Managerial ownership and performance

This study revisits the classical debate about the nature of the relationship between managerial ownership and corporate performance by using a semi-parametric estimation approach. The semi-parametric approach helps sidestep concerns associated with the potential misspecification of parametric models (e.g., the arbitrary choice of a fixed number and/or location of turning points) and enables the consideration of a wider range of non-linear behaviors. The empirical results support the existence of the initial alignment effect of managerial ownership at levels lower than 15%, while they do not lead to a strong inference on the relationship between managerial ownership and corporate performance for intermediate and high levels of managerial ownership. The results cast doubt on the findings of recent studies on the subject, which critically rely on fully parametric methods, and instead suggest the use of semi-parametric methods in estimating the shape of the ownership-performance curve.     

Inequality and Participative Democracy: A Self-Reinforcing Mechanism

During the last three decades, a notable increase in economic inequality is observed, accompanied by a decline in people's engagement in politics and electoral participation. This is an unsatisfactory phenomenon as it undermines the legitimacy of democratic representation. This negative association is produced by a complex salient mechanism. This study aims at investigating this issue. Using data from a panel of 28 OECD and European countries, this paper identifies a two-way causal relationship between inequality and political participation. The results show that greater income inequality alienates and discourages people from engaging with common affairs, thus leading to lower political participation. Yet, lower electoral participation leads towards a less equitable distribution of income. Hence, this study reveals a self-reinforcing mechanism where the unequal distribution of income leads to political exclusion, which in turn leads to more inequality.     

An Investigation of the Pay-As-You-Go Financing Method Using a Contingency Fund and Optimal Control Techniques

Abstract

In many countries, aging populations are expected to lead to substantial rises in the cost of public pension systems financed by the pay-as-you-go (PAYGO) method. These systems will need to be adapted to cope with these changes. This paper considers one approach to reform, described in the literature as “parametric” (see, e.g., Disney 2000), and develops a model for adapting the PAYGO method using a contingency fund and optimal control techniques. The solution of the original model is investigated within two different frameworks: a deterministic-continuous one and a stochastic-discrete one. Finally, a case study applied to Greece is discussed, leading to a potentially acceptable proposal of a smooth path for contribution rates and the age of eligibility for the normal retirement pension.     

Curiosity's pleasure? Exploring motives for cultural consumption

Although there is a robust research framework describing several motivational factors explaining cultural consumption behavior, most of these research endeavors do not rely on specific theories. Therefore, based on three psychological approaches and previous research, this study aims to identify the main motives of people consuming various cultural goods (i.e., books, recorded music, historical monuments, and festivals). To further extend current studies, this research suggests a hierarchical structure of consumer needs and investigates the motivational differences between cultural consumption behavior and demographic variables (gender and age). A structural equation modeling was employed to confirm the structure of the consumers' drives indicating that six motives (entertainment, escapism, cultural exploration, learning/curiosity, family togetherness, and socialization) can sufficiently describe individuals' needs. The above dimensions can be sorted into three higher‐order types of motivation, which are the emotional, cognitive, and social ones. The results also revealed that there are significant differences in motivation depending on cultural participation as well as demographic variables. The current findings are important not only for academics, but also for art practitioners, who need to develop effective marketing strategies, increase consumer satisfaction, and meet their economic objectives.     

Interactions of the firm's real and financial decisions

This paper provides an integrated approach to the theory of the firm. Under technological uncertainty, corporate taxes, risky debt and risk neutrality it is shown that the firm's investment production and financing decisions are made simultaneously. It is demonstrated that the relationship between optimal capital (or labour) and debt is not strictly negative as in Dotan and Ravid (1982) nor strictly positive as in Hite (1977). The direction of this relationship depends on the characteristics of debt and the characteristics of the firm's production function. Given the simultaneity of the real and financial decisions, it is shown that an interior optimum exists for the firm's value as a function of debt.     

Seniority Profiles in Unionized Workplaces: Do Unions Still have the Edge?*

The focus of this study is to distinguish the different paths seniority earning profiles follow depending on whether the individual is employed in a workplace where trade unions and collective bargaining are present, or not. Within this framework, two propositions are set. In the union sector seniority should be an important determinant of wages, while in the non‐union sector productivity, proxied by occupational experience, should have a key role on earning profiles. The empirical analysis verifies both propositions. Seniority earning profiles appear to be steeper in the union sector, while occupational expertise is estimated to have a more significant role in non‐union jobs.     

The Components of the Bid‐Ask Spread: the Case of the Athens Stock Exchange

We analyse the components of the bid‐ask spread in the Athens Stock Exchange (ASE), which was recently characterised as a developed market. For large and medium capitalisation stocks, we estimate the adverse selection and the order handling component of the spreads as well as the probability of a trade continuation on the same side of either the bid or the ask price, using the Madhavan et al. (1997) model. We extend it by incorporating the traded volume and we find that the adverse selection component exhibits U‐shape patterns, while the cost component pattern depends on the stock price. For high priced stocks, the usual U‐shape applies, while for low‐priced ones, it is an increasing function of time, mainly due to the order handling spread component. Furthermore, the expected price change and the liquidity adjustment to Value‐at‐Risk that is needed are higher in the low capitalisation stocks, while the most liquid stocks are the high priced ones. Moreover, by estimating the Madhavan et al. (1997) model for two distinct periods we explain why there are differences in the components of the bid‐ask spread.     

Structure in product line management: The role of formalization in service elimination decisions

Formalization is a core structural characteristic of the firm and an important determinant of decision-making efficiency. This empirical paper explores formalization in financial institutions’ product line pruning decisions. The authors develop a set of hypotheses that are empirically tested in a stratified random sample of UK financial institutions. The results demonstrate that the level of formalization in the elimination decision-making process depends on specific organizational and environmental conditions, including overall company strategy, product line length, market orientation, top management attitude toward line pruning, austerity of the regulatory context, and rate of technological change. The results also show that formalization enhances the procedural rationality of elimination decisions, and leads to customer-sensitive implementation strategies. This paper is the first attempt to link service elimination decision-making with structural characteristics of organizational decision-making. The results yield important managerial implications and point at useful directions for future research.