Articles

Examining the patterns of goodwill impairments in Europe and the US

P ANDRE, A FILIP, L. PAUGAM

Accounting in Europe

2016, vol. 16, n°3, pp.329-352

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

Mots clés : Goodwill, Impairment, IFRS 3, IAS 36, Europe, US

http://www.tandfonline.com/doi/full/10.1080/17449480.2016.1260748


We examine the patterns of goodwill impairments in Europe and in the US over the period from 2006 to 2015, for a sample of more than 35,000 firm-year observations. We define the timeliness of goodwill impairments as the frequency of accounting impairments conditional to indications of economic impairments. We measure indications of economic impairment with three metrics: equity market value minus equity book value less than goodwill, market-to-book smaller than one, and negative EBITDA. Our research strategy leads us to draw very different conclusions than those in the recent EFRAG (2016) study. While median levels of goodwill on the books between US and European firms are relatively similar, we find several indications that US firms recognize timelier impairments, at least during 2008 and 2009, i.e., the early years of the financial crisis. We further document that US impairers write down a much greater percentage of their beginning balance of goodwill than European impairers. During the financial crisis, the median level of impairment by US firms was 63% of opening goodwill in 2008 and 40% in 2009, whereas median European write-downs were only 6% and 7% of goodwill, respectively. Even though European firms are more likely to impair over multiple years, the cumulative impairments never come close to the level of US firms, be it in a single year or cumulative over multiple years. We also find that the frequency of accounting impairment is small compared to the number of firms presenting evidence of economic impairment: only 20 to 25% of firms recognize impairments depending on the measure of economic impairment. This has often been interpreted by academics as a sign of untimely write-offs. Accounting differences between US GAAP and IFRS are unlikely to explain our results. One caveat of our analysis is that it does not allow us to draw conclusions on whether the observed differences between US and European firms are driven by differences in conditional conservatism and/or big bath accounting practices

Fed Funds Futures Variance Futures

D. FILIPOVIC, A. TROLLE

Quantitative Finance

2016, vol. 16, n°9, pp.1413-1422

Départements : Finance

Mots clés : fed funds futures, Funding costs, Unsecured interbank money market

http://www.tandfonline.com/doi/full/10.1080/14697688.2016.1152391


We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model-independent in a general setting that includes the cases where the underlying FFF rate exhibits jumps and where the realized variance is computed by sampling the FFF rate discretely. The valuation of longer-term FFF variance futures is subject to an approximation error which we quantify and show is negligible. We also provide an illustrative example of the practical valuation and use of the FFF variance futures contract

Financial Distress Risk and New CEO Compensation

W.-J. CHANG, R. M. HAYES, S. HILLEGEIST

Management Science

février 2016, vol. 62, n°2, pp. 479 - 501

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

Mots clés : CEO compensation, Compensation premium, CEO incentives, Financial distress risk


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 firms to provide CEOs with more equity-based incentives. We also build on research that finds a positive relation between forced turnover risk and CEO compensation. Our analyses suggest the compensation effects of forced turnover risk appear to be mainly attributable to financial distress risk. Overall, our results indicate financial distress risk is an economically important determinant of new CEO compensation packages

For a dollar, would you...? How (we think) money affects compliance with our requests

V. K. BOHNS, D. NEWARK, A. Z. XU

Organizational Behavior and Human Decision Processes

mai 2016, vol. 134, pp.45-62

Départements : Management et Ressources Humaines

Mots clés : Compliance; Money; Morality; Prosocial behavior; Social influence; Social prediction

http://www.sciencedirect.com/science/article/pii/S0749597816302102


Research has shown a robust tendency for people to underestimate their ability to get others to comply with their requests. In five studies, we demonstrate that this underestimation-of-compliance effect is reduced when requesters offer money in exchange for compliance. In Studies 1 and 2, participants assigned to a no-incentive or monetary-incentive condition made actual requests of others. In both studies, requesters who offered no incentives underestimated the likelihood that those they approached would grant their requests; however, when requesters offered monetary incentives, this prediction error was mitigated. In Studies 3–5, we present evidence in support of a model to explain the underlying mechanism for this attenuation effect. Studies 3 and 4 demonstrate that offering monetary incentives activates a money-market frame. In Study 5, we find that this activation reduces the discomfort associated with asking, allowing requesters to more accurately assess the size of their request and, consequently, the likelihood of compliance

Global Cities and Liability of Foreignness

K. MEHLSEN, G. WERNICKE

European Journal of International Management

2016, vol. 10, n°1, pp.78-94

Départements : Stratégie et Politique d’Entreprise

Mots clés : global cities; liability of foreignness; multinational enterprises; MNEs; institutional distance; location choices; cosmopolitanism; service availability; advanced producer services; interconnectedness; Nordic countries; Japan; industrial characteristics; globalisation

http://www.inderscience.com/info/inarticle.php?artid=73983


In this paper, we combine the concepts of location, liability of foreignness (LoF), and their relation to factors that drive multinational enterprises (MNEs) towards, or away from, global cities. We argue that three interrelated characteristics of global cities - cosmopolitanism, availability of advanced producer services, and interconnectedness - help MNEs to overcome the liability of foreignness. We operationalise liability of foreignness as institutional distance and analyse its influence on the worldwide location of a large sample of subsidiaries of Nordic and Japanese MNEs. Our results indicate that MNEs have a stronger propensity to locate in global cities than in metropolitan or peripheral areas, and that these locational choices are affected by institutional distance and industrial characteristics. The results provide empirical support for our argument that locating in a global city can reduce the liability of foreignness suffered by MNEs, and that global cities play a central role in the process of globalisation

Hierarchies and entrepreneurship

J. TAG, T. ASTEBRO, P. THOMPSON

European Economic Review

octobre 2016, vol. 89, pp.129–147

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Entrepreneurship, Employee mobility, Hierarchy, Rank; Small firm effect

http://www.sciencedirect.com/science/article/pii/S0014292116301179


We establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees, using a sample of 16 million observations of Swedish workers and a novel proxy for hierarchies based on occupation data. Conditional on firm size and many other variables, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills. One test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting

Il piombo e l’oro: riflessioni sul caso Oliari c. Italia

M. M. WINKLER

GenIUS - Rivista di studi giuridici sull'orientamento sessuale e l'identità di genere

décembre 2016, vol. 3, n°1, pp.46-61

Départements : Droit et fiscalité, GREGHEC (CNRS)

Mots clés : Italy; Constitutional Law; Human Rights; LGBT Rights

http://www.articolo29.it/wp-content/uploads/2017/03/genius-2016-02.pdf


Il presente articolo propone un’analisi della sentenza resa in data 21 luglio 2015 dalla Corte europea dei diritti umani nel caso Oliari c. Italia. Qui la Corte, dichiarando che l’assenza di una legge sulle unioni omosessuali viola l’art. 8 della Convenzione europea dei diritti umani, ha di fatto accelerato il dibattito interno sulla legge sulle unioni civili promulgata, dieci mesi più tardi, il 20 maggio 2016. Nella prima parte, l’articolo esamina la sentenza Oliari, che rappresenta la conclusione di un percorso di formazione, attraverso il diritto sovranazionale, di uno statuto giuridico delle unioni omosessuali secondo il diritto italiano. La seconda parte, invece, esplorerà il “detto” e il “non detto” della sentenza Oliari, in particolare nella sua dimensione comparata e egualitaria. Infine, la terza parte metterà a confronto le statuizioni della Corte di Strasburgo con le disposizioni della legge n. 76/2016 sulle unioni civili per verificare se effettivamente il legislatore italiano abbia adempiuto ai propri obblighi internazionali.

Incomplete preferences and confidence

B. HILL

Journal of Mathematical Economics

aout 2016, vol. 65, pp.83–103

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Incomplete preferences, Confidence, Multiple priors, Choice under incomplete preferences, Absence of trade

http://dx.doi.org/10.2139/ssrn.2460508


A theory of incomplete preferences under uncertainty is proposed, according to which a decision maker’s preferences are indeterminate if and only if her confidence in the relevant beliefs does not match up to the stakes involved in the decision. We use the representation of confidence in beliefs introduced in Hill (2013), and axiomatise a class of models, differing from each other in the appropriate notion of stakes. The theory naturally suggests two distinct strategies for completing preferences, and hence for choosing in the presence of incompleteness: one that relies only on beliefs in which the decision maker is sufficiently confident, and one that mobilises all beliefs, no matter how little confidence she may have in them. Axiomatic characterisations are given for completion procedures following each of the strategies. Finally, in a market setting, the incorporation of confidence is shown to add an extra friction, beyond the standard implications of non-expected utility models for Pareto optima

Industries de création et territoires, une relation spécifique ?

T. PARIS, P. LÊ

Réseaux

juin 2016, vol. 196, n°2, pp.49-80

Départements : GREGHEC (CNRS)

https://www.cairn.info/revue-reseaux-2016-2-page-49.htm


Information asymmetry, the cost of debt, and credit events: Evidence from quasi-random analyst disappearances

F. DERRIEN, A. KECSKÉS, S. A. MANSI

Journal of Corporate Finance: Contracting, Governance and Organization

aout 2016, vol. 39, pp.295-311

Départements : Finance, GREGHEC (CNRS)

Mots clés : Information asymmetry, Cost of debt, Default, Bankruptcy, Natural experiment, Matching estimators, Difference-in-differences, Equity research analysts, Creditors

https://doi.org/10.1016/j.jcorpfin.2016.05.002


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


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