Financial Distress Risk and New CEO Compensation


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


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

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


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

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


European Economic Review

octobre 2016, vol. 89, pp.129–147

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

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

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


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

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


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

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 ?



juin 2016, vol. 196, n°2, pp.49-80

Départements : GREGHEC (CNRS)

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


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

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

Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks


Quarterly Journal of Economics

août 2016, vol. 131, n°3, pp.1543-1592

Départements : Finance

Mots clés : E23 - Production E32 - Business Fluctuations; Cycles L14 - Transactional Relationships; Contracts and Reputation; Networks

This article examines whether firm-level idiosyncratic shocks propagate in production networks. We identify idiosyncratic shocks with the occurrence of natural disasters. We find that affected suppliers impose substantial output losses on their customers, especially when they produce specific inputs. These output losses translate into significant market value losses, and they spill over to other suppliers. Our point estimates are economically large, suggesting that input specificity is an important determinant of the propagation of idiosyncratic shocks in the economy

Institutional Complexity and the Strategic Behaviors of SMEs in Transitional Environments


International Journal of Emerging Markets

septembre 2016, vol. 11, n°4, pp.514 - 532

Départements : Comptabilité et Contrôle de Gestion

Mots clés : Institutional Logics, Institutional Complexity, Strategic Behaviors, SMEs, Transition Economies

We study how five privately owned Chinese companies adapted their strategies in the 2000-2012 period to large-scale macro-level institutional changes. Drawing on recent developments in institutional theory, in particular on the constructs of institutional logics, institutional complexity and “organizational filters”, we explain why our subject firms’ range of strategic behaviors went from broad to narrow, as a function of i) the stage of institutional transition and ii) organizational filters, i.e., how the firms make sense of the institutional complexity based on their own attributes. We discuss the implications of ourfindings for managers of SMEs in transitional economies and researchers