Industry and time specific deviations from fundamental values in a random coefficient model

The paper analyzes the relationship between stock prices and fundamentals for a large sample of US stocks in the last 10 years using a random coefficient model. Heterogeneity and omitted variable bias are properly taken into account with model coefficients being allowed to vary across time and industries. The random coefficient model allows to track waves of reliance on analysts’ forecasts and nonfundamental stock price components across time and clearly identifies the growth of the nonfundamental component in the long 1991–2000 swing.      

Extending a Logistic Approach to Risk Modeling through Semiparametric Mixing

The new proposal of the Basel Committee on banking regulation issued in January 2001 allows banks to use internal ratings systems to classify firms. Within this context, the main problem is to find a model that fits the data as well as possible, but one that also provides good prediction and explicative capabilities. In this paper, our aim is to compare two kinds of classification models applied to creditworthiness using weighted classification error as the performance function: the standard logistic model and a mixed logistic model, adopting, respectively, a parametric and a semiparametric approach. The main problem of the former is related to the assumption of an i.i.d. hypothesis, but it is often necessary to consider the possible presence of unobservable heterogeneity that characterizes microeconomic data. To better consider this phenomenon, we defined and applied a random effect logistic model, avoiding parametric assumptions upon the random effect distribution. This leads to a likelihood that is defined as the integral of the kernel density with respect to the mixing density, which has no analytical solution. This problem can be obviated by approximating the integral with a finite sum of kernel densities, each one characterized by a different set of model parameters. This discrete nature helps us in detecting non-overlapping clusters characterized by homogeneous values of insolvency risk, and in classifying firms to one of these clusters by means of estimated posterior probabilities of component membership.     

Corporate social responsibility and firm efficiency: a latent class stochastic frontier analysis

The nexus between corporate social responsibility and corporate performance is of fundamental importance to understand if the former can be a sustainable strategy in the competitive race. In this paper we test this relationship on a sample of firms observed in a 13-year interval by focusing on a performance indicator (productive efficiency) seldom explored in this literature with a novel approach (latent class stochastic frontiers). Our empirical findings show that firms included in the Domini 400 index (a CSR stock market index) do not appear to be more distant from the production frontier than firms in the control sample after controlling for the heterogeneity of production structure.     

The Determinants of Growth for Small and Medium Sized Firms. The Role of the Availability of External Finance

We present an empirical analysis of the determinants of growth for a sample of Italian small and medium sized firms. We show that, when investigating a sample which includes firms between 10 and 50 employees and a set of variables larger than those usually considered in the literature, growth – net of industry characteristics and ex ante market power – turns out to be significantly affected not only by size and age, but also by state subsidies, export capacity and credit rationing. By adopting a multivariate approach we also show that these findings are confirmed after controlling for heteroskedasticity, survivorship bias and serial correlation. Our results suggest that the hypothesis of independence of firm growth from the initial size and other factors (usually referred to as Gibrat's law in the literature) is not rejected for large firms, while it does not hold for small and medium sized firms under financial constraints in a "bank-oriented" financial system in which access to external finance is difficult.