The Loss of Raw Material Criticality: Implications of the Collapse of Saudi Arabian Oil Exports

Intereconomics - Raw material criticality has played an important role in geostrategic thinking, especially since the crisis surrounding the price and supply of rare earths at the beginning of the...     

Managers’ use of language in corrupt firms’ financial disclosures: Evidence from FCPA violators

This paper explores management’s use of language in financial disclosures of corrupt firms by looking at a sample of firms that have been prosecuted for violating the Foreign Corrupt Practices Act (FCPA). We find that the management of FCPA violators use more negative, less litigious, more complex and less conservative language when disclosing financials than non‐violators. The language effect prior to an FCPA prosecution is driven by firms with low corporate governance performance. By contrast, firms with high corporate governance use less complex and more conservative language before an FCPA prosecution than firms with low corporate governance performance. Furthermore, we find that after an FCPA prosecution the language becomes less litigious and complex than before the FCPA litigation.     

Accounting for Sustainable Development over the Long‐Run: Lessons from Germany

We construct long‐run sustainability indicators based on changes in Comprehensive Wealth – which we refer to as Genuine Savings (GS) – for Germany over the period 1850–2000. We find that German sustainability indicators are positive for the most part, although they are negative during and after the two World Wars and also the Great Depression. We also test the relationship between these wealth changes and a number of measures of well‐being over the long‐run: changes in consumption as well as changes in average height and infant mortality rates. We find a positive relationship between GS and our well‐being indicators over different time horizons, however, the relationship breaks down during WWII. We also test if the GS/Comprehensive Wealth framework is able to cope with massive disinvestment at the end of the Second World War due to war‐related destructions and dismantlement. We find that negative rates of GS were by and large avoided due to the accumulation of technology and growth‐friendly institutions. We demonstrate the importance of broader measures of capital, including measures of technological progress, and its role in the process of economic development; and the limits of conventional measures of investment to understand why future German consumption did not collapse.     

Sovereign bond yield spreads: A time-varying coefficient approach

We study the determinants of sovereign bond yield spreads across 10 EMU countries between Q1/1999 and Q1/2010. We apply a semiparametric time-varying coefficient model to identify, to what extent an observed change in the yield spread is due to a shift in macroeconomic fundamentals or due to altering risk pricing. We find that at the beginning of EMU, the government debt level and the general investors’ risk aversion had a significant impact on interest differentials. In the subsequent years, however, financial markets paid less attention to the fiscal position of a country and the safe haven status of Germany diminished in importance. By the end of 2006, two years before the fall of Lehman Brothers, financial markets began to grant Germany safe haven status again. One year later, when financial turmoil began, the market reaction to fiscal loosening increased considerably. The altering in risk pricing over time period confirms the need of time-varying coefficient models in this context.     

The Effect of Selective Openness on Value Creation in User Innovation Communities

Open innovation research and practice recognize the important role of external complementors in value creation. At the same time, firms need to retain exclusive control over some essential components to capture value from their product and/or service system. This paper contributes to the literature by analyzing some of the trade‐offs between openness to external value creation and closedness for internal value capture. It focuses on selective openness as a key variable and investigates how it affects value creation by external complementors, specifically the members of user innovation communities. Openness, it is hypothesized, matters to community members: The more open a product design is, the higher their sense of involvement in the innovation project, and the larger the effort they devote to it. Unlike prior literature, different forms and loci of openness are distinguished, specifically the transparency, accessibility, and replicability of different components of the product being developed. Hypotheses are tested based on survey data (n = 309) from 20 online communities in the consumer electronics and information technology hardware industries. Multilevel regression analysis is used to account for clustering, and thus nonindependent data, at the community level. We find that openness indeed increases community members’ involvement in the innovation project and their contributions to it. Interestingly, however, some forms and loci of openness strongly affect community perceptions and behavior, while others have limited or no impact. This finding suggests that, at least in relation to user communities, the trade‐off that firms face between external value creation and internal value capture is softer than hitherto understood. Contingency factors that may be able to explain these patterns are advanced. For example, users are expected to value the form of openness that they have the capabilities and incentives to exploit. The findings in this paper extend the literature on selective openness in innovation. They emphasize the need to study the demand for different forms of openness at the subsystem level and align supply‐side strategies to it. In managerial practice, a careful assessment of the demand for openness enables firms to successfully use selective openness and to effectively appropriate value from selectively open systems.     

Managerial style in cost asymmetry and shareholder value

We show that CEOs' contribution to SG&A cost asymmetry is associated with lower shareholder value. CEO-related excess SG&A cost stickiness of CEOs with compensation less tied to shareholder value creation and high power drive this association. Last, we provide first evidence that cost asymmetry incorporates a harmful element to the firm and shareholders, namely CEO-related excess SG&A cost asymmetry.