HEC Paris

About: HEC Paris is a education organization based out in Jouy-en-Josas, France. It is known for research contribution in the topics: Investment (macroeconomics) & Market liquidity. The organization has 584 authors who have published 2756 publications receiving 104467 citations. The organization is also known as: Ecole des Hautes Etudes Commerciales & HEC School of Management Paris.

Audit pricing and nature of controlling shareholders: Evidence from France

Abstract: This study examines whether auditors are employed as a monitoring mechanism to mitigate agency problems arising from different types of controlling shareholders. In a context of concentrated ownership and poor investor protection, controlling shareholders can easily expropriate wealth from minority shareholders and profit from private benefits of control. However, this agency conflict has been rarely studied, as the most commonly assumed agency conflict occurs between managers and shareholders. Using an audit fee model derived from Simunic (1980), we study the impact of the nature of controlling shareholders on audit fees in French listed firms. Our results show: (1) a negative relationship between audit fees and government shareholdings; (2) a positive relationship between audit fees and institutional shareholdings; and (3) no relationship between audit fees and family shareholdings. These results illustrate the mixed effects of the nature of ownership on audit fees.

Trust in scientists in times of pandemic: Panel evidence from 12 countries.

Abstract: This article analyzes the specific and critical role of trust in scientists on both the support for and compliance with nonpharmaceutical interventions (NPIs) during the COVID-19 pandemic. We exploit large-scale, longitudinal, and representative surveys for 12 countries over the period from March to December 2020, and we complement the analysis with experimental data. We find that trust in scientists is the key driving force behind individual support for and compliance with NPIs and for favorable attitudes toward vaccination. The effect of trust in government is more ambiguous and tends to diminish support for and compliance with NPIs in countries where the recommendations from scientists and the government were not aligned. Trust in others also has seemingly paradoxical effects: in countries where social trust is high, the support for NPIs is low due to higher expectations that others will voluntary social distance. Our individual-level longitudinal data also allows us to evaluate the effects of within-person changes in trust over the pandemic: we show that trust levels and, in particular, trust in scientists have changed dramatically for individuals and within countries, with important subsequent effects on compliant behavior and support for NPIs. Such findings point out the challenging but critical need to maintain trust in scientists during a lasting pandemic that strains citizens and governments.

Alleviating managerial dilemmas in human‐capital‐intensive firms through incentives: Evidence from M&A legal advisors

Abstract: Research summary: We examine how human-capital-intensive firms deploy their human assets and how firm-specific human capital interacts with incentives to influence this deployment. Our empirical context is the UK M&A legal market, where micro-data enable us to observe the allocation of lawyers to M&A mandates under different incentive regimes. We find that law firms actively equalize the workload among their lawyers to seek efficiency gains, while “stretching” lawyers with high firm-specific capital to a greater extent. However, lawyers with high firm-specific capital also appear to influence the staffing process in their favor, leading to unbalanced allocations and less sharing of projects and clients. Paradoxically, law firms may adopt a seniority-based rent-sharing system that weakens individual incentives to mitigate the impact of incentive conflicts on resource deployment. Managerial summary: The study highlights the dilemmas when professional service firms allocate their key individuals to incoming projects, and the role that monetary incentives play in aggravating or alleviating these dilemmas. In the context of UK M&A law firms, we find that partners have a tendency to be attached to too many projects and not to share enough work, which is exacerbated when individual monetary incentives are stronger. Firms adopting a seniority based incentive system (lockstep system) are able to alleviate this effect. This implies that there is a trade-off between rewarding personal performance versus balancing workloads and fostering collaboration among professionals. Copyright © 2015 John Wiley & Sons, Ltd.

Platform re-use: lessons from the automotive industry

Abstract: The platform strategy adopted by firms in a multi-project context reduces lead-time and development cost, enhances reliability, allows mass customization and increases manufacturing flexibility. While the major challenges of this strategy have been highlighted, the evolution of the platform and its management during its lifecycle is under studied. The paper address this missing point by considering the sustainability of the platform during its life cycle. Design/methodology/approach - For that purpose, the paper has carried out a field methodology research at a car manufacturer six years after the successful setting of the platform strategy. It analyzes at a fine-grained level the development of a second generation product on this existing platform. Findings - Using a model that traces the design decisions taken during this development, it has identified that, in order to reuse the platform over two generations, the engineers implicitly apply, besides the design rules that correspond to the very definition of platform strategy as presented in the literature such as the carry-over and the lean design, a learning routine that challenges these rules. It designates this routine by "smart reuse" because it enables the reuse of the platform from one generation to another. It highlights the interplay between the products and the platform that co-evolve by pointing out the reciprocal prescription relationships. This co-evolution operates through two levels: between the product planning and the platform on one hand and the product development and the platform on the other. Practical implications - The paper has several implications, such as the central role of the platform director in the platform reuse and the platform architecture, mainly its modularity, and its impact on the platform progressive renewal. This research reveals ideas that need to be validated and tested through other methods and in other industrial contexts. Originality/value - The paper offers insights into platform-re-use, focusing on the automotive industry.

The Joint Dynamics of Equity Market Factors

Abstract: The four equity market factors from Fama and French (1993) and Carhart (1997) are pervasive in academic empirical asset pricing studies and in applied portfolio allocation. However, the joint distributional dynamics of the factors are rarely studied. For investors basing strategies on the factors or using them to model the returns of a wider set of assets, proper risk management requires knowing the joint factor dynamics which we model. We find striking evidence of asymmetric tail dependence across the factors. While the linear factor correlations are small and even negative, the extreme correlations are large and positive, so that the linear correlations drastically overstate the benefits of diversification across the factors. We model the nonlinear factor dependence and explore its economic importance in a portfolio allocation experiment which shows that significant economic value is earned when acknowledging the nonlinear dependence.