Does self-regulation work? Experimental evidence of the reputational incentives of Self-Regulatory Organizations

Self-regulation (SR) is a common way of enforcing quality in markets (such as banking, financial services and several professions) and in a variety of public and private organizations. We provide experimental evidence of the reputational incentives of self-regulatory organizations (SROs) to publicly disclose versus cover-up fraud in an incomplete information environment. We find that observed behaviour is generally consistent with Bayesian equilibrium when subjects are informed about the relative likelihood of fraud detection by a ‘vigilant’ versus a ‘lax’ SRO type. In particular, a fraud disclosure equilibrium is supported when subjects are informed that the ‘vigilant’ SRO is more likely to detect fraud; otherwise, a cover-up equilibrium is supported. However, when subjects are not informed about the relative likelihood of fraud detection by the SRO types (as expected in real SR situations), no equilibrium is strongly supported. Our results suggest that in practice, the reputation-based incentives for effective SR may be inherently ambiguous and weak.     

Measuring persistence in Croatian tourism: evidence from the Adriatic region

This study examines the degree of persistence in foreign tourist arrivals and overnight stays for seven Croatian coastal counties over the period January 1998 to December 2013 using fractional integration techniques. Our findings reveal that the respective regional tourism indicators exhibit seasonal unit roots which require seasonal first differences to render the respective time series stationary. With respect to the long-run evolution of the respective time series, both the parametric and semi-parametric fractional integration approaches show the degree of persistence is greater than zero, but significantly less than one for the majority of the coastal counties. Impulse response analysis reveals indeed shocks to the deseasonalized time series, either foreign tourist arrivals or foreign tourist overnight stays, appear short-lived with the exception of Istria and Primorje-Gorski kotar counties. Policy implications of the results are also discussed.     

Tail dependence risk exposure and diversification potential of Islamic and conventional banks

This paper undertakes a rolling window comparative analysis of risks for portfolios consisting of GCC Islamic and conventional bank indices. We draw our empirical results by employing canonical, drawable and regular vine copula models, as well as by implementing a portfolio optimization method with a conditional Value-at-Risk constraint. We find evidence of higher riskiness in the group of Islamic banks relative to the group of conventional banks across each of the financial rolling window scenarios under consideration. Specifically, a greater negative (nonlinear) tail asymmetric dependence is observed in the pairs of Islamic banks’ relationships. The results also show that the optimal portfolio model supports a clear preference towards the group of conventional banks in regard to risk minimization and diversification benefits.     

Spillovers and absorptive capacity in the decision to innovate of Spanish firms: the role of human capital

This paper investigates whether the existence of knowledge spillovers and the capacity of firms to assimilate them, which we relate with R&D intensity and some human resource management practices, are associated with the decision to innovate of Spanish firms. In order to do this, we employ data from the ‘Central de Balances’ database, which covers both manufacturing and services firms during the period 2003–2007, and use an estimator proposed by Wooldridge [2005. Simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics 20, no. 1: 39–54] for dynamic random effects discrete choice models. The empirical exercise provides evidence on the positive link between spillovers and the innovative behaviour of companies, not just for the knowledge generated in the same industry, but also for that generated in the same region or by the public sector. Moreover, this link is stronger for those firms with a higher capacity to absorb those spillovers. This ability not only works through firms’ R&D capabilities, but also through factors such as the quality of the labour force, the share of temporary employment and the amount of resources spent in training. In addition to these factors, we find that innovation performance exhibits a high degree of inertia. Further, some other observed firm characteristics, such as size, sales growth, export behaviour, sector capital intensity or financial structure variables, are also found to be relevant determinants of the likelihood of innovation.     

The Role of Green Collaborative Strategies in Improving Environmental Sustainability in Supply Chains: Insights from a Case Study

This article aims to quantify to what extent collaborative strategies are more effective than internal or organization‐level actions to green supply chains. In this regard, the impact of decisions made at different stages of a supply chain in a product's carbon footprint is quantified. Organizational and product carbon footprints are calculated using the Compound Method Based on Financial Accounts (MC3). The results underline that concentrating reduction efforts in some stages of the supply chain is more effective than implementing individual actions by the participants. Collaboration among the participants is needed to decide what practices are implemented, at what stage they are needed and how they are to be implemented. This article adds to the literature on supply chains and sustainability. Previous research suggests that collaborative strategies have great potential for reducing the carbon footprint of products, while indicating the need for empirical research to support this statement. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Are traditional timing models well specified?

Traditional timing models are affected by several biases, which generate spurious timing and stock-picking coefficients. Academics have appointed different causes as the possible sources of these biases. A negative correlation between timing and stock-picking abilities arises as a consequence of the biases in traditional timing models. This article provides evidence for one bias commonly found in traditional timing models, which is related with options. We focus on this bias in view of the scant attention it has so far received in the literature. We believe one possible cause for this bias is the failure to include the cost of the option implicit in timing activities in the timing models, and on this basis, we opt for a corrected version of the Merton and Henriksson model (1981 Merton, RC and Henriksson, RD. 1981. On market timing and investment performance II: statistical procedures for evaluating forecasting skills. Journal of Business, 54: 513–34. [Crossref] , [Google Scholar]). This study therefore is a pioneer in the assessment of the magnitude of this bias and in the measurement of the impact of its correction on fund managers’ results. Our results confirm both the existence of the bias and the correction of the problem when the cost of the option is included in timing models. The modified version of the Merton and Henriksson model, unlike the traditional model, reports positive timing and stock-picking coefficients, supporting the good performance by managers.     

Learning before the storm: Modeling multiple stakeholder activities in support of crisis management,a practical case

The severe consequences of a Critical Infrastructure (CI) crisis demand continued research directed toward proactive and reactive management strategies. Despite the best efforts of governments and communities, the diversity of stakeholders, conflicting demands for resources, and a lack of trust among organizations create complexities that limit the effectiveness of the response. This paper identifies four specific problems that appear to reoccur when CIs are challenged: heterogeneity, multiple and inconsistent boundaries, resilience building and knowledge transfer and sharing. A combination of collaborative modeling and software simulation methodologies is proposed in order to identify the interrelationships among diverse stakeholders when managing the preparation for and reaction to a CI crisis. This approach allows experts to work together and share experiences through the modeling process which can lead them to a better understanding of how other organizations work and integrate different perspectives. In addition, simulation models enable domain experts to understand the consequences of certain policies in the short and long terms, thus improving the crisis managers' knowledge for future crisis situations. This paper presents a practical case of a hypothetical crisis in the CI sector and the approach used in order to deal with the four problems identified above.     

Battle royal in biotechnology: R&D vs. product vs. process innovations

Companies regard innovation as a central element of their business. However, as not all innovation types are the same, the central question is: should their announcements bring about the same effect on performance? This article analyses potential differences in firm value derived from the innovation-type announcements ‘R&;D’, ‘product’, and ‘process’, made by intensive news-generating firms such as biotech companies. The empirical application shows a significantly positive reaction to innovation announcements, with the prospect of future innovation (‘R&;D’ investment announcements) having greater impact on firm value than ‘product’ and ‘process’ innovations. Firm experience also acts as a moderator in this innovation–performance relationship, which is particularly relevant for entrepreneurs who need to develop and send credible signals indicating the value of the firm's intangible assets to the market.     

The Endurance and Eclipse of the Controlled Vote: A Formal Model of Vote Brokerage Under the Secret Ballot

Throughout much of mankind's experience with elections, vote brokers – local elites who direct the voting decisions of a subset of the electorate – have been able to make or break political careers. In various polities, brokers have thrived in spite of the secret ballot, a surprising outcome given that vote secrecy would ostensibly allow citizens to pocket the inducements offered by such individuals and vote their consciences anyway. To address this puzzle, we develop a framework for understanding the persistence and demise of vote brokerage under the secret ballot. In our model, a broker contracts with voters using an outcome contingent contract: some fixed benefit is promised to all voters sharing one of several observable profiles should the broker's candidate win the election. Using this framework, we demonstrate that the existence of brokerage depends on the size of the electorate contained within the jurisdiction controlled by the broker, with large jurisdiction sizes tending to drive brokerage out of existence. Moreover, we detail the manner in which the strategies employed by brokers depend on their economic power, the size of social groups, and ideological polarization. Empirical evidence from Minas Gerais, Brazil is used to evaluate the performance of the model.