Exploring the Curvature of the Relationship Between HRM–CSR and Corporate Financial Performance

Journal of Business Ethics - This article contributes to the general literature on the relationship between corporate social performance and corporate financial performance, as well as to the...     

Size matters for OTC market makers: General results and dimensionality reduction techniques

In most over‐the‐counter (OTC) markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting optimization problem: they need to choose bid and ask prices for making money while mitigating the risk associated with holding inventory in a volatile market. Many market‐making models have been proposed in the academic literature, most of them dealing with single‐asset market making whereas market makers are usually in charge of a long list of assets. The rare models tackling multiasset market making suffer however from the curse of dimensionality when it comes to the numerical approximation of the optimal quotes. The goal of this paper is to propose a dimensionality reduction technique to address multiasset market making by using a factor model. Moreover, we generalize existing market‐making models by the addition of an important feature: the existence of different transaction sizes and the possibility for the market makers in OTC markets to answer different prices to requests with different sizes.     

Environmental management certification and environmental performance: Greening or greenwashing?

This article analyzes the contribution of certifiable environmental management standards—such as ISO 14001 and the Eco‐Management and Audit Scheme (EMAS)—to corporate environmental performance. Based on a content analysis of 414 third‐party‐verified environmental statements from EMAS‐registered Spanish organizations, which included information for around 6,700 detailed indicators, a weak improvement in environmental performance was found. Less than half of the analyzed indicators—namely, 48.27%—revealed a net improvement. Similarly, analysis of the justifications of the registered companies for the lack of improvement points to a rather symbolical adoption of the certification, intended to do only the bare minimum. These findings call into question the prevailing opinion about the positive impact of voluntary certifiable environmental management standards on environmental greening. Implications for managers and public policy makers, as well as for other stakeholders, are discussed.     

Measuring sustainability risks: A rational myth?

The objective of this paper is to investigate the rigorousness and reliability of sustainability rating agencies' evaluation of corporate sustainability risks. Using grounded theory, this study conducts a qualitative analysis of 32 semi‐structured interviews with practitioners involved in this activity and shows the trade‐offs and rational myths underlying this evaluation process. The image of rationality and rigorousness projected by sustainability risk measurements is mostly intended to address the increasing institutional pressures for reliable and comparable information, particularly from institutional investors and socially responsible investment decision makers. Nevertheless, risk analysts face serious challenges due to the lack of reliable information, the unpredictability of sustainability risks, the methodological issues related to the measurement process, and the complexity and context‐dependency of risk assessment. These challenges call into question the official and optimistic rhetoric of rating agencies. This study contributes to the literature on sustainability risks and rational myths in organizations. Managerial implications and avenues for future research are also discussed.     

Charitable asymmetric bidders

Recent papers show that the all‐pay auction is better at raising money for charity than the first‐price auction with symmetric bidders under incomplete information. Yet, this result is lost with sufficiently asymmetric bidders under complete information. In this paper, we consider a framework on charity auctions with asymmetric bidders under some incomplete information. We find that the all‐pay auction still raises more money than the first‐price auction. Thus, the all‐pay auction should be seriously considered when one wants to organize a charity auction.     

Boom,slump, sudden stops,recovery, and policy options. Portugal and the Euro

Over the past 20 years, Portugal has gone through a boom, a slump, a sudden stop, and now a recovery. Unemployment has decreased, but remains high, and output is still far below potential. Competitiveness has improved, but more is needed to keep the current account in check as the economy recovers. Private and public debt are high, both legacies of the boom, the slump and the sudden stop. Productivity growth remains low. Because of high debt and low growth, the recovery remains fragile. We review the history and the main mechanisms at work. We then review a number of policy options, from fiscal consolidation to fiscal expansion, cleaning up of non-performing loans, labor market reforms, product market reforms, and euro exit. We argue that at this point, the main focus of macroeconomic policy should be twofold. The first is the treatment of non-performing loans, the second is product market reforms and reforms aimed at increasing micro-flexibility in the labor market. Symmetrically, we also argue that at this point, some policies would be undesirable, among them faster fiscal consolidation, measures aimed at decreasing nominal wages and prices, and euro exit.     

Habit,Decision-Making,and Rationality: Comparing Thorstein Veblen and Early Herbert Simon

The article aims to contribute to the convergence between institutional and neo-Schumpeterian evolutionary economics. It intends to help unify the behavioral foundations of these two strands of thought by returning to the original views of their main historical inspirations. It thus proposes a comparative analysis of the theory of human behavior developed by Thorstein Veblen and Herbert Simon, respectively. The article notably discusses how Simon’s early work links together the notions of habit, rationality, and the decision-making process, and explores the extent to which his views are consistent with, complementary to, or divergent from Veblen’s. The article highlights several commonalities between Simon and Veblen’s views on habits. However, Simon departs from Veblen in developing a dual model of human behavior which clearly differentiates habit-based from decision-based behaviors. The article argues that neo-Schumpeterian evolutionary economists should go beyond this binary model and build on the pragmatist-Veblenian approach, in which these two dimensions are intimately entangled. This process could allow the economists in question to take advantage of the most valuable insights of institutional economics regarding the interactions between individual choices and habits and institutions.     

Government‐spending multipliers and the zero lower bound in an open economy

This paper assesses the size of the government‐spending multiplier in an open economy when the zero lower bound (ZLB) on the nominal interest rate is binding. In a theoretical framework, in a closed economy, other authors have shown that when the nominal interest rate is binding the government‐spending multiplier can be very large (close to four). Their theory helps illuminate the government‐spending multiplier in the ZLB, but it is difficult to match that theory with the data. We argue that, in an open economy, another channel exists for the crowding‐out effect via the real exchange rate. For an open economy, the government‐spending multiplier is not large owing to the appreciation of the real exchange rate, induced by the appreciation of aggregate demand that follows the increases in government spending. To test the robustness of our open economic model, we conduct the same analysis in a corresponding closed economy model. The result from our closed economy model confirms the result obtained in the other work. Our theoretical results are consistent with the results obtained in the empirical literature, which uses the vector autoregressive method and the structural vector autoregressive approach to measure the impact of government‐spending shock on the real gross domestic product and revealed that the government‐spending multiplier tends to be lower in open economy.