Information,market power,and price volatility

We consider demand function competition with a finite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. Regardless of the number of agents and the correlation of payoff shocks, market power may be arbitrarily close to zero (the competitive outcome) or arbitrarily large (so there is no trade). By contrast, price volatility is always lower than the variance of the aggregate shock across all information structures. Alternative trading mechanisms lead to very distinct bounds as a comparison with Cournot competition establishes.     

SPAC merger announcement returns and subsequent performance

Special purpose acquisition companies (SPACs) are created to raise capital and then find non-listed operating companies with which to merge. While most of the extant research has focused on SPAC initial public offerings, we study what happens when SPACs announce business combinations. Our analysis of 236 ‘deSPACs’ completed between January 2012 and June 2021 in the United States documents an average short-term announcement return of +7.4% and a 1-year abnormal return of −14.1% (−18.0% over 2 years) for public investors beginning from the merger announcement. Short-term returns decrease with longer times from initial public offering until announcement.     

Excess corporate payouts and financial distress risk

Firms that follow excessive payout policies (over-payers) are higher on the financial distress spectrum and have lower survival rates than under-payers. In addition, over-payers endure lower future sales and asset growth than under-payers and experience negative abnormal returns in the bond and stock markets. Exogenous import tariff reductions and commodity price jumps reduce the likelihood of overpayment. We interpret this as evidence consistent with financial flexibility considerations, rather than risk-shifting, explaining the decision to overpay. We also find that CEO overconfidence and catering incentives affect overpayment.     

A note on estimating the divisional cost of capital for diversified companies: an empirical evaluation of heuristic-based approaches

This note provides an empirical analysis of the potential for heuristic-based approaches to derive a divisional cost of equity from a firm's total cost of capital. Since an empirical relationship between fundamental information and systematic risk has previously been shown in other studies, idiosyncratic information on risk and performance ought to serve as a good proxy to calculate divisional adjustments. Two practically used, heuristic-based approaches are tested and a significant relationship is found between one of the measures and CAPM beta. This method may offer a plausible and comparatively uncomplicated method for adjusting a firm's total cost of capital for divisional use.     

Mean and dispersion modelling for policy claims costs

A model for the statistical analysis of the total amount of insurance paid out on a policy is developed and applied. The model simultaneously deals with the number of claims (zero or more) and the amount of each claim. The number of claims is from a Poisson-based discrete distribution. Individual claim sizes are from a continuous right skewed distribution. The resulting distribution of total claim size is a mixed discrete-continuous model, with positive probability of a zero claim. The means and dispersions of the claim frequency and claim size distribution are modeled in terms of risk factors. The model is applied to a car insurance data set.     

An integrated approach to supply chain risk analysis

Despite the increasing attention that supply chain risk management is receiving by both researchers and practitioners, companies still lack a risk culture. Moreover, risk management approaches are either too general or require pieces of information not regularly recorded by organisations. This work develops a risk identification and analysis methodology that integrates widely adopted supply chain and risk management tools. In particular, process analysis is performed by means of the standard framework provided by the Supply Chain Operations Reference Model, the risk identification and analysis tasks are accomplished by applying the Risk Breakdown Structure and the Risk Breakdown Matrix, and the effects of risk occurrence on activities are assessed by indicators that are already measured by companies in order to monitor their performances. In such a way, the framework contributes to increase companies’ awareness and communication about risk, which are essential components of the management of modern supply chains. A base case has been developed by applying the proposed approach to a hypothetical manufacturing supply chain. An in-depth validation will be carried out to improve the methodology and further demonstrate its benefits and limitations. Future research will extend the framework to include the understanding of the multiple effects of risky events on different processes.     

Who Receives Medicaid in Old Age? Rules and Reality

Medicaid is a government programme that also provides health insurance to the elderly who have few assets and either low income or catastrophic health care expenses. We ask how the Medicaid rules map into the reality of Medicaid recipiency, and we ask what other observable characteristics are important to determine who ends up on Medicaid. The data show that both singles and couples with high retirement income can end up on Medicaid at very advanced ages. We find that, conditioning on a large number of observable characteristics, including those that directly relate to Medicaid eligibility criteria, single women are more likely to end up on Medicaid – so are non‐white people, but, surprisingly, their higher recipiency is concentrated in the higher income percentiles. We also find that people with low incomes who have a high‐school diploma or higher degree are much less likely to end up receiving Medicaid than their less‐educated counterparts. All of these effects are large and depend on retirement income in a very non‐linear way.     

Monetary policy and financial (in)stability: An integrated micro–macro approach

Evidence on central banks’ twin objective, monetary and financial stability, is scarce. We suggest an integrated micro–macro approach with two core virtues. First, we measure financial stability directly at the bank level as the probability of distress. Second, we integrate a microeconomic hazard model for bank distress and a standard macroeconomic model. The advantage of this approach is to incorporate micro information, to allow for non-linearities and to permit general feedback effects between financial distress and the real economy. We base the analysis on German bank and macro data between 1995 and 2004. Our results confirm the existence of a trade-off between monetary and financial stability. An unexpected tightening of monetary policy increases the probability of distress. This effect disappears when neglecting microeffects and non-linearities, underlining their importance. Distress responses are largest for small cooperative banks, weak distress events, and at times when capitalization is low. An important policy implication is that the separation of financial supervision and monetary policy requires close collaboration among members in the European System of Central Banks and national bank supervisors.     

A Network-based Approach on Opportunity Recognition

This paper argues that individuals differ in terms of their perception of opportunities because of the differences between the networks they are embedded in. We focus on two aspects of individuals embeddedness in networks, that is, (1) individuals belonging to residential areas that are more or less likely to be characterized by network cohesion, and (2) individuals differential access to network contacts based on the level of human capital they hold. Our analyses show that the nature of ones residential area influences the perception of entrepreneurial opportunities. Further, we find a positive effect for education, i.e., people with a higher educational level are more likely to perceive entrepreneurial opportunities compared to those with a lower educational level.     

Global Entrepreneurship Monitor: Data Collection Design and Implementation 1998–2003

The Global Entrepreneurship Monitor research program was designed as a comprehensive assessment of the role of entrepreneurship in national economic growth. The conceptual model reflected in a wide range of factors associated with national variations in entrepreneurial activity and the major contextual features. Empirical tests of the many relationships in the model required four major data collection activities: adult population surveys, unstructured interviews with national experts, self-administered questionnaires completed by national experts, and assembly of relevant standardized measures from existing cross-national data sets. Adult population surveys were implemented to identify those entrepreneurially active, which required a set of precise criteria and careful processing to ensure harmonized counts and prevalence rates across 41 countries. Existing evidence on measures of reliability indicates that the measures met contemporary standards and the project was cost-effective.