Tax Deferral and Mutual Fund Inflows: Evidence from a Quasi‐Natural Experiment

We propose a new method to identify the impact of a change in the tax burden on mutual fund inflows. We use quasi‐experimental data from Italy where, starting from July 2011, the tax regime for domestic mutual funds was changed from an accruals basis to a realisation basis, while the taxation of foreign funds remained on a realisation basis. We find that the reform has had a positive effect on net inflows of Italian funds (the treated group) with respect to foreign funds (the control group). The effect is both economically and statistically significant. Moreover, there is no evidence that the increase in the demand for Italian funds came at the expense of foreign funds.     

Signaling Strategies for Innovative Design: A Study on Design Tradition and Expert Attention

There is increasing acknowledgement that innovative product design has a positive effect on financial performance. However, innovative design may require specific efforts to aid interpretation and appreciation by the market. So far, little is known about how companies can enhance their chances of success when introducing innovative designs. This study contributes to the development of this area of research. Drawing on signaling theory, it examines the role of two types of signals that may act as enablers for market acceptance of innovative design: adherence to a national design tradition, and attention from experts and specialized media. Using data collected from Danish design‐intensive companies, findings show that design innovativeness has a positive impact on financial performance. The analyses demonstrate that the effect is reinforced if a novel design adheres to a national design tradition. In addition, novel designs will be more positively accepted if they receive attention from design experts and attract media coverage. Research also contributes to signaling theory, as it shows how intrinsic—design innovativeness and adherence to a design tradition—and extrinsic—expert and media attention—cues interact and influence financial performance. The paper concludes by discussing managerial implications, particularly in relation to the new product development process and the role of design, and by suggesting avenues for further research.     

Asset restructuring strategies in bank acquisitions: Does distance between dealing partners matter?

One of the most lively-debated effects of banking acquisitions is the change in lending and asset allocation of the target bank in favour of transaction-based products, at the expense of small and informationally opaque borrowers. These changes may be the result of two distinct restructuring strategies pursued by the acquirer with respect to the asset portfolio of the acquired bank: a cleaning strategy (CS), in which the acquirer makes a clean sweep of all the negative net present value activities in the portfolio of the acquired bank, and a portfolio strategy (PS), in which the acquiring bank permanently changes the portfolio allocation of the acquired bank. In this paper we focus on Italian bank acquisitions and test which asset restructuring strategy was predominantly pursued over the period 1997–2003. Moreover, we distinguish acquisitions according to their geographic diversifying character and to the physical and cultural distances that separate acquiring from acquired banks. When we look at the mean value, we do not find clear evidence of a primacy either of CSs or PSs. When we separate in-market from out-of-market bank acquisitions, however, results show that the CSs prevail only in the former type of deals, while in the latter the portfolio of acquired banks is subject to PSs. Finally, we find that differences in asset restructuring strategies can be explained by differences in corporate culture and the workplace environment of the dealing partners.     

One size fits all? High frequency trading,tick size changes and the implications for exchanges: market quality and market structure considerations

This paper offers a systematic review of the empirical literature on the implications of tick size changes for exchanges. Our focus is twofold: first, we are concerned with the market quality implications of a change in the minimum tick size. Second, we are interested in the implications of changes in the minimum tick size on market structure. We show that there is a large body of empirical literature that documents a decrease in transaction costs following a decrease in the minimum tick size. However, even though market liquidity increases, the incentive to provide market making activities decreases. We document a strong link between the minimum tick size regulations and the recent increase in high frequency trading activity. A smaller tick enhances the price discovery process. However, the question of how multiple tick size regimes affect market liquidity in a fragmented market remains to be answered. Finally, we identify topics for future research; we discuss the empirical literature on the minimum trade unit and the recent calls for a minimum resting time for quotes.     

Family CEO and board service: Turning the tide for export scope in family SMEs

Adopting the socioemotional wealth perspective, we argue that the presence of a family CEO in family SMEs negatively affects export scope, but that such negative effect is mitigated by board service. We develop and test a model that considers the synergistic combination of family management and another important aspect of family governance in the context of family firm internationalization: the service behavior of the board of directors. The empirical evidence from a sample of 248 Belgian family SMEs shows that governance is crucial to overcoming the problems of family management: family CEOs may negatively influence export scope, but board service is able to turn the tide so that the family CEO effect becomes positive. With such novel findings, we contribute to international business and family business studies     

Exploring the link between innovation and growth in Chilean firms

We investigate the relation between the introduction of innovation and subsequent firm growth employing a dataset representative of the Chilean productive structure. By means of quantile treatment effects (QTE), we estimate the effect of the introduction of innovation by comparing firms with a similar propensity to innovate for different quantiles of the firm growth distribution. Our results indicate that process innovation positively affects sales growth for those firms located at the 75th and 90th percentiles. Contrarily, product innovation appears not to be a driver of firm performance. We also find that process innovation benefits mature firms at higher quantiles while it positively affects young firms located at low-medium quantiles.     

Going Public and the Sale of Shares with Heterogeneous Investors: Agent‐Based Computational Modelling and Computer Simulations

In this paper we use agent‐based computational modelling and computer simulations to examine the interrelationship between different selling strategies for going public. A great deal of recent empirical evidence suggests that to maximise the revenue raised from the shares sold in the public offering, it is fundamental to choose the appropriate design for the sale which, in turn, reflects the final ownership structure. This literature establishes that the market for shares is segmented and, particularly, that firms manage the sale of shares with the purpose of discriminating between relatively small and passive investors and applicants for large potentially controlling blocks. One of the key questions in this area, then, is: How and to what extent should this heterogeneity among potential investors influence the firm's strategy for selling shares? Here we attempt to address this question from the standpoint of using agent‐based computational modelling and computer simulations. Results show that the design of the sale is an important determinant of the performance of the negotiation process through which the firm is sold. A sequential sale beginning with an initial public offering of dispersed shares, followed by a negotiated sale of a controlling block is, in general, more effective than other alternative selling strategies. Changing the negotiation protocol itself can act as an effective way of impacting upon the revenue raised and the length of the process. The interrelationship between the method of sale and the performance may also depend on the degree of cognitive accuracy that characterises the negotiating agents' mental representations of their physical and social environment.     

Economic Fluctuations in the U.S. and Euro Area: Quantifying the Contribution of Technical Change

This article aims at quantifying the contribution of technical change to cyclical fluctuations in the U.S. and euro area. We distinguish technical progress in labor-augmenting and capital-augmenting change. To this end, we derive and estimate a New Keynesian DSGE model embodying a constant elasticity of substitution (CES) production function for both areas. Our main findings are: (i) capital-augmenting progress is the main source of technical change volatility; (ii) labor-augmenting shocks give a negligible contribution to the variance of output; (iii) technical change (of both types) explains more economic fluctuations in the U.S. than in the euro area; and (iv) historical decomposition of GDP growth over our sample period (1980–2008) shows that capital-augmenting progress is one of the key drivers of the business cycle.     

The Pricing of Italian Equity Returns

In this paper, we investigate the relationship between common risk factors and average returns for Italian stocks. Our research has identified the Italian stock market's economic variables by using the results from factor analyses and time series regressions. We study several multi‐factor models combining the relevant macroeconomic variables with the mimicking equity portfolios SMB (small minus big) and HML (high minus low) proposed by Fama and French (1993). The key question we want to ask ourselves, is whether the influential role of the size and book‐to‐market equity factors in explaining average stock returns can stand up well when competing with some macroeconomic factors. In other words, do stock returns carry some risk premium that is independent of either the market return or the economic forces that underlie the common variation in returns? Our empirical work estimates risk premiums using both traditional two‐pass procedures and one‐pass (full information) methodologies. We show that only the market index and variables linked to interest rate shifts are consistently priced in the Italian stock returns. The role of other factors, and in particular both the size and the price‐to book ratio, are crucially dependent on the estimation procedure. (J.E.L.: G11, G12).