Mapping the antecedents of telework diffusion: firm‐level evidence from Italy

Previous literature has studied telework practices predominantly from the employees' perspective rather than exploring its use at the firm level. With the objective of contributing to reducing this research gap, the relationship between firms' adoption of telework and the firms' technological, organisational and environmental contexts is explored. Data were obtained from a survey conducted between 2005 and 2009 on a sample of 1,134 Italian firms in the Piedmont region. The results show an overall increase in the diffusion of telework primarily attributable to a rise in the adoption of ‘mobile’ work rather than home‐based forms of telework. The results also show that firms that had previously adopted information systems supporting core business processes and knowledge management were more inclined to adopt telework. Telework arrangements were more widely diffused among firms facing a growing and geographically dispersed market demand, and also in the contexts of higher levels of human capital and lower capital intensity.     

Big Data for Creating and Capturing Value in the Digitalized Environment: Unpacking the Effects of Volume,Variety, and Veracity on Firm Performance*

Despite significant academic and managerial interest in big data, there is a dearth of research on how big data impacts the long‐term firm performance. Reasons for this gap include a lack of objective indices to measure big data availability and its impact, and the tendency of studies to ignore the costs associated with collecting and analyzing big data, assuming that big data automatically delivers benefits to firms. Focusing on how firms create and capture value from big data about customers, we use the resource‐based view and three dimensions of big data (i.e., volume, variety, and veracity) to understand when the benefits outweigh the costs. Relying on the number of downloads of mobile device applications, we find that volume of big data has a negative effect on firm performance. This result suggests that the “bigness” of big data alone does not ensure value creation for a firm, and could even constitute a “dark side” of big data. Because big data variety—measured as the number of types of information taken per each application—moderates the negative effects of big data volume, simultaneous high values of volume and variety allow firms to create value that positively affects their performance. In addition, high levels of veracity (i.e., a high percentage of employees devoted to big data analysis), are linked to firms benefiting from big data via value capture. These findings shed light on the circumstances in which big data can be beneficial for firms, contributing to a better theoretical understanding of the opportunities and challenges and providing useful indications to managers.     

The Volatility of European Banking Systems: A Two-Decade Study

This paper examines the trends and composition of volatility across European banking systems from January 1988 to December 2010. While there is no evidence of a long-term trend in the average level of banking system volatility, there is a change in its composition resulting from the growing importance of International and European nonfinancial components, especially in the largest banking systems. We argue that the changing composition of banking system volatility is the effect of a long-term integration process (with a growing importance of cross-border activities) that has not been influenced by the introduction of the Euro. Our results highlight the increasing vulnerability of the European banking systems to International and European shocks and an increasing likelihood of cross-border banking crises, and the need for regulatory reforms that focus on effective cross-border crisis management and resolution so as to safeguard the systemic stability of European banking in the near future.     

Financial systemic risk: Taxation or regulation?

This paper describes financial systemic risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either by financial regulation or by taxation. From a normative viewpoint, taxation is superior in many respects. However, reality shows that financial regulation is adopted more frequently. This paper makes a positive, politico-economic argument. If the majority chooses regulation, the level is likely to be too harsh. If it chooses taxation, then the level is likely to be too low. Due to regressive effects, a tax on financial transactions receives low support from a majority of low polluting portfolio owners. The same kind of majority may strategically choose regulation in order to burden the minority with a larger share of the cost of reducing systemic risk.     

Hierarchical structures in the aggregation of premium risk for insurance underwriting

In the valuation of the Solvency II capital requirement, the correct appraisal of risk dependencies acquires particular relevance. These dependencies refer to the recognition of risk diversification in the aggregation process and there are different levels of aggregation and hence different types of diversification. For instance, for a non-life company at the first level the risk components of each single line of business (e.g. premium, reserve, and CAT risks) need to be combined in the overall portfolio, the second level regards the aggregation of different kind of risks as, for example, market and underwriting risk, and finally various solo legal entities could be joined together in a group.

Solvency II allows companies to capture these diversification effects in capital requirement assessment, but the identification of a proper methodology can represent a delicate issue. Indeed, while internal models by simulation approaches permit usually to obtain the portfolio multivariate distribution only in the independence case, generally the use of copula functions can consent to have the multivariate distribution under dependence assumptions too.

However, the choice of the copula and the parameter estimation could be very problematic when only few data are available. So it could be useful to find a closed formula based on Internal Models independence results with the aim to obtain the capital requirement under dependence assumption.

A simple technique, to measure the diversification effect in capital requirement assessment, is the formula, proposed by Solvency II quantitative impact studies, focused on the aggregation of capital charges, the latter equal to percentile minus average of total claims amount distribution of single line of business (LoB), using a linear correlation matrix.

On the other hand, this formula produces the correct result only for a restricted class of distributions, while it may underestimate the diversification effect.

In this paper we present an alternative method, based on the idea to adjust that formula with proper calibration factors (proposed by Sandström (2007)) and appropriately extended with the aim to consider very skewed distribution too.

In the last part considering different non-life multi-line insurers, we compare the capital requirements obtained, for only premium risk, applying the aggregation formula to the results derived by elliptical copulas and hierarchical Archimedean copulas.     

The fundamental theorem of asset pricing for continuous processes under small transaction costs

A version of the fundamental theorem of asset pricing is proved for continuous asset prices with small proportional transaction costs. Equivalence is established between: (a) the absence of arbitrage with general strategies for arbitrarily small transaction costs ${\varepsilon > 0}${\varepsilon > 0}, (b) the absence of free lunches with bounded risk for arbitrarily small transaction costs ${\varepsilon > 0}${\varepsilon > 0}, and (c) the existence of e{\varepsilon}-consistent price systems—the analogue of martingale measures under transaction costs—for arbitrarily small ${\varepsilon > 0}${\varepsilon > 0}. The proof proceeds through an explicit construction, as opposed to the usual separation arguments. The paper concludes comparing numéraire-free and numéraire-based notions of admissibility, and the corresponding martingale and local martingale properties for consistent price systems.     

Arbitrage Free Price Bounds for Property Derivatives

Market frictions inhibit the perfect replication of property derivatives, and define the property spread as a price measure in the incomplete real estate market. We identify transaction costs, transaction time, and short sale constraints as the main frictions in this market. Based on these frictions, we set up a framework of arbitrage free price bounds for property derivatives. In turn, we use observed derivative prices to determine the implied cost of the frictions. Lastly, we verify these values by using other research, which confirms the accuracy of our framework.     

The capital structure of multinational companies under tax competition

This article studies the relation between debt policies of multinational companies (MNCs) and governments’ tax strategies. In the first part, we show that the ability to shift income from high- to low-tax countries affects MNCs’ financial choices. In the second part we show how MNCs’ financial decisions can affect the tax strategies of two governments competing to attract income.      

On the benefits of party competition

We study the role of parties in a citizen-candidate repeated-elections model in which voters have incomplete information. We first identify a novel “party competition effect” in a setting with two opposing parties. Compared with “at large” selection of candidates, party selection makes office-holders more willing to avoid extreme ideological stands, and this benefits voters of all ideologies. We then allow for additional parties. With strategic voting, citizens benefit most when the only two parties receiving votes are more moderate. With sincere voting, even with three parties, extreme parties can thrive at the expense of a middle party; and whether most citizens prefer two or three parties varies with model parameters.