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.

Dynamic Dependence and Diversification in Corporate Credit

Abstract: We characterize dependence in corporate credit and equity returns for 215 firms using a new class of large-scale dynamic copula models. Copula dependence and especially tail dependence are highly variable and persistent, increase signifi cantly in the fi nancial crisis, and have remained high since. The most drastic increases in credit dependence occur in July/August of 2007 and in August of 2011 and the decrease in diversifi cation potential caused by the increases in dependence and tail dependence is large. CDS correlation dynamics help explain the time-series variation in CDO tranche spreads and are also important determinants of credit spreads.

The Political Economy of Financial Innovation: Evidence from Local Governments

Abstract: We present an empirical investigation of the role of political incentives in the use of innovative nancial products. We document that the adoption of toxic loans, a new and high-risk type of borrowing for local governments, is highly correlated with higher incentives for politicians to obtain immediate cash-ows. We also show that using toxic loans help politicians getting re-elected, mainly by allowing them to oer relatively lower taxes. Conversely, toxic loan usage is hard to empirically reconcile with politicians’ ex post claim that they do not understand the transactions. Our ndings are supportive of nancial innovation amplifying agency costs within the political system.

Impact of Age on Brand Choice

Abstract: Brand choice processes and actual brand choices differ importantly across consumers of different age groups. This chapter presents selected findings and reviews the potential underlying mechanisms. Older consumers tend to prefer long-established brands. Their awareness set comprises typically fewer, older brands. This leads to smaller considerations sets and a shrinking purchase process. Not surprisingly, older consumers have a higher tendency to repeat purchase the previous brand. As a consequence, market shares depend on both consumer age and brand age (how long ago the brand was introduced). A variety of mechanisms may account for these results. They include well-known age-related factors: cognitive decline in memory and processing speed, biological aging and its impact on physical capabilities, increased aversion to change, declining innovativeness, increased socioemotional selectivity, stronger brand attachment and habits built over time, and nostalgia. Expertise may have opposite effects, depending on whether expertise acquired over a lifetime is still relevant for today’s market offering. Of course, it is difficult to delineate the effects of age, cohort, and period. We review questions for further research and consider the public policy issues. What can be done to protect older consumers while helping them realize benefits from both the new market opportunities and their own accumulated experience?

Voting in assemblies of shareholders and incomplete markets

Abstract: An economy with two dates is considered, one state at the first date and a finite number of states at the last date. Shareholders determine production plans by voting - one share, one vote - and at $\rho$ -majority stable stock market equilibria, alternative production plans are supported by at most $\rho \times 100$ percent of the shareholders. It is shown that a $\rho$ -majority stable stock market equilibrium exists if $$ \rho\ \geq\ \dfrac{S-J}{S-J + 1}, $$ where S is the number of states at the last date and J is the number of firms. Moreover, an example shows that $\rho$ -majority stable stock market equilibria need not exist for smaller $\rho$ ’s.

The Timing of Resource Development and Sustainable Competitive Advantage

Abstract: We develop a formal model of the timing of resource development by competing firms. Our aim is to deepen and extend resource-level theorizing about sustainable competitive advantage. Our analysis formalizes the notion of barriers to imitation, particularly those based on time compression diseconomies where the faster a firm develops a resource the greater the cost. Time compression diseconomies are derived from a micro-model of resource development with diminishing returns to effort. We use a continuous time model of the flows of development costs and market revenues, which allows us to integrate strategic and financial analyses of firm investment problems.We examine two dimensions of sustainability: whether the resources underlying a firm's competitive advantage are economically imitable and, if so, how long imitation takes. Surprisingly, we show that sustainable competitive advantage does not necessarily lead to superior performance. We find that imitators sometimes benefit from reductions in their absorptive capacity and that innovators should license either all or none of their knowledge. Despite recent criticisms, we reaffirm the usefulness of a resource-level of analysis for strategy research, especially when the focus is on resources developed through internal projects with identifiable stopping times.