research@hec - Issue #8 - (Page II)

Harald Hau (INSEAD) has revealed the systematic underperformance of German state banks during the current crisis. His study suggests that losses incurred by this type of bank are the result of extremely weak organizational governance. One reason for this is that management teams in state banks are less skillful than those in private banks. Gilles Hilary (HEC Paris) presented empirical evidence that stock prices from firms benefiting from high quality accounting systems are less affected by stock market crashes than others. In such circumstances, stock market quality indicators like liquidity and intraday volatility are also upset less in companies with higher quality accounting systems. Milo Bianchi (PSE) has created a model of the lifecycle of speculative bubbles using a theory that draws on the idea that investors do not always behave rationally. Bianchi’s model shows that markets would be more efficient if there were greater numbers of investors with an aversion to uncertainty. The 6th HEC-INSEAD-PSE Workshop on Economics & Finance was held on April 9, 2009 on the HEC Paris campus. The theme of this year’s workshop was the financial crisis and its impact on the economy. Six research papers were presented to an assembly of forty professors and doctoral students from the three organizing institutions. The principal findings of the studies presented and discussed were as follows: Research Update: research hec Financial Crisis Recherche@hec provides researchers and non-specialists with highlights of studies conducted at HEC. Prior to submission for publication, HEC research is also presented at workshops, research seminars, and conferences. Astrid Dick (INSEAD) conducted an empirical study on personal bankruptcy rates in the United States. The study reveals two principal causes of this phenomenon. First, banking deregulation, as it enables banks to operate outside of their home state and to thus increase credit availability; second, technological advances, because they have made it possible to more effectively assess people’s reimbursement capacity. The increase in personal bankruptcy rates between 1980 and 1994 is linked to the fact that more households gained access to credit. Xavier Ragot (PSE and Banque de France) has developed a theoretical model of the dynamics of derivative transaction volume. Derivatives enable economic actors to protect themselves from unfavorable macro-economic changes. Ragot’s model says that derivative transaction volume increases as economic risk increases, a concept that is backed by reality. I Laurent Frésard (HEC Paris) has produced an empirical demonstration of the strategic role of a company’s cash position. It is particularly significant when competitors are having financial difficulties, like during a crisis. Companies with more cash than their competitors are more likely to increase their market share as time goes on. II research@hec • April-May 2009

Table of Contents for the Digital Edition of research@hec - Issue #8

Cover & Contents
Research Update: Financial Crisis
The Upside of Ambivalence
Inventory Management and Financial Performance
Sending Signals: the Meaning of Equity vs. Cash

research@hec - Issue #8