Estimating Central Banks’ preferences from a time-varying empirical reaction function

We estimate monetary policy reaction functions for the United States, the United Kingdom, and Germany, using a Markov-switching model that allows for shifts in the coefficients of the central bank's reaction function as well as for independent shifts in the residual variance. The results indicate that central bank policy can be characterized as falling into a low- and a high-inflation regime. Over time all central banks have assigned changing weights to inflation and the output gap. Switching in the residual variance turns out to be important for the fit of the model. As a reaction function is a reduced form, coefficients embody preference parameters as well as parameters characterizing the structure of the economy. To recover the central banks’ preferences, we estimate the preference parameters jointly with a small model of the economy. The results show that the Bundesbank has placed a relatively higher weight on inflation than the Fed. Moreover, for the Bundesbank and the Fed the differences between both regimes seem to originate mainly from a changing preference for interest rate smoothing.     

China’s CO2 emissions from power generating stations and the role of subsidies – a first exploration

Our analysis is the first of its kind to explore patterns of subsidization and CO₂ emissions in China’s electricity-producing sector. Applying data for all power plants across China and controlling for the age, capacity and location of generating stations, we find that plants attracting a higher government subsidy are also the plants generating a disproportionate share of CO₂ emissions. This distortion is incongruent with China’s aspiration for a greener economy but may be eliminated if China delivers on its November 2013 announcement to review many industry subsidies on its way to a fully fledged market economy.     

Management of environmental and social risks and topics in the banking sector - An empirical investigation

This paper investigates how environmental and social (E&S) risks and topics (i. e. E&S issues that are important in terms of adaptation to a changing business environment) are integrated in the banking sector. Despite banks’ key role in steering financial flows towards sustainable development, little is currently known as to whether and how banks integrate E&S aspects into their management control systems and whether this integration translates into E&S performance. Building on prior studies in the environmental management control literature, we design a conceptual model in which we link contextual factors, a proactive strategy approach, E&S management controls, and E&S performance. Following common practice in the banking sector, we differentiate between two paths of E&S management controls: risk management (value protection) and topic management (value creation). Based on survey data for a small sample of 50 European banks, we find evidence that contextual factors, reflected in the perceived power and legitimacy of clients, voluntary standard setters and NGOs, are positively related to a proactive strategy approach. This proactive strategy translates into both topic and risk management. Yet, in the next step, only topic management is positively related to the E&S performance of a bank, but not risk management.     

Scared Stiff? The Effectiveness of Threat Appeals in Counseling Services Advertising to High‐Anxiety Students

This exploratory study proposes and tests a theoretical model that analyzes threat appeals in regard to their effectiveness for high‐anxiety students, one of the major target groups for counseling services. In particular, affective and cognitive responses to a threat appeal advertisement and their effects on attitude toward the advertisement and behavior are examined. The results suggest that a strong threat appeal is not effective for counseling services but that positive emotions toward the advertisement and cognitive involvement have a positive impact on advertising outcomes. The study contributes further to knowledge of threat appeal effectiveness, targeting “anxious” audiences.     

The Co‐Movement of Credit Default Swap Spreads,Equity Returns and Volatility: Evidence from Asia‐Pacific Markets

We provide a comprehensive analysis of the co‐movement of credit default swap (CDS), equity, and volatility markets in four Asia‐Pacific countries at firm and index level during the period 2007–2010. First, we examine lead–lag relationships between CDS spread changes, equity returns, and changes in volatility using a vector autoregressive model. At the firm level equity returns lead changes in CDS spreads and realized volatility. However, at the index level the intertemporal linkages between the three markets are less clear‐cut. Second, we apply the measures proposed by Diebold and Yilmaz (2014) to an analysis of volatility spillovers among the CDS, equities, and volatility asset classes. The results suggest that realized volatility (at firm level) and implied volatility (at index level) are the main transmitters of cross‐market volatility spillovers. Third, we analyze the impact of various structural factors and confirm the importance of realized volatility of equity returns as a determinant of CDS spreads.     

The effect of uncertainty on pollution abatement investments: Measuring hurdle rates for Swedish industry

We estimate hurdle rates for firms’ investments in pollution abatement technology, using ex post data. The method is based on a structural option value model where the future price of polluting fuel is the major source of uncertainty facing the firm. The empirical procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector, and their sulfur dioxide emissions over the period 2000–2003. The results indicate that hurdle rates of investment vary from 2.7 to 3.1 in the pulp and paper industry and from 3.4 to 3.6 in the energy and heating sector depending on econometric specification.     

DIFFERENCES IN FINANCIAL PERFORMANCE AMONGST SPANISH SMES ACCORDING TO THEIR CAPITAL-OWNERSHIP STRUCTURE: A DESCRIPTIVE ANALYSIS

ABSTRACT ** :  The purpose of this paper is to assess whether financial performance differences between labour-managed (LOFs) and mercantile (PCFs) firms are due to differences in their capital-ownership configuration or to the particular measurement indexes commonly used to quantify performance. The empirical evidence rests upon a 1994–2003 data set of LOFs and PCFs that operate in the Industrial and Services sectors of the economy of Navarre, Spain. The results do not detect significant differences in financial performance between LOFs and PCFs, especially in the long-term and suggest the need to develop performance indices more akin to the special nature of the LOFs.     

Innovation Field Orientation and Its Effect on Innovativeness and Firm Performance

New product development (NPD) has become a prime source for gaining a competitive edge in the market. Although a large body of research has addressed the question of how to successfully manage individual innovation projects, the management of a firm's new product portfolio has received comparably less research attention. A phenomenon that has recently emerged on the research agenda is innovation field orientation. Such orientation is understood as the deliberate setup and management of multiple thematically related NPD projects. However, the facets and effects of innovation field orientation are still unexplored. In particular, this study is interested in (1) developing a concept of innovation field orientation, (2) investigating the extent to which innovation field orientation is an established part of the corporate strategic planning practice, and (3) assessing the direct and indirect performance effects of innovation field orientation. For the empirical analysis, data were collected through a mail survey and document analyses from 122 publicly listed firms. Tobin's q was used as an objective performance metric directly related to shareholder value. The results confirm that innovation field orientation is a phenomenon that prevails in practice. In addition, all defining aspects of this orientation have either direct or indirect effects on firm performance. Hence, those firms that deliberately specify and manage innovation fields have a more innovative product portfolio and are more successful than others. Specifically, the findings underline the performance relevance of formally framing innovation fields and assigning a critical mass of resources to them. In addition, empirical support is lent to the suggestion that innovation field orientation has strong indirect performance effects mediated by the innovativeness of the firm's new product portfolio. This implies that firms that deliberately specify focus areas, assign resources to, provide organizational framing for, and stimulate synergies between related NPD projects stand a better chance to achieve a more innovative new product portfolio. This again is highly appreciated by investors and results in a superior stock market evaluation of these firms.