Contributions in Merlin

Previous organizational research on decoupling in the context of socio-environmental governance has suggested a trade-off between compliance and goal achievement, meaning that remedying the decoupling of policies and practices tends to jeopardize efforts to remedy the decoupling of means and ends. We expand on previous research on the trade-off between compliance and goal achievement by examining the spatiotemporal processes of sensemaking by which the meaning of compliance and achievement is negotiated among multiple actors. Taking a qualitative analytical approach we examine the evolution of anti-corruption policies at Siemens and affiliated actors, and describe how different anti-corruption narratives have developed over time at different locations and how they have been linked to each other. We explain that through narration actors develop a shared understanding of what it means to be compliant and successful and elaborate how the apparent tension between compliance and goal achievement is dissolved through story-telling. Our study contributes to decoupling re-search by examining the ideational-communicative dynamics underlying the social deconstruction of the compliance-achievement gap.

Sustainable investing (SI) has lately been viewed as a mainstream investment style. However, this notion can be questioned since private investors appear substantially underrepresented in SI compared to institutional investors. In this study, we empirically explore SI-barriers for private investors. We provide insights from interviews with High Net Worth Individuals (HNWIs), an economically highly significant yet secretive and thus little researched segment of private investors. Our results indicate substantial interest in SI amongst HNWIs, while the perception of what SI entails varied across individuals. From our analysis, we propose three specific SI-barriers. The first is an SI-information asymmetry based on investment advisors’ perception that appears to misinterpret clients’ interest in SI. The second relates to HNWIs’ perception of SI to be more volatile then average investments. This perception limits the engagement in SI in situations where the investor has a short-term investment horizon. The third barrier highlights the role of recent financial losses. In situations where the investor experienced such losses, the perception of SI as being more volatile than average investments results in less SI engagement. We reflect on these empirical results by drawing on insights from Prospect Theory and propose avenues for future research. In sum, this paper shows that investors’ cognition of SI appears to be an important engagement reason that goes beyond the usual business-case-arguments.

In this paper we develop a one-factor non-affine stochastic volatility option pricing model where the dynamics of the underlying is endogenously determined from micro-foundations. The interaction and herding of the agents trading the underlying asset induce an amplification of the volatility of the asset over the volatility of the fundamentals. Although the model is non-affine, a closed form option pricing formula can still be derived by using a Gauss-Hermite series expansion methodology. The model is calibrated using S&P 500 index options for the period 1996-2013. When its results are compared to some benchmark models we find that the new non-affine one-factor model outperforms the affine one-factor Heston model and it is competitive, especially out-of-sample, with the affine two-factor double Heston model.

This paper proposes a new measurement for the specificity of occupations based on a content analysis of training curricula that we link to labor market demands. We apply Lazear’s (2009) skill weights approach and test predictions on labor market outcomes derived from his theory. We find clear evidence of a trade-off between earning higher returns with more specific training and higher occupational mobility with less specific training. Our measure improves the micro-foundation of human capital specificity and provides an evidence-based approach to evaluate the specificity of training curricula.

Bhattacharya et al. (2012) shows that many investors are reluctant to accept and follow financial advice. This study analyzes three possibilities which could cause this misbehavior: non-monetary costs, willingness to become informed and comprehensibility of financial information. As so many investors do not accept financial advice, the study further analyzes if it is beneficial to nudge investors to do what is good for them (i.e. a risk profiling task). In order to improve the comprehensibility of financial information, the study further tests if different kinds of investors prefer different kinds of risk description formats. The results show that non-monetary costs and the comprehensibility of financial information are not the reasons why so many investors are reluctant to become informed investors. Moreover, nudging investors to do what is good for them is especially beneficial for investors who are intrinsically insufficiently motivated to become informed and who are financially unexperienced. Last but not least, the data clearly shows that different kinds of investors prefer different kinds of risk description formats.

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We study the link between the profitability of momentum strategies and firm size, drawing on an extensive dataset covering 23 stock markets across the globe. We first present evidence of an "extreme" size premium in a large number of countries. These size premia, however, are most likely not realizable due to low stock market depth. We also show that international momentum profitability declines sharply with market capitalization. Momentum premiums are also considerably diminished by trading costs, when taking into account the actual portfolio turnover incurred when implementing this strategy. In contrast to strategies based on size, we find that momentum premia especially for medium-sized stocks still remain economically and statistically significant in most equity markets worldwide after adjusting for transaction costs.

Organizational configurations, sets of firms with similarities in a number of essential characteristics, provide important insights into the synergies inherent to certain combinations of structural attributes and the performance effects of firms’ retention of, adaptation to, or decoupling from high-performing configurations. The fundamental assumption is that the better a firm’s “fit” with an ideal type configuration, the higher its performance. Although configurations are multidimensional constructs, researchers often simplify the dynamics of structural changes of configurations and the movement of firms within and between them. This simplification risks mis-specifying the organizational changes necessary for firms to achieve high performance. Using a mix of set-theoretic and econometric methods, we analyze a balanced panel of 244 Swiss firms in 2005, 2008, and 2011. We identify four temporally stable high-performing configurations: the “professional service firm,” the “organic,” the “mechanistic,” and the “small bureaucracy,” and demonstrate that even within this relatively short period, firms are exceptionally versatile in their change tracks. Thus high-performing configurations appear enduring not despite but because of firms' movements through these configurations. Furthermore, we demonstrate the complexity of the fit-performance association and argue that firms with a good fit will not only benefit from implementing an efficient yet firm-unspecific organizational structure, but will—through this configuration additionally improve their ability to exploit inimitable firm-specific resources.

We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of distress propagation. The main features are as follows. First, the framework allows to estimate and disentangle not only first-round effects (i.e. shock on external assets) and second-round effects (i.e. distress induced in the interbank network), but also third-round effects induced by possible fire sales. Second, it allows to monitor at the same time the impact of shocks on individual or groups of financial institutions as well as their vulnerability to shocks on counterparties or certain asset classes. Third, it includes estimates for loss distributions, thus combining network effects with familiar risk measures such as VaR and CVaR. Fourth, in order to perform robustness analyses and cope with incomplete data, the framework features a module for the generation of sets of networks of interbank exposures that are coherent with the total lending and borrowing of each bank. As an illustration, we carry out a stress--test exercise on a dataset of listed European banks over the years 2008-2013. We find that second-round and third-round effects dominate first-round effects, therefore suggesting that most current stress-test frameworks might lead to a severe underestimation of systemic risk.

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