Risk management under extreme events

This article presents two applications of extreme value theory (EVT) to financial markets: computation of value at risk (VaR) and cross-section dependence of extreme returns (i.e., tail dependence). We use a sample comprised of the United States, Europe, Asia, and Latin America. Our main findings are the following. First, on average, EVT gives the most accurate estimate of VaR. Second, tail dependence of paired returns decreases substantially when both heteroscedasticity and serial correlation are filtered out by a multivariate GARCH model. Both findings are in agreement with previous research in this area for other financial markets.     

The Future of Financial Reporting: Insights from Research

Research offers insights that, if heeded and built upon, could improve financial reporting, thereby contributing to a more prosperous society. In particular, research suggests improvement could stem from greater use of fair value; a performance statement designed to reveal the information embedded in changes in fair value; better information to help investors assess the value of intangible assets; more specific information about risk and uncertainty; information that is unbiased, rather than conservative; acceptance of a degree of earnings management together with a determination of how much earnings management is acceptable; and a financial reporting package designed to convey information users need, which presumably is broader than today's financial statements.     

Zombie Board: Board Tenure and Firm Performance

We show that board tenure exhibits an inverted U‐shaped relation with firm value and accounting performance. The quality of corporate decisions, such as M&A, financial reporting quality, and CEO compensation, also has a quadratic relation with board tenure. Our results are consistent with the interpretation that directors’ on‐the‐job learning improves firm value up to a threshold, at which point entrenchment dominates and firm performance suffers. To address endogeneity concerns, we use a sample of firms in which an outside director suffered a sudden death, and find that sudden deaths that move board tenure away from (toward) the empirically observed optimum level in the cross‐section are associated with negative (positive) announcement returns. The quality of corporate decisions also follows an inverted U‐shaped pattern in a sample of firms affected by the death of a director.     

Fair value disclosures and crash risk

In response to the public criticism of the inadequate disclosures mandated by SFAS No. 157, Fair Value Measurements, the FASB issued ASU (Accounting Standards Update) 2010–06, Improving Disclosures about Fair Value Measurements, and ASU 2011–04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements, in an effort to increase the reporting transparency. We examine whether the increased fair value disclosures required by these two updates effectively decrease crash risk, defined as the frequency of extreme negative stock returns. In support of the hypothesis, we find that increased transparency from these updates reduces crash risk among U.S. banking firms and that the reduction is greater in banks that have a higher level of Level 3 financial assets.     

The raw material basis of global value chains: allocating environmental responsibility based on value generation

A new approach to allocate environmental responsibility, the ‘value added-based responsibility’ allocation, is presented in this article. This metric allocates total environmental pressures occurring along an international supply chain to the participating sectors and countries according to the share of value added they generate within that specific supply chain. We show that – due to their position in global value chains – certain sectors (e.g. services) and countries (e.g. Germany) receive significantly greater responsibility compared to other allocation approaches. This adds a new perspective to the discussions concerning a fair distribution of mitigation costs among nations, companies and consumers.     

Relationship Between Sustainable Development and Financial Performance: International Empirical Research

The aim of this paper is to clarify the relationship between companies' sustainable behavior and their financial performance (FP), which has been studied for several years without reaching a consensus on the effect and the direction of it. Hypotheses are tested for an unbalanced sample of 1960 multinational non‐financial listed companies from 25 countries and one administrative region for the period between 2002 and 2010. Due to the use of an international database and the differences among countries, it is possible to observe divergence between institutional settings. For this reason, a corporate governance system (Anglo‐Saxon, Germanic, Latin and Asian) is used as characteristic of the macro‐environment. Results obtained via the generalized method of moments estimator allow us to support the existence of a positive bidirectional relationship between corporate social responsibility and FP, evidencing the existence of a synergistic circle. The use of market value indicated that investors are able to identify economic, social and environmental practices generating a positive effect on FP. These relationships differ between corporate governance systems, due to the specific characteristics of each system. Findings are robust for each sustainable sub‐index (society, human rights, environmental and board). Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

Anthropogenic and topographic correlates of natural vegetation cover within agricultural landscape mosaics in Turkey

Natural vegetation enhances the value of agricultural landscapes for people and wildlife. However, the role of anthropogenic versus topographic factors in driving the extent of natural vegetation cover within agricultural lands at large spatial scales remains unexplored. I assessed the influence of anthropogenic and topographic variables on the extent of agricultural mosaics with high natural vegetation cover in the country of Turkey where a large extent of natural and semi-natural vegetation is maintained by traditional agriculture. GIS layers depicting human land use, elevation, slope, roads and population data were obtained and summarized at two spatial scales, within provinces and for 100 km² grid cells covering the country’s entire agricultural land area. Average farm size was also obtained at province level. Hierarchical Partitioning was conducted to determine the independent effect of anthropogenic and topographic variables on the variation in agriculture with high natural vegetation. Slope had the largest independent effect on the variation in the proportion of agricultural mosaic with high natural vegetation cover. The extent of agricultural and settlement area also explained much of the variation in natural vegetation across both grid cells and provinces. The proportion of natural vegetation increased as human population and road density decreased across grid cells and as average farm size decreased across provinces. These results suggest that while topography is the primary driver of natural vegetation cover within agricultural mosaics in Turkey, the pressures associated with urban development and agricultural industrialization may also influence the cultural and wildlife value of agricultural landscapes.     

The moments of the Gompertz distribution and maximum likelihood estimation of its parameters

The Gompertz distribution is widely used to describe the distribution of adult deaths. Previous works concentrated on formulating approximate relationships to characterise it. However, using the generalised integro-exponential function, exact formulas can be derived for its moment-generating function and central moments. Based on the exact central moments, higher accuracy approximations can be defined for them. In demographic or actuarial applications, maximum likelihood estimation is often used to determine the parameters of the Gompertz distribution. By solving the maximum likelihood estimates analytically, the dimension of the optimisation problem can be reduced to one both in the case of discrete and continuous data. Monte Carlo experiments show that by ML estimation, higher accuracy estimates can be acquired than by the method of moments.     

钢铁生产物流工艺过程监测与控制系统设计与实现

文章运用生产物流管理的思想和方法,阐释钢铁生产物流工艺过程的特点、监控的问题和原因,提出建立物流仿真系统和物流自动化技术设计方案,有效实现钢铁生产物流工艺过程的监测与控制手段,对现代钢铁生产物流工艺过程的科学管理具有重要的指导价值。     

Choosing for others

Experiments conducted in the US and France were used to study how individuals make trade-offs between health and taste for themselves and others. When someone receives a choice made for them that differs from their preference, they experience a welfare loss; at least in the short-term. We measure the empirical magnitude of this loss, and suggest it play a role in assessing the desirability of paternalistic policies motivated by behavioural economics. We show that the welfare loss changes with the provision of new information and the impact of this information differs for the two countries.