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.

Recursive Methods in Discounted Stochastic Games: An Algorithm for δ → 1 and a Folk Theorem

Abstract: We present an algorithm to compute the set of perfect public equilibrium payoffs as the discount factor tends to one for stochastic games with observable states and public (but not necessarily perfect) monitoring when the limiting set of (long-run players’) equilibrium payoffs is independent of the initial state. This is the case, for instance, if the Markov chain induced by any Markov strategy profile is irreducible. We then provide conditions under which a folk theorem obtains: if in each state the joint distribution over the public signal and next period’s state satisfies some rank condition, every feasible payoff vector above the minmax payoff is sustained by a perfect public equilibrium with low discounting.

Divisive Faultlines and the Unplanned Dissolutions of Multipartner Alliances

Abstract: Received wisdom suggests that multipartner alliances are relatively unstable because of their complexity and the increased potential for free riding. Nonetheless, multipartner alliances do benefit from built-in stabilizing third-party ties that mitigate opportunism and conflict between partner pairs. Previous empirical research on multipartner alliance stability has been inconclusive. We shed some light on these inconsistencies by recognizing that within multipartner alliances, schisms can occur not only between a pair of partners but also between subgroups of partners that are divided by faultlines. We suggest that divisive faultlines can form between subgroups of partners within a multipartner alliance as a function of their prior experience with one another. When a subgroup of alliance partners has relatively strong ties to each other and weak ties to other partners, destabilizing factions can develop that hamper reciprocity among the partners. Using a longitudinal analysis of 59 multipartner alliances, we found that, in general, faultlines as modeled by the dispersion of tie strength within multipartner alliances increase the hazard of unplanned dissolutions. We also found that multipartner alliances comprising a mix of centrally and peripherally positioned partners within the industry network were less apt to suffer the effects of divisive faultlines. We suggest that this is due to the greater opportunity costs of dissolution and the presence of relatively high-status partners who can act as peacekeepers and coordinators of their lower-status partners.

Do investors actually value sustainability indices? Replication, development, and new evidence on CSR visibility

Abstract: Research Summary In this study, we replicate and expand Hawn et al.’s study (Strategic Management Journal, 2018, 39, 949–976) that used Dow Jones Sustainability World Index (DJSI) events to measure variations in firms' Corporate Social Responsibility (CSR)‐activism and examined their effect on a firm's stock price. We use DJSI events to capture variations in firms' CSR visibility, holding CSR activism constant by restricting our analyses to CSR‐equivalent firms. First, we find similar results on stock price (i.e., no impact) and on trading volumes. Second, because professional market participants pay more attention to CSR‐oriented firms and use visible cues such as DJSI events, we study and find that additions to DJSI lead to more analysts following a firm, and that continuations on the DJSI lead to an increase in equity being held by long‐term investors. Managerial Summary We replicate and complement a recent study that showed that the events of a firm's addition, continuation, or deletion in a major sustainability index (DJSI) had little impact on stock market reactions (Hawn et al. Strategic Management Journal, 2018, 39, 949–976). We redefine the comparison set that was previously used and compare across observationally equivalent firms in terms of CSR orientation in order to isolate the visibility effect of DJSI events. We find that these events do not significantly impact stock price and trading volumes. However, we expand the analysis and find that sustainability events attract more attention from financial analysts and lead to an increase in the percentage of shares held by long‐term investors indicative of a trend that professional investors pay more attention to CSR‐visible firms over time.

Trading Fees and Efficiency in Limit Order Markets

Abstract: We study competition between a dealer (OTC) market and a limit order market. In the limit order market, investors can choose to be "makers" (post limit orders) or "takers" (hit limit orders) whereas in the dealer market they must trade at dealers' quotes. Moreover, in the limit order market, investors pay a trading fee to the operator of this market ("the matchmaker"). We show that an increase in the matchmaker's trading fee can raise investors' ex-ante expected welfare. Actually, it induces makers to post more aggressive offers and thereby it raises the likelihood of a direct trade between investors. For this reason as well, a reduction in the matchmaker's trading fee can counter-intuitively raise the OTC market share. However, entry of a new matchmaker results in an improvement in investors' welfare, despite its negative effect on trading fees. The model has testable implications for the effects of a change in trading fees and their breakdown between makers and takers on various measures of market liquidity.