Articles

Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?

J. HOMBERT, A. MATRAY

The Journal of Finance

Forthcoming

Departments: Finance, GREGHEC (CNRS)


We study whether R&D-intensive firms are more resilient to trade shocks. Wecorrect for the endogeneity of R&D using tax-induced changes to R&D cost. While rising imports from China lead to slower sales growth and lower profitability, these effects are significantly smaller for firms with a larger stock of R&D (by about half when moving from the bottom quartile to the top quartile of R&D). We provide evidence that this effect is explained R&D allowing firms to increase product differentiation. As a result, while firms in import-competing industries cut capital expenditures and employment, R&D-intensive firms downsize considerably less

CoMargin

J. A. CRUZ LOPEZ, J. HARRIS, C. HURLIN, C. PERIGNON

Journal of Financial and Quantitative Analysis

Forthcoming

Departments: Finance, GREGHEC (CNRS)

Keywords: Collateral, Counterparty Risk, Derivatives Markets, Extreme Dependence

https://depts.washington.edu/jfqa/2016/02/25/comargin/


We present CoMargin, a new methodology to estimate collateral requirements in derivatives central counterparties (CCPs). CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes trading externalities and enhances the stability of CCPs, thus, reducing systemic risk concerns. We assess our methodology using proprietary data from the Canadian Derivatives Clearing Corporation that includes daily observations of the actual trading positions of all of its members from 2003 to 2011. We show that CoMargin outperforms existing margining systems by stabilizing the probability and minimizing the shortfall of simultaneous margin-exceeding losses

Consequences of the Abandonment of Mandatory Joint Audit: An Empirical Study of Audit Costs and Audit Quality Effects

C. LESAGE, N. RATZINGER-SAKEL, J. KETTUNEN

European Accounting Review

Forthcoming

Departments: Accounting & Management Control, GREGHEC (CNRS)

Keywords: Joint audit, Audit cost, Audit quality, Audit market, Denmark


This paper focuses on the unique Danish setting in examining the consequences of abandoning a mandatory joint audit regime. We study the effects on audit costs (measured by audit fees) and audit quality (measured by abnormal accruals) of the abandonment of the mandatory joint audit in Denmark in 2005. We perform our analysis on non-financial listed Danish companies for the 2002–2010 period. Our results show that a joint audit is associated with higher fees, but that the association between joint audit and abnormal accruals is insignificant. This suggests that the higher audit fees cannot be explained by higher audit quality. Our results are robust to alternative measurements of fees and audit quality. Additional analyses show that the fee premium related to a joint audit decreases over time and that the Big 4 concentration in our sample has increased since the switch from mandatory to voluntary joint audit. Our results are consistent with the motivations driving the regulatory change in Denmark and are of interest to regulators and actors in the audit market

Constructing, Contesting, and Overloading: A Study of Risk Management Framing

M. BRIVOT, D. HIMICK, D. MARTINEZ

European Accounting Review

Forthcoming

Departments: Accounting & Management Control, GREGHEC (CNRS)


In this study, we examine the ways in which actuarial consultants attempt to motivate their clients to see pension-related accounting regulations and market volatility as ‘risks’ that need to be managed through particular risk-mitigating technologies. This study is predicated on 23 interviews conducted with actuarial consultants and their clients and consulting agencies’ publically available documents. Taking framing theory and the sociological literature on risk as conceptual starting points, we find that consultants engage in specific framing strategies to persuade clients by rhetorically weaving a series of financial risk objects, financial de-risking strategies, and calls for action. We also find that current and prospective clients sometimes contest consultants’ prescriptions, despite the pervasiveness of risk management as the ultima ratio of organizational governance. This contestation occurs, ironically, because adopting de-risking solutions in one area is perceived by some clients as triggering new risks in areas unforeseen by consultants. This research increases our knowledge of how new risk objects and de-risking solutions come into existence and why some risk management practices fail to be diffused within organizations despite the staggering success of the risk management rationality. We explain the latter through the concepts of frame diffraction and overload

Data abundance and asset price informativeness

T. FOUCAULT, J. DUGAST

Journal of Financial Economics

Forthcoming

Departments: Finance, GREGHEC (CNRS)

Keywords: Asset Price Informativeness, Big Data, FinTech, Information Processing, Markets for Information, Contrarian and momentum trading

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398904


Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns


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