Cahiers de recherche

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

This paper examines when human-capital-intensive firms reconfigure their human assets for incoming client projects, and how clients matter to firms’ reconfiguration decisions. Using micro-data in the UK merger and acquisition (M&A) legal services industry, we find that law firms consistently reconfigure the combinations of lawyers working together on M&A mandates, forgoing synergies from tried-and-tested combinations. Firms’ reconfiguration decisions are also influenced by prior relations with clients, and client attributes. Firms are more likely to use tried-and-tested combinations of lawyers when providing services to existing clients, especially when the same lawyers have served those clients together previously. Further, the economic attractiveness of clients also decreases human asset reconfiguration. Our paper contributes to the literatures on strategic human capital and the micro-foundations of resource-based theory.

Mots clés : Strategic Human Capital; Resource Reconfiguration; Resource Based Theory; Micro-Foundations of Strategy; Human-Asset-Intensive Firms

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

This paper investigates the link between one managerial characteristic, the degree of risk aversion, and accounting conservatism. Two models are analyzed, one where the degree of conservatism is chosen by the principal (Board) and accounting information is used for stewardship, and a second where the principal delegates the choice of the degree of conservatism to the manager and accounting information is primarily used for investment efficiency. We show in the first model that higher risk aversion reduces the demand for conservatism from a stewardship point of view. In the second model, we show that delegation is an optimal way for the principal of committing to conservative reporting. Hiring a more risk-averse manager lowers the cost of implementing this conservative reporting. The two models provide opposite predictions for the association between managerial risk aversion and the degree of conservatism. Empirical evidence favors the second model’s prediction. The paper suggests that managers with specific characteristics and incentive contracts might be endogenously chosen by the firm to implement an ex-ante optimal degree of conservatism.

Mots clés : Accounting Conservatism, Risk Aversion, Limited Liability, Reporting Bias, Principal-Agent Theory, Stewardship, Investment Efficiency

Départements : Finance, GREGHEC (CNRS)

We study price and liquidity spillovers in U.S. stock markets around mutual fund fire sales. We find that the well-documented impact-reversal pattern for the returns of fire sale stocks (e.g., Coval and Stafford, 2007) spills over onto the stock returns of economic peers, with a magnitude that is around one fifth of the original effect. These spillovers extend to liquidity and are not explained by common funding shocks or the hedging activity of liquidity providers. We conclude that they represent information spillovers due to learning from prices, thus identifying cross-asset learning as an important driver for the commonality in returns and liquidity.

Mots clés : Learning, Spillovers, Liquidity, Comovement, Rational Expectations

Départements : Finance, GREGHEC (CNRS)

In an empirical study of cash mergers since 1996, we find that the equity options on target firms display a pronounced smile pattern in their implied volatilities which gets more pronounced when the merger success probability gets higher. We propose an arbitrage-free model to analyze option prices for firms undergoing a cash merger attempt. Our formula matches well the observed merger volatility smile. Furthermore, as predicted by the model, we show empirically that the merger volatility smile has a kink at the offer price, and that the magnitude of the kink is proportional to the merger success probability.

Mots clés : Mergers and acquisitions, Black-Scholes formula, success probability, fallback price, Markov Chain Monte Carlo

Départements : Finance, GREGHEC (CNRS)

Do claims on the private sector serve the role of safe assets? We answer this question using high-frequency panel data on prices and quantities of certificates of deposit (CD) and commercial paper (CP) issued in Europe. We show that only very short-term private securities benefit from a premium for safety. Using several identification strategies, we show that the issuance of short-term CDs, but not of CPs, strongly responds to measures of safety demand. The private production of safe assets is stronger for issuers with high credit worthiness, and breaks down during episodes of market stress. We conclude that even very short-term private assets are sensitive to changes in the information environment and should not be treated as equally safe at all times.

Mots clés : Safe assets, Collateral, Short-term debt, Treasuries

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

Extant research suggests that hiring experts during economic downturns can improve firm financial performance. However, recessionary labor markets deepen the challenges facing hiring firms, calling to question both the firm-level benefits and the tactics of acquiring talent when demand for a firm’s business is declining. We theorize and find that hiring expert talent during a recession actually weakens firm performance in the context of knowledge-based services. Notably though, we find firms can effectively attenuate the negative hiring effect by targeting particular labor pools, underlining the significance of gaining human capital advantages through focused sourcing. We test our hypotheses using a longitudinal sample of large U.S. corporate law firms between 2002 and 2010.

Mots clés : human capital, firm performance, knowledge workers, labor pools, economic recession

Départements : Droit et fiscalité, GREGHEC (CNRS)

The article outlines the options for collaboration between the European Union (EU) and the Open Government Partnership (OGP). The OGP accepts full participants (states), sub-national participants (pilot program), and observers. As of now, the OGP’s charter states that it only accepts “states” for full participant status. Three options are available to the OGP for accommodating the EU:1. Full participant status for the EU: the OGP would have to amend its Articles of Governance to allow non-state entities such as the EU to be participants by removing any mention of “government” of states, and replacing it with any government at the sub-national, national or supranational levels;2. Ad-hoc participation of the EU by creating a supra-national government program: the OGP would have to create a program tailored to the EU, which could be used as a model for allowing other supra-national bodies in the future. If option 2 is a success, the OGP could propose full participant status to the EU at that time;3. ‘Observer status’ for non-state entities with the EU as an observer: the OGP maintains the status quo by enabling non-state actors to obtain observer status.The article also reviews the requirements for OGP membership, the competence of the EU to join, and the question of which EU institution would be responsible for negotiating OGP membership. The article concludes by analysing how the EU would formalise its commitment to the OGP through an Inter-Institutional Agreement.

Mots clés : Open Government, Transparency, Participation, Civic Empowerment, Legitimacy, Accountability, Civil Society, European Union, Good Governance

Départements : Economie et Sciences de la décision

This paper shows that bailouts of private agents can optimally take the form of asset purchases, even if this also means paying off external asset holders, in the presence of borrowing constraints and asymmetric information on liquidity needs. The combination of these two ingredients make direct compensation through loans and/or net transfers imperfect. Thus, when more constrained agents are also more exposed to the asset, the compensation through asset purchases becomes desirable. Anticipating these purchases, private agents engage in a collective bet on the defaulting asset, leading to an equilibrium implicit guarantee, where even an intrinsically worthless asset can be traded at a positive price

Mots clés : Implicit guarantees, bailouts, capital ows, capital controls

Départements : Finance

We provide empirical evidence of the importance of hold-up problems for investment decisions in a large number of U.S. manufacturing industries. We exploit variation in the severity of hold-up problems between upstream suppliers and downstream customers resulting from import tariff reductions in upstream industries. We find that downstream customers respond by increasing investment. As theory predicts, the effect is stronger if the customers have little bargaining power and are not vertically integrated with their suppliers, if the suppliers produce differentiated inputs, if high uncertainty inhibits the use of long-term contracts, and if shipping costs are low

Départements : Droit et fiscalité, GREGHEC (CNRS)

This study assesses the legal feasibility of a EU instrument that would impose mandatory human rights due diligence (“HRDD”) requirements on companies in the garment and textile sector. The proposal serves as an example of a sector-specific approach to HRDD requirements, and could be modified to develop similar proposals in other sectors. The study also illustrates the differences between a sector-specific and a cross-sectoral approach by highlighting the implications of each in the following areas: legal bases, personal scope, and requirements and enforcement.

Mots clés : business and human rights, EU law, corporations, corporate responsibility, human rights due diligence