The drivers and value of enterprise risk management: evidence from ERM ratings

In the course of recent regulatory developments, holistic enterprise-wide risk management (ERM) frameworks have become increasingly relevant for insurance companies. The aim of this paper is to contribute to the literature by analyzing determinants (firm characteristics) as well as the impact of ERM on the shareholder value of European insurers using the Standard & Poor’s ERM rating to identify ERM activities. This has not been done so far, even though it is of high relevance against the background of the introduction of Solvency II, which requires a holistic approach to risk management. Results show a significant positive impact of ERM on firm value for the case of European insurers. In particular, we find that insurers with a high quality risk management (RM) system exhibit a Tobin’s Q that on average is about 6.5% higher than for insurers with less high quality RM after controlling for covariates and endogeneity bias.     

The role of the exchange rate in Canadian monetary policy: evidence from a TVP-BVAR model

A time-varying parameters Bayesian structural vector autoregression (TVP-BVAR) model with stochastic volatility is employed to characterize the monetary policy stance of the Bank of Canada (BoC) in terms of an interest rate rule linking the policy rate to the output gap, inflation and the exchange rate. Using quarterly bilateral Canadian–US data, we find such an interest rate rule to have little explanatory power for the early part of our sample starting in the mid-1980s, but to become more suitable to explain interest rate dynamics from the mid-1990s onwards. Whereas the exchange rate turns out to be the major determinant of the policy rate in the 1980s, its importance declines throughout the 1990s and 2000s, although it continues to be influential even towards the end of the sample period ending in 2015Q2. We also find interest rate shocks to have become more effective in influencing the macroeconomy over time, indicating that the BoC has continually gained monetary policy credibility. We associate this development with the BoC successively de-emphasizing the role of the exchange rate in informing interest rate decisions, thereby alleviating the potential monetary policy conflict between targeting the exchange rate and maintaining the price stability goal.     

Export Spillovers: Opening the Black Box

This paper studies the importance of export spillovers in a firm's decision to enter specific export markets and extends the current state of the literature by assessing different mechanisms through which they may occur, namely (i) labour movement, (ii) intra‐industry spillovers and (iii) inter‐industry linkages. We do so by exploiting a unique data set covering the universe of manufacturing firms in Denmark for the period 1995–2006 which combines transaction‐level export data, firm accounting data, employer–employee linked data and information from yearly input–output tables. We corroborate the literature on export spillovers by presenting robust evidence of destination‐specific export spillovers. The results suggest that labour mobility as well as intra‐ and inter‐industry linkages (backward linkages) are important channels for export spillovers, while presenting heterogeneous effects across firms of different size and export markets.