Idiosyncratic risk matters! A regime switching approach

The evidence on the inter-temporal relation between idiosyncratic risk and future stock returns is conflicting and confusing. We shed new light on the issue using a more flexible econometric approach based on [Hamilton, J.D. 1989. A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica, 57, 357–384.] regime switching model that accommodates the parameter instability of the forecasting relation between returns and financial variables. We find strong evidence suggesting that idiosyncratic risk is related to future stock market returns only in the low variance regime.     

AN ULTIMATUM WAGE BARGAINING EXPERIMENT ON TRADE UNION EFFICIENCY

We present an ultimatum wage bargaining experiment showing that a trade union facilitating non‐binding communication among workers, raises wages by simultaneously increasing employers’ posted offers and toughening the bargaining position of employees, without reducing overall market efficiency.     

Market Effects of Changes in Consumers' Social Responsibility

In a duopoly model of vertical differentiation, we study market equilibrium and the resulting social welfare following an increase in the consumer's willingness to pay (WTP) for products sold by socially responsible manufacturers. Different types of such changes emerge depending on their effects on consumer heterogeneity. We show that, in most cases, increases in the consumers' social consciousness yield higher profits to socially responsible firms and may lead to higher levels of social welfare, provided that the market structure is left unchanged. However, when an increase in the consumer's social consciousness changes the market structure, welfare may fall, while the duopolists' profits rise. The resulting tension between private and social interest calls for a cautious attitude toward information campaigns aimed at increasing the consumer's social consciousness.     

Intraorganizational information and communication technology diffusion: Implications for industrial sellers and buyers

Information and communication technologies (ICTs) like CRM, ERP and Intranet are considered important for creating competitive advantage. Despite their rapid deployment rates, only a few studies mainly from the information technology (IT) and engineering literature have been devoted in uncovering the factors that influence the diffusion of new information technologies within an organization. Similarly, empirical studies regarding the impact of ICT diffusion on organizations are strikingly limited. In an attempt to fill this research void, the present study examines the implementation of ICT tools within marketing-related and non-marketing-related functions. By testing a number of hypotheses using structural equation modeling, the authors conclude that the antecedents and consequences of ICT diffusion in these functions vary. Their findings provide the foundation for a more thorough examination of both intraorganizational diffusion of ICT tools as well as their impact on organizations.     

Investor Sentiment and the Closed‐end Fund Puzzle: Out‐of‐sample Evidence

In this paper we examine the proposition that small investor sentiment, measured by the change in the discount/premium on closed‐end funds, is an important factor in stock returns. We conduct an out‐of‐sample test of the investor sentiment hypothesis in a market environment that is more likely to be prone to investor sentiment than the USA. We fail to provide supporting evidence for the claim of Lee et al. (1991) that investor sentiment affects the risk of common stocks. Consistent with Elton et al. (1998) , who show that investor sentiment does not enter the return generating process, our tests do not detect investor sentiment in a capital market that is more susceptible to small investor sentiment. Our results provide additional support against the claim that investor sentiment represents an independent and systematic asset pricing risk.     

Does trust in the bank build trust in its technology-based channels?

Trust appears as an important factor for the adoption of technology-based distribution channels. This paper investigates the construct of trust and its antecedents in the context of technology-based distribution channels, such as ATMs, the internet and phone banking. Specifically, it tests the role of trust in the bank in building trust in these channels. It reports findings from a retail bank customer survey, which revealed two dimensions of trust, affective and cognitive trust, and the significant role of three variables in forming trust in these channels: trust in the company, reputation of the company and disposition to trust. Implications of further research on understanding the antecedents of trust towards channels as well as managerial recommendations on how to build such trust are discussed.     

How changes in market conditions affect screening activity,credit risk,and the lending behaviour of banks

The global financial crisis dramatically transformed the market conditions in the banking industry. We construct a theoretical model of spatial competition that considers the differential information between lenders and loan applicants to explore how changes in the market structure affect the lending behaviour of banks and their incentives to invest in screening and how this, in turn, affects the level of credit risk in the economy. Our findings reveal that enhanced competition reduces lending cost thus encouraging the entry of new customers in credit markets. Also, that the transportation cost that loan applicants are required to pay to reach the bank of their interest shrinks with respect to the degree of competition. We further lend support to the view that stiffer competition has an increasing impact on the level of credit risk. Notably, we find that competition strengthens the incentives of banks to engage in screening activity and that screening serves as a protection mechanism that can provide banks with a shield against bad loans. Overall, when market conditions are substantially distorted, this has a dilutive impact on the incentives mechanism of banks to screen their applicants. We provide empirical evidence which is consistent with the conceptual underpinnings of our theoretical model and the obtained findings.     

Predictability of sustainable investments and the role of uncertainty: evidence from a non-parametric causality-in-quantiles test

In this article, we examine sustainable investments returns predictability based on the U.S. Dow Jones Sustainability Index (DJSI) and a wide set of uncertainty and financial distress indicators for the period 2002:01–2014:12. To this end, we employ a novel non-parametric causality-in-quantile approach that captures non-linearities in returns distribution. Based on our findings we conclude that the aggregate economic policy uncertainty (EPU) indicator and some components have predictive ability for real returns of the U.S. sustainable investments index. Moreover, if we split our sample to before and after the global financial crisis our results suggest that predictors carry causal information for real returns only in the after-crisis period. Finally, some marginal evidence of predictability from sovereign debt is also observed at the lower and upper ends of the conditional distribution of the real returns of sustainable investments. Our results might entail policy implications for investors and market authorities.     

Foreign bank ownership and income inequality: empirical evidence

ABSTRACT

Using country-level panel data over 1995–2013 on within-country income inequality and foreign bank presence, this paper establishes a positive relation between the two, running from higher foreign bank presence to income inequality. Given that foreign bank participation increased by 62% over the period 1995 to 2013, our baseline results imply a 5.8% increase in the Gini coefficient on average over this period, ceteris paribus. These results are robust to the inclusion of country and year fixed effects and to the use of restrictions on foreign bank entry in the host countries as an instrumental variable. We show that this positive effect is channelled through the lack of greenfield entry and the associated lower levels of competition.