INDIFFERENCE PRICING FOR CONTINGENT CLAIMS: LARGE DEVIATIONS EFFECTS

We study utility indifference prices and optimal purchasing quantities for a nontraded contingent claim in an incomplete semimartingale market with vanishing hedging errors. We make connections with the theory of large deviations. We concentrate on sequences of semicomplete markets where in the nth market, the claim admits the decomposition . Here, is replicable by trading in the underlying assets , but is independent of . Under broad conditions, we may assume that vanishes in accordance with a large deviations principle (LDP) as n grows. In this setting, for an exponential investor, we identify the limit of the average indifference price , for units of , as . We show that if , the limiting price typically differs from the price obtained by assuming bounded positions , and the difference is explicitly identifiable using large deviations theory. Furthermore, we show that optimal purchase quantities occur at the large deviations scaling, and hence large positions arise endogenously in this setting.     

What Drives Substantive Versus Symbolic Implementation of ISO 14001 in a Time of Economic Crisis? Insights from Greek Manufacturing Companies

This paper analyses the role of external pressures, internal motivations and their interplay, with the intention of identifying whether they drive substantive or instead symbolic implementation of ISO 14001. The context is one of economic crisis. We focus on Greece, where the economic crisis has weakened the country’s institutional environment, and analyse qualitatively new interview data from 45 ISO 14001 certified firms. Our findings show that (a) weak external pressures can lead to a symbolic implementation of ISO 14001, as firms can defend their legitimacy without incurring the costs of internalization in the local market; (b) weak external pressures can lead to substantive implementation of ISO 14001 when firms have strong internal motivations seeking to strategically differentiate from competitors in international markets. Firms internalize ISO 14001 so as to restore their legitimacy and reputation in foreign markets and stimulate their competitiveness; and (c) strong internal motivations pave the way for companies to stimulate their competitiveness by enhancing their efficiency, as some companies might strengthen their position in the local market by implementing ISO 14001 substantively. The contribution of this paper to the literature on ISO 14001 internalization lies in refining existing theory on the importance of internal motivations for the substantive implementation of ISO 14001 in the context of economic crisis. In addition, this paper extends current theory by challenging studies that dismiss the importance of external pressures. We argue that the intensity of external pressures influences the internalization of ISO 14001, but propose that this relationship might not be linear.     

Absorptive capacity, innovation, and financial performance

This study here examines the role of absorptive capacity as both a mechanism to identify and translate external knowledge inflows into tangible benefits, as well as a means of achieving superior innovation and time-lagged financial performance. Using path analysis in a sample of 461 Greek enterprises participating in the third Community Innovation Survey, this study demonstrates that external knowledge inflows are directly related to absorptive capacity and indirectly related to innovation. Absorptive capacity contributes, directly and indirectly, to innovation and financial performance but in different time spans. This study, therefore, contributes to the understanding of absorptive capacity's antecedents and outcomes by providing empirical evidence of longitudinal form that offers important research and practical implications.     

Management earnings forecasts and IPO performance: evidence of a regime change

Companies undertaking initial public offerings (IPOs) in Greece were obliged to include next-year profit forecast in their prospectuses, until the regulation changed in 2001 to voluntary forecasting. Drawing evidence from IPOs issued in the period 1993–2015, this is the first study to investigate the effect of disclosure regime on management earnings forecasts and IPO long-term performance. The findings show mainly positive forecast errors (forecasts are lower than actual earnings) and higher long-term returns during the mandatory period, suggesting that the mandatory disclosure requirement causes issuers to systematically bias profit forecasts downwards as they opt for the safety of accounting conservatism. The mandatory disclosure requirement artificially improves IPO share performance. Overall, our results show that mandatory disclosure of earnings forecasts can impede capital market efficiency once it goes beyond historical financial information to involve compulsory projections of future performance.     

Exogenously driven CSR: insights from the consultants' perspective

This paper offers insights into corporate social responsibility (CSR) consulting in Greece. It sheds light on perspectives of how socially responsible business conduct is shaped by consultancies in a national business environment where such an essential aspect of organizational commitment and behavior exhibits comparatively little resonance among companies and is primarily induced by supranational and international policy schemes as well as foreign competitors. Drawing from long interviews with consulting professionals, we explore key topics: the domestic CSR (consulting) industry's characteristics, issues pertaining to the engagement with clients, the endorsement of CSR standards and initiatives, along with the consultants' perspective on institutional dynamics and their prospects with respect to the future of CSR in Greece. In this context, we aim to indicate trends on CSR implementation, pressures exerted on consultants, and managerial attitudes towards corporate responsibility. Our findings illustrate an oligopolistically structured market that encourages consultancies to compete intensely, the consultants' limited capacity to influence the business behavior of their clients, with the latter to adopt a promotional communicative approach to CSR, as well as a lack of institutional coordination and mechanisms that will materially embed social responsibility in the strategic management of business.     

The role of context in case study selection: An international business perspective

The extant methodological literature has challenged case selection in qualitative case study research for being arbitrary or relying too much on convenience logic. This paper aims to address parts of such criticism on the rigour of case selection through the presentation of a sampling framework that promotes contextualisation and thoroughness of sampling decisions in the study of international phenomena. This framework emerged from an inductive process following an actual case study project in international marketing and promotes the idea that context matters for sampling purposes, too. The proposed framework integrates methodological tools that complement the overarching principle of purposeful sampling and considers respective contextual challenges that the researchers encountered before and during fieldwork. It serves to highlight in an iterative fashion the role that context plays in the case selection process and the importance of contextualised sampling processes for qualitative case study research in international business.     

STATE DEPENDENCE IN LABOR MARKET FLUCTUATIONS

This article documents state dependence in labor market fluctuations. Using a Threshold Vector Autoregression (TVAR) model, we establish that the unemployment rate, the job separation rate, and the job-finding rate (JFR) exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond–Mortensen–Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. We calibrate the model to match the standard deviation of the job-transition rates explained by productivity shocks in the TVAR, and show that the model explains 88% of the state dependence in the unemployment rate, 76% for the separation rate and 36% for the JFR. The key channel underpinning state dependence in both job separation and JFRs is the interaction of the firm's reservation productivity level and the distribution of match-specific idiosyncratic productivity. Results are robust across several variations to the baseline model.     

On the choice of functional form in stochastic frontier modeling

This paper examines the effect of functional form specification on the estimation of technical efficiency using a panel data set of 125 olive-growing farms in Greece for the period 1987–93. The generalized quadratic Box-Cox transformation is used to test the relative performance of alternative, widely used, functional forms and to examine the effect of prior choice on final efficiency estimates. Other than the functional specifications nested within the Box-Cox transformation, the comparative analysis includes the minflex Laurent translog and generalized Leontief that possess desirable approximation properties. The results indicate that technical efficiency measures are very sensitive to the choice of functional specification. Perhaps most importantly, the choice of functional form affects the identification of the factors affecting individual performance – the sources of technical inefficiency. The analysis also shows that while specification searches do narrow down the set of feasible alternatives, the identification of the most appropriate functional specification might not always be (statistically) feasible. First version received: November 1999/Final version received: July 2001 RID="*" ID="*"  The authors wish to thank Almas Heshmati, Robert Romain, and an anonymous referee for insightful comments and suggestions. Special thanks go to the associate editor who handled the paper, and whose careful reading and suggestions have improved the paper substantially. The second author wishes to acknowledge the financial support from “President SSHRC” from the University of Saskatchewan. The usual caveats with respect to opinions expressed in the paper apply. Senior authorship is shared. This is University of Nebraska-Lincoln Agricultural Research Division Article No. 13270.     

Customer information sharing among rival firms

The recent rapid growth of the Internet as a medium of communication and commerce, combined with the development of sophisticated software tools, are to a large extent responsible for producing a new kind of information: Databases with detailed records about consumers’ preferences. These databases have become part of a firm's assets, and as such they can be sold to third parties. This possibility has raised numerous concerns from consumer privacy advocates and regulators, who have entered into a heated debate with business groups and industry associations about whether the practice of customer information sharing should be banned, regulated, or left unchecked. This paper investigates the incentives of rival firms to share their customer-specific information and evaluates the welfare implications if such exchanges are banned, in the context of a perfect price discrimination model.     

News shocks and labour market dynamics in matching models

We enrich a baseline real business cycle (RBC) model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks. The analysis allows shocks to have an unanticipated and a news (i.e., anticipated) component. The Bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data. News shocks in stationary and non‐stationary TFP, investment‐specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium‐ and long‐run horizons. Historically, news shocks have played a relevant role for output, but they have had a limited influence on unemployment.