Wild Bids. Gambling for Resurrection in Procurement Contracts

This paper analyses the problem of abnormally low tenders in the procurement process. Limited liability causes firms in a bad financial situation to bid more aggressively than financially healthy firms in the procurement auction. Therefore, it is likely that the winning firm is a firm in financial difficulties with a high risk of bankruptcy. The paper focuses on the regulatory practice of surety bonds to face this problem. We show that the use of surety bonds reduces and sometimes eliminates the problem of abnormally low tenders. We provide a characterization of the optimal surety bond and show that the U.S. practice of requiring that surety bonds cover over 100% of the contract price can be excessive, implying overinsurance to the problem of abnormally low tenders.     

Expected shortfall assessment in commodity (L)ETF portfolios with semi-nonparametric specifications

ABSTRACT

This paper studies the risk assessment of semi-nonparametric (SNP) distributions for leveraged exchange trade funds, (L)ETFs. We applied the SNP model with dynamic conditional correlations (DCC) and EGARCH innovations, and implement recent techniques to backtest Expected Shortfall (ES) to portfolios formed by bivariate combinations of major (L)ETFs on metal (Gold and Silver) and energy (Oil and Gas) commodities. Results support that multivariate SNP-DCC model outperforms the Gaussian-DCC and provides accurate risk measures for commodity (L)ETFs.     

Is disclosure the right way to comply with stakeholders? The Shell case

This paper is part of an ongoing research project and builds upon a previous one in which we explain the failure of the Agency Theory through the Shell case. In that, we analysed the behaviour of Shell managers, who reclassified oil reserves, playing with the share price because they owned share options. This previous paper established an important literature framework that is continued and organized to go deeper into our analysis in this paper. The goal here is to show that the way that is supposed to be the right tool to inform stakeholders – disclosure – is not enough, and even in the Shell case, no one would have noticed the problems with the oil reserves through the mere analysis of the company disclosure during the ‘strange period’ (1998–2003). The methodology used in this paper is lexical analysis, which seems to be an innovative and effective approach to the analysis of Corporate Social Disclosure, given the un‐codified nature of the latter. The conclusions obtained highlight the problem of lack of transparency in the contents of corporate social disclosure: some firms avoid communicating crucial contents, some others twist the results in order to camouflage advantages to shareholders or managers. If it is like this for disclosing firms, what is happening in the case of non‐disclosing firms?     

Protection with many sellers: An Application to Legislatures with Malapportionment

What effect, if any, does legislative malapportionment have on international trade protection? This paper argues that in malapportioned legislatures, such as the U.S. Senate, industries become over‐represented in a legislature if they are disproportionately located in small constituencies. As a result, industries that are disproportionately located in smaller constituencies are likely to receive greater protection from international trade. To argue this point theoretically, this paper develops a new model, combining legislative bargaining and a model of lobbying to study trade protection while allowing for a legislature with multiple legislators and differently sized constituencies. We then test the predictions of this new model using tariff votes from the U.S. Senate in the late nineteenth and early twentieth centuries and a panel of tariffs and non‐tariff barriers to trade in the U.S. in the 1990s. Considerable support is found for the model's predictions. Industries concentrated in states where the population is low receive greater protection from imports.     

A drunk and her dog: a spurious relation? Cointegration tests as instruments to detect spurious correlations between integrated time series

A significant correlation between integrated time series does not necessarily imply a meaningful relation. The relation can also be meaningless, i.e. spurious. Cointegration is sometimes illustrated by the metaphor of ‘a drunk and her dog’. The relation between integrated processes is meaningful, if they are cointegrated. To prevent spurious correlations, integrated series are usually transformed. This implies a loss of information. In case of cointegration, these transformations are no longer necessary. Moreover, it can be shown that cointegration tests are instruments to detect spurious correlations between integrated time series. This paper compares the Dickey–Fuller and the Johansen cointegration test. By means of Monte Carlo simulations, we found that these cointegration tests are a much more accurate alternative for the identification of spurious relations compared to the rather imprecise method of utilizing the R ²-and DW-statistics recommended by some authors. Furthermore, we demonstrate that cointegration techniques are precise methods of distinguishing between spurious and meaningful relations even if the dependency between the processes is very low. Using these tests, the researcher is not in danger of either neglecting a small but meaningful relation or regarding a relation as meaningful which is actually spurious.     

The Effects of Progressive Levels of Interactivity and Vividness in Web Marketing Sites

Abstract

This experiment examines interactivity and vividness in commercial web sites. We expected increased levels of interactivity and vividness would lead to more positive attitudes toward web sites, stronger feelings of telepresence, and greater attitude—behavior consistency. In addition, we expected increased levels of vividness to lead to the development of more enduring attitudes toward the site. Participants explored four web sites. Increases in interactivity and vividness were associated with increased feelings of telepresence. In addition, increases in vividness were associated with more positive and more enduring attitudes toward the web site. Implications for new media researchers and practitioners are discussed.     

The Effects of CEO Trustworthiness on Directors’ Monitoring and Resource Provision

This research investigates the interplay between leadership styles and institutional corporate social responsibility (CSR) practices. A large-scale field survey of managers reveals that firms with greater transformational leadership are more likely to engage in institutional CSR practices, whereas transactional leadership is not associated with such practices. Furthermore, stakeholder-oriented marketing reinforces the positive link between transformational leadership and institutional CSR practices. Finally, transactional leadership enhances, whereas transformational leadership diminishes, the positive relationship between institutional CSR practices and organizational outcomes. This research highlights the differential roles that transformational and transactional leadership styles play for a firm’s institutional CSR practices and has significant implications for theory and practice.     

Cultural compatibility in internal knowledge transfers: an application to hotel chain growth

This work addresses the internal transfer of knowledge from a cultural perspective when hotel chains grow. The analysis begins with an approach to the intra-organisational transfer of knowledge in hotel chain expansion. Later, culture in organisations is addressed; this gives rise to the proposal of cultural compatibility as a determinant of the intra-firm transfer of knowledge. Moreover, reference is made to possible sources of cultural incompatibility: location abroad of the new hotel, conversions where most employees stay, and small size of the new hotel. The hypotheses are tested in the Spanish hotel context. The results show effects and causes of the compatibility between the cultural context in which the knowledge to be transferred originated and the cultural framework in which it is to be implemented.     

Ownership structure and diversification in a scenario of weak shareholder protection

This work examines the influences of ownership concentration and insider ownership on corporate strategies for diversification within a scenario characterized by poor protection of shareholder interests. We find evidence of a quadratic relationship between ownership concentration and diversification, and a cubic relationship between diversification and insider ownership. These results point towards the high probability of both expropriation and entrenchment phenomena, respectively, in this kind of scenario. We also find that concentrated ownership requires high levels of insider ownership, in order to prevent negative externalities of diversification. Another result shows that entrenchment externalities affect diversification before they erode firm value, which suggests that for low levels of diversification, firm value is still not negatively affected. Additionally, our results show that control mechanisms, such as debt, director remuneration and compliance with codes of good practice, are negatively related to the level of diversification. Overall, our results confirm the theoretical relevance of agency theory in explaining managerial attitudes towards corporate strategy, i.e. diversification. Furthermore, companies characterized by deficiencies in shareholder legal protection, concentrated ownership structures and a higher likelihood of managers being entrenched, should focus on the correct functioning of corporate governance mechanisms.     

Has China’s fast industrial growth been efficient? An industry-level investigation with a newly constructed data set

We adopt contemporaneous, nonradial and variable returns to scale assumptions in a data envelopment analysis (DEA) exercise to address the inefficiency problem in Chinese industries in different policy regimes using a newly constructed data set for 24 Chinese manufacturing industries in 1952–2008. While confirming that the central planning period was indeed a ‘graveyard’ for productivity that entailed severe technical regress and efficiency losses, we do not find a steady improvement in efficiency during the reform period despite strong technical progress. We argue that the resurgent prominence of the government and the state sector since the late 1990s, especially following China’s World Trade Organization accession, has obstructed the efficiency improvement.