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Organizational adaptation is a ubiquitous concept in management and organization research. Discussed in many theories, sometimes under different labels, the notion of adaptation is related to organizations being congruent to the environments within which they operate. Research traditions including behavioral theory (see A Behavioral Theory of the Firm), contingency theory as explained in Differentiation and Integration in Complex Organizations, population ecology (see The Population Ecology of Organizations), institutional theory elaborated upon in both Institutionalized Organizations: Formal Structure as Myth and Ceremony and The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields, resource dependence (see The External Control of Organizations: A Resource Dependence Perspective), and evolutionary economics (see An Evolutionary Theory of Economic Change) all address organizational adaptation—though they emphasize different mechanisms. Adaptation, regarded as the strategic choice that organizations make, is often contrasted with the notion of selection driven by the determinism imposed by environments (see Organizational Adaptation: Strategic Choice and Environmental Determinism). Adaptive organizations are those able to obtain congruence both within organizations, reflected as congruence in internal functions and strategies, and across organizations, reflected as congruence with the needs of the external environment. The form of adaptation is also particularly relevant. Organizational theory has viewed adaptation as a state, an ability, and as a process. States of adaptation discuss stability and adaptation at points in time. From states of adaptation, adaptive abilities determine the impetus of adaptation and the locus of adaptation within organizations. Finally, the adaptation processes describe the means by which organizations adapt the challenges they face in negotiating new positions within environments. Research has covered each of these areas and this bibliography is organized primarily around forms of adaptation to elaborate on the ways in which it has been viewed by organizational theory and strategy scholars. The variety of research traditions examining organizational adaptation have not always aligned, however. Each research tradition seeks to explain different outcomes, from survival to performance to change. Thus, across theoretical traditions, the adaptation construct has been measured in many different ways—and often not as congruence with the external environment. In fact, this represents one of the challenges that recent research has identified as holding back progression of the adaptation research agenda. As such, this bibliography concludes with a section on issues in adaptation research in order to assist researchers in pursuing research in this area.

Stochastic independence has a complex status in probability theory. It is not part of the definition of a probability measure, but it is nonetheless an essential property for the mathematical development of this theory. Bayesian decision theorists such as Savage can be criticized for being silent about stochastic independence. From their current preference axioms, they can derive no more than the definitional properties of a probability measure. In a new framework of twofold uncertainty, we introduce preference axioms that entail not only these definitional properties, but also the stochastic independence of the two sources of uncertainty. This goes some way towards filling a curious lacuna in Bayesian decision theory., Comment: In Proceedings TARK 2017, arXiv:1707.08250

We measure the impact of bank capital requirements on corporate borrowing and expansion. We use French loan-level data and take advantage of the transition from Basel I to Basel II. While under Basel I the capital charge was the same for all firms, under Basel II, it depends in a predictable way on both the bank's model and the firm's risk. We exploit this two-way variation to empirically estimate the sensitivity of bank lending to capital requirement. This rich identification allows us to control for firm-level credit demand shocks and bank-level credit supply shocks. We find very large effects of capital requirements on bank lending: A 1 percentage point decrease in capital requirement leads to an increase in loan size by about 5%. At the firm level, borrowing also responds strongly although a bit less, consistent with some limited between-bank substitutability. Investment and employment also increase strongly. Overall, because the transition to Basel II led to an average reduction by 2 percentage points of capital requirements, we estimate that the new regulation led, in France, to an increase in average loan size by 10%, an increase in aggregate corporate lending by 1.5%, an increase in aggregate investment by 0.5%, and the creation or preservation of 235,000 jobs.

We examine whether impact investing is more effective in fostering business venture success and social impact when directed toward ventures located in vs. outside disadvantaged urban areas (i.e., areas with high crime, unemployment, and poverty). We explore this question in the context of loans made to business ventures located in French “banlieues” vs. “non-banlieues”. We find that loans issued to banlieue ventures, compared to non-banlieue ventures, yield greater improvements in financial performance, as well as greater social impact in terms of the creation of local employment opportunities, quality jobs, and jobs for minorities — all of which contribute to the social inclusion of marginalized communities and the development of sustainable cities.

Previous research have opposed secrecy and openness as mutually exclusive processes. In this paper, we suggest a more nuanced approach to secrecy in open innovation, drawing from Philosophy and Sociology. We have conducted a two-year research program in the defense industry, collecting data on the practices of concealment in open innovation activities. We found that focal actors utilize distinct cognitive techniques to decontextualize knowledge in the course of open innovation projects in order to safeguard secrecy while preserving mutual learning. Further, focal actors design contrasted relational approaches to secrecy with their open innovation partners. Such approaches are based on the positions of secrecy boundaries, which are internal or external to the relationship. In fact, actors intentionally make use of the reversible nature of secrecy, balancing inclusion and exclusion of knowledge in partnerships, to meet objectives that sometimes go beyond knowledge protection. Finally, we build on our findings to introduce a capability-based framework of secrecy management in openness processes. This framework, which we call Knowledge Discretion, suggests that actors overcome tensions stemming from secrecy and openness playing on the contextual depth and relational breadth of external knowledge sharing.

Massive Online Open Courses (MOOCs) are a booming phenomenon in the digital era, having attracted millions of users around the world to date. At the same time, educational delivery via MOOCs comes with its own distinct difficulties for students and instructors, as the online nature of MOOCs creates every opportunity for digital distraction and procrastination. In this work, we consider that the digital nature of MOOCs and online learning management systems (LMSs) may also offer unique opportunities to counteract procrastination. Building on the temporal motivation theory, this study examines a number of calls-to-action (CTAs) pertaining to the completion and submission of course assignments, with an eye toward combatting student procrastination on MOOCs. We report on the results of a randomized field experiment on a leading MOOC platform in China. By randomly treating MOOC users with different CTAs related to active course assignments, we seek to examine the impacts of alternative informational interventions on students’ duration to and probability of on-time assignment submission. We consider multiple types of CTAs: a simple call-to-action, a deadline reminder, descriptive norm interventions (communicating peer assignment completion rates), and a simple CTA combined with a financial incentive. We find that descriptive norms lead to higher probabilities of assignment completion and a shorter time to completion. In contrast, we find that the deadline reminder has a surprisingly counter-productive effect. Subsequently, exploring heterogeneity in the response to our different interventions – considering factors such as course load, education level, and user tenure on the MOOC platform – we find evidence that the deadline reminder, in particular, can backfire if students’ active course load is low. This result suggests that students with low course loads may perceive the deadline to be distant, which reduces their sense of urgency and leads to complacency. We discuss the implications of our findings for both research and practice.

This paper examines how data-driven personalized decisions can be made while preserving consumer privacy. Our setting is one in which the firm chooses a personalized price based on each new customer's vector of individual features; the true set of individual demand-generating parameters is unknown to the firm and so must be estimated from historical data. We extend this classical framework of personalized pricing by requiring also that the firm's pricing policy preserve consumer privacy, or (formally) that it be differentially private -- an industry standard for privacy preservation. The two settings we consider are theoretically and practically relevant: central and local models of differential privacy, which differ in the strength of the privacy guarantees they provide. For both models, we develop privacy-preserving personalized pricing algorithms and derive the theoretical bounds on their performance as measured by the firm's revenue. Our analyses suggest that, if the firm possesses a sufficient amount of historical data, then it can achieve central differential privacy at a cost of the same order as the "classical" loss in revenue due to estimation error. Comparing the two models, we conclude that local differentially private personalized pricing yields better privacy guarantees but leads to much greater revenue loss by the firm. We confirm our theoretical findings in a series of numerical experiments based on synthetically generated and real-world On-line Auto Lending (CPRM-12-001) data sets. Finally, we also apply our theoretical framework to the setting of personalized assortment optimization.

Media dissemination plays an important role in facilitating price discovery. Political pressure that restricts media dissemination can hinder this function and affect investors’ perceptions. This paper studies the magnitude of newspaper censorship in China and its economic consequences using a setting of “tunneling” scandals. We find significant evidence of censorship of tunneling-related negative news at the national and local level. We further show that news that survives censorship reduces information asymmetry and improves pricing efficiency. We find that censorship blocks informative tunneling news and delays incorporation of tunneling reporting into prices.

Big data and technological change have enabled loyalty programs to become more prevalent and complex. How these developments influence society has been overlooked, both in academic research and in practice. We argue why this issue is important and propose a framework to refocus loyalty programs in the era of big data through a societal lens. We focus on three aspects of the societal lens—inequality, privacy, and sustainability. We discuss how loyalty programs in the big data era impact each of these societal factors, and then illustrate how, by adopting this societal lens paradigm, researchers and practitioners can generate insights and ideas that address the challenges and opportunities that arise from the interaction between loyalty programs and society. Our goal is to broaden the perspectives of researchers and managers so they can enhance loyalty programs to address evolving societal needs.

This article unveils Italy’s exceptionalism in recognising and protecting same-sex couples by adopting a three-dimension analysis: constitutional, comparative and supranational. It maintains that, compared to other countries whose courts were sympathetic with the legal claims raised by lesbian and gay people, Italy’s Constitutional Court adopted a totally different approach, reinforcing the heteronormativity of marriage in a way that delayed all efforts to pass a law on same-sex registered partnerships. The Constitutional Court, in particular, interpreted the Constitution, the experience of other nations and supranational law according to heteronormativity, an example that is unique in the comparative context. As an illustration, this article addresses the case Bernaroli vs Ministry of the Interior. In Bernaroli, a male-to-female transgender person wanted to remain married to her wife notwithstanding the transition. The case ignited a heated debate among scholars and questioned the courts’ opinions as to the human rights dynamics surrounding same-sex marriage and, more importantly, about the current role of heteronormativity in marriage law. This article concludes that the legal existence of Bernaroli’s marriage represents a constant challenge to the status quo and highlights the permanent crisis of heteronormativity. After the Austrian Constitutional Court’s recent ruling that declared the law on same-sex domestic partnership to be discriminatory, heteronormativity’s defence became even more untenable, making Italy’s a true exception in the continent’s legal landscape.

We examine whether the joint provision of corporate social responsibility (CSR) assurance services and financial audit by the same audit firm influences auditors’ assessment of going concern risk. We predict that the provision of CSR assurance and financial audit by the same audit firm creates CSR-related knowledge spillovers from the CSR assurance team to the financial audit engagement team, which help in the auditor’s assessment of going concern risk. Using more than 28,000 firm-year observations from 55 countries, we document that, relative to audit firms that provide only the financial audit, audit firms that provide both CSR assurance and financial audit for the same client (1) issue more frequent going concern opinions and have lower Type-II going concern errors, (2) have clients that book larger environmental and litigation provisions, (3) report earnings that are more persistent and value relevant and are less likely to book income-decreasing earnings restatements, and (4) do not charge higher audit fees or total fees. Our results are important especially because of firms’ increasing exposure to CSR risks and the growing number of countries that require assurance of CSR reports.

Europe has largely been absent from the US-dominated debate surrounding the introduction of nudge-type interventions in policy-making. Yet the European Union and some of its Member States are exploring the possibility of informing their policy action with behavioural insights. While a great deal of academic attention is currently been paid to the philosophical, ethical and other abstract implications of behavioural-informed regulation, such as those concerning autonomy, dignity and moral development, this chapter charts and systematizes the incipient European Nudge discourse. Besides a few isolated initiatives displaying some behavioural considerations (e.g. consumer rights, revised tobacco products directive, sporadic behavioural remedies in competition law), the EU – similarly to its own Member States – has not yet shown a general commitment to systematically integrate behavioural insights into policy-making. Given the potential of this innovative regulatory approach to attain effective, low-cost and choice-preserving policies, such a stance seems surprising, especially when measured against growing citizen mistrust towards EU policy action. At a time in which some EU countries are calling for a repatriation of powers and the European Commission promises to redefine - in the framework of its Better Regulation agenda - the relationships between the Union and its citizens, nudging might provide a promising way forward. In the aftermath of the Brexit vote, this promise has not only been shared by the 27 remaining Member State but also represents one of their major priorities . Yet with promises come challenges too. The chapter proceeds as follows. Section 2 sets the scene by discussing the growing appeal of nudging among policymakers within and across Europe. Section 3 introduces the notion of behavioural policymaking and contrasts it with that of nudging. Section 4 describes the early and rather timid attempts at integrating behavioural insights into EU policymaking and identifies some domestic experiences. Section 5 discusses the institutional and methodological efforts undertaken by the EU and some of its member states to embrace behavioural policymaking. In turn, section 6 discusses the major difficulties of integrating behavioural insights into EU policymaking and offers some concluding remarks.

Research Summary In this study, we replicate and expand Hawn et al.’s study (Strategic Management Journal, 2018, 39, 949–976) that used Dow Jones Sustainability World Index (DJSI) events to measure variations in firms' Corporate Social Responsibility (CSR)‐activism and examined their effect on a firm's stock price. We use DJSI events to capture variations in firms' CSR visibility, holding CSR activism constant by restricting our analyses to CSR‐equivalent firms. First, we find similar results on stock price (i.e., no impact) and on trading volumes. Second, because professional market participants pay more attention to CSR‐oriented firms and use visible cues such as DJSI events, we study and find that additions to DJSI lead to more analysts following a firm, and that continuations on the DJSI lead to an increase in equity being held by long‐term investors. Managerial Summary We replicate and complement a recent study that showed that the events of a firm's addition, continuation, or deletion in a major sustainability index (DJSI) had little impact on stock market reactions (Hawn et al. Strategic Management Journal, 2018, 39, 949–976). We redefine the comparison set that was previously used and compare across observationally equivalent firms in terms of CSR orientation in order to isolate the visibility effect of DJSI events. We find that these events do not significantly impact stock price and trading volumes. However, we expand the analysis and find that sustainability events attract more attention from financial analysts and lead to an increase in the percentage of shares held by long‐term investors indicative of a trend that professional investors pay more attention to CSR‐visible firms over time.

Data is increasingly regarded as an essential infrastructural resource for economic growth, innovation and the overall wellbeing of society. Thanks to our enhanced capability to collect, process and use data, we are able to know where the epicentre of an earthquake is, how to limit a pandemic such as Zika from spreading or even how to reduce pollution in cities.This data ‘revolution’ must be contextualised within a broader, 3-centurylong attempt to neutralise irrationality in human decisionmaking by gaining increased access to information. Yet, while virtually every organisation today, including small companies or grassroots movements, is a data entity, only a few of them (generally in the private sector) have collected vast amounts of data (be it personal or non-personal) and acquired a unique capability to make sense of such information.As a result, most of this much-prized data is in the hands of businesses, not of public authorities, with the latter lagging behind in embracing the power of data to inform their daily policies and service-delivery actions. Hence the challenge — entrusted by the European Commission to our expert group — to explore the creation of an enabling environment for privately held data to be shared with (or at least be accessible to) public authorities in complying with their public-interest missions. For the time being, most of the efforts focus on getting the supply-side ready (e.g. by developing data-sharing models, de-risking data sharing or re-skilling personnel) for B2G data sharing, but omit the need to sensitise and prepare the demand side (the public authorities). More critically, at a time in which reputation-based mechanisms transcend the mere financial rating and venture into state-driven ‘social credit’ scoring, the role that citizens play in the data-sharing equation remains limited and ancillary to most of the solutions at stake.This report, which has benefited from the experience and dedication of 23 experts coming from different walks of life, strives to address both of these systemic shortcomings. By carving out a role to play for both the public sector and citizens, it offers an initial set of ethically-aware paths the EU might chart to break new ground in advancing and accompanying B2G data sharing. The hope is that by following some of this expert advice the EU might become a global leader in fostering not only a market for B2G data access, but also a sensible, inclusive and participatory data culture through a set of viable, practicable and scalable welfare-enhancing solutions. Only a more cautious, humble and humanised approach to the unprecedented amount of data we produce and collect every day may pave the way for a future in which it is the human factor that defines our daily life experiences

This article offers an original case study of the failed sale of Victoria’s Secret’s business to examine the deep consequences of the COVID-19 pandemic in the context of M&A transactions. After presenting the case, it draws two lessons from it by: (1) proposing a multi-layered analysis of the effects of covid-19 depending on the type of event considered and on the contract language, and (2) exploring the possible reshaping of the termination right in connection with the dramatic variations of the target’s value during the interim period caused by COVID-19.

COVID-19 is a matter of common European interest since its very first detection on the continent. Yet this pandemic outbreak has largely been handled as an essentially national matter.This article makes a first attempt at unpacking how such fragmented, uncoordinated national responses to COVID19 came into being under the EU legal order. To do so, it systematizes the European response into separate stages. Phase 1 – the emergency – has been characterized by the adoption of national emergency risk management measures that, albeit country specific, were inspired by a common objective of pandemic suppression, i.e. to reduce disease transmission and thereby diminishing pressure on health services, under the by now well-known ‘flatten the curve’ imperative. Phase 2 – the lifting – is about the attempt at relaxing some of the national risk responses in a coordinated fashion to avoid creating negative spillovers or distortions – be they sanitary and/or financial – across the Union.The article argues that contrary to conventional wisdom the resulting uncoordinated EU response to Covid-19 shouldn’t be seen as the inevitable consequence of the EU’s limited competence in public health. Against this backdrop, it strives to define the regulatory policy framework that might be governing the next phases of the European risk management response to this pandemic as they will emerge from a widely undefined yet unescapable dialectic between the Union and its member states. Ultimately, it predicts that by testing the outer limits of the EU public health competence COVID-19 is set to go down in history as a major catalyst in the advancement of EU health emergency action.

We investigate how Activist Short Sellers (AShSs) expose publicly listed firms in an increasingly popular form of “research reports” openly denouncing alleged frauds, flawed business models, accounting irregularities, and wrongdoings. We focus on six AShSs that issued research reports that often led to a strong negative market reaction. Our empirical analysis exploits both qualitative and quantitative methods for a comprehensive dataset of 383 research reports targeting 171 unique firms, and three first-hand interviews with AShSs. Drawing on Aristotle’s rhetoric, we first examine how AShSs use narratives in striving to convince other investors that the target firms are overvalued. Specifically, we search the documents produced by AShSs for stylized narratives related to credibility-based (ethos), emotions-based (pathos), and logic-based (logos) rhetorical strategies. To assess the impact of these strategies, we examine the extent to which the AShSs’ rhetorical strategies resonate in 3,665 press articles. As expected, the press often refers to logos-based arguments. Interestingly, the press also brings up frequently pathos-based and ethos-based statements. Considering the importance of the press in shaping investors’ opinions, our study points to AShSs’ narratives playing a major role in policing financial markets. Theoretically, we show that AShSs, as dissenting market participants, produce narratives that go beyond the language of formal rationality – as they strive to reveal new information and frame it persuasively, in order to destabilize the extent of trustworthiness surrounding target firms.

We propose a new methodology to implement unconditionally optimal dynamic mean-variance portfolios. We model portfolio allocations using an auto-regressive process in which the shock to the portfolio allocation is the gradient of the investor's realized certainty equivalent with respect to the allocation. Our methodology can accommodate transaction costs, short-selling and leverage constraints, and a large number of assets. In out-of-sample tests using equity portfolios, long-short factors, government bonds, and commodities, we find that its risk-adjusted performance, net of transaction costs, is on average more than double that of other benchmark allocations.

The Intergovernmental Panel on Climate Change has developed a novel framework for assessing and communicating uncertainty in the findings published in its periodic assessment reports. But how should these uncertainty assessments inform decisions? We take a formal decision-making perspective to investigate how scientific input formulated in the IPCC’s novel framework might inform decisions in a principled way through a normative decision model.

Product categories are more than classification devices that organize markets; when reflecting market actors' purposes, they are also judgment devices. Taking stock of the literature on product categories and drawing on the distinction between the faculties of knowing and judging, we elaborate a framework that accounts for how and why market actors include or exclude normative attributes in a product category definition. Based on a field study of the development of socially responsible investment (SRI) funds in France, we describe the phases and conditions of a judgment framework for category definition for both established and nascent categories. We discuss implications for research on product categories and the workings of markets more broadly.

This paper examines how the international demand for luxury consumption affects the real estate market in global hotspots. Using a unique data set of housing transactions in Paris, we find that (i) non-resident foreigners crowd out residents in highly desirable areas of the city, especially in good times; (ii) these non-residents overpay and realize lower capital gains when reselling; and (iii) purchases by non-resident foreigners have a causal positive effect on price levels. Our results illustrate the importance of foreign buyers — and their tastes — in attractive locations worldwide.

Twenty years ago, on early morning of 7 October 1998, a mountain bike rider cycling through the prairies surrounding Laramie, Wyoming, casually bumped into the body of a 21-year-old boy. His hands were tied to a fence with an iron thread and his face had been so badly disfigured that he resembled a scarecrow. Investigations soon unveiled that the boy, whose name was Matthew Shepard, had been beaten to death by two men because he was gay. Shepard’s brutal murder not only caused an acceleration of the development of the gay rights movement in the United States, but also vividly symbolized a conflict that existed – and exists today – in American society. In fact, “as Matt lay in the hospital just a few miles away, a float in the parade [at the Colorado State University] carried a scarecrow draped in anti-gay epithets” (B. Loffreda, Losing Matthew Shepard: Life and Politics in the Aftermath of Anti-Gay Murder, Columbia UP, 2000, 11), while at Matthew’s funeral “a very vocal group of people that condoned the brutality” held the sign “Fags Die God Laughs” (M. Cobb, God Hates Fags. The Rethorics of Religious Violence, NYU Press, 2006, 2). According to the Supreme Court, the Constitution allows gays and lesbians to take part in the public debate and seek protection from discrimination, but at the same time shields anti-gay funeral picketing as free speech [see respectively Romer v. Evans, 517 U.S. 620 (1996) and Snyder v. Phelps, 562 U.S. 443 (2011)].

Scotland is the first jurisdiction in the world to introduce a minimum price per unit of alcohol to reduce consumption. The relevant industry did not hesitate to challenge this new alcohol control policy before courts. The ensuing judgment contains a wealth of insights stemming from regulatory autonomy to proportionality review. What is the role of a national court in the review of national measures restricting free movement? In particular, how should it review the proportionality of those measures when adopted on public health grounds, and on the basis of what evidence? What is the burden of proof that the relevant Member State must discharge? Those are essentially the questions referred by a Scottish court to the Court of Justice when called upon to determine the compatibility with EU law of Minimum Unit Prices for alcohol introduced by the Scottish Government. Although rather recurrent in the Court’s free movement case law, the question of the standard of review, and corresponding burden of proof epitomises the struggle currently faced by national courts in striking the right balance between the proper functioning of the market and due recognition and protection of national regulatory autonomy. As such, this preliminary reference offered an opportunity to address “the information gap on what the Court of Justice expects defendant States to establish” in order to justify their measures under the proportionality stages of free movement analysis. But there is more. This case also raises deeper epistemic and methodological questions faced by any court of law when asked to review the proportionality, and in particular the necessity, of an individual policy intervention that belongs to a wider ‘political strategy’. Indeed, those strategies – as exemplified in the present case by the Scottish policy designed to combat the devastating effects of alcohol – generally entail the enactment of a full ‘regulatory mix’ of policy interventions. In those circumstances, how can we pinpoint the effect of a given policy option when it is part of a set of measures? How can we distinguish the effect, in terms of health gains deriving from a drop in alcohol consumption, to be ascribed to the introduction of MUP when such a measure coexists with other measures (more than 40 in Scotland) that have been introduced? And what when the contested measure has never been tested before? While this judgment confirms the gradual empirical turn made by the Court in its own review of the proportionality of national restrictive measures, it also provides some pragmatic guidance on how national courts may realistically engage in that review. Given the growing number of Member States ready to experiment with new policies aimed at tackling inter alia lifestyle risk factors, such as tobacco use, harmful consumption of alcohol and unhealthy diets, this appears as welcome development. Ultimately, the ensuing number of national restrictive measures of trade enacted on public health grounds, such as the UK standardised packaging for cigarettes, its sugar tax or the Hungarian ‘fat tax’, is set to put to test the Court’s approach towards both the qualification of those measures as restrictions and their justification under EU law.

Unrealized gains and losses on available-for-sale securities (AFSGL) are included in Other Comprehensive Income (OCI) and directly affect shareholders’ equity but are not included in earnings. We investigate whether unrealized AFSGL help predict future earnings and whether analysts and investors incorporate the information conveyed by unrealized AFSGL in a timely manner. We conduct our investigation on a sample of banks because unrealized AFSGL are material in the banking industry. First, we show that unrealized AFSGL are material and help in predicting next period realized AFSGL and future earnings change. Second, we document that financial analysts are slow to react to unrealized AFSGL and update their forecasts after AFSGL are realized in earnings. Third, we find that investors are also slow to react to unrealized AFSGL and do so only after AFSGL are included (realized) in earnings and after financial analysts update their forecasts. We document an annual difference of 5% in future abnormal returns between banks in the top and bottom quintiles of past unrealized AFSGL. A zero-cost trading strategy that relies on public information about unrealized AFSGL generates a sizeable monthly alpha that ranges between 1.8% and 1.9%.

Stock prices occasionally move in response to unverified rumors. I propose a cheap talk model in which a rumormonger’s incentives to tell the truth depend on the interaction between her investment horizon and the information acquisition decisions of message-receiving investors. The model’s key prediction is that short investment horizons can facilitate credible information sharing between investors, thereby accelerating the information capitalization into market prices. Analyzing a data set of takeover rumors covered by U.S. newspapers, I find suggestive evidence in support of this prediction. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

This article examines what difference – if any – the renewed EU Better Regulation Agenda has made for the EU Commission in terms of its own accountability and policy outcomes. Emboldened by the Spitzenkandidaten process – which established for the first time a link between the outcome of the EU elections and the presidency of the EU Commission –, the Juncker Commission emerged as the most political yet. To shrug off the label of technocratic institution – historically insulated from citizens’ preferences –, the new Commission asked EU citizens to judge its operation by its ability ‘to deliver solutions to the big issues that cannot be addressed by the Member States alone’. By embracing such a panem et circenses approach to EU democracy – as such not too dissimilar from the Santer’s and Barroso’s previous administrations – the Juncker Commission raised new expectations. This is true not only in terms of output legitimacy – which was meant to become the privileged benchmark against which to measure the Commission’s success –, but also in terms of its own democratic and political accountability vis-à-vis EU citizens. Indeed, although unintelligible to the many, the Spitzenkandidaten logic entails that EU citizens contributed for the first time with their vote to shape the political orientation of this Commission and – as a result – could hold it accountable. While the very notion of political accountability is foreign to the EU constitutional setting – as citizens don’t have the possibility to replace the Commission if this does not meet their hopes –, the Juncker Commission has strived to frame its mandate as if such an oversight existed. This article concludes that at the very same time the Juncker Commission has been striving to develop its own, autonomous democratic credentials, its choice to embrace a set of well-defined institutional mechanisms that reward expert judgment over political adjudication appears at odds with its newly-acquired political nature.

Engaging in unethical consumption behaviors is an acute societal problem that can have severe consequences for adolescents, and businesses in particular have been accused of making such consumption particularly appealing and accessible. However, the causes of unethical behaviors are not well understood and research on the causes has been mixed. In this research, we investigate the effects of coping strategies for loneliness on adolescents’ adoption of unethical behaviors, a topic that business ethics research has not explored. In a large-scale study (n = 409) of adolescents (ages 13–17), we show that whether loneliness leads to the adoption of unethical behaviors depends on the strategies adolescents use to cope with their loneliness: active coping strategies are associated with fewer unethical behaviors, whereas passive coping strategies are associated with more unethical behaviors. In addition, we show that active and passive coping strategies can be executed through consumption practices. We show that the relation between active coping and fewer unethical behaviors is mediated by sharing of possessions, whereas the relation between passive coping strategies and more unethical behaviors is mediated by product acquisition. Finally, we also show that these mediated relations differ as a function of age cohort (grade level). The indirect effect of active coping on fewer unethical behaviors via sharing holds only for middle school adolescents, whereas the indirect effect of passive coping on more unethical behaviors via product acquisition holds only for high school adolescents. We shed new light on both the bright and dark sides of materialism and unethical behaviors and provide practical implications for research on loneliness, business ethics, and unethical behaviors.

International audience; The essential corporate finance text, updated with new data Corporate Finance has long been a favourite among both students and professionals in the field for its unique blend of theory and practice with a truly global perspective. The fact that the authors are well-known academics and professionals in the world of mergers and acquisitions (M&A) and investment explains this popularity. This new Fifth Edition continues the tradition, offering a comprehensive tour of the field through scenario-based instruction that places concept and application in parallel. A new chapter has been added, devoted to the financial management of operating buildings that aims to answer questions such as, “to own or to rent?” “variable or fixed rents?” etc. The book’s companion website features regularly updated statistics, graphs and charts, along with study aids including quizzes, case studies, articles, lecture notes and computer models, reflecting the author team’s deep commitment to facilitating well-rounded knowledge of corporate finance topics. In addition, a monthly free newsletter keeps the readers updated on the latest developments in corporate finance as well as the book’s Facebook page, which publishes a post daily. Financial concepts can be quite complex, but a familiar setting eases understanding while immediate application promotes retention over simple memorisation. As comprehensive, relevant skills are the goal, this book blends academic and industry perspective with the latest regulatory and practical developments to provide a complete corporate finance education with real-world applicability. Blend theory and practice to gain a more relevant understanding of corporate finance concepts Explore the field from a truly European perspective for a more global knowledge base Learn essential concepts, tools and techniques by delving into real-world applications Access up-to-date data, plus quizzes, case studies, lecture notes and more A good financial manager must be able to analyse a company’s economic, financial and strategic situation, and then value it, all while mastering the conceptual underpinnings of all decisions involved. By emphasising the ways in which concepts impact and relate to real-world situations, Corporate Finance provides exceptional preparation for working productively and effectively in the field.

This article hinges on the preliminary ruling rendered by the Court of Justice of the EU (CJEU) (Grand Chamber) on 18 October 2016 and the related judgment of the German Federal Labour Court of 26 April 2017 in the Nikiforidis case to investigate an area of private international law that is undergoing a substantial development: overriding mandatory provisions. In Nikiforidis, the CJEU excluded that two Greek laws cutting the salary of public employees may be enforced against a teacher working in Germany for the Greek Government under an employment contract governed by German law. The question addressed to the CJEU was whether the said laws were “overriding mandatory provisions” according to the Rome I Regulation. The Court denied it, and left to the referring court to determine whether they could nevertheless operate “as matter of fact” under the governing law. This article explains how the CJEU’s conclusion has broader implications by regulating third countries’ interference in international business transactions. Starting with an analysis of the case, the article examines the history and nature of overriding mandatory provisions under EU private international law and argues that the solution embraced by the CJEU leaves room for uncertainty and unpredictability in the operation of foreign mandatory provisions.This material was firstly published by Thomson Reuters Limited in Edoardo Avato & Matteo Winkler, Reinforcing the Public Law Taboo: A Note on Hellenic Republic v Nikiforidis, 43 European Law Review (2018), 569-582, and is reproduced by agreement with the publisher

This paper provides a critical assessment of the realities of EU participatory democracy and offers a set of innovative democratic innovations capable of making the Union more responsive to public input. It argues that today’s limited effectiveness of citizen participation to EU decision-making is due to the design, nature and practice of those instruments more than to the inherent inability of citizens to participate. As such, it concludes, the democratizing potential of the EU participatory tool-box remains not only fundamentally misaligned with societal participatory expectations, but also largely untapped.The paper suggests that the time has come for the EU to create an enabling and collaborative political environment fostering citizen participation beyond elections. Such a space may give birth to alternative, unconventional forms of participation capable of channeling citizens’ pluralistic and increasingly chaotic input into the political conversation to bring citizens closer to our representatives and, moreover, doing so in-between elections and across countries. Thus, for instance, by centralising all public input in a one-stop-shop entailing the participation of all EU institutions, a European Question Time might crystallise and eventually connect the daily realities of Europeans with the day-to-day operation of their institutions. A European Democratic Jury of randomly selected citizens from all over the Union could further contribute to such an objective by ‘humanising’ the EU decision-making.While this participatory framework would not magically fix the European accountability deficit, it may compensate for that by making the system responsive to citizen-driven agenda-setting and monitoring and eventually making it more intelligible and accessible to the many.

© 2020 The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. There is a discrepancy between CAPM-implied and realized returns. Using the CAPM in capital budgeting - as recommended in textbooks - should thus have real effects. For instance, low beta projects should be valued more by CAPM users than by the market. We test this hypothesis using M&A data and show that bids for low-beta private targets entail lower bidder returns. We provide further support by testing several ancillary predictions. Our analyses suggest that using the CAPM when valuing targets leads to valuation errors (relative to the market's view) corresponding on average to 12% to 33% of the deal values.

Research has suggested that firms may benefit from price uncertainty - about input commodities - because it creates an "option value". We use a stylized mathematical model to explore and generalize this claim and to specify its implications for firms' investment decisions under various setups. In particular, we study firms' motivation for investing in such risk management measures as financial hedging (FH) and technology improvement (TI): technology changes that result in less consumption of an input commodity, fewer waste products and emissions, and lower production costs. We derive a simple expression that explicitly quantities firm's attitude toward input-price risk by considering the firm's (positive or negative) risk premium (i.e., what it would pay to "lock in" the unit input price at its mean) and linking that premium to various firm and industry-level characteristics. Also, we examine the comparative risk management advantages of TI and FH and characterize conditions under which these strategies are complements or substitutes. We find that although input-price uncertainty may be beneficial even for risk-averse firms, they can benefit from investing in risk reduction measures (e.g., TI, FH) because they could increase the option value of that uncertainty. A firm's ability to adjust its price in response to both market competition and input-price variation mediates the benefit of risk-reducing measures and also affects the two strategies' complementarity.

Online crowdfunding is a popular new tool for raising capital to commercialize product innovation. Product innovation must be both novel and useful (1-4). Therefore, we study the role of novelty and usefulness claims on Kickstarter. Startlingly, we find that a single claim of novelty increases project funding by about 200%, a single claim of usefulness increases project funding by about 1200%, and the co-occurrence of novelty and usefulness claims lowers funding by about 26%. Our findings are encouraging because they suggest the crowd strongly supports novelty and usefulness. However, our findings are disappointing because the premise of crowdfunding is to support projects that are innovative, i.e. that are both novel and useful, rather than projects that are only novel or only useful.

Young people entering the job market are in a precarious economic position. Across Europe, and in Belgium in particular, those who wish to enter into the professional world are faced with the de facto mandate that in order to gain experience and build the connections that will enable them to find paid professional work in the future, they must complete several internships. Yet many of these internships are unpaid or underpaid, forcing some young people to rely on their savings or their parents and shutting others out of the process entirely. The European Committee of Social Rights (the “Committee”) accepts collective complaints lodged by non-governmental organisations alleging violations of the European Social Charter (the “Charter”). The EU Public Interest Clinic prepared this draft Complaint for the non-profit organization European Youth Forum, alleging that unpaid internships in Belgium violate the Charter. Specifically, the provisions in Belgian law that enable unpaid internships, and the lack of enforcement of provisions that aim to curtail them, violate Articles 4, 7, and 10 of the Charter, which provide for fair remuneration, the protection of young people, and financial assistance for vocational training, respectively.

The purpose of this legal memorandum is to provide advice to organisations and individuals interested in submitting a request for public access to documents under Regulation (EC) No 1049/01 (“Regulation 1049/01”) to the European Parliament for documents related to the spending of political groups covered by Budget Item 400 appropriations under Chapter 7. Requests for those documents may face rejection on grounds related to exceptions provided for in Regulation 1049/01, specifically those found in Articles 4(1)b, 4(2), and 4(3) pertaining to privacy and integrity of the individual, commercial interests, and institution’s decision-making process respectively. This legal memorandum addresses the applicability of those exceptions to the documents requested for potential use in a confirmatory request to be submitted to the European Parliament subsequent to the initial rejection in line with Article 7 of Regulation 1049/01. The memo also provides arguments for overcoming these exceptions in light of: 1) recent developments in the case law of the Court of Justice of the European Union (“CJEU”) relating to the privacy exception; and 2) the strict legal requirements for triggering the commercial interests and institutional decision-making exceptions. The last section of the memo is structured to provide draft responses to the denial of requests for documents and should be tailored to the specific situation in question.

Firm political contributions are associated with lower credit default swap spreads for contributing firms. To address endogeneity, we employ novel instruments and use a set of exogenous events on campaign contribution restrictions: (a) the passage of the Bipartisan Campaign Reform Act (BCRA) that banned soft money contributions, (b) the Federal Election Commission decision to interpret the BCRA less strictly, (c) the partial reversal of the BCRA and, (d) the McConnell v. FEC Supreme Court decision, which upheld the BCRA. Overall, the evidence suggests that political contributions are valued by credit market participants.

Extant research has highlighted the importance of resource reconfiguration for firm performance and has identified important drivers of the reconfiguration of macro-level resources, e.g. business units, focusing primarily on supply-side factors. Yet less is known about drivers of the reconfiguration of micro-level resources, e.g. human assets, and about the role which demand-side factors play in resource reconfiguration. We address these gaps and investigate how client-related factors influence the reconfiguration of micro-level resources in human-asset-intensive firms. Using fine-grained data on law firms advising on M&A mandates, we find that law firms are less likely to reconfigure their human assets (lawyers) on mandates for high-status clients, but more likely to reconfigure them when a client has a greater proclivity to switch business between multiple suppliers. Law firms also reconfigure their human assets less for incoming client projects when they have provided prior M&A services to the client, but they are more likely to reconfigure them when the client relationship has a broader scope. Finally, we also show that the size of a firm's client portfolio lowers reconfiguration. Our paper extends the literature on resource reconfiguration by explicating antecedents of the reconfiguration of micro-level resources and by highlighting the role demand-side factors play in it. We also contribute to the strategic human capital literature by showing how demand-side factors shape human capital deployment. Finally, we also add to the micro-foundations of resource-based theory by studying important micro-foundational processes underlying a firm's capacity to reconfigure its resources.

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.

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.

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.

We exploit detailed transaction and position data for a sample of long-short equity hedge funds to document new facts about the trading activity of sophisticated investors. We find that the initiation of both long and short positions is associated with significant abnormal returns, suggesting that the hedge funds in our sample possess investment skill. In contrast, the closing of long and short positions is followed by return continuation, implying that hedge funds close their positions too early and “leave money on the table.” As we demonstrate with a simple model, this behaviour can be explained by hedge funds being (risk) capital constrained and facing position monitoring costs. Consistent with our model, we document that the return continuation following closing orders is more pronounced when these constraints become more binding (e.g., after negative fund returns or increases in volatility).

Nudge is a concept of policy intervention that originates in Thaler and Sunstein's (2008) popular eponymous book. Following their own hints, we distinguish three properties of nudge interventions: they redirect individual choices by only slightly altering choice conditions (here nudge 1), they use rationality failures instrumentally (here nudge 2), and they alleviate the unfavourable effects of these failures (here nudge 3). We explore each property in semantic detail and show that no entailment relation holds between them. This calls into question the theoretical unity of nudge, as intended by Thaler and Sunstein and most followers. We eventually recommend pursuing each property separately, both in policy research and at the foundational level. We particularly emphasize the need of reconsidering the respective roles of decision theory and behavioural economics to delineate nudge 2 correctly. The paper differs from most of the literature in focusing on the definitional rather than the normative problems of nudge.

We develop a model in which collateral serves to protect creditors from the claims of competing creditors. We find that borrowers rely most on collateral when cash flow pledgeability is high, because this is when it is easy to take on new debt, diluting existing creditors. Creditors thus require collateral for protection against being diluted. This causes a collateral rat race that results in all borrowing being collateralized. But collateralized borrowing has a cost: it encumbers assets, constraining future borrowing and investment, i.e. there is a collateral overhang. Our results suggest that the absolute priority rule, by which secured creditors are senior to unsecured creditors, may have an adverse effect — it may trigger the collateral rat race.

Agents make predictions based on similar past cases. The notion of similarity is itself learnt from experience by "second-order induction": past cases inform agents also about the relative importance of various attributes in judging similarity. However, there may be multiple "optimal" similarity functions for explaining past data. Moreover, the computation of the optimal similarity function is NP-Hard. We offer conditions under which rational agents who have access to the same observations are likely to converge on the same predictions, and conditions under which they may entertain different probabilistic beliefs.

Research Summary: Firms and nongovernmental organizations (NGOs) often collaborate to establish new supply chains. With a formal model, we analyze how NGOs can alleviate market failures and improve supplier economic inclusion while strategically interacting with firms. We account for the specific goals of the NGO and the need to induce collaboration between firms and their suppliers. The analysis reveals a “valley of frustration,” when NGO efforts benefit all actors but only marginally the firm. We also show that more powerful firms might prefer to internalize NGO functions, while firms with lower bargaining power and higher investment requirements are better off collaborating with NGOs. Finally, we study NGOs‐firms matching patterns and find that firms with higher bargaining power match with NGOs holding stronger capabilities. Managerial Summary: This article analyzes interactions between firms and nongovernmental organizations (NGOs) aiming to improve the economic inclusion of suppliers or to promote the adoption of specific (e.g., sustainable) practices. For firm executives, this study shows the constraints and benefits associated with working with NGOs, the conditions under which integration of NGO functions is preferable as well as the types of NGOs that offer better prospects for a successful collaboration. For NGO executives, it highlights the need to provide enough economic incentives to firms and suppliers alike to ensure their collaboration and the trade‐offs associated with this constraint, in particular, if NGO capabilities are limited. Overall, the study provides a comprehensive understanding of how NGO activities can influence value creation in a vertical value chain.

We study how upstream tariffs affect downstream investment in US manufacturing firms. Exploiting tariff reductions following multinational trade agreements, we estimate that a 10% decrease of upstream tariffs entails an increase in downstream investment by 4% to 6%. This effect stems from tariff reductions for homogeneous and low-R&D inputs (e.g., cement), consistent with the investment response being due to cost reductions rather than superior foreign technology embodied in imported inputs. Extending the analysis beyond tariffs, we use the sudden increase in Chinese import penetration in an instrumental variable estimation and show that higher import competition leads to higher downstream investment.

Energy efficiency projects are often executed by specialized entities, namely energy service companies (ESCOs). A typical ESCO's core business is conducted using performance-based contracts, whereby payment terms depend on the energy savings achieved. Despite their success in public, commercial, and industrial sectors, ESCOs in the residential sector are involved in fewer projects and face several challenges. First, an energy efficiency project often leads to changed consumption behavior; hence it is more difficult to evaluate the energy savings that are due to the project itself. The second challenge is that residential clients are more risk averse and, thus, less willing to contract for projects whose outcomes are uncertain. Third, a lack of monitoring protocols leads to ESCO's moral hazard problems. This paper studies ESCO contract design issues, focusing primarily on the residential market for energy efficiency. As opposed to other sectors, coordinating contracts do not exist. We show, however, that simple piecewise linear contracts work reasonably well. To improve their profitability, ESCOs can reduce uncertainty about the technology employed and/or develop ways of verifying post-project energy efficiency. Since policy makers are understandably keen to promote energy efficiency, we show also how regulations and monetary incentives can reduce inefficiencies in ESCOs' relationships and thereby maximize environmental benefits.

We argue that a precedent is important not only because it changes the relative frequency of a certain event, making it positive rather than zero, but also because it changes the way that relative frequencies are weighed. Specifically, agents assess probabilities of future events based on past occurrences, where not all of these occurrences are deemed equally relevant. More similar cases are weighed more heavily than less similar ones. Importantly, the similarity function is also learnt from experience by "second-order induction". The model can explain why a single precedent affects beliefs above and beyond its effect on relative frequencies, as well as why it is easier to establish reputation at the outset than to re-establish it after having lost it. Finally, we discuss more sophisticated forms of learning, by which similarity is defined not only on cases but also on attributes, and the importance of some attributes, learnt from the data by second-order induction, can also affect the perceived importance of other attributes.