Bond offerings in China

This study appraises the value created by a bond offering in China, where high levels of state ownership and insider ownership raise concerns about the use of the proceeds. To estimate the impact of a bond issue on the firm's value, we apply an event‐study methodology on a sample of 481 issues of 347 Chinese companies over the period 2009–2013. It turns out that state ownership has a positive impact on the value of a bond offering for shareholders, which is consistent with an implicit guarantee of the issue by the state. For privately owned companies, insider ownership exerts a nonlinear impact on the firm's value, supporting an aligning effect in the use of the proceeds. Overall, the study confirms the key role of ownership structure in Chinese firms.     

The Context of Entrepreneurial Judgment: Organizations,Markets, and Institutions

The economics and management literatures pay increasing attention to the technological, competitive, and institutional environment for entrepreneurship. However, less is known about how context influences the judgment of entrepreneurs. Focusing on the emerging judgment‐based approach to entrepreneurship, we argue that economics can say much about how the organizational, market, and institutional context shapes entrepreneurial judgment. We describe entrepreneurs as individuals who deploy scarce, heterogeneous resources to service customer preferences at a profit. Because of uncertainty, this process is essentially experimental, and context influences the experimental process. Thus, entrepreneurs will seek to design the internal organization of the firm so that it facilitates internal experimentation. Moreover, the market or task environment determines the need for experimentation (e.g., how fast do consumer preferences change, how does technology evolve, which assets are available at which terms, etc.). Finally, the institutional environment influences, for example, the transaction costs of acquiring and divesting assets as firms adjust their boundaries through ongoing commercial experimentation.     

Avoiding digitalization traps: Tools for top managers

Digital transformation is fundamentally changing the business landscape. It is also affecting the roles of top managers within firms. Our survey of more than 160 senior managers in Europe suggests that digitalization, rather than encouraging more decentralized forms of management, will lead to an expanded role for headquarters and further empowerment of top managers. While acknowledging the benefits of the digital transformation, in this Executive Digest we identify five key challenges for newly empowered top managers and offer solutions for these digitalization traps.     

Leverage Dynamics and the Burden of Debt

In addition to leverage, the debt service burden of households and firms is an important link between financial and real developments at the aggregate level. Using US data from 1985 to 2017, we find that the debt service burden has sizeable negative effects on expenditure. Its interplay with leverage also explains several data puzzles, including the lack of above-trend output growth during credit booms and the severity of ensuing recessions, without appealing to large shocks or nonlinearities. Estimating the model with data up to 2005, it predicts credit and expenditure paths that closely match actual developments before and during the Great Recession.     

Academic freedom,private‐sector focus,and the process of innovation

We develop a model that clarifies the respective advantages and disadvantages of academic and private‐sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control‐rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests, academia can be indispensable for early‐stage research. At the same time, the private sector's ability to direct scientists toward higher‐payoff activities makes it more attractive for later‐stage research.     

Recovering the real-world density and liquidity premia from option data

In this paper, we develop a methodology for simultaneous recovery of the real-world probability density and liquidity premia from observed S&P 500 index option prices. Assuming the existence of a numéraire portfolio for the US equity market, fair prices of derivatives under the benchmark approach can be obtained directly under the real-world measure. Under this modelling framework, there exists a direct link between observed call option prices on the index and the real-world density for the underlying index. We use a novel method for the estimation of option-implied volatility surfaces of high quality, which enables the subsequent analysis. We show that the real-world density that we recover is consistent with the observed realized dynamics of the underlying index. This admits the identification of liquidity premia embedded in option price data. We identify and estimate two separate liquidity premia embedded in S&P 500 index options that are consistent with previous findings in the literature.     

The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application

Credit and interest rate risk are the two most important risks faced by commercial banks in their banking book. In this paper we derive a consistent and comprehensive framework to measure the integrated impact of both risks. By taking account of the repricing characteristics of assets, liabilities and off balance sheet items, we assess the integrated impact of credit and interest rate risk on banks’ economic value and capital adequacy. We then stress test a hypothetical but realistic bank using our framework and show that it is fundamental to measure the impact of credit and interest rate risk jointly.     

Resource utilization and procedure-related costs associated with transfemoral transcatheter aortic valve replacement

Aims: Transcatheter aortic valve implantation (TAVI) is an alternative to surgical valve replacement for patients with aortic stenosis (AS). This study assessed the impact of changing from a self-expandable (SE) valve to a balloon-expandable (BE) valve on healthcare resource use and procedural costs in a population of inoperable AS patients.

Methods: In this retrospective single center study, data for 195 patients who received either an SE or a BE valve between 2010–2014 were collected. Procedural and post-procedural healthcare resource use and cost parameters were determined for the two groups.

Results: The study showed that overall procedural time, including time required by medical personnel, was significantly shorter for TAVI using a BE compared with an SE valve. Post-surgery, patients in the BE valve group had significantly shorter hospital stays than the SE valve group, including significantly fewer days spent in the intensive care unit (ICU). Additionally, trends towards reduced 30-day mortality, incidence of new permanent pacemaker implantation, and incidence of blood transfusion were observed in the BE valve group compared with the SE valve group. Finally, total procedural costs were 24% higher in the SE compared with the BE valve group.

Limitations: The BE valve data were acquired in a single year, whereas the SE valve data were from a 5-year period. However, a year-by-year analysis of patient characteristics and study outcomes for the SE valve group showed few significant differences over this 5-year period.

Conclusions: Overall, changing from an SE to a BE valve for TAVI in patients with severe AS reduced both healthcare resource use and procedure-related costs, while maintaining patient safety. For healthcare providers, this could increase efficiency and capacity within the healthcare system, with the added advantage of reducing costs.