Showing papers by "HEC Paris published in 2008"

European guidance for the diagnosis and management of osteoporosis in postmenopausal women

Abstract: Summary Guidance is provided in a European setting on the assessment and treatment of postmenopausal women with or at risk from osteoporosis. Introduction The European Foundation for Osteoporosis and Bone disease (subsequently the International Osteopo- rosis Foundation) published guidelines for the diagnosis and management of osteoporosis in 1997. This manuscript updates these in a European setting. Methods The following areas are reviewed: the role of bone mineral density measurement for the diagnosis of osteoporo- sis and assessment of fracture risk; general and pharmaco- logical management of osteoporosis; monitoring of treatment; assessment of fracture risk; case finding strategies; investigation of patients; health economics of treatment. Results and conclusions A platform is provided on which specific guidelines can be developed for national use.

Trust and Electronic Government Success: An Empirical Study

Abstract: Electronic government is being increasingly recognized as a means for transforming public governance. Despite this increasing interest, information systems (IS) literature is mostly silent on what really contributes to the success of e-government Web sites. To fill this gap, this study examines the role of trust in e-government success using the updated DeLone and McLean IS success model as the theoretical framework. The model is tested via a survey of 214 Singapore e-government Web site users. The results show that trust in government, but not trust in technology, is positively related to trust in e-government Web sites. Further, trust in e-government Web sites is positively related to information quality, system quality, and service quality. The quality constructs have different effects on "intention to continue" using the Web site and "satisfaction" with the Web site. Post hoc analysis indicates that the nature of usage (active versus passive users) may help us better understand the interrelationships among success variables examined in this study. This result suggests that the DeLone and McLean model can be further extended by examining the nature of IS use. In addition, it is important to consider the role of trust as well as various Web site quality attributes in understanding e-government success.

Controlling for endogeneity with instrumental variables in strategic management research

Abstract: This article offers a framework to understand how endogeneity arises and how to control for it with instrumental variables to estimate causal relations with observational data. It builds on the state-of-the-art research in applied and theoretical econometrics to highlight the importance of endogeneity and review the methods that can be used to address it with instrumental variables.The article also discusses when the Heckman two-step procedure can be used, as well as the tests, methods and assumptions that researchers should check when using instrumental variables.To ease implementation of the instrumental variables techniques, the author offers the STATA commands of the exposed tests and methods. Further, an empirical example is provided along with the utilized STATA codes. In the end, this article serves as a`toolkit' allowing scholars not only to understand whether endogeneity is present in their empirical setting, but also to assess the empirical validity of their work when using instrumental variables.

Corporate Political Contributions and Stock Returns

Abstract: We develop a new and comprehensive database of firm-level contributions to U.S. political campaigns from 1979 to 2004. We construct variables that measure the extent of firm support for candidates. We find that these measures are positively and significantly correlated with the cross-section of future returns. The effect is strongest for firms that support a greater number of candidates which hold office in the same state that the firm is based. In addition, there are stronger effects for firms whose contributions are slanted toward House candidates and Democrats.

A tractable method to measure utility and loss aversion under prospect theory

Abstract: This paper provides an efficient method to measure utility under prospect theory. Our method minimizes both the number of elicitations required to measure utility and the cognitive burden for subjects, being based on the elicitation of certainty equivalents for two-outcome prospects. We applied our method in an experiment and were able to replicate the main findings on prospect theory, suggesting that our method measures what it is intended to. Our data confirmed empirically that risk seeking and concave utility can coincide under prospect theory. Utility did not depend on the probability used in the elicitation, which offers support for the validity of prospect theory.

The accentuated CEO career horizon problem: evidence from international acquisitions

Abstract: We develop a conceptual model of the career horizon problem of CEOs approaching retirement and discuss its implications on firm risk taking, specifically in engagement in international acquisitions. Based on prospect theory and agency theory, we emphasize the legacy conservation and wealth preservation concerns of CEOs and investigate how their holdings of in-the-money unexercised options and firm equity accentuate or mitigate the career horizon problem. The model is tested in the context of international acquisitions with a sample of 293 U.S. firms over a five-year period (1995–1999). We find that a longer CEO career horizon is associated with a higher likelihood of international acquisitions. We also find that CEOs nearing retirement with high levels of in-the-money unexercised options and equity holdings are less likely to engage in international acquisitions than CEOs with low levels of in-the-money options and equity holdings. The study raises important considerations about the implications of CEOs' equity and in-the-money option holdings on firm risk taking at various stages of their career horizon. Copyright © 2008 John Wiley & Sons, Ltd.

Cross-cultural adjustment of expatriates in Japan

Abstract: This study examines determinants of expatriate cross-cultural adjustment related to non-work- (interaction and general living adjustment) and work- (work adjustment and job satisfaction) aspects in Japan. It was hypothesized that cultural distance and expatriate gender, language proficiency, type (organizational or self-initiated expatriates), and stable personality traits (social initiative, emotional stability, cultural empathy, flexibility, and open-mindedness) have an influence on both non-work- and work-related adjustment. Hierarchical regression analyses, performed on data from 110 expatriates, indicate that expatriate language proficiency, type, and the personality traits of emotional stability and cultural empathy have a positive influence on both types of adjustment. Implications of these findings for practice are discussed.

Component-based structural equation modelling

Abstract: In this research, the authors explore the use of ULS-SEM (Structural-Equation-Modelling), PLS (Partial Least Squares), GSCA (Generalized Structured Component Analysis), path analysis on block principal components and path analysis on block scales on customer satisfaction data.

Component-based Structural Equation Modelling

Abstract: Two complementary schools have come to the fore in the field of Structural Equation Modelling (SEM): covariance-based SEM and component-based SEM. The first approach has been developed around Karl Joreskog and the second one around Herman Wold under the name "PLS" (Partial Least Squares). Hwang and Takane have proposed a new component-based SEM method named Generalized Structured Component Analysis. Covariance-based SEM is usually used with an objective of model validation and needs a large sample. Component-based SEM is mainly used for score computation and can be carried out on very small samples. In this research, we will explore the use of ULS-SEM, PLS, GSCA, path analysis on block principal components and path analysis on block scales on customer satisfaction data. Our conclusion is that score computation and bootstrap validation are very insensitive to the choice of the method when the blocks are homogenous.

Transactive Memory Systems

Abstract: The literature on transactive memory (TM) continues to grow in several interrelated scholarly fields. Although this increased interest in TM systems has been beneficial, it has also led to a plural...

What Accounts for the Changes in U.S. Fiscal Policy Transmission

Abstract: Using vector autoregressions on U.S. time series for 1957-79 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker-Greenspan period.

Imperfect Competition in the Interbank Market for Liquidity as a Rationale for Central Banking

Abstract: We study liquidity transfers between banks through the interbank borrowing and asset sale markets when (i) surplus banks providing liquidity have market power, (ii) there are frictions in the lending market due to moral hazard, and (iii) assets are bank-specific. We show that when the outside options of needy banks are weak, surplus banks may strategically under-provide lending, thereby inducing inefficient sales of bank-specific assets. A central bank can ameliorate this inefficiency by standing ready to lend to needy banks, provided it has greater information about banks (e.g., through supervision) compared to outside markets, or is prepared to extend loss-making loans. The public provision of liquidity to banks, in fact its mere credibility, can thus improve the private allocation of liquidity among banks. This rationale for central banking finds support in historical episodes preceding the modern era of central banking and has implications for recent debates on the supervisory and lender-of-last-resort roles of central banks.

Mothering or Auditing? The Case of Two Big Four in France

Abstract: Purpose – Women in public accounting firms are still proportionally much fewer in number in the highest levels of the hierarchy than men, whereas recruitment at junior level tends to be increasingly gender-balanced. This paper aims to analyse the relationships between the glass ceiling and motherhood. The mechanisms explaining the difficulties encountered by auditor mothers in their hierarchical progression within the Big Four in France are identified.Design/methodology/approach – From 24 interviews with male and female auditors of various hierarchical levels, one seeks to reveal the specificity of the difficulties encountered by auditor mothers.Findings – It is argued that, throughout their careers, they are confronted with a dilemma that often leads to their being excluded and excluding themselves from the group of “those who may become partners.” It is shown that public accounting firms place both implicit and explicit obstacles in their way, tied to a desire to neutralise the effects, deemed costly, of motherhood. Moreover, the expectations of the organisation and society as a whole conflict on many points and confront female auditors with a dilemma: how to be a good mother and have a bright career? It appears that women who want to better manage this dilemma shape working practices imposed on the whole team and implement tactics to adapt their work-life balance (specialisation and lateral move to staff departments). This leads to individual trajectories that break out of the organisational model and account for the scarcity of women in the upper management levels in audit firms.Originality/value – The paper gives voice to male auditors and shows that managing the professional life/private life dilemma is difficult for fathers as well as mothers, in the long term. Moreover, rather than thinking in terms of horizontal and vertical segregations, this paper invites one to question the concept of the glass ceiling and consider the construction of the scarcity of women in the accounting profession.Paper type – Research paper.

The Dog That Did Not Bark: Insider Trading and Crashes

Abstract: This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.

REBUS-PLS: A response-based procedure for detecting unit segments in PLS path modelling

Abstract: Structural equation models (SEMs) make it possible to estimate the causal relationships, defined according to a theoretical model, linking two or more latent complex concepts, each measured through a number of observable indicators, usually called manifest variables. Traditionally, the component-based estimation of SEMs by means of partial least squares (PLS path modelling, PLS-PM) assumes homogeneity over the observed set of units: all units are supposed to be well represented by a unique model estimated on the overall data set. In many cases, however, it is reasonable to expect classes made of units showing heterogeneous behaviours to exist. Two different kinds of heterogeneity could be affecting the data: observed and unobserved heterogeneity. The first refers to the case of a priori existing classes, whereas in unobserved heterogeneity no information is available either on the number of classes or on their composition. If a group structure for the statistical units is given, the aim of the analysis is to search for any differences in the behaviours of the a priori given classes. In PLS-PM this would mean studying the effect of directly observed moderating variables, i.e. estimating as many (local) models as there are classes. Unobserved heterogeneity, instead, implies identifying classes of units (a priori unknown) having similar behaviours. Such heterogeneity is captured by an unobserved (latent) discrete moderating variable defining both the number of classes and the class membership. A new method for unobserved heterogeneity detection in PLS-PM is proposed in this paper: response-based procedure for detecting unit segments in PLS-PM (REBUS-PLS). REBUS-PLS, according to PLS-PM features, does not require distributional hypotheses and may lead to local models that are different in terms of both structural and measurement models. An application of REBUS-PLS on real data will be shown. Copyright © 2008 John Wiley & Sons, Ltd.

Capital Structure Decisions: Evidence from Deregulated Industries

Abstract: Deregulation significantly affects the firms' operating environment and leverage decisions. Firms experience a significant decline in profitability, asset tangibility and a significant increase in growth opportunities following deregulation. Firms respond by reducing leverage. Deregulation also significantly affects the cross-sectional relationship between leverage and its determinants. Leverage is much less negatively correlated with profitability and market-to-book and much more positively correlated with firm size following deregulation. These results are consistent with the dynamic tradeoff theory of capital structure. Also consistent with the dynamic tradeoff theory, the speed of leverage adjustment to optimal leverage increases significantly following deregulation.

Towards an understanding of the phases of goodwill accounting in four Western capitalist countries: From stakeholder model to shareholder model

Abstract: The objective of this paper is to illustrate that the change in shareholders' attitude towards firms (from stakeholder model to shareholder model) influences the accounting treatments of goodwill. Our study is based on four countries (Great Britain, the United States, Germany, and France) and covers more than a century, starting in 1880. We explain that all these countries have gone through four identified phases of goodwill accounting, classified as (1) "static" (immediate or rapid expensing), (2) "weakened static" (write-off against equity), (3) "dynamic" (recognition with amortization over a long period) and (4) "actuarial" (recognition without amortization but with impairment if necessary). We contribute several new features to the existing literature on goodwill: our study (1) is international and comparative, (2) spans more than a century, (3) uses the stakeholder/shareholder models to explain the evolution in goodwill treatment in the four countries studied. More precisely, it relates a balance sheet theory, which distinguishes four phases in accounting treatment for goodwill, to the shift from a stakeholder model to a shareholder model, which leads to the preference for short-term rather than long-term profit, (4) contributes to the debate on whether accounting rules simply reflect or arguably help to produce the general trend towards the shareholder model, (5) demonstrates a "one-way" evolution of goodwill treatment in the four countries studied, towards the actuarial phase.

Earnings Management and Value Relevance During the Mandatory Transition from Local GAAPs to IFRS in Europe

Abstract: This paper analyzes a sample of 1,722 European firms during their mandatory transition from local country accounting rules (Local GAAP) to International Financial Reporting Standards (IFRS) in 2004 and 2005 using the same set of firm-year observations. We use this unique transition period to examine the impact of a change in accounting standards on the quality of firms' financial statements. The transition to IFRS appears to have a small but significant impact on firms' reported total assets and book equity, as well as on their reported goodwill, intangible assets, property plant and equipment, long term debt and current assets and liabilities. For the same reporting period, Return on Assets (ROA) is significantly higher under IFRS than under Local GAAP with the greater increase occurring in those firms with lower levels of ROA under Local GAAP. This transition earnings management is present in all countries, but its level is highest in those countries with weaker legal institutions and higher levels of pre-transition earnings management. These results are consistent with managers using the transition to improve their reported earnings and ROA. IFRS earnings reconciliation disclosures are value relevant even with the noted transition earnings management. The value relevance of the book value of equity is limited to the Local GAAP reports. Both, partial and full IFRS earnings reconciliations are associated with market value and returns.

Decision making and brand choice by older consumers

Abstract: Older adults constitute a rapidly growing demographic segment, but stereotypes persist about their consumer behavior. The goal of this review was to develop a more considered understanding of age-associated changes in consumer decision making. Our theoretical model suggests that age-associated changes in cognition, affect, and goals interact to make older consumers’ decision-making processes, brand choices, and habits different from those of younger adults. We first review literature on stereotypes about the elderly and then turn to an analysis of age differences in the inputs (cognition, affect, and goals) and the outcomes (decisions, brand choices, and habits) of decision processes.

Do banks overstate their Value-at-Risk?

Abstract: This paper is the first empirical study of banks’ risk management systems based on non-anonymous daily Value-at-Risk (VaR) and profit-and-loss data. Using actual data from the six largest Canadian commercial banks, we uncover evidence that banks exhibit a systematic excess of conservatism in their VaR estimates. The data used in this paper have been extracted from the banks’ annual reports using an innovative Matlab-based data extraction method. Out of the 7354 trading days analyzed in this study, there are only two exceptions, i.e. days when the actual loss exceeds the disclosed VaR, whereas the expected number of exceptions with a 99% VaR is 74. For each sample bank, we extract from historical VaRs a risk-overstatement coefficient, ranging between 19 and 79%. We attribute VaR overstatement to several factors, including extreme cautiousness and underestimation of diversification effects when aggregating VaRs across business lines and/or risk categories. We also discuss the economic and social cost of reporting inflated VaRs.

A Dynamic Model of the Limit Order Book

Abstract: This paper presents a model of an order-driven market where fully strategic, symmetrically informed liquidity traders dynamically choose between limit and market orders, trading off execution price and waiting costs. In equilibrium the bid and ask prices depend only on the numbers of buy and sell orders in the book. The model has a number of empirical predictions: (i) higher trading activity and higher trading competition cause smaller spreads and lower price impact; (ii) market orders lead to a temporary price impact larger than the permanent price impact, therefore to price overshooting; (iii) buy and sell orders can cluster away from the bid-ask spread, generating a hump-shaped order book; (iv) bid and ask prices display a comovement effect: after e.g. a sell market order moves the bid price down, the ask price also falls, by a smaller amount, so the bid-ask spread widens; (v) when the order book is full, traders may submit quick, or fleeting, limit orders.

Legitimacy and Identity in Germanic Management Accounting Research

Abstract: The notion of ‘Controlling’, as it is commonly used in German-speaking countries, may be regarded as an equivalent term for management accounting. At the same time, there have been considerable efforts to establish Controlling as a discipline on its own, rather than to regard it simply as the German synonym of management accounting. This is reflected in many writings on Controlling which have tried to identify a possible ‘core’ or ‘essence’ of the subject. In this paper, we argue that this identity discourse may be interpreted as a strategy of Controlling researchers to achieve cognitive and sociopolitical legitimacy of their discipline. Drawing on interview material as well as publication and citation analyses, we show how various institutional pressures and constraints not only influenced the institutionalization of Controlling as an academic discipline but also impacted the form and substance of Controlling research. This raises some important questions for our understanding of academic discip...

Do Science and Money Go Together? The Case of the French Biotech Industry

Abstract: Developing technological applications, entering exploitation alliances, and choosing between research- or service-focused strategic orientations are decisions that high-tech firms must manage concurrently. This article explores systematically the contrasting effects of these strategic determinants on rent generation and rent appropriation using the entire population of French biotech firms (1994‐2002). Findings indicate that science and money do not unconditionally go together‐the direct relationship between rent-accruing resources (e.g., patents or articles) and rent appropriation varies depending on the type of resources and the strategic orientation. Moreover, the effects of strategic determinants differ for rent generation vs. rent appropriation: 1) technological application diversity undermines a firm’s capacity to appropriate rents‐in particular for research-oriented firms; 2) exploitation alliances favor rent generation but hinder rent appropriation; 3) service-oriented firms exhibit significantly better performance than research-oriented firms. Such evidence challenges the emergence in the biotechnology industry of a ‘one-best’ strategic trajectory, as represented by research-intensive start-ups funded by private money engaged in publishing and patenting races. Copyright  2008 John Wiley & Sons, Ltd.

The Competitive Dynamics of Geographic Deregulation in Banking: Implications for Productive Efficiency

Abstract: Deregulation of geographic restrictions in banking over the past 20 years has intensified both potential and actual competition in the industry. The accumulating empirical evidence suggests that potential efficiency gains associated with consolidating banks are often not realized. We evaluate the impact of this increased competition on the productive efficiency of nonmerging banks confronted with new entry in their local markets and find that the incumbent banks respond by improving cost efficiency. Thus, studies evaluating the impact of bank mergers on the efficiency of the combining parties alone may be overlooking the most significant welfare-enhancing aspect of merger activity.