Global Sourcing Decision‐Making Processes: Politics,Intuition, and Procedural Rationality

Global sourcing (GS) is a firmly established phenomenon in modern business practice that requires specific expertise from different organizational functions, such as purchasing, production, logistics, and research and development to analyze and select sourcing alternatives effectively. In this context, global sourcing decision‐making (GSDM) processes pose major challenges because two dimensions of functional politics, namely goal misalignment and power imbalance across functions, appear to influence procedural rationality in a manner not understood to date. Likewise, intuition also seems to play a role for the procedural rationality of GSDM processes. To elucidate the conditions under which procedural rationality is hampered or enhanced by politics and intuition, we studied five cross‐functional GSDM processes, in front of extant strategic decision‐making literature. We derive formal propositions on how functional politics and intuition influence the procedural rationality and present contingencies for the divergent role of intuition as well as functional politics in GDSM processes. Our research contributes to existing GS literature by providing a theoretical model of important microfoundations of how GSDM processes evolve. The findings also guide managers on how to structure GSDM processes such that GS projects can be conducted in a more rational fashion.     

Combining mean reversion and momentum trading strategies in foreign exchange markets

The literature on equity markets documents the existence of mean reversion and momentum phenomena. Researchers in foreign exchange markets find that foreign exchange rates also display behaviors akin to momentum and mean reversion. This paper implements a trading strategy combining mean reversion and momentum in foreign exchange markets. The strategy was originally designed for equity markets, but it also generates abnormal returns when applied to uncovered interest parity deviations for five countries. I find that the pattern for the positions thus created in the foreign exchange markets is qualitatively similar to that found in the equity markets. Quantitatively, this strategy performs better in foreign exchange markets than in equity markets. Also, it outperforms traditional foreign exchange trading strategies, such as carry trades and moving average rules.     

Truthfulness in Accounting: How to Discriminate Accounting Manipulators from Non-manipulators

Accountants preparing information are in a position to manipulate the view of economic reality presented in such information to interested parties. These manipulations can be regarded as morally reprehensible because they are not fair to users, they involve in an unjust exercise of power, and they tend to weaken the authority of accounting regulators. This paper develops a model for detecting earnings manipulators using financial statements’ ratios in a sample of Spanish listed companies. Our results provide evidence that accounting data can be extremely useful in detecting manipulators. This approach can be used by a large category of users of accounting information among which we can cite stock exchange supervisors or investing professionals.     

Educational qualifications mismatch in Europe. Is it demand or supply driven?

Most papers dealing with individual overeducation risks focus on labour supply characteristics and workers’ behaviour. On the other hand, only few studies consider labour demand characteristics and technological change. In this paper we analyse the influence of both demand and supply factors on educational mismatch in a set of 10 European countries. Our hypothesis, confirmed by results obtained using ordered probit model with sample selection, is that demand factors generally play a major role in reducing educational mismatch in technologically more advanced countries, whereas supply factors are more important in countries that are lagging behind in the international division of labour. At the same time, important cross-country and gender differences have been identified in how the demand/supply factors operate. All this calls for the fine-tuning of policies intended to tackle the problem of educational mismatch.     

Twin Crises in Emerging Markets: The Role of Liability Dollarization and Imperfect Competition in Banking

Currency crises in emerging markets have been accompanied by banking crises, with concentration in the market for bank credit increasing after large devaluations. This paper examines how the presence of imperfect competition and liability dollarization in banking shapes the real effects of the just mentioned twin crises. An important gap in the theoretical literature is filled, by being the first paper to provide a model of twin crises in the presence of imperfect competition in banking, and the changes in market structure that occur in the aftermath of crises. Doing so, the analysis is able to reveal that currency devaluations generate more severe twin crises in economies with less competitive banking sectors. This result is consistent with the empirical evidence on the concentration‐fragility view, and it unveils the importance of prudential regulation that focuses on the market structure in banking.     

Worker Personality: Another Skill Bias beyond Education in the Digital Age

We present empirical evidence suggesting that technological progress in the digital age will be biased not only with respect to skills acquired through education but additionally with respect to non‐cognitive skills (personality). We measure the direction of technological change by estimated future digitalization probabilities of occupations, and non‐cognitive skills by the Big Five personality traits from four German worker surveys. Even though we control for education and work experience, we find that workers who are more open to experience, emotionally more stable and less agreeable will tend to be less susceptible to digitalization. We also find that future technological progress may not continue to hollow out the middle class as much as it did in the recent past. These results suggest that education and labor market policies should put more emphasis on children's and workers’ personalities to strengthen their labor market resilience in the digital age.     

Decomposition of the Gini Index by Sources of Income

The Gini concentration coefficient is considered to be the best synthetic inequality measure and is widely used in economic research. In this paper, we present its decomposition by factor components with an application to income distributions in Poland. Income inequality measures proposed by Gini, Zenga and Bonferroni are calculated for different socio-economic groups based on their exclusive or primary source of maintenance. For theoretical income distribution, the Dagum type-I model was used. The basis for the calculations was the individual data coming from the Household Budgets Survey conducted quarterly by the Polish Central Statistical Office. Using the decomposition of inequality by source, we were able to examine how changes in particular income components affected overall inequality.      

Idiosyncratic volatility and the cross-section of anomaly returns: is risk your Ally?

Due to arbitrage risk asymmetries, the relationship between idiosyncratic risk and expected returns is positive (negative) among overpriced (underpriced) stocks. We offer a new active anomaly-selection strategy that capitalizes on this effect. To this end, we consider 11 equity anomalies in the U.S. market for years 1963–2016. Buying (selling) long (short) legs of the anomaly portfolios with the highest idiosyncratic volatility produces monthly abnormal returns ranging from 0.97% to 1.14% per month, outperforming a naive benchmark that equally weights all the anomalies by 45–70%. The effect cannot be subsumed by any other established anomaly-return predictor, such as momentum or seasonality. The results are robust to many considerations, including different numbers of anomalies in the portfolios, subperiod analysis, as well as estimation of idiosyncratic risk from the alternative models and throughout different periods.     

Workplace Flexibility Practices in SMEs: Relationship with Performance via Redundancies,Absenteeism, and Financial Turnover

This workplace flexibility study uses primary data on private sector small and medium‐sized enterprises (SMEs) in Lancashire, United Kingdom, collected in 2009 during the recent “credit crunch” recession. Key features include: (1) objective measures of SME performance; (2) a focus on the previously relatively neglected relationship between workplace flexibility practices (WFPs) and three SME performance indicators, namely, redundancies, absenteeism, and financial turnover; and (3) a timely contribution to research on SMEs. Numerical, functional, and cost WFPs analyses, via zero‐inflated Poisson and linear regressions, control for SME and market characteristics. Despite SMEs having limited resources, the results show a significant section of SMEs to be innovative and entrepreneurial organizations, embracing advancements in employment relations regarding employee discretion, training, participative working arrangements, and/or job security. Moreover, results indicate that WFPs have the potential to assist SMEs in responding to periods of constrained demand. Flexitime and job sharing are associated with low permanent‐employee redundancies. Training, job security, and family‐friendly practices relate to low absenteeism with reductions of up to six annual days per worker. Job security and profit‐related pay are associated with high financial turnover. Staff pay‐freeze links with high financial turnover, but to the detriment of redundancies and absenteeism, whereas management pay‐cuts or management pay‐freeze relate to low financial turnover. On a cautionary note, spending cuts, often enforced by policymakers, may be of limited benefit to SMEs, and thus other approaches would appear more fruitful.