On the stability of the Klein-I model

This paper presents a revision of the numerical results by Theil and Boot (1962) on the asymptotic standard errors of characteristic roots in the Klein-I model.     

Auditors’ Joint Engagements and Audit Quality: Evidence from Italian Private Companies

This study examines the effect of auditors’ collaboration in joint audit engagements on knowledge transfer, auditor expertise, and audit outcomes. I employ a unique sample of Italian private companies whose financial statements are jointly audited by three individual auditors and use measures from the network literature to capture the intensity of interactions between these auditors. I find a positive association between several audit quality proxies and auditors’ collaboration in multiple joint engagements. My results suggest that auditors develop knowledge and contacts through collaboration which potentially leads to higher audit quality. Overall, my findings suggest that joint engagements facilitate knowledge transfer and increase auditor expertise.     

Industrial policy and manufacturing targeting in the US: new methodological tools for strategic policy-making

The economic crisis has pushed several countries to adopt selective industrial policies to promote manufacturing and some selected strategic sectors. Despite this new activism, the process of defining strategic targets risks being carried out with poor rigour on a political level, setting governments up for failure. This paper discusses the notion of strategic sector and proposes a new methodology to increase transparency and effectiveness in the identification of what can be defined as ‘strategic’. Focusing on the analysis of the US manufacturing system, we develop a composite indicator – the Strategic Sector Index (SSI) – to rank manufacturing industries on the basis of their strategic significance. Furthermore, we apply an uncertainty analysis methodology to the SSI to evaluate the robustness of the ranking and to minimise the degree of policy-makers’ discretionality in influencing the results.     

Food Competition in World Markets: Some Evidence from a Panel Data Analysis of Top Exporting Countries

This paper investigates the relevance of relative prices and world income as determinants of food exports for the top trading countries in the period 1992–2012 using a panel data framework. We find that price elasticities generally take lower values for processed goods, and the opposite holds for income elasticities. Processed goods are also characterised by an inverse relationship between price elasticities and average unit values. The analysis suggests that both emerging and advanced countries can be expected to increase their export specialisation in processed goods. Furthermore, developed economies can face fierce competition from emerging countries by enhancing the quality content of their processed good exports.     

Organisational modes for Open Innovation in the bio-pharmaceutical industry: An exploratory analysis

This paper investigates the adoption of Open Innovation in the bio-pharmaceutical industry, studying through which organisational modes it is put into practice and how these modes are interwoven with the different phases of drug discovery and development process. Two rounds of interviews with industry experts were carried out to develop a model describing the adoption of Open Innovation by bio-pharmaceutical companies. This framework was then applied to an extensive and longitudinal empirical basis, which includes data about the adoption of Open Innovation by the top 20 worldwide industry players, in the time period 2000-2007. The paper provides a thorough discussion of how bio-pharmaceutical firms have used different organisational modes (i.e. licensing agreements, non-equity alliance, purchase and supply of technical and scientific services) to enter into relationship with different types of partners (i.e. large pharmaceutical companies, product biotech firms, platform biotech firms and universities) with the aim to acquire (Inbound Open Innovation) or commercially exploit (Outbound Open Innovation) technologies and knowledge. The implications of the study for Open Innovation research and possible avenues for future investigation are discussed at length in the paper.     

An Exploratory Study of the Factors Enhancing and Inhibiting Export Growth in the Chilean Wine Industry

This exploratory study investigates the main drivers that enhance and inhibit the export performance of Chilean wineries. The findings of this study suggest that the main constraints within the Chilean wineries in developing exports is the lack of financial resources, limited quantities of stocks for market expansion, management's lack of knowledge and experience, and the high cost of traveling and participating in trade shows. The main drivers of wine export performance according to the respondents are high quality of the wines, well-established network of international distributors, and marketing skills. The major inhibitors of developing wine exports are exchange rate variability, problems in selecting a reliable international distributor, and limited government support to promote wine exports. This study also shows that export managers of Chilean wineries have high educational levels and have international experience. The findings have important implications for export development efforts of both governments and managers.     

An Assessment of the Within-Year Seasonality in the Loan Loss Provisioning Behavior of European Banks

This study aims at assessing whether a significant within-year seasonality exists in the loan loss provisioning behavior of European listed banks observed in the period from 2004 to 2013. Since the accuracy of auditing processes and the level of disclosure requirements in financial reports differ among quarters, during the year, banks may have a leeway to underestimate and postpone the complete provisioning of loan losses in the less regulated and less audited quarters. We hypothesize that those differences are relevant factors which determine non-lower or significantly higher average levels of loan loss provisions in the half-yearly and especially in the annual financial reports than in the interim management statements disclosed in the first and the third quarters of the year. We also investigate the impact of the recent financial crisis and develop a special analysis for the ltalian banks＇ case. The empirical results support our hypotheses, suggesting that, in some cases, a convergence among quarterly levels of auditing processes and disclosure requirements may be needed. Our work contributes to the existing literature by providing additional evidences and considerations on the within-year seasonality in the loan loss provisioning behavior of European listed banks observed in the last decade.     

The effect of price targets on the composition of CEO pay

This article analyzes the impact of price targets from the IBES Detail Price History Target database on CEO compensation retained from Execucomp. The two databases are merged at fiscal year frequency and an OLS regression with fixed effect is used to analyze the impact of price target on CEO compensation. The analysis reveals that analysts’ price targets affect top executives’ compensation: when analysts predict a growth in the share price for a company, the compensation package tilts towards stock options, when analysts forecast a drop in the share price, the compensation package tilts towards cash-based compensation and restricted stocks. I argue that the result is more aligned with the managerial power model of compensation (which assumes the board of directors maximizes managers’ compensation) than with the arm’s length bargaining model (that states that managers’ compensation is set to maximize shareholders’ profit).     

A jump-diffusion model for the euro overnight rate

In this work we introduce a jump-diffusion process for the euro overnight rate (the European over night index average) that is able to capture the main characteristics of this rate: (i) dynamics constrained to remain in the corridor of official rates fixed by the European Central Bank; (ii) mean reversion towards the official rate on main refinancing operations; and (iii) highly discontinuous pattern (with jumps), also without variations in the official rate. After calibrating the model parameters on historical data, we implement the model to price an overnight indexed swap. Finally, a comparison between our model and the most common short-term interest rate models is presented.