity, this study addresses the issue of whether transnational and/or domestic terrorist attacks have affected in any significant manner the time‐varying stock–bond covariance, their returns, and their variances. Stock and bond markets can be influenced and determined not only by the usual array of macroeconomic factors but also by security shocks, such as a terrorist incident, that have the potential to affect investors' sentiment and portfolio allocation decisions. The issue at hand is addressed using a VAR(p)‐GARCH(1,1)‐in‐mean model, and the results reported herein indicate that terrorist attacks trigger a flight‐to‐safety effect primarily in France and Germany and to a smaller degree in Great Britain and Spain.