Should there exist secondary markets for executive stock options?

This paper investigates the potential disadvantages of the secondary markets for executive stock options (ESOs). The benefits of such markets are evident, but they might also have negative effects for shareholders. Executives might, for example, use inside information to time their ESO selling. We investigate two personal motives of managers that can be assumed to affect their optimal selling decision, that is, managers' personal portfolio management issues and the use of inside information. We explore these motives by analyzing unique data from Finland, where there are secondary markets for ESOs. The results of the study support the traditional portfolio diversification hypothesis according to which managers tend to sell their ESOs when holding an ESO is equivalent to holding the underlying stock; that is, in such a case a manager's wealth is closely tied to the stock price of the firm. With respect to the use of inside information the results indicate that ESO selling activity is not related to future stock price behaviour, suggesting that managers do not use inside information to determine the selling time of their ESOs. These results imply that the existence of secondary markets for ESOs does not weaken the usefulness of ESOs as the management compensation, although the benefits of such markets are evident.     

Adjustment costs and time-to-build in factor demand in the U.S. manufacturing industry

In order to explain cyclical behavior of factor demand, the static neoclassical model of the firm has been extended to include either adjustment costs (e.g. Lucas (1967)) or time-to-build considerations as in Kydland and Prescott (1982). This paper presents an intertemporal factor demand model which accounts for adjustment costs and gestation lags. The closed form solution of the model is a highly restricted vector ARMA-process that is estimated using quarterly data for the manufacturing industry in the U.S., 1960–1988. The main conclusion is that both sources of dynamics of factor demand are identifiable and found to be empirically of importance.     

Corporate Governance,Social Responsibility,and Data Breaches

We study whether corporate governance and social responsibility are related to data breaches. We find that socially responsible companies with smaller boards and greater financial expertise are less likely to be breached. The financial impact of a breach is visible in the long term. Specifically, data‐breach firms have –3.5% one‐year buy‐and‐hold abnormal returns. Additionally, banks with breaches have significant declines in deposits and nonbanks have significant declines in sales in the long run. Finally, we find that following a data breach, companies are more likely to replace their chief executive officer and chief technology officer as well as improve their governance and social responsibility.     

Experience, information asymmetry, and rational forecast bias

This study examines whether it is ever rational for analysts to post biased estimates and how information asymmetry and analyst experience factor into the decision. Using a construct where analysts wish to minimize their forecasting error, we model forecasted earnings when analysts combine private information with consensus estimates to determine the optimal forecast bias, i.e., the deviation from the consensus. We show that the analyst??s rational bias increases with information asymmetry, but is concavely related with experience. Novice analysts post estimates similar to the consensus but as they become more experienced and develop private information channels, their estimates become biased and deviated from the consensus. Highly seasoned analysts, who have superior analytical skills and valuable relationships, need not post biased forecasts.     

Ideologie vor Eigennutz?

The case study regards the question whether economic self-interests of publishers have a significant influence on the reporting of their own newspapers with regard to crucial topics touching those interests. The conflict about the minimum wage in the mailing business is scrutinized. The newspapers engaged in the mailing business are compared with those of independent newspapers without these interests. Because the political inclination of a newspaper, even beyond the self-interests of its publisher, affects the reporting of a conflict, newspapers with different political views are chosen among economically involved and uninvolved media companies. The study is based on the “public task” of press and researches, using a quantifying analysis of contents, relevance and plurality of conflict reports. The results show that in this case the basic political orientation of a newspaper had a significant influence on the portrayal of the conflict. An additional influence with regard to the economic self-interests could not be proven significantly. Ideology seems to be more important than self-interest. However in this case political orientation and economic self-interests harmonized. Therefore it is still relevant to study the role of economic interests for the realization of the “public task”.     

Testing the dynamic specification of an econometric model with an application to Belgian data

In this paper, we analyze the Final Equation and Transfer Function form associated with a linear dynamic simultaneous equation model and use the empirical findings as a guidance to a structural form specification in accordance with the information in a sample of monthly Belgian data.     

Interdependencies in the Dynamics of Firm Entry and Exit

This paper investigates the interdependence between firm entry and exit from an industrial dynamics perspective. The paper discusses how entry and exit rates in industrial sectors are affected by previous exit and entry rates. Economic theory presents two different approaches to how entry and exit of firms are interrelated, the multiplier effect and the competition effect. This paper intends to investigate which force is the predominant one, for entry and exit patterns, respectively. The empirical analysis is based on data for 25 Swedish manufacturing industries at the 2-digit SIC level, during the period 1991–2000. In the estimation work the study applies a dynamic panel data approach as suggested by Anderson and Hsiao [Journal of the American Statistical Association, 76:598–606, 1981] and Arellano and Bond [Review of Economic Studies, 58(2):277–297, 1991]. With respect to entry, the empirical results support the multiplier effect such that entry stimulates future entry, but also a competition effect such that past exit induces additional entry. With regard to exit, on the other hand, the competition effect rules, implying that previous entry causes subsequent exit and previous exit reduces subsequent exit.