Dynamic Moral Hazard and Executive Stock Options

This paper shows that the optimal executive compensation scheme in a dynamic moral hazard environment is convex in the firm value. This implies that the optimal contract should include stock options. This is because the private benefit of shirking is increasing in firm value and the manager's utility is concave. Therefore, in contrast to the previous literature that takes stock options in the incentive contract exogenously, we rationalize the optimality of their use endogenously. Moreover, we show that the optimal amount of stock options (restricted stocks) increases with agency cost and the executive's reservation utility, decreases with the degree of risk aversion of the manager, and increases (decreases) with the firm size.     

Leaving EMU: a real options perspective

The real option implicit in a country's decision of whether to leave an existing monetary union when there is uncertainty over the future benefits of this move is examined. The theoretical model used is calibrated for the current Euro-12 area by proxying policymakers’ inflation preferences with unemployment rates and debt-to-GDP ratios. A robust group of countries is observed that would choose to remain within EMU consisting of Belgium, Finland, Greece and Italy; France and Spain loosely also belong to this core. Only Luxembourg would robustly want to leave EMU; Ireland and The Netherlands, however, complement that core closely.     

Stochastic trend,weather and US corn yield variability

Regional corn yield models incorporating stochastic trends, prices and weather variables are estimated. Hypothesis tests suggest yield variability has increased because of an increase in error variance and an increase in weather-related effects. Decomposition of the error variance shows much of its increase is due to an increased correlaion between regional yields.     

Heterogeneity and the evaluation of efficiency: the case of Italian universities

This study investigates the quarterly relationship between the quantity of cigarettes sold, real disposable income per capita, and the relative price level of cigarettes in Canada. Careful attention is paid to the nonstationarity of the data and the dynamic specification of the model. It is concluded that cigarette demand is extremely insensitive to price and income changes. This is evidence of the large consumer surplus smokers enjoy and the large revenue increasing potential of a cigarette tax increase policy, as opposed to cigarette bans.     

A Model of Outsourcing and Foreign Direct Investment

This paper presents a model in which two firms may use foreign direct investment or outsourcing in order to reduce the production cost of an intermediate input. Outsourcing requires training which is costly and creates a positive spillover. The paper shows that the equilibrium depends on the level of training costs. If they are high, only bilateral outsourcing is possible in equilibrium. If bilateral outsourcing is incomplete, it will not change prices compared to no outsourcing. If they are low, only complete outsourcing is possible. If complete outsourcing is unilateral (bilateral), the price increases (decreases) with the degree of spillovers.     

Commodity price cycles and heterogeneous speculators: a STAR–GARCH model

We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR–GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types. The paper represents the authors’ personal opinion and does not necessarily reflect the views of the Deutsche Bundesbank.     

Coping with sales call anxiety: The role of sale perseverance and task concentration strategies

The authors study how salespeople cope with social anxiety during customer contacts and find that two tactics, sale perseverance and task concentration, ultimately reduce dysfunctional protective actions. Both coping tactics, however, are differentially moderated by strength of felt physiological sensations and strength of negative expectations and thoughts. Salespeople experiencing anxiety cognitions should distract themselves by concentrating on their task to free up their thinking in relation to the task at hand. Engaging in behaviors to modify the situation by persevering on the sale, on the other hand, occupies action space and should be the coping strategy of choice for those salespeople confronting physiological sensations in relation to felt anxiety. Hypotheses are tested on a sample of 171 salespersons. Frank Belschak (f.d.belschak@uva.nl) is an assistant professor of marketing and organizational behavior in the Business School at the University of Amsterdam, the Netherlands. He received his PhD from the University of Cologne in Germany. His current research interests include personal selling, emotions, and emotion regulation in organizations and across cultures. Willem Verbeke (verbeke@few.eur.nl) is a chaired professor of sales and account management at Erasmus University in Rotterdam, the Netherlands. He received his PhD from the University of Pennsylvania. His area of research interests includes personal selling, sales management, emotions and emotion regulation, and knowledge management. Richard P. Bagozzi (bagozzi@umich.edu) is a professor of marketing in the Ross School of Business and a professor of social and administrative sciences in the College of Pharmacy at the University of Michigan. He received his PhD from Northwestern University. He conducts research on human emotions, the theory of action, goal setting and goal striving, and structural equation methods.     

Brands matter: An empirical demonstration of the creation of shareholder value through branding

This research responds to the attendant need for empirical evidence pertaining to how marketing affects firm performance. Using the Fama-French method, common in finance, and a leading marketplace measure of a brand’s financial equity value, the authors provide empirical evidence for the branding-shareholder value creation link. The results extend previous research by showing that strong brands not only deliver greater returns to stockholders than does a relevant benchmark but do so with less risk This finding holds even when market share and firm size are considered. Barclays Global Investors Thomas J. Madden is a professor of marketing and director of the Professional MBA/Executive International MBA programs at the Moore School of Business, University of South Carolina. His research focuses on the measurement of brand meaning, marketing metrics, and value-based marketing strategies. His research has appeared in theJournal of Marketing Research, theJournal of Marketing, and theJournal of Consumer Behavior. Frank Fehle (frank.fehle@barclaysglobal.com) is the head of Europe Equity Research at Barclays Global Investors in London, United Kingdom. Previously, he was an assistant professor of finance at the University of South Carolina. His research focuses on empirical asset pricing, market microstructure, risk management, and derivatives. His work has appeared in theJournal of Financial Economics, theJournal of Futures Markets, theJournal of Economics and Business, theReview of Quantitative Finance and Accounting, among other journals and conference proceedings. Susan Fournier is an associate professor of marketing at Boston University. Her research focuses on branding and brand relationship marketing. Current projects explore person-brands, resonance as a moderator of the brand meaning → brand strength connection, the types of relationships consumers form with brands, and dynamic processes of relationship development and evolution. She served for 9 years on the Harvard Business School faculty and 2 years as a visitor at Dartmouth College. She consults with a range of companies to inform her teaching, case development, and research.