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.

Acts, Persons, and Intuitions: Person-Centered Cues and Gut Reactions to Harmless Transgressions

Abstract: Negative gut reactions to harmless-but-offensive transgressions can be driven by inferences about the moral character of the agent more so than condemnation of the act itself. Dissociations between moral judgments of acts and persons emerged, such that participants viewed a harmless-but-offensive transgression to be a less immoral act than a harmful act, yet more indicative of poor moral character. Participants were more likely to become “morally dumbfounded” when asked to justify their judgments of a harmless-but-offensive act relative to a harmful act. However, they were significantly less likely to become morally dumbfounded when asked to justify character judgments of persons who engaged in the harmless-but-offensive transgression, an effect based in part on the information-rich nature of such behaviors. Distinguishing between evaluations of acts and persons helps account for both moral outrage over harmless transgressions and when individuals are (and are not) at a loss to explain their own judgments.

Information Asymmetry, the Cost of Debt, and Credit Events: Evidence from Quasi-Random Analyst Disappearances

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.

Who are the Value and Growth Investors

Abstract: This paper investigates the determinants of value and growth investing in a large administrative panel of Swedish residents over the 1999-2007 period. We document strong relationships between a household’s portfolio tilt and the household’s financial and demographic characteristics. Value investors have higher financial and real estate wealth, lower leverage, lower income risk, lower human capital, and are more likely to be female than the average growth investor. Households actively migrate to value stocks over the life-cycle and, at higher frequencies, dynamically offset the passive variations in the value tilt induced by market movements. We verify that these results are not driven by cohort effects, financial sophistication, biases toward popular or professionally close stocks, or unobserved heterogeneity in preferences. We relate these household-level results to some of the leading explanations of the value premium.

Liquidity and Information in Order Driven Markets

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.

Firm non-market capabilities and the effect of supranational institutional safeguards on the location choice of international investments

Abstract: Research Summary: We investigate the extent to which firms rely on supranational institutional safeguards versus their non‐market capabilities to offset the risks of investing abroad. We argue that firms with non‐market capabilities are insensitive to supranational institutional safeguards when choosing the location of their international investments. We show that supranational agreements between an investor's home and host nation, operationalized as bilateral investment treaties (BITs), increase the likelihood of investment, but there is substantial firm heterogeneity with respect to this relationship. Firms with various forms of non‐market capabilities are not sensitive to BITs, whereas other firms are more likely to invest under BITs. We advance the understanding of how firm non‐market capabilities can substitute for supranational institutional arrangements in addressing risks associated with host country institutional weaknesses. Managerial Summary: The risk of expropriation is one of the main concerns companies have when investing abroad. Because of this, many countries implement bilateral investment treaties (BITs) to safeguard foreign investments, alleviate foreign investor concerns, and promote investments. We show that only those companies without political competence or political connections favor countries with BITs when choosing where to invest. Companies with political competence or political connections, on the other hand, ignore BITs and apparently rely on their ability to influence governments whenever their foreign investments face expropriation threats. As a result, politically connected or competent companies can enter markets most of their competitors lacking these capabilities shy away from. They can, therefore, do business in environments in which they face less competition.