Séminaires de Recherche

Sovereign credit risk and exchange rates: Evidence from CDS quanto spreads


Intervenant : Mikhail Chernov
UCLA Anderson School of Management

3 mai 2018 - T015 - De 14h00 à 15h15


Sovereign CDS quanto spreads { the difference between CDS premiums denominated in U.S. dollars and a foreign currency { tell us how fnancial markets view the interaction between a country's likelihood of default and associated currency devaluations (the twin Ds). A noarbitrage model applied to the term structure of quanto spreads can isolate the interaction between the twin Ds and gauge the associated risk premiums. We study countries in the Eurozone because their quanto spreads pertain to the same exchange rate and monetary policy, allowing us to link cross-sectional variation in their term structures to cross-country differences in fscal policies. The ratio of the risk-adjusted to the true default intensities is 2, on average. Conditional on the occurrence default, the true and risk-adjusted 1-wee probabilities of devaluation are 4% and 75%, respectively. The risk premium for the euro
devaluation in case of default exceeds the regular currency premium by up to 0.4% per week.

“States of Mind: the many forms of government influence on the Accounting Profession in China”

Comptabilité et Contrôle de Gestion

Intervenant : Crawford Spence
King’s College London

20 avril 2018 - HEC Paris - salle T004 - De 14h00 à 16h00

Literature examining dynamics between the State and the Accounting Profession is well established and points towards the crucial interrelations between the two. However, this literature evinces an occidental orientation, privileging the notion of a State characterised by self-limiting, liberal ideology and that is captured by dominant interests. An extension of this view portrays professional bodies as largely autonomous from State structures and effectively avatars for said dominant interests. This paper starts from the premise that studying State-Profession dynamics in China has the potential to invigorate this literature given the non-liberal, expansive nature of the Chinese State and the situation of a professional body that is effectively under the tutelage of the Ministry of Finance. Drawing on archival analysis and interviews with over 60 regulators, State actors, practitioners in local and foreign firms in China, we show that the State successfully shapes the accounting profession by performing multiple roles: as field-maker, as regulator and as a consumer of accounting services. Accounting firms, in turn, need to develop variable strategies in order to successfully position themselves in the face of this complexity. Conceptually, this permits us to demonstrate that the State is a deep rooted cultural phenomenon existing in the cognitive structures of key actors in the accounting field in China, thereby drawing attention to further reaching forms of State influence than have hitherto been recognised in extant literature analysing State-Profession dynamics.


Intervenant : Adrien Matray
Princeton University

12 avril 2018 - T004 - De 11h15 à 12h30

Entrepreneurial Wages


Intervenant : Paige Ouimet
UNC Kenan–Flagler Business School

5 avril 2018 - T022 - De 14h00 à 15h15


Do young firms pay less? Previous studies have argued that employees earn less when they join young firms. Using US Census employer-employee matched data, we confirm lower average wages at new firms. However, after including worker fixed effects, nearly two thirds of this decline disappears, suggesting differences in worker quality at new firms. Moreover, once we control for
firm fixed effects, absorbing time invariant firm quality, the wage difference between new and established firms becomes economically unimportant. Overall, our findings indicate that, for a given worker who has job opportunities at similar quality new and established firms, the expected wage penalty of going to work at the new firm are, on average, economically insignificant.

Strategic trading at the preopening after earnings announcements

Comptabilité et Contrôle de Gestion

Intervenant : Shai Levi
Tel Aviv University

23 mars 2018 - HEC Paris - Salle T004 - De 14h00 à 16h00

Prior literature finds the price adjustment after earnings announcements is not immediate. This paper shows that informed investors act strategically to prevent their information from immediately affecting prices after announcements. Specifically, we examine the price discovery at the preopening auction after earning announcements. We show that traders place more orders at the end of the preopening after earnings announcements, a behavior that reduces the market’s ability to learn their information, and we find they profit from these late orders.

Swap Trading after Dodd-Frank: Evidence from Index CDS


Intervenant : Haoxiang Zhu
MIT Sloan School of Management

22 mars 2018 - T004 - De 14h00 à 15h15


The Dodd-Frank Act mandates that certain standard OTC derivatives, also known as swaps, must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers' and customers' trading behavior on the two largest dealer-to-customer SEFs for index CDS. On average, a typical customer contacts few dealers when seeking liquidity. A theoretical model shows that the benefit of competition through wider order exposure is mitigated by an endogenous winner's curse problem. Consistent with the model, we find that order size, market conditions, and customer-dealer relationships are important empirical determinants of customers' choice of trading mechanism and dealers' liquidity provision.

Managerial Power and CEO Pay

Comptabilité et Contrôle de Gestion

Intervenant : Robert F. Göx
University of Zurich

16 mars 2018 - HEC Paris - salle T004 - De 14h00 à 16h00

We study the consequences of the CEO’s power over the board of directors in the context of a standard agency model. Our results indicate that a CEO-friendly board affects the structure of the optimal compensation contract in a more subtle way than suggested by the managerial power approach. First, we find that the optimal compensation level is not an increasing function of the CEO’s power. According to our analysis, a friendly board generally raises CEO pay for low performance levels but reduces it for high performance levels. Second, we find that the pay-performance sensitivity (PPS) typically varies with the firm’s performance. Third, we identify conditions for which the optimal contract implemented by a friendly board exhibits a higher PPS than the contract that maximizes the utility of shareholders. As a special case of the general model, we derive an optimal quadratic contract. In this setting, a more friendly board always proposes a contract with a higher salary, more stocks, and the same number of options. In an extension of our base model, we examine how a friendly board affects the optimal use and the rules for aggregating multiple performance measures into a single performance index. While we find that both decisions are generally not affected by the friendliness of the board, we identify conditions under which the sensitivity of CEO pay-to-peer-performance is increasing in the CEO’s power over the board. Overall, our results suggest that neither high pay levels nor the magnitude of the sensitivities of the CEO’s pay to the firm’s own performance or the performance of its peers can be taken as indicators for or against the soundness of firms’ compensation practices without relating these measures to the realized values of the performance measures used in the optimal compensation contract.

Nonbank Lending


Intervenant : Sergey Chernenko
Fisher College of Business

15 mars 2018 - T004 - De 14h00 à 15h15


We provide novel systematic evidence on the terms of direct lending by nonbank financial institutions. Analyzing hand-collected data for a random sample of publicly-traded middle-market firms during the 2010-2015 period, we find that lending from nonbank financial institutions is substantial, with 30% of all loans being extended by nonbanks. Firms are more likely to borrow from a nonbank lender if local banks are poorly capitalized and less concentrated. Nonbank borrowers are smaller, riskier, and significantly more likely to have negative EBITDA. Nonbank lenders are less likely to include financial covenants in their loans, but appear to engage in substantial ex-ante screening: origination of nonbank loans is associated with larger positive announcement returns while ex-post performance is not distinguishable from bank loans. We also find that nonbank borrowers pay about 200 basis points higher interest rates than bank borrowers do. Using fuzzy regression discontinuity design and matching techniques generates similar results. Overall, our results provide evidence of market segmentation in the commercial loan market, where bank and nonbank lenders utilize different lending technologies and cater to different types of borrowers.

Societal Trust and Corporate Tax Avoidance

Comptabilité et Contrôle de Gestion

Intervenant : Kiridaran Kanagaretnam
Schulich School of Business

14 mars 2018 - HEC Paris - salle T004 - De 14h00 à 16h00

Using an international sample of firms from 25 countries and a country-level index for societal trust, we document strong evidence that societal trust is negatively associated with tax avoidance, even after controlling for other institutional determinants such as home country legal institutions, capital market development, and tax system characteristics. We then explore the effects of two country-level institutional characteristics – strength of legal institutions and capital market pressure – on the relation between societal trust and tax avoidance. We predict and find that the relation between trust and tax avoidance is more pronounced when the legal institutions in a country are weaker and the capital market pressure is stronger. Finally, we examine the relation between societal trust and tax evasion. We show that societal trust is negatively related to tax evasion, an extreme and illegal form of tax avoidance, and the negative relation is more pronounced when the legal institutions are weaker.

The Effect of Exogenous Information on Voluntary Disclosure and Market Quality

Comptabilité et Contrôle de Gestion

Intervenant : Ilan Guttman
New York University

9 mars 2018 - HEC Paris - salle T004 - De 14h00 à 16h00

We analyze a game in which a firm chooses whether to disclose information, knowing this information may be published by a third party, such as an analyst. We analyze how the firm's disclosure strategy is affected by probability of disclosure by the third party; we refer to this probability as analyst coverage. Under plausible assumptions, analyst coverage crowds out disclosure. Despite the crowding out effect, we argue that an increase in analyst coverage increases aggregate information. We base this claim on
two measures of information in prices. The first is statistical in nature while the second relies on liquidity in a model in which following information disclosure there is trade. We show how an increase in analyst coverage increases liquidity as measured by the bid ask spread.