Bank Capital and Liquidity Creation: Granger-Causality Evidence

We examine the relation between capital and liquidity creation. This issue is interesting because of the potential impact on liquidity creation from tighter capital requirements such as those in Basel III. We perform Granger-causality tests in a dynamic GMM panel estimator framework on an exhaustive data set of Czech banks, which mainly includes small banks from 2000 to 2010. We observe a strong expansion in liquidity creation until the financial crisis that was mainly driven by large banks. We show that capital negatively Granger-causes liquidity creation in this industry, where majority of banks are small. But we also observe that liquidity creation Granger-causes a reduction in capital. These findings support the view that Basel III can reduce liquidity creation, but also that greater liquidity creation can reduce banks’ solvency. Thus, we show that this reverse causality generates a trade-off between the benefits of financial stability induced by stronger capital requirements and the benefits of increased liquidity creation.     

Role of Retailer Positioning and Product Category on the Relationship Between Store Brand Consumption and Store Loyalty

Recent empirical evidence regarding the relationship between store brand purchase and store loyalty suggests a nonmonotonic relationship (inverted U): positive up to a certain store brand consumption level, after which it becomes negative. To investigate this idea further, this research analyzes the role of (1) the retailer's competitive positioning, and specifically its price positioning, and (2) the product category. On the one hand, the more price oriented the retailer's positioning, the more favorable is the relationship between store brand consumption and store loyalty. The threshold level of store brand purchasing at which the relationship becomes negative occurs later, and this negative relationship is less prominent. On the other hand, the relationship between store brand consumption and store loyalty appears to differ across product categories as a consequence of several factors, including perceived risk. The relationship therefore appears more favorable for risky categories. An empirical study of ten retailers that adopt different price positions corroborates these propositions.     

The Decision to Use Alliances as Corporate Entrepreneurship: The Role of Resources and Skills

This aim of this research is to analyse the role of firm resources and skills in the decision to cooperate as a method for developing entrepreneurial activity. We use a sample of 967 entrepreneurial operations undertaken between 2000 and 2004 by 323 EU-15 companies. Results suggest that skills are more important than resources when choosing how to undertake an entrepreneurial activity. While experience in cooperation and possession of technological resources make the choice of an alliance more probable, experience in entrepreneurial activities and possession of physical resources may lead the company to opt for other alternatives.     

Industrial Policy in the New Member Countries of the European Union: A Survey of Patterns and Initiatives Since 1990

The transitional recession in the new Central and East European members of the EU called for completely novel approaches to industrial policy in the nineties. A strong rejection of industrial policy could be observed only in some countries and during the first years of the transition process. Subsequently however, deteriorating competitiveness, soaring unemployment and the dramatic condition of key export sectors made the re-appearance of supply-side economic policy thinking inevitable in most Central East European Countries (CEECs), except for such small and open economies as Slovenia and Estonia. A wide variety of industrial policies implemented in the CEECs are compared in the study, with special emphasis on tools used in order to promote incoming foreign direct investment, technological development and the small and medium-sized enterprise sector. These elements of the industrial policy toolkit will keep their key role in most CEECs, albeit their industrial policies will gradually align themselves to the European mainstream.     

Entrepreneurial orientation and international commitment

This paper contributes to the development of the field of international corporate entrepreneurship (ICE) by examining the influences that the time lapse between foundation and first international market entry may have on the development of an entrepreneurial orientation (EO). Moreover, the paper highlights the existence of a positive relationship between the development of an entrepreneurial orientation and both internationalization decision and dimensions (degree, scope) in established companies. Based on a sample of 155 Spanish firms, our findings suggest that an entrepreneurial orientation positively influences a firm’s propensity to internationalize activities. The results obtained confirm the idea that fast entry into foreign markets is positively related to the development of an entrepreneurial orientation in established firms, and that firms with a marked entrepreneurial orientation have higher relative international sales and operate in a greater number of foreign countries.     

The Role of Anticipated Emotions in Purchase Intentions

Key personal inputs to decision making reside in expectations about whether a purchase or nonpurchase will make one feel better. Integrating several theoretical approaches, this research proposes a holistic framework formed by four kinds of anticipated emotions (AEs) resulting from the crossing of positive‐ or negative‐valenced emotions with action or inaction. Specifically, this research proposes that consumers under a purchase scenario tend to consider positive and negative AEs of both purchase and nonpurchase in their decisions. Research in this area to date has been sparse and focused mostly on AEs with regard to purchase, but not nonpurchase. The results of four studies confirm that AEs influence purchase decisions in a coordinated way depending on their instrumentality, motivating purchase or nonpurchase. AEs also partially mediate the effect of outcome valence on purchase decisions. Taking the status quo bias as a theoretical basis, this work proposes that the amount of information of favorable and unfavorable outcome messages has a greater influence on AEs motivating purchase than AEs motivating nonpurchase. Finally, future research lines are proposed to expand the use of this fourfold framework and more generally to understand the role of forward‐looking emotions in decision processes.     

Corporate Social Responsibility as a Strategic Shield Against Costs of Earnings Management Practices

We highlight how Corporate Social Responsibility (CSR) can be strategically used against the negative perception from earnings management (EM). Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favourable effect of CSR on cost of capital is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship.     

A Comment on Barnett and Block on Time Deposit and Bagus and Howden on Loan Maturity Mismatching

In Time Deposits, Dimension, and Fraud (2009), William Barnett and Walter Block argue that by borrowing short and lending long there is an over issuance of property rights. Their article, however, does not fully extend the consequences of their contribution. Once this is done, it becomes clearer that their argument suits a great impediment to banking, becoming a possible reason to support rather than to oppose fractional reserve banking. Bagus and Howden (J Bus Ethics 90(3):399–406, 2009) comment on Barnett and Block (J Bus Ethics 88(4):711–716, 2009), the authors claim that while maintaining the illegitimacy of fractional reserve deposits, borrowing short and lending long it is actually not illegitimate. An extension on Bagus and Howden (2009) will show that their line of argumentation can be applied as a defense of fractional reserve banking as well.     

EFFICIENT HEDGING OF EUROPEAN OPTIONS WITH ROBUST CONVEX LOSS FUNCTIONALS: A DUAL‐REPRESENTATION FORMULA

Motivated by numerical representations of robust utility functionals, due to Maccheroni et al., we study the problem of partially hedging a European option H when a hedging strategy is selected through a robust convex loss functional L(·) involving a penalization term γ(·) and a class of absolutely continuous probability measures . We present three results. An optimization problem is defined in a space of stochastic integrals with value function EH(·) . Extending the method of Föllmer and Leukerte, it is shown how to construct an optimal strategy. The optimization problem EH(·) as criterion to select a hedge, is of a “minimax” type. In the second, and main result of this paper, a dual‐representation formula for this value is presented, which is of a “maxmax” type. This leads us to a dual optimization problem. In the third result of this paper, we apply some key arguments in the robust convex‐duality theory developed by Schied to construct optimal solutions to the dual problem, if the loss functional L(·) has an associated convex risk measure ρ^L(·) which is continuous from below, and if the European option H is essentially bounded.