Taking Stock: Equity-Based Compensation and the Evolution of Managerial Ownership

We investigate the impact of stock-based compensation on managerial ownership. We find that equity compensation succeeds in increasing incentives of lower-ownership managers, but higher-ownership managers negate much of its impact by selling previously owned shares. When executives exercise options to acquire stock, nearly all of the shares are sold. Our results illuminate dynamic aspects of managerial ownership arising from divergent goals of boards of directors, who use equity compensation for incentives, and managers, who respond by selling shares for diversification. The findings cast doubt on the frequent and important theoretical assumption that managers cannot hedge the risks of these awards.     

Corporate taxation, incumbency advantage and entry

It is the purpose of this paper to show that corporation tax may affect industrial structure. Analyzing the effects of corporation tax, we demonstrate that it tends to favour incumbents over entrants. We further show that the effect of this advantage on an incumbent's output depends on his profit or loss history. An incumbent with a past profit is likely to produce a greater output, thereby partially or fully crowding out an entrant's output. In contrast, an incumbent with a past loss is more likely to produce a smaller output, making entry easier.     

Engaging diasporas as international entrepreneurs in developing countries: In search of determinants

Diaspora has been increasingly recognized by practitioners and scholars as an important factor of development in developing economies. Through their remittances and expertise, diaspora members have become an important source of foreign direct investment and managerial capabilities. Although the literature is glutted with examples of the impact of diaspora in fostering international entrepreneurship and reducing poverty, a theoretical foundation and framework is needed to explain this impact. This study explores a theoretical foundation of the diaspora entrepreneurship. A framework identifying the determinants of the diaspora’s international new venture creation in the country of origin is developed. The study suggests that diaspora international entrepreneurship depends on the level of altruistic motivation, need of social recognition, entrepreneurial opportunities, friendliness and receptivity of the home country, as well as integration of and support to immigrants in the host countries. Propositions for diaspora entrepreneurship are developed.     

Testing neoclassical production theory

In this paper we propose and carry out some tests that help us evaluate the neoclassical theory of production. First, we use the implied relationship between cost (production) and (inverse) derived demand equations to provide a test which can be interpreted as a test for the validity of the theory. Then, using the same relationships we provide a test for the internal consistency of the theory. Finally, we examine the extent to which the primal and dual models yield the same implications. We find that except for one case the theory does not pass the proposed tests and furthermore, the primal and dual do not yield the same implications.     

Partial rank estimation of duration models with general forms of censoring

In this paper we propose estimators for the regression coefficients in censored duration models which are distribution free, impose no parametric specification on the baseline hazard function, and can accommodate general forms of censoring. The estimators are shown to have desirable asymptotic properties and Monte Carlo simulations demonstrate good finite sample performance. Among the data features the new estimators can accommodate are covariate-dependent censoring, double censoring, and fixed (individual or group specific) effects. We also examine the behavior of the estimator in an empirical illustration.     

Fear Linkages Between the US and BRICS Stock Markets: A Frequency-Domain Causality

Abstract

We employ a spectral causality approach to uncover short-, medium-, and long-run causal relations between the US implied volatility index and the five individual implied volatility indexes of BRICS markets from 16^th March 2011 to 31^st January 2018. We show that the volatility causal relations differ between the short and long run in many cases. Although the results indicate the dominant role played by US uncertainty in shaping uncertainty in all BRICS markets, there is also evidence of a feedback effect from Brazil, Russia, and China to the US that differs across the spectrum. The implications for hedging and risk management practices are explored.     

Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms

This study analyses the investment decision of 497 Brazilian firms during a period of unstable macroeconomic conditions. The role of financial constraints is considered in a Bayesian econometric model. We estimate three different models, and the results indicate the presence of financial restrictions, especially for capital-intensive firms. The recursive predictive density criterion indicates that the most preferred model is the one in which firm-specific effects are correlated with cash-flow. Financial restrictions are more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.     

Correlates and Consequences of the 1918 Influenza in South Africa

We study the demographic and economic correlates of the 1918 influenza or “Spanish flu” that killed an estimated 6% of South Africa's population. While the pandemic has received some attention in South African historiography and from social scientists in other contexts, little is known about its long-term impact on the country. Bringing together data from a range of new sources, including population and agricultural censuses, household surveys, and the voters’ rolls, we provide analyses that show, first, the factors that (do and do not) predict flu mortality across South Africa's magisterial districts, and, second, suggest some important consequences of the flu. Our results reveal a large but short-lived demographic shock, and detectable, if small scale, long-term economic consequences.     

Exploring B-to-B e-commerce adoption trajectories in manufacturing SMEs

The intent of this paper is to capture the gradual unfolding of business-to-business (B-to-B) e-commerce adoption in small and medium-sized enterprises (SMEs). Empirical evidence was gathered in three separate but complementary phases: first, a pilot study to identify and validate metrics for B-to-B e-commerce adoption; second, an e-survey to gain an in-depth understanding of B-to-B e-commerce adoption and its related benefits; and third, a multiple case study to further validate the e-commerce adoption trajectories we observed and their underlying dynamics. Findings suggest logical evolutionary paths to the penetration of B-to-B e-commerce in SMEs. The cumulative and self-reinforcing nature of both e-commerce initiatives and the benefits derived therefrom points to the existence of e-commerce adoption trajectories.     

Causes and effects of corporate refocusing programs

We study the precursors and outcomes of refocusing episodesby 107 diversified firms that were not taken over between 1984and 1993. These firms had more value-reducing diversificationpolicies than diversified firms that did not refocus. However,major disciplinary or incentive-altering events (including managementturnover, outside shareholder pressure, changes in managementcompensation, and financial distress) usually occurred beforerefocusing took place. The cumulative abnormal returns overa firm's refocusing-related announcements averaged 7.3% andwere significantly related to the amount of value reductionassociated with the refocuser's diversification policy.