On the generic impossibility of truthful behavior: A simple approach

Summary We provide an elementary proof showing how in economies with an arbitrary number of agents an arbitrary number of public goods and utility functions quasi-linear in money, any efficient and individually rational mechanism is not strategy-proof for any economy satisfying a mild regularity requirement.The authors wish to thank William Thomson, Salvadpr Barberá, José Angel Silva and an anonymous referee for helpful comments. The remaining errors are our exclusive responsibility. Financial support from DGICYT under project PB 91-0756 and the Instituto Valenciano de Investigaciones Económicas is gratefully acknowledged.     

Automatic balancing mechanisms for notional defined contribution accounts in the presence of uncertainty

The notional defined contribution model combines pay-as-you-go financing and a defined contribution pension formula. This paper aims to demonstrate the extent to which liquidity and solvency indicators are affected by fluctuations in economic and demographic conditions and to explore the introduction of an automatic balancing mechanism (ABM) into the pension scheme. We demonstrate that the introduction of an ABM reduces the volatility of the buffer fund and that, in most cases, the automatic mechanism that re-establishes solvency produces the highest value of the risk-adjusted notional factor.     

The effects on investment incentives of an allowance for corporate equity tax system: the Belgian case as an example

The Modigliani–Miller theorem serves as the standard finance paradigm on corporate capital structure and managerial decision making. Implicitly, it is assumed that the market possesses full information about the firm. However, if firm managers have insider information, they may attempt to ‘signal’ changes in the firm’s financial structure and, in competitive equilibrium, shareholders will draw deductions from such signals. Empirical work shows that the value of underlying firms rises with leverage because investors expect such firms to implement positive NPV projects. We empirically examine this view using a sample of debt issue announcements by publicly traded firms listed on the London Stock Exchange. We argue that the timing of debt issues is fundamental in determining the relationship between leverage and risk-adjusted returns. We show that an announcing firm’s intrinsic value may not rise depending on when management publicly ‘signals’ changes in their firm’s capital structure. Specifically, we show that risk-adjusted returns rise positively for firms that make debt announcements during normal economic conditions while they tend to decline for firms making debt announcements during recessionary periods. During recessionary periods, market risk and loss aversion rise and investors focus less on the potential growth of debt announcing firms and focus more on potential losses instead. We conclude that the timing of new debt is of paramount importance and managers’ inability to prudently time such announcements can lead to exacerbated levels of systematic risk coupled with a significant erosion in shareholder wealth.     

Lost in intervention. The Harrod–Balassa–Samuelson effect on the peseta/dollar real exchange rate (1870–1998)

We have decomposed the peseta/dollar real exchange rate (1870–1998) into its trend and cyclical components and used the former to proxy its time-varying equilibrium. Then, we have compared changes in the equilibrium with changes in the Spanish and the USA productivity differentials to identify years that do not fit with the Harrod–Balassa–Samuelson (HBS) hypothesis. The greatest maladjustment is found in the 1940s and 1950s, decades of strong exchange rate intervention in Spain. Conversely, the link between equilibrium and differentials adjusts to the hypothesis when using the non-intervened peseta/dollar exchange rate on the Tangier black market. These contrasting results back up the idea that exchange rate intervention, so common in developing countries, might explain their scanter evidence in favour of the HBS effect.     

An algorithm for panel ANOVA with grouped data

In this paper, we present an algorithm suitable for analysing the variance of panel data when some observations are either given in grouped form or are missed. The analysis is carried out from the perspective of ANOVA panel data models with general errors. The classification intervals of the grouped observations may vary from one to another, thus the missing observations are in fact a particular case of grouping. The proposed Algorithm (1) estimates the parameters of the panel data models; (2) evaluates the covariance matrices of the asymptotic distribution of the time-dependent parameters assuming that the number of time periods, T, is fixed and the number of individuals, N, tends to infinity and similarly, of the individual parameters when T → ∞ and N is fixed; and, finally, (3) uses these asymptotic covariance matrix estimations to analyse the variance of the panel data.     

An Empirical Investigation on the Transfer of Expatriates Within MNCs from a Knowledge Perspective

We study the use of expatriates in transferring knowledge within a multinational corporation (MNC). We argue that MNCs use expatriates to allocate knowledge between headquarters and its foreign affiliates. With data from MNCs headquartered in South Korea, we trace unobservable knowledge using observable labour mobility. Our empirical analysis shows that the use of expatriates increases as communication between South Korea and the host country becomes more costly. However, the extent to which the use of expatriates relates with communication costs decreases in the sectoral complexity.     

Is there life after degeneration? The organizational life cycle of cooperatives under a ‘grow‐or‐die’ dichotomy

This article provides an in‐depth, longitudinal analysis combining real‐time and retrospective data on a set of Mondragon's industrial cooperatives that are organized as international groups. We examine the life cycle of these international cooperative groups, which is expected to evolve differently to that of small‐ and medium‐sized cooperatives that operate exclusively on a local scale. The article is theoretically informed by the cooperative life cycle theory, as well as by recent insights from the degeneration and regeneration theses. Our analysis yields an intricate picture of the evolution of cooperatives faced with a ‘grow‐or‐die’ dichotomy. On the one hand, our findings reject the highly simplistic and deterministic view of the degeneration thesis by demonstrating that these cooperatives can mobilize resources to revitalize cooperative values and practices. On the other, we find that regeneration may not occur in a consistent, sequential fashion as the previous literature suggests, but rather degenerative and regenerative tendencies can occur simultaneously, even leading to long‐lasting, unresolvable situations. In light of this, the article asks future research to draw on power‐aware and politically informed approaches for further understanding of how cooperatives manage the tensions at each organizational stage of their life cycle, and of which organizational actors benefit, and how, from reversing some degenerative tendencies while maintaining others intact.     

Marketing capabilities and innovation. How do they affect the financial results of hotels?

From the point of view of firms’ managers, the knowledge of the factors which explain their firms’ financial results is considered of great usefulness to propose the most appropriate and profitable marketing strategies and actions. This research sets out from this central idea and proposes a model of relationships that considers the marketing results, the marketing capabilities, and the innovation capability as key factors for achieving good financial results. This model is verified via an empirical investigation carried out among 200 directors of hotel establishments in Andalusia, a region in the south of Spain which is one of the country's main tourist destinations. The results indicate that innovation capability is strongly conditioned by marketing capabilities and resources and that this innovation capability affects the financial results of the firms analyzed. Likewise, it is deduced that a market-oriented management philosophy contributes to the development of these marketing capabilities. The implications for management are considered very relevant as they must lead these firms to invest in the development of marketing resources and capabilities, and apply a market-oriented management philosophy if they wish to improve their financial results.