Short-cuts in issuance decisions and subsequent small firm performance

This paper examines the subsequent change in performance characteristics of companies that make security issuance choices consistent with “following the herd.” It extends the literature on decision heuristics (i.e., decision short-cuts) by exploring the outcome of mimicking behavior. Results suggest that firms that issue equity in an environment consistent with mimicking are associated with subsequent increased risk of bankruptcy relative to their non-mimicking counterparts. Moreover, the results also suggest that these mimicking actions are not associated with subsequent changes in profitability. This gives support to the argument that decision short-cuts produce suboptimal results. Moreover, the effect is concentrated in very small (i.e., micro-cap) companies, but not present for companies in larger size categories. Similar patterns for debt issuers who mimic competitors are not observed, which may reflect the greater scrutiny imposed by lenders and debt under-writers with regard to debt issuances.

Negotiation Based on Fuzzy Logic and Knowledge Engineering: Some Case Studies

One of the most recent mathematical models for negotiation is the Compensatory Negotiation Solution by Knowledge Engineering (CNSKE). In this model a logic system called Compensatory Fuzzy Logic was used, which is more adequate to solve problems of decision making than the classical one probabilistic fuzzy logic system. The idempotency axiom of this system and the continuity of the operators allow the truth-values of the membership function to have a cardinal and not exclusively ordinal semantic meaning. On the other hand, continuity also makes ‘sensible’ the truth-values of the predicates. The aim of this paper is to illustrate the advantages of the CNSKE over other approaches in Game Theory. To show these advantages, some case studies are analyzed, consisting on the solution of three problems in which CNSKE is applied in economic and politic cases of negotiation, and compared with other alternative approaches.     

Autonomy and Monitoring

This paper provides a theoretical and empirical analysis of an under‐explored consequence of granting autonomy to workers: monitoring. In the principal‐agent model that we develop, granting autonomy allows workers to carry out innovative tasks in the workplace. Given that innovative tasks are more difficult to monitor, the model predicts a positive relationship between autonomy and monitoring. Relying on information about blue‐collar workers coming from a dataset of Spanish industrial plants, we provide strong support for this prediction.     

Corporate environmental sustainability reporting in the context of national cultures: A quantile regression approach

This work, based on previous evidence within international business management research, aims to test the influence of communities’ culture features on corporate environmental sustainability reporting (CESR) practices. To overcome some limitations of conventional statistical approaches applied by previous research, a quantile regression (QR) model is implemented which allows setting a framework to test the working hypotheses in different scenarios that cover divergent firms’ commitment levels to stakeholder engagement and CESR practices development. Our central results addresses that different national culture dimensions present a non-monotonic influence on CESR practices. This result, which is analyzed through the Stakeholder Theory proposals, can be explained because corporate sustainability behaviors are highly sensitive to stakeholders’ pressures and demands which are ultimately conditioned by the cultural environment. Some interesting recommendations for companies’ strategic management and governmental policy-making processes are reported.     

Productivity Analysis of UK Auditing Firms

This study analyses the productivity change in the United Kingdom (UK) of auditing firms over the period 2005–2012, using a Malmquist index with a technological bias. Productivity is the rate at which goods or services are produced relative to the input. A common measure of productivity is the ratio of output per unit of labour used in the production. Productivity change is the change in the total output relative to the change in the total input and it is composed of technical efficiency change (managerial practices and scale effects) and technological change (innovation and investment in new technologies). Until 2005, the auditing profession in the UK employed a regime of self‐regulation; after a brief hiatus, the country adopted the new European Statutory Audit Directive in April 2008, changing the regulatory framework. This study analyses the productivity change among UK auditing companies both before and after the regulation change. Our results indicate that the productivity change among UK auditing companies is mixed and not dictated by regulation. Furthermore, the traditional growth accounting method, which assumes Hicks‐neutral technological change, is not appropriate for an analysis of the productivity change in auditing firms.     

The opportunity costs of commuting: the value of a commuting satellite account framework with an example from Lisbon Metropolitan Area*

Commuting affects regional and urban economies. It shapes urban areas, defines their relationships with neighboring regions, intensifies economic flows and exacerbates energy consumption and greenhouse gas emissions. This paper sets out a proposal for an innovative commuting satellite account (CSA), integrated in a multi-regional input–output model. This framework combines commuting activities with regional distribution of income, distinct household consumption structures, real estate renting activities and the energy consumption and environmental flows incorporated in the different industries. To assess the opportunity costs of commuting, the CSA framework is applied to the Lisbon Metropolitan Area. The socio-economic-environmental impacts of a scenario in which commuters become non-commuters by moving their residence to the municipality in which they work are estimated. The analysis indicates that: commuting, in general, induces significant economic and environmental opportunity costs. Finally, the adoption of policy-oriented recommendations contributing to limit sprawling in metropolitan regions is discussed.     

The effect of oil prices on stock prices: fresh evidence from asymmetric causality tests

This article investigates the causal impact of oil prices on stock prices in each G7 market as well as in the world market. An asymmetric causality test developed by Hatemi-J is used for this purpose. Since the underlying data appears to be non-normal with time-varying volatility, we use bootstrap simulations with leverage adjustments in order to produce more reliable critical values than the asymptotic ones. Based on symmetric causality tests, we find no causal effect of oil prices on the stock prices of the world market or any of the G7 countries. However, when we apply an asymmetric causality test, we find that increasing oil prices cause stock prices to rise in the world, the U.S. and Japan while decreasing oil prices cause stock prices to fall in Germany. This may imply that the world, the U.S. and Japanese stock markets consider increases in oil prices as an indicator of good news as this may mean that there is an increase in oil demand due to an expected growth in the economy while the German stock market treats decreasing oil prices as a signal of an expected contraction in the economy.     

BRIC and GIPS – who drives who? Evidence from newly developed asymmetric causality tests

We investigate the asymmetric causal interaction between the stock markets of the GIPS (Greece, Ireland, Portugal and Spain) and those of the BRIC (Brazil, Russia, India and China) based on a newly developed asymmetric causality test by Hatemi-J (2012) [Hatemi-J, A. 2012. “Asymmetric Causality Tests with an Application.” Empirical Economics 43: 447–456. doi:10.1007/s00181-011-0484-x]. We confirm a significant stock market interaction between the two blocs in which the BRIC drives the GIPS but not vice versa. Thus, the BRIC seems to be more influential on the GIPS than the GIPS on the BRIC. However, this interaction occurs only during downmarket conditions but not during upmarket times. The BRIC pulls down the GIPS during bad times but does not pull them up during good times. These results have significant implications for international policymakers and provide further evidence on the existence of asymmetric causal interactions between financial markets.     

Expected utility inequalities: theory and applications

Suppose we know the utility function of a risk averse decision maker who values a risky prospect X at a price CE. Based on this information alone I develop upper bounds for the tails of the probabilistic belief about X of the decision maker. In the paper I also illustrate how to use these expected utility bounds in a variety of applications, which include the estimation of risk measures from observed data, option valuation, and the study of credit risk. I would like to thank John Cochrane, Tom Cosimano, Amanda Friedenberg, George Korniotis, Markus Brunermeier and Paul Schultz for helpful discussions and to participants at two Notre Dame seminars, at the 2006 Spring Midwest Economic Theory and International Economics Conference, and at the 2006 Australasian Meeting of the Econometric Society for their very useful comments. I began working on this project during a year-long visit to the Central Bank of Venezuela. I gratefully acknowledge their hospitality and financial support.