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Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms

Like Feinberg and Sherman (1985) and Phillips and Mason (1992), we test experimentally whether conglomerate firms, i.e. firms competing on multiple, structurally unrelated markets, effectively limit competition through forbearance. Unlike these authors, our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test their forbearance hypothesis. We vary the duration of the interaction to disentangle effects of forbearance and repetition. Surprisingly, rather than limiting competition, conglomerate firms foster it. In line with our expectations, we find more cooperation with strategic complements than with strategic substitutes and also more cooperation with long term than with short term interaction.     

Illiquidity and the Measurement of Stock Price Synchronicity

This paper demonstrates that measures of stock price synchronicity based on market model R² s are predictably biased downward as a result of stock illiquidity, and that previously employed remedies to correct market model betas for measurement bias do not fix R² . Using a large international sample of firm-years, we find strong negative and nonlinear relations between illiquidity and R² across countries, across firms, and over time. Because variables of interest frequently relate to illiquidity as well, we illustrate the consequences of not controlling for illiquidity in synchronicity research. More generally, we demonstrate the importance of using nonlinear control variable methods. Overall, we conclude that the illiquidity-driven measurement bias in R² provides an explanation for why prior research finds low-R² firms to have weak information environments, and suggest future research carefully evaluate the sensitivity of its results to nonlinear controls for illiquidity.     

Youth unemployment in Europe – business cycle and institutional effects

In the aftermath of the Great Recession 2008/2009 European youth unemployment rose sharply from below 4.2 m in 2007 to more than 5.6 m young people under 25 unemployed in the EU28 countries in 2013. The youth unemployment rate expanded from 15.5 in 2007 to 25.5 in 2013. Beyond the consequences for individuals youth unemployment as a mass phenomenon is potentially menacing the stability of democratic societies. Hence there are good reasons to fight youth unemployment by any means. The paper analyses the specific structure and causes of youth unemployment. Although youth unemployment is also influenced by individual factors like insufficient qualification, we show that country-specific factors - institutions, traditions and characteristic structures - are of high importance in explaining the huge disparities between European countries. Using panel data estimates with specific country and time fixed effects we show that especially the Mediterranean countries responded to the economic downturn in a specific way. However, the high correlation of changes in the youth and adult unemployment rates across countries points to the fact that not only structural factors but also business cycle effects are important for explaining the sharp increase in the youth unemployment rate in Europe. The rise in joblessness is in fact closely related to macroeconomic slackness. Therefore, we argue that a two-handed approach combining institutional improvements with growth stimulating measures is needed to overcome the problem.     

Corporate Communications from the Top and from the Center: Comparing Experiences and Expectations of CEOs and Communicators

Common viewpoints as well as divergences between top executives and communication professionals influence the institutionalization of strategic communication. However, there is little empirical evidence on the accordance between both groups. Most research explores either communication professionals or chief communication officers (CEOs). Very few studies have combined both perspectives. This article identifies the research gap, explores insights from previous research, and contributes to the body of knowledge in strategic communication with an original study that is based on two surveys with replies from 602 CEOs and executive board members as well as 1,251 communication managers from companies in the largest European country, Germany. Although top executives rate the information and motivation of employees as the most important objective of corporate communication, communication professionals focus on the creation of a positive image. Respondents from both groups also state different opinions about dealing with the demand for transparency. Both top executives and communicators give most support to a role model that describes communication professionals as a facilitator between an organization and its publics. Nevertheless the overall conclusion is that perspectives diverge quite often and attention should be directed towards a better alignment between top management and those leading the strategic communication function.     

Price Flexibility as a Two-dimensional Concept and the Volatility of Output

The stabilizing effect of increased price flexibility has been challenged in a series of articles. We show that it is important to distinguish between two different dimensions of flexibility. An increase in the responsiveness of the price level with respect to excess demand may both stabilize and destabilize the economy depending on whether the price level reacts with a lag or whether prices adjust immediately. Hence, the degree of price rigidity in the sense of a delayed price reaction turns out to be of crucial importance for the consequences of an increase in the responsiveness of the price level.     

Die radikalen Steuerpläne der US-Republikaner und die Folgen für die EU

The Republican majority in the US House of Representatives is considering the introduction of a destination-based cash flow tax (DBCFT). While its global implementation has the potential to substantially increase welfare, a unilateral introduction of such a tax system raises a range of questions due to the existence of source-based taxation systems abroad. We consider the US tax plans from an EU perspective. We show that European exporters may suffer, but European firms with affiliation in the US may benefit from a switch to the DBCFT. American firms will be the likely losers of this policy. Finally, we discuss potential policy reactions by the EU and its member countries as well as legal and economic implications of possible adjustments in EU tax systems.     

An evolutionary approach to the examination of capital market efficiency

The paper investigates capital market efficiency on basis of an evolutionary model of asset pricing. Participants of capital markets are considered as organizations in the sense of Nelson and Winter (1982). Behavior of these organizations is described by routines. Routines are regular and predictable behavioral patterns, which determine how individuals gather information, form expectations, and order assets. The participants change their behavior by innovating new routines or by imitating routines of other participants.