Cahiers de recherche

Départements : Finance

Consistent with salience theories of choice, we find that managers overreact to salient risks. We study how managers respond to the occurrence of a hurricane event when their firms are located in the neighborhood of the disaster area. We find that the sudden shock to the perceived liquidity risk leads managers to increase the amount of corporate cash holdings, even though the real liquidity risk remains unchanged. Such an increase in cash holdings is only temporary. Over time, the perceived risk decreases, and the bias disappears. This bias is costly for shareholders because it leads to higher retained earnings and negatively impacts firm value by reducing the value of cash. We examine alternative explanations for our findings. In particular, we find only weak evidence that the possibility of risk learning or regional spillover effects may influence our results.

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Départements : Marketing, GREGHEC (CNRS)

This paper studies the impact of consumer resistance, which is triggered by deviations from a psychological reference point, on optimal pricing and cost communication. Assuming that consumers evaluate purchases not only in the material domain, we show that consumer resistance reduces the pricing power and profit. We also show that consumer resistance provides an incentive to engage in cost communication when consumers underestimate cost. While cheap communication does not affect behavior, persuasive communication may increase sales and profit. Finally, we show that a firm can benefit from engaging in operational transparency by revealing information about features of the production process.

Mots clés : Price Fairness, Cost Communication, Operational Transparency

Départements : Finance, GREGHEC (CNRS)

We estimate international factor models with time-varying factor exposures and risk premia at the individual stock level using a large unbalanced panel of 58,674 stocks in 46 countries over the 1985-2017 period. We consider market, size, value, momentum, profitability, and investment factors aggregated at the country, regional, and world level. The country market in excess of the world or regional market is required in addition to world or regional factors to capture the factor structure for both developed and emerging markets. We do not reject mixed CAPM models with regional and excess country market factors for 76% of the countries. We do not reject mixed multi-factor models in 80% to 94% of countries. Value and momentum premia show more variability over time and across countries than profitability and investment premia. The excess country market premium is statistically significant in many developed and emerging markets but economically larger in emerging markets.

Mots clés : large panel, approximate factor model, risk premium, international asset pricing, market integration

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

Organizational adaptation is a concept that describes both congruence within organizations, with respect to the strategies and structures deployed, and across organizations, with respect to the degrees to which organizations meet the expectations of their environments. A wide array of research traditions have explored the concept of adaptation, albeit with many different labels. This annotated bibliography tracks the foundations of organizational adaptation, its digressions, and its challenges. Such a review provides important resources for scholars interested in conducting research in organizational adaptation by identifying the multitude of perspectives that encompass adaptation.

Mots clés : Adaptation, Organizational Change, Strategic Choice

Départements : Economie et Sciences de la décision

This paper analyzes, empirically and theoretically, the link between capital inflows and the quality of economic institutions. Starting with the example of Southern European countries (Spain, Portugal, Italy and Greece), we show that they experienced a significant decline in the quality of their institutions in the run-up to the euro currency, a period of cheap external funding and large capital inflows. We confirm this joint pattern of capital flows and institutional decline in a large panel of countries since the mid-1990s. We then develop an open-economy model of the "soft budget constraint" syndrome wherein persistently cheap funding from abroad (i) raises the prevalence of extractive projects and (ii) expands their support by the (benevolent) government ex post. While the government may in principle limit the prevalence of extractive projects ex ante, we show that the incentives to do so is limited when foreign borrowing is cheap.

Mots clés : Institutions, current account

Départements : Economie et Sciences de la décision

This paper shows that bailouts of private agents can optimally take the form of the purchase of a defaulting asset, even if this also means paying off external asset holders. When anticipated, this form of bailouts leads to an endogenous implicit guarantee, where even an intrinsically worthless asset may be traded at a positive price. In the presence of borrowing constraints and imperfectly observable private liquidity needs, direct transfers are imperfect so that, when more constrained agents are also more exposed to a given asset, the compensation through asset purchases becomes optimal. I then show that this possibility of implicit guarantee is amplified by other frictions as risk-shifting and ultimately leads to a coordination problem for selecting stores of liquidity. Finally, I derive policy implications for financial regulation and international capital flows.

Mots clés : Implicit guarantees, bailouts, intrinsically worthless assets

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

We revisit well-known models of learning in which a sequence of agents make a binary decision on the basis of a private signal and additional information. We introduce efficiency measures, aimed at capturing the speed of learning in such contexts. Whatever the distribution of private signals, we show that the learning efficiency is the same, whether each agent observes the entire sequence of earlier decisions, or only the previous decision. We provide a simple necessary and sufficient condition on the signal distributions under which learning is efficient. This condition fails to hold in many prominent cases of interest. Extensions are discussed.

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

Equity crowdfunding has recently become available and is quickly expanding. Concerns have been raised that investors ('backers') may be following the crowd 'too much' and making investments ('pledges') based on past investments rather than private information. We construct a model of equilibrium rational herding where uninformed investors follow signals generated by in formed investors with private information and a public belief generated by all past pledges. We show that large investments provide positive public information about the project's quality, whereas periods of absence of investment provide negative information. An information cascade is shown to occur only if not enough positive signals are generated. We then empirically analyse a large number of pledges from a leading European equity crowdfunding platform. We show that a pledge is strongly affected by both the size of the most recent pledge, and the time elapsed since the most recent pledge. For pledges that are not adjacent in the order of arrivals, the correlation between their sizes is still positive, but after being separated by two or more intervening pledges the correlation is no longer statistically significant. The effects are strongest for less-informed investors, and in some specifications the effects are strongest at the early stage of a campaign. We find similar results in IV analysis. Results are consistent with our model and inconsistent with some alternative models

Mots clés : Equity Crowdfunding, Herding

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

We consider a Bayesian persuasion problem where the persuader and the decision maker communicate through an imperfect channel which has a fixed and limited number of messages and is subject to exogenous noise. Imperfect communication entails a loss of payoff for the persuader. We establish an upper bound on the payoffs the persuader can secure by communicating through the channel. We also show that the bound is tight: if the persuasion problem consists of a large number of independent copies of the same base problem, then the persuader can achieve this bound arbitrarily closely by using strategies which tie all the problems together. We characterize this optimal payoff as a function of the information-theoretic capacity of the communication channel

Départements : Finance, GREGHEC (CNRS)

We study the effect of demographics on innovation, arguing that a younger labor force produces more innovation. Using the native born labor force projected based on local historical births, we find that a younger age structure causes a significant increase in innovation. We confirm our finding at three levels of analysis – commuting zones, firms, and inventors – in demanding specifications that account for firm and inventor life cycles and location choices. Innovation activities reflect the innovative characteristics of younger labor forces. Our results indicate that demographics increase innovation through the labor supply channel rather than through a financing supply or consumer demand channel.

Mots clés : Innovation; Demographics; Age structure; Labor markets; Firms; Inventors; Patents

Départements : Marketing, GREGHEC (CNRS)

While single-brand reward programs encourage customers to remain loyal to that one brand, coalition programs encourage customers to be “promiscuous” by offering points redeemable across partner stores. Despite the benefits of this “open relationship” with customers, store managers face uncertainty as to how rewards offered by partners influence transactions at their own stores. We use a model of multi-store purchase incidence to show how the value of points shared among partner stores can explain patterns in customer-level purchases across them. The model is used to empirically test hypotheses on how reward spillovers among partners are driven by: (1) differences in policies on reward redemption, (2) the overlap in product categories between stores, and (3) geographic distance between stores within a city. In addition, we leverage variation generated by a natural experiment, i.e., a devaluation of the program's points, to demonstrate how the value of points influences the positioning of partner stores within the coalition and the purchasing patterns across them. We conclude by delineating some managerial implications for the design of a coalition's reward policies, including a simulation showing that customer-centric targeted rewards can be an effective strategy to compensate for the devaluation.

Mots clés : loyalty programs, rewards, retailing, Bayesian estimation