Are company founders underpaid?

This article examines the relation between founder status and CEO compensation in publicly listed US firms. The results suggest that CEO/founders receive lower cash pay and total compensation compared to professional managers. In contrast, CEOs who are relatives of the founders receive similar cash pay and total compensation to that of professional managers. Different compensation levels also emerge in terms of stock option awards. The findings underline the importance of distinguishing among these three CEO types when examining the determinants of executive compensation.     

Large lending and banks performance. Is there any relationship? Empirical evidence from US banks

Large lending in the banking industry has sparked concerns about banks’ efficiency performance, particularly, if it is related to their credit risk, as trade credit, provided by large, creditworthy firms. We provide evidence of a rather neglected issue regarding the impact of large lending on banks’ efficiency using cost and profit stochastic functions. A unique dataset was constructed concerning all US banks collected from the Statistics on Depository Institutions report compiled by the Federal Deposit Insurance Corporation. Our sample contains US banks tracked yearly for the period 2010–2017, creating an unbalanced panel of year observations. An econometric framework based on nested non-neutral frontiers was developed to estimate the influence and the decomposition of large lending on the three banks’ performance aspects. Moreover, different types of frontiers aiming at the cost and profit sides have been investigated, and the associated elasticities have been calculated. We notice that large lending plays a crucial role in banks’ technical efficiency. Variations among different frontier models, type of bank and size, banks’ ownership structure, and macroeconomic conditions appear to be present. By considering all capital adequacy asset quality management earnings liquidity parameters, we notice that banks’ financial strength affects banks’ efficiency.     

Optimal investment,derivative demand,and arbitrage under price impact

This paper studies the optimal investment problem with random endowment in an inventory‐based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules and demand schedules for contingent claims. For exponential market makers preferences, we establish two effects due to price impact: constrained trading and nonlinear hedging costs. To the former, wealth processes in the impact model are identified with those in a model without impact, but with constrained trading, where the (random) constraint set is generically neither closed nor convex. Regarding hedging, nonlinear hedging costs motivate the study of arbitrage free prices for the claim. We provide three such notions, which coincide in the frictionless case, but which dramatically differ in the presence of price impact. Additionally, we show arbitrage opportunities, should they arise from claim prices, can be exploited only for limited position sizes, and may be ignored if outweighed by hedging considerations. We also show that arbitrage‐inducing prices may arise endogenously in equilibrium, and that equilibrium positions are inversely proportional to the market makers' representative risk aversion. Therefore, large positions endogenously arise in the limit of either market maker risk neutrality, or a large number of market makers.     

Location decisions and welfare under spatial price discrimination

The welfare effects of regulation are of crucial importance to policy makers. To this end, we present a model of n firms with differentiated costs competing in a linear market within the framework of spatial price discrimination. We prove that the Nash equilibrium locations of firms are always socially optimal irrespective of the number of competitors, the distribution of consumers, firms' cost heterogeneity, the level of privatization, and the number and/or the varieties of the produced goods. We also provide an algorithm on how to find the unique Nash equilibrium in the case of uniformly distributed consumers.     

Pathwise moderate deviations for option pricing

We provide a unifying treatment of pathwise moderate deviations for models commonly used in financial applications, and for related integrated functionals. Suitable scaling enables us to transfer these results into small‐time, large‐time, and tail asymptotics for diffusions, as well as for option prices and realized variances. In passing, we highlight some intuitive relationships between moderate deviations rate functions and their large deviations counterparts; these turn out to be useful for numerical purposes, as large deviations rate functions are often difficult to compute.     

On the choice of functional form in stochastic frontier modeling

This paper examines the effect of functional form specification on the estimation of technical efficiency using a panel data set of 125 olive-growing farms in Greece for the period 1987–93. The generalized quadratic Box-Cox transformation is used to test the relative performance of alternative, widely used, functional forms and to examine the effect of prior choice on final efficiency estimates. Other than the functional specifications nested within the Box-Cox transformation, the comparative analysis includes the minflex Laurent translog and generalized Leontief that possess desirable approximation properties. The results indicate that technical efficiency measures are very sensitive to the choice of functional specification. Perhaps most importantly, the choice of functional form affects the identification of the factors affecting individual performance – the sources of technical inefficiency. The analysis also shows that while specification searches do narrow down the set of feasible alternatives, the identification of the most appropriate functional specification might not always be (statistically) feasible. First version received: November 1999/Final version received: July 2001 RID="*" ID="*"  The authors wish to thank Almas Heshmati, Robert Romain, and an anonymous referee for insightful comments and suggestions. Special thanks go to the associate editor who handled the paper, and whose careful reading and suggestions have improved the paper substantially. The second author wishes to acknowledge the financial support from “President SSHRC” from the University of Saskatchewan. The usual caveats with respect to opinions expressed in the paper apply. Senior authorship is shared. This is University of Nebraska-Lincoln Agricultural Research Division Article No. 13270.     

Customer information sharing among rival firms

The recent rapid growth of the Internet as a medium of communication and commerce, combined with the development of sophisticated software tools, are to a large extent responsible for producing a new kind of information: Databases with detailed records about consumers’ preferences. These databases have become part of a firm's assets, and as such they can be sold to third parties. This possibility has raised numerous concerns from consumer privacy advocates and regulators, who have entered into a heated debate with business groups and industry associations about whether the practice of customer information sharing should be banned, regulated, or left unchecked. This paper investigates the incentives of rival firms to share their customer-specific information and evaluates the welfare implications if such exchanges are banned, in the context of a perfect price discrimination model.     

News shocks and labour market dynamics in matching models

We enrich a baseline real business cycle (RBC) model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks. The analysis allows shocks to have an unanticipated and a news (i.e., anticipated) component. The Bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data. News shocks in stationary and non‐stationary TFP, investment‐specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium‐ and long‐run horizons. Historically, news shocks have played a relevant role for output, but they have had a limited influence on unemployment.     

Integrated Resort Development: The Case of Cavo Sidero,Crete

Many governments have encouraged integrated resort development in an attempt to improve the well-being of the local population by generating jobs and increasing income, and because of the easier control of tourism activities within their boundaries. However, most research reports various adverse environmental and social impacts. Because of the difficulty of assessing the impacts that may result from the construction of integrated resorts, the majority of research has been conducted after their construction. This study is an impact assessment carried out prior to a large-scale development that examines whether an integrated resort proposed for development at Cavo Sidero, Crete, will result in positive impacts for the destination and the local community, and it investigates whether any conflicting interests have arisen within stakeholder groups. Through primary research examining various stakeholder groups it is revealed that economic impacts are perceived as mostly positive, while social and environmental impacts, in many cases, are viewed as negative, and that conflicting interests have arisen between different stakeholder groups.