Banks’ risk taking,financial innovation and macroeconomic risk

This paper shows how financial innovation in combination with the fall of macroeconomic risk can explain the strong growth of the primary and secondary credit markets in the U.S. economy. We document empirically the fall in macroeconomic risk, the expansion of the prime and secondary credit market and we provide evidence that changes in macroeconomic risk are closely related to the evolution of the prime market. In the theoretical part of the paper we study in a simple portfolio optimization framework the effect of financial innovation and macroeconomic risk on banks’ risk taking. The results of the model show that financial innovation increases bank appetite for risky investment both in the prime and secondary markets and that this effect is stronger in environments with low aggregate macroeconomic risk. In addition the banking system becomes less stable because of the portfolio risk of each individual bank increases.     

The effects of psychological capital and risk tolerance on service workers’ internal motivation for firm performance and entrepreneurship

This study investigates how psychological capital and risk tolerance can inspire service workers to develop internal motivation and entrepreneurial confidence. Data were gathered from a survey of 255 service workers in the metropolitan area of Seoul, South Korea. The results showed that service workers’ psychological capital consisted of two main constructs: hopeful self-efficacy and optimistic resilience. The results indicated that hopeful self-efficacy had no significant effect on service workers’ internal motivation, while the optimistic resilience had a positive effect which in turn positively impacted entrepreneurial confidence. On the other hand, risk tolerance was found not to affect service workers’ internal motivation. These results imply that optimistic service workers, with recuperative powers, tended to be proactive in their work and have more confidence when establishing new ventures. They also suggest that service firms can improve organizational performance by promoting worker optimism and resilience. This study provides practical insights into why service firms should pay attention to worker optimism and resilience to improve firm performance over the long run, not only for the firms but for the national economy as a whole.     

Tail risk and investors’ concerns: Evidence from Brazil

I estimate tail risk for Brazil from January 2001 to July 2020 and investigate the origins of tail risk variation. The tail risk measure peaks at stock market crashes, financial crises, political shocks and disaster events such as the coronavirus pandemic. Moreover, I find that tail risk is countercyclical, has strong predictive power for market returns and negatively predicts real economic activity. In order to identify the investors’ concerns associated with tail risk, I extract daily news from the largest financial newspaper in Brazil. The co-movement between news and tail risk indicates that tail risk variation is mainly driven by disaster concerns, followed by economic and government uncertainty. While economic uncertainty explains the countercyclical property of tail risk, investors only require compensation for bearing tail risk implied by disaster concerns. Similarly, tail risk negatively impacts real outcomes because of the disaster concerns that it identifies. These findings support recent models explaining asset pricing puzzles with time-varying disaster risk.     

Re-examining risk premiums in the Fama–French model: The role of investor sentiment

This paper reconstructs the Fama–French three-factor (F–F) model as a panel smooth transition regression (PSTR) framework to investigate the differentiated effects of investor sentiment proxies-the volatility index (VIX), credit default swap (CDS), and TED spread-on the three risk premiums. Sample period spans from 2003: 1Q to 2013: 4Q. Sample objects are 58 semiconductor companies listed on Taiwan Security Exchange Corporation. The empirical results report that stock returns display a nonlinear path, and the three risk premiums are time-varying, depending on different proxies of investor sentiment in different regimes. Market premiums fall as investors in stock markets show extreme optimism or extreme pessimism. Except in rare situations, the size premium is significant and decreases with the increase in the VIX. Returns in holding growth stocks dominate holding value stocks when the investors show extreme pessimism or optimism. However, in normal sentiment of investment, value stocks earn more returns than growth stocks.     

Why do merger premiums vary across industries and over time?

We identify time-varying industry and macroeconomic factors that explain the observed variation in takeover premiums over time. Results support our hypotheses that some industry and economic factors can increase the growth prospects in an industry, which boosts expected synergies and/or demand for the target firm, and therefore increases the merger premiums. Merger premiums are higher when the target's corresponding industry experiences higher growth, has more research and development (a proxy for expected growth), and has less dispersion in performance among firms within the industry. Merger premiums are also positively related to capital liquidity, which can enhance economic growth and competition for target firms, and positively related to volatility in economic growth, which affect merger waves and the demand for target firms over time.     

Wealth effects of banks’ rights to market and originate annuities

We examine wealth effects, for banks and insurers, of bank rights to sell and underwrite annuities. The stock-price reactions to four court and regulatory decisions are consistent with expectations of bank gains at insurers’ expense. Cross-sectionally, smaller, riskier insurers with higher distribution costs and substantial annuity business sustain larger wealth losses. Larger, riskier bank-holding companies with fee-based and consumer business gain most, consistent with the extension of federal safety-net guarantees as a source of gains. Banking stock-price reactions to the Supreme Court’s decision are opposite other findings, possibly reflecting unfulfilled expectations of a broader mandate for expanded bank rights.     

Industry risk transmission channels and the spillover effects of specific determinants in China’s stock market: A spatial econometrics approach

This paper uses a spatial econometrics approach to study the industry risks in China’s stock market. We comprehensively consider the real linkage and information risk transmission channels and analyze the risk spillovers of specific determinants. Our empirical results show the following: 1) The real linkage channel and information channel are both effective transmission channels for driving spillover effects, and the information channel is of the utmost importance. 2) The spillover effects of specific determinants exist and are persistent. The superposition of spillover effects may lead to extreme risk. 3) The transmission channels and spillover effects are asymmetric in different regimes.     

Economic policy uncertainty and industry risk on China’s stock market

We propose a dynamic mixture Copula with time-varying weight, which is endowed with generalized autoregressive score dynamics. Based on this model, we portray the lower-tail dependence between the return of WIND first-level industry and CSI-300 index as a proxy variable for the industry risk in China’s stock market, and use the VAR-GARCH-in-mean model based on BEKK-GARCH to deconstruct the different impact of the economic policy uncertainty (EPU) on industry risk of the first and second moments in terms of four policy categories, namely fiscal policy, monetary policy, trade policy, and foreign exchange rate and capital account policy. The results are followed. Firstly, the risk of Consumer Discretionary is averagely the highest, while the risk of Utilities remains the lowest. Secondly, category-specific EPU has no significant mean spillover to the risk of overall industries, while the variance spillover is significant for all the cases. Thirdly, except for Real Estate, the GARCH-in-mean effect is not significant of EPU on industry risks. Further more, all those three kinds of impact show industrial heterogeneities. To avoid systemic risks, we advise that the issue of economic policy should be forward-looking, consistent, and targeted, especially for sensitive industries.     

The effects of appraisal review content on employees’ reactions and performance

Do appraisal reviews actually change employees’ subsequent performance? To answer this question, longitudinal analyses are required. Dorfman et al. (1986) and Nathan et al. (1991) performed longitudinal studies, to attain contradicting results. Apparently we need additional longitudinal studies. We analysed a data set collected from a Korean petrochemical company, and found that, even though each of the three measures of appraisal review content (i.e. the degree to which, during the appraisal review, (1) employees have opportunity to participate in discussion, (2) goals are clearly set and (3) career issues are discussed) was significantly related to the employees’ reactions to the review, none of them had a positive impact on the subsequent job performance. This result is consistent with the Dorfman et al.’s finding. Possible reasons for our result being different from Nathan et al.’s finding, limitations of our study and further studies required are discussed.     

Erratum to ‘Inventory record inaccuracy: Causes and labor effects’

Inventory record inaccuracy (IRI) is a pervasive problem in retailing and causes non-trivial profit loss. In response to retailers’ interest in identifying antecedents and consequences of IRI, we present a study that comprises multiple modeling initiatives. We first develop a dynamic simulation model to compare and contrast impacts of different operational errors in a continuous (Q, R) inventory system through a full-factorial experimental design. While backroom and shelf shrinkage are found to be predominant drivers of IRI, the other three errors related to recording and shelving have negligible impacts on IRI. Next, we empirically assess the relationships between labor availability and IRI using longitudinal data from five stores in a global retail chain. After deriving a robust measure of IRI through Bayesian computation and estimating panel data models, we find strong evidence that full-time labor reduces IRI whereas part-time labor fails to alleviate it. Further, we articulate the reinforcing relationships between labor and IRI by formally assessing the gain of the feedback loop based on our empirical findings and analyzing immediate, intermediate, and long-term impacts of IRI on labor availability. The feedback modeling effort not only integrates findings from simulation and econometric analysis but also structurally explores the impacts of current practices. We conclude by discussing implications of our findings for practitioners and researchers.     

From original equipment manufacturing to branding: entrepreneurship,strategic leadership,and Taiwan’s firm transformation

This paper investigates firm transformation from original equipment manufacturing (OEM) to original brand manufacturing (OBM) based on variant experiences of Taiwan’s top global brands. Taking the competitive advantage of practicing OEM for multinational corporations (MNCs), latecomer firms can generate capital and accumulate capabilities by engaging with the global production network. Rarely does every firm transform into a global enterprise. We propose that only entrepreneurs with strategic leadership competence, which serves to manage a delicate balance between stability and change in a firm, are capable to facilitate firm transformation from OEM to a global enterprise practicing OBM. We provide an analytical framework that combines the research fields of entrepreneurship, strategic management, and leadership to analyze firm growth and firm transformation of Taiwanese firms. In light of possible branding dilemma when straddling dual-track businesses, successful transforming firms can alleviate this problem either by separating their OBM units from their OEM units or by creating a symbiotic relationship with their MNC customers. How Taiwanese firms first took advantage of initiating OEM to create capital and capabilities and later transformed into OBM provide useful experiences for other latecomer firms.     

Does risk sharing increase with risk aversion and risk when commitment is limited?

I consider a risk-sharing game with limited commitment, and study how the discount factor above which perfect risk sharing is self-enforcing in the long run depends on agents׳ risk aversion and the riskiness of their endowment. When agents face no aggregate risk, a mean-preserving spread may destroy the sustainability of perfect risk sharing if each agent׳s endowment may take more than three values. With aggregate risk the same can happen with only two possible endowment realizations. With respect to risk aversion the intuitive comparative statics result holds without aggregate risk, but it holds only under strong assumptions in the presence of aggregate risk. In simple settings with two endowment values I also show that the threshold discount factor co-moves with popular measures of risk sharing.     

Connectedness and risk spillovers in China’s stock market: A sectoral analysis

This paper shows how sectors in the Chinese stock market are connected and investigates risk spillovers across these sectors. Using graph theory and a recently developed time series technique, we are able to identify the systemically important sector in the market and the patterns of risk spillovers across sectors over time. Unlike standard econometric modeling, graph theory enables us to approach this question in a more reader-friendly way. The empirical results show that Industrial sector plays a central role and should thus be considered the systemically most important sector in the Chinese stock market. The spillover structure is found to be time-varying. While Industrial sector dominates the system for most of the time, other sectors such as Consumer Discretionary sector also occasionally appear as the central sector. Our empirical results also indicate that the simple correlation-based approach can produce equally useful information as more advanced econometric models.     

New insights on respondents’ recall ability and memory effects when repeatedly measuring political efficacy

Quality & Quantity - Many study designs in social science research rely on repeated measurements implying that the same respondents are asked the same (or nearly the same) questions at least...     

Exploring entrepreneurs’ human capital components and effects on learning orientation in early internationalizing firms

This study aims to enhance our understanding of the role of entrepreneurs’ human capital components and the influences on learning orientation in early internationalizing firms. Drawing from the integration of human capital theory, resource-based view theory, learning theory, and on the literature of international entrepreneurship and strategic management, a research model is proposed and consists of five constructs, namely international business skill, international business knowledge, entrepreneurial competence, managerial competence and learning orientation. The empirical analysis was carried out on a sample of 158 early internationalizing firms in a food industry in Thailand. Partial least square technique was conducted to test the structural equation models and hypotheses. This followed by some illustrative case studies as supplementary to the empirical findings. The results confirm our hypotheses and support the proposed research model. This study yielded interesting findings in which an entrepreneur’s skill and knowledge in international business enhance entrepreneurial and managerial competencies. These competencies, in turn, play an important role in influencing a firm’s strategic learning orientation     

The effects of an environmental accountability system on local environmental governance and firms’ emissions

The Chinese central government introduced the environmental accountability system (EAS) policy in 2006 to encourage local governments to execute environmental policies appropriately. However, the effects of this EAS policy have not been investigated at the firm level. In this study, we first measured the environmental governance intensity of local governments by calculating the environment word portion (EWP) of the annual governments’ work reports and found that local governments increased their efforts after the EAS policy implementation. We then constructed a continuous difference-in-difference (DID) strategy to estimate the effect of the EAS on firms’ emission and found that firms significantly reduced their sulphur dioxide (SO₂) emission under the regulation intensity of local governments after the EAS policy. The reductions are mainly because of the private, non-export, labour- and capital-intensive firms. The EAS policy may encourage firms to reduce coal usage, design more products, decrease capacity investment and even withdraw from the market, thus reducing pollutant emission. Finally, we tested firms’ response in various polluting sectors and found that the EAS policy may cause local governments to fail in distinguishing low pollution sectors from high pollution sectors.     

The effects of low internal integration between purchasing and operations on suppliers’ resource mobilization

A company that suffers from low internal integration between corporate functions performs worse than its more integrated competitors, leaving it in a position of competitive disparity. This paper reports on an investigation of the effects of internal integration between purchasing and operations on the mobilization of supplier resources. Low internal integration generates uncoordinated operations and purchasing behaviors that negatively affect supplier resource mobilization. We find that the lack of operations support for eight major purchasing initiatives in a construction company negatively affects supplier resource mobilization, resulting in poor exchange outcomes for the suppliers. Furthermore, different types of uncoordinated behaviors affect suppliers’ resource mobilization in diverse negative ways. Based on the results, we offer a categorization of diverse types of supplier mobilization activities and offer several managerial implications for both buyers and suppliers.     

The relationship between ‘high-performance work practices’ and employee attitudes: an investigation of additive and interaction effects

In order to improve our understanding of mediating variables inside the ‘black box’ of the firm's labour management, this paper examines the relationship between high-performance work system (HPWS) practices and employee attitudes. Using a randomly selected, national population sample, clear evidence was found for a positive relationship between HPWS practices and the attitudinal variables of job satisfaction, trust in management, and organizational commitment, implying that HPWS can provide win-win outcomes for employees and employers. However, the study also tests – from an employee perspective – the ‘complementarities thesis’ and finds negative interaction effects among HPWS practices. This strengthens the argument that there are likely to be limits to the positive outcomes of HPWSs for employees. Evidence of sequencing in the employee attitudinal responses to HPWSs was also found, with job satisfaction as the key mediating variable.     

Caught in the Middle: Organizational Impediments to Middle Managers’ Work-life Balance

As increased work demands and longer working hours become the reality for many employees, the concept of work-life balance has received increasing attention. This paper presents findings from an exploratory study of Australian middle managers, which investigated the impact of middle managers’ daily organizational experiences on their lives both in and beyond the workplace. We focus on respondents’ reports of the difficulty in achieving work-life balance, specifically, the organizational impediments to creating balance. Three particular areas where these impediments were apparent are: the impact of new technologies; limits to autonomy and control in the middle management role; and difficulties in taking advantage of flexibility initiatives in the workplace. As middle managers are caught in the middle between work and personal life, there is a need for organizations to support middle managers’ efforts to achieve work-life balance if the organization’s long-term goals are to be achieved.