Showing papers by "HEC Paris published in 2016"
TL;DR: In this paper, the authors conduct a meta-analysis of 1,532 effect sizes across 96 studies covering 40 platforms and 26 product categories and find that eWOM is positively correlated with sales, but its effectiveness differs across platform, product, and metric factors.
Abstract: The increasing amount of electronic word of mouth (eWOM) has significantly affected the way consumers make purchase decisions. Empirical studies have established an effect of eWOM on sales but disagree on which online platforms, products, and eWOM metrics moderate this effect. The authors conduct a meta-analysis of 1,532 effect sizes across 96 studies covering 40 platforms and 26 product categories. On average, eWOM is positively correlated with sales (.091), but its effectiveness differs across platform, product, and metric factors. For example, the effectiveness of eWOM on social media platforms is stronger when eWOM receivers can assess their own similarity to eWOM senders, whereas these homophily details do not influence the effectiveness of eWOM for e-commerce platforms. In addition, whereas eWOM has a stronger effect on sales for tangible goods new to the market, the product life cycle does not moderate the eWOM effectiveness for services. With respect to the eWOM metrics, eWOM volume has a ...
669 citations
TL;DR: A survey of recent decision-theoretic literature involving beliefs that cannot be quantified by a Bayesian prior is given in this paper, where historical, philosophical, and axiomatic foundations of the Bayesian model are discussed as well as several alternative models recently proposed.
Abstract: This is a survey of some of the recent decision-theoretic literature involving beliefs that cannot be quantified by a Bayesian prior. We discuss historical, philosophical, and axiomatic foundations of the Bayesian model, as well as of several alternative models recently proposed. The definition and comparison of ambiguity aversion and the updating of non-Bayesian beliefs are briefly discussed. Finally, several applications are mentioned to illustrate the way that ambiguity (or “Knightian uncertainty”) can change the way we think about economic problems.
345 citations
TL;DR: In this article, the authors evaluate six of the leading rating agencies and find little overlap in their assessments of corporate social responsibility (CSR), suggesting that social responsibility is challenging to measure reliably and that users of these ratings should be cautious in drawing conclusions about firms based on this data.
Abstract: Research summary: Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital, and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. We document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. Our results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings.
Managerial summary: Ratings of corporate social responsibility (CSR) guide trillions of dollars of investment, but managers, investors, and researchers know little about whether these ratings accurately measure CSR. In practice, there are examples of highly rated firms becoming embroiled in scandals and the same firm receiving sharply different ratings from different rating agencies. We evaluate six of the leading raters and find little overlap in their assessments of CSR. This lack of consensus suggests that social responsibility is challenging to measure reliably and that users of these ratings should be cautious in drawing conclusions about firms based on this data. We encourage the rating agencies to regularly validate their data in an effort to improve the measurement of CSR. Copyright © 2015 John Wiley & Sons, Ltd.
340 citations
TL;DR: This article found that most Western world policies do not greatly reduce or solve any market failures but instead waste taxpayers' money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low-growth intentions and a lack of interest in innovating.
Abstract: We debate the motivation for and effectiveness of public policies to encourage individuals to become entrepreneurs. Reviewing established evidence we find that most Western world policies do not greatly reduce or solve any market failures but instead waste taxpayers’ money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low-growth intentions and a lack of interest in innovating. Most policy initiatives that would have the effect of promoting valuable entrepreneurship would not be recognizable as such, because they would primarily address other market failures: A central-payer health care would remove healthcare-related distortions affecting employment choices; greater STEM education would produce more engineers of which some start valuable new firms; and labor market reform to encourage hiring immigrants in jobs they have been educated for would reduce inefficient allocation of talent to entrepreneurship.
219 citations
TL;DR: The authors analyzed 636 campaigns, encompassing 17,188 investors and 64,831 investments between 2012 and 2015, from one of the leading European equity crowdfunding platforms and carried out cross-campaign regression analysis.
187 citations
TL;DR: The methodology of the team Tololo, which ranked first in the load forecasting and price forecasting tracks of the Global Energy Forecasting Competition 2014, is summarized and three methods used during the competition are investigated.
176 citations
TL;DR: In this paper, the authors investigate the consistency of the GHG information voluntarily disclosed by French listed firms through two different communication channels: corporate reports (CR) and the Carbon Disclosure Project (CDP).
Abstract: As global warming continues to attract growing levels of attention, various stakeholders (states, general public, investors, and lobbyists) have put climate change on corporate agendas and expect firms to disclose relevant greenhouse gas (GHG) information. In this paper, we investigate the consistency of the GHG information voluntarily disclosed by French listed firms through two different communication channels: corporate reports (CR) and the Carbon Disclosure Project (CDP). More precisely, we contrast the amounts of GHG emissions reported and the methodological explanations provided (named ‘traceability’) in each channel. Consistent with a stakeholder theory perspective, we find that GHG amounts are significantly lower in the CR than in the CDP. We also find that firms increase the CR figures’ traceability when there is a discrepancy between disclosures in the two channels. We suggest that the aim of this greater traceability is to enhance information credibility across the different channels used.
167 citations
TL;DR: In this paper, a review of research on employee mobility and its organizational impacts is presented, where the authors highlight how the various organizational impacts of employee mobility are ultimately engendered by different dimensions of human and/or relational capital that are conveyed by mobile individuals.
144 citations
TL;DR: In this article, the authors collected multilevel data from 426 team members and 52 leaders during an organizational crisis in health care, and the results of hierarchical linear modeling describe the influence of leader behavior on team members' resilience, which is primarily through affective mechanisms.
Abstract: During an organizational crisis in health care, we collected multilevel data from 426 team members and 52 leaders. The results of hierarchical linear modeling describe the influence of leader behavior on team members’ resilience, which is primarily through affective mechanisms. Specifically, transformational leadership was associated with greater levels of positive affect and lower levels of negative affect, which in turn predicted higher resilience among team members. Inverse effects were found for the passive form of management-by-exception (MBE) leadership. Contrary to expectation, no relationship was found between active MBE leadership and affect. The implications for leaders and team members to foster positive affect and resilience during a crisis are discussed.
139 citations
TL;DR: In this paper, the authors developed a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of alliance formation: two-sided decision-making; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side of the market for partners on the other side.
Abstract: Research summary: Strategic alliances are undertaken to create value through complementarities of resources and capabilities of the partner firms. This paper uses a recently developed estimator of matching games, i.e., the maximum score estimator, to advance strategic management research on partner selection in strategic alliances, with a focus on the formation of research alliances in the biopharmaceutical industry. We contribute to the literature in three ways. First, we develop a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of alliance formation: two-sided decision making; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side of the market for partners on the other side of the market. Second, we assess the relative performance of the maximum score and standard discrete choice estimators by performing simulations based on known functional relationships in various matching scenarios. Third, within the context of biopharmaceutical research alliances, we hypothesize and find support using the maximum score estimator for complementarity in partner size and in upstream research capabilities.
Managerial summary: A critical question facing managers who seek to benefit from strategic alliances is “whom to ally with”. Typically, each party seeks a partner whose attributes reinforce their own. This paper explains that the interaction of these preferences leads to a market-wide sorting of alliance partners. Since the value created by an alliance is driven by attributes of all alliance partners, firms cannot successfully bid financial resources to get access to their most preferred partner. Instead, managers need to understand the market-wide competition and invest in the “right” mixture of attributes to make their firm more attractive in the market for alliance partners. Using this framework, we highlight firms' sizes and research capabilities as two drivers of partner selection and sorting in bio-pharmaceutical research alliances.
127 citations
Posted Content•
TL;DR: Lower bounds on the regret in the case of multi-armed bandit problems are revisited and bounds show that in an initial phase the regret grows almost linearly, and that the well-known logarithmic growth of the regret only holds in a final phase.
Abstract: We revisit lower bounds on the regret in the case of multi-armed bandit problems. We obtain non-asymptotic, distribution-dependent bounds and provide straightforward proofs based only on well-known properties of Kullback-Leibler divergences. These bounds show in particular that in an initial phase the regret grows almost linearly, and that the well-known logarithmic growth of the regret only holds in a final phase. The proof techniques come to the essence of the information-theoretic arguments used and they are deprived of all unnecessary complications.
TL;DR: In this article, the authors find that the transition to IAS/IFRS deters or contributes to greater earnings management (smoothing), while the dominant explanation for the conflicting results is self-selection.
TL;DR: This paper found that category spanners receive better evaluation and more so when their categorical combination is more inclusive, and that the evaluation mediates significantly the relationship between category spanning and performance.
Abstract: Studies suggest that category-spanning organizations receive lower evaluation and perform worse than organizations focused on a single category. We propose that (a) these effects are contingent on clients’ theory of value, and that, as clients expect more sophisticated services, they tend to value category spanners more positively, and (b) the evaluation of producers mediates the relationship between category spanning and performance. We test our hypotheses using original data on corporate legal services in three markets (London, New York City, and Paris) over the decade 2000–2010. We find that (a) category spanners receive a better evaluation, and more so when their categorical combination is more inclusive, and (b) evaluation mediates significantly the relationship between category spanning and performance. This study enriches our understanding of how audiences apprehend a whole market category system and why organizations span categories.
Posted Content•
01 Jan 2016TL;DR: In this article, several streams of research on market category formation have been reviewed, including established category systems and the antecedents and consequences of categorical positioning, but relatively ignored the formative processes leading to new categories.
Abstract: This paper reviews several streams of research on market category formation. Most past research has largely focused on established category systems and the antecedents and consequences of categorical positioning (i.e. categorical purity vs. spanning; combination vs. replacement) but relatively ignored the formative processes leading to new categories. In this review, we address this lacuna to posit that scholarship would benefit from clearly disentangling category emergence from category creation. We analytically describe the differences between the two and elaborate the boundary conditions that guide and define which process is more likely to occur in a given market. Our review contributes to illuminating the role of organizational agency and strategic actions in market categories and their formation, which deserve greater attention due to their theoretical and practical implications.
TL;DR: In this article, the authors compare the optimal trading strategy of an informed speculator when he can trade ahead of incoming news (is "fast"), versus when he cannot (slow), and find that speed matters: the fast speculator's trades account for a larger fraction of trading volume, and are more correlated with short-run price changes.
Abstract: We compare the optimal trading strategy of an informed speculator when he can trade ahead of incoming news (is "fast"), versus when he cannot (is "slow"). We find that speed matters: the fast speculator's trades account for a larger fraction of trading volume, and are more correlated with short-run price changes. Nevertheless, he realizes a large fraction of his profits from trading on long-term price changes. The fast speculator's behavior matches evidence about high frequency traders. We predict that stocks with more informative news are more liquid even though they attract more activity from informed high frequency traders.
TL;DR: This article investigated the social mechanisms underlying teenage attitudes toward luxury fashion brands in a cross-cultural context and found that both need for uniqueness and susceptibility to influence relate positively to attitudes towards luxury brands, and fashion innovativeness mediates these relations.
TL;DR: The authors study whether relationship lending is conducive to the financing of innovation and show that it reduces the number of innovative firms, especially those that depend more on relationship lending such as small, young, and opaque firms.
Abstract: We study whether relationship lending is conducive to the financing of innovation. Exploiting a negative shock to relationships, we show that it reduces the number of innovative firms, especially those that depend more on relationship lending such as small, young, and opaque firms. This credit supply shock leads to reallocation of inventors whereby young and promising inventors leave small firms and move out of geographical areas where lending relationships are hurt. Overall, our results suggest that credit markets affect both the level of innovation activity and the distribution of innovative human capital across the economy.
TL;DR: The authors examined how corporate reliance on budgets is affected by major changes in the economic environment and found that budgeting became more important for planning and resource allocation but less important for performance evaluation in companies affected more strongly by the 2008 economic crisis.
Abstract: This article examines how corporate reliance on budgets is affected by major changes in the economic environment. We combine survey and archival data from the economic crisis that began in 2008. The results indicate that budgeting became more important for planning and resource allocation but less important for performance evaluation in companies affected more strongly by the 2008 economic crisis. Additional evidence from interviews and data gathered in a focus group further illustrate these results and show the changes organizations have introduced to respond to the economic crisis. Taken together, and contrary to more general conclusions from the literature such as an overall increase or decrease in the importance of budgeting, we find that companies emphasize certain budgeting functions over others during economic crises.
TL;DR: The Access to Medicine Index as mentioned in this paper is a ranking of the world's largest pharmaceutical companies with regards to their access to medicine policies and practices, which aims to help address the problem of access to healthcare through stakeholder consultation, transparency and competition.
Abstract: The past thirty years have witnessed the spread of rankings, ratings and league tables as governance technologies which aim to regulate the provision of public goods by means of market pressures. This paper examines the process of company analysis underlying the production of a ranking known as the Access to Medicine Index. We conceptualize the Index as a “regulatory ranking” with the explicit mission of addressing a perceived regulatory gap and market failure: the lack of access to medicine in the Global South. The Index, which ranks the world's largest pharmaceutical companies with regards to their access to medicine policies and practices, aspires to help address the problem of access to medicine through stakeholder consultation, transparency and competition. This study unbundles the epistemic work underlying the performance measurement process leading to the creation of the Index. We trace how the goal of stakeholder consensus, the need to project objectivity and the aspiration to govern through competition shape analysts' epistemic work. We discuss how through notions such as “the good distribution” and “aspirational indicators”, performance measurement and ranking become entangled in a “politics of variability” whereby company data need to be variably interpreted in order to optimise the possibilities of intervening in companies through competitive pressures, while at the same time complying with the imperatives to remain in the space of perceived stakeholder consensus and to provide a faithful representation of companies performance to inform public debates. We reflect on the challenges posed by these analysis processes for the regulatory aspirations of the ranking.
TL;DR: This paper developed a model in which traders receive a stream of private signals, and differ in their information processing speed, showing that the fast traders quickly reveal a large fraction of their information, and generate most of the volume, volatility and profits in the market.
Abstract: This paper develops a model in which traders receive a stream of private signals, and differ in their information processing speed. In equilibrium, the fast traders (FTs) quickly reveal a large fraction of their information, and generate most of the volume, volatility and profits in the market. If a FT is averse to holding inventory, his optimal strategy changes considerably as his aversion crosses a threshold. He no longer takes long-term bets on the asset value, gets most of his profits in cash, and generates a "hot potato" effect: after trading on information, the FT quickly unloads part of his inventory to slower traders. The results match evidence about high frequency traders.
TL;DR: In this paper, the authors identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers, and find that the loss caused the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) was roughly 150% higher.
Abstract: We hypothesize that greater information asymmetry causes greater losses to debtholders. To test this, we identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers. We find that the loss of an analyst causes the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) is roughly 100-150% higher. These results are driven by firms that are more sensitive to changes in information (e.g., less analyst coverage). The evidence is broadly consistent with both financing and monitoring channels, although only a financing channel explains the impact of the loss of an analyst on firms' cost of debt.
TL;DR: In this article, informed trading in order-driven markets is studied and it is shown that a higher share of informed traders improves liquidity as proxied by the bid-ask spread and market resiliency, and no effect on the price impact of orders.
Abstract: How does informed trading affect liquidity in order driven markets, where traders can choose between market orders (demanding liquidity) and limit orders (providing liquidity)? In a dynamic model of order driven markets we find that informed trading overall helps liquidity: a higher share of informed traders (i) improves liquidity as proxied by the bid-ask spread and market resiliency, and (ii) has no effect on the price impact of orders. The model generates other testable implications, and suggests new measures of informed trading.
TL;DR: In this article, the authors identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers, and find that the loss caused the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) was roughly 100-150% higher.
TL;DR: Research on organizational slack, which has focused mainly on its effect in large publicly traded firms and on transitional economies, has found that slack functions as a buffer in periods of cris... as mentioned in this paper.
Abstract: Research on organizational slack, which has focused mainly on its effect in large, publicly traded firms and on transitional economies, has found that slack functions as a buffer in periods of cris...
TL;DR: In this article, the authors use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on the impact of FTTs on the market quality.
Abstract: We use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on the impact of FTTs. We find no support for the idea that an FTT improves market quality by affecting the composition of trading volume. Instead, our results are in line with the idea that a lower trading volume reduces liquidity, and thereby market quality. Consistent with theories of asset pricing under transaction costs, we document a shift in security holdings from short-term to long-term institutional investors. More generally, our findings confirm that moderate aggregate effects on market quality can mask large adjustments made by individual market participants.
TL;DR: This article found that most western world policies do not greatly reduce or solve any market failures but instead waste taxpayers' money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low growth intentions and a lack of interest in innovating.
Abstract: We debate the motivation for and effectiveness of public policies to encourage individuals to become entrepreneurs. Reviewing established evidence we find that most western world policies do not greatly reduce or solve any market failures but instead waste taxpayers’ money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low growth intentions and a lack of interest in innovating. Most policy initiatives that would have the effect of promoting valuable entrepreneurship would not be recognizable as such, because they would primarily address other market failures: a central-payer healthcare would remove health-care related distortions affecting employment choices; greater STEM education would produce more engineers of which some start valuable new firms; and labor market reform to encourage hiring immigrants in jobs they have been educated for would reduce inefficient allocation of talent to entrepreneurship.
TL;DR: In this paper, the authors examine how ex ante financial distress risk affects CEO compensation and find that new CEOs receive significantly more compensation when financial distress risks are higher, which is consistent with CEOs receiving a compensation premium for bearing this risk since CEOs experience large personal costs if their firms later become financially distressed.
Abstract: We examine how ex ante financial distress risk affects CEO compensation. To disentangle the joint effects of performance on compensation and distress risk, we focus our analyses on new CEOs. Our results indicate that financial distress risk affects compensation through two channels. First, new CEOs receive significantly more compensation when financial distress risk is higher. This finding is consistent with CEOs receiving a compensation premium for bearing this risk since CEOs experience large personal costs if their firms later become financially distressed. Second, financial distress risk is associated with the incentives provided to new CEOs; distress risk is positively associated with pay-performance sensitivity and equity-based compensation and is negatively associated with cash bonuses. Further, financial distress risk is positively associated with pay-risk sensitivity for new CEOs. These findings suggest that financial distress risk alters the nature of the agency relationship in ways that lead fi...
TL;DR: In this paper, the authors offer a systemic analysis of the Colombian war economy, with its conflicted shadow and coping markets, to show how a growing network of fair-trade coffee actors has played a key role in transitioning the country's war economy into a peace economy.
Abstract: Social conflicts are ubiquitous to the human condition and occur throughout markets, marketing processes, and marketing systems. When unchecked or unmitigated, social conflict can have devastating consequences for consumers, marketers, and societies, especially when conflict escalates to war. In this article, the authors offer a systemic analysis of the Colombian war economy, with its conflicted shadow and coping markets, to show how a growing network of fair-trade coffee actors has played a key role in transitioning the country’s war economy into a peace economy. They particularly draw attention to the sources of conflict in this market and highlight four transition mechanisms—empowerment, communication, community building, and regulation—through which marketers can contribute to peacemaking and thus produce mutually beneficial outcomes for consumers and society. The article concludes with a discussion of implications for marketing theory, practice, and public policy.
TL;DR: In this article, the effect of carbon taxes on the cost and share of wind capacity in an energy portfolio is investigated. But the authors focus on the trade-off between renewable and non-renewable technologies and find that the intermittency of renewable technologies drives the effectiveness of carbon pricing mechanisms and suggests that charging more for emissions could unexpectedly discourage investment in renewables.
Abstract: To analyze incentives for investing in the capacity to generate renewable electricity, we model the trade-off between renewable (e.g. wind) and nonrenewable (e.g. natural gas) technology. Renewable technology has a higher investment cost and yields only an intermittent supply of electricity; nonrenewable technology is reliable and has lower investment cost but entails both fuel expenditures and carbon emission costs. With reference to existing electricity markets, we model several interrelated contexts|the vertically integrated electricity supplier, market competition, and partial market competition with long-term fixed-price contracts for renewable electricity|and examine the effect of carbon taxes on the cost and share of wind capacity in an energy portfolio. We find that the intermittency of renewable technologies drives the effectiveness of carbon pricing mechanisms, which suggests that charging more for emissions could unexpectedly discourage investment in renewables. We also show that market liberalization may reduce investment in renewable capacity while increasing the overall system's cost and emissions. Fixed-price contracts with renewable generators can mitigate these detrimental effects, but not without possibly creating other problems. In short: actions to reduce the intermittency of renewable sources may be more effective than carbon taxes alone at promoting investment in renewable generation capacity.