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Based on representative longitudinal data (CNEF 1980–2013) the paper analyzes gender differences of the level and the determinants of earnings dynamics in the work life of different cohorts of employees in Germany, Great Britain, and the United States. Notwithstanding country differences concerning the existing welfare state regime constituting the institutional settings of the labor market, the educational system, and family role models, the empirical results show decreasing earnings mobility in the work history. The earnings level, educational attainment, family size, the occupational choice, the career stage, the birth cohort, and the macroeconomic fluctuations significantly influence earnings mobility. In the United States, earnings mobility is significantly lower and gender differences are less pronounced than in Germany and Great Britain. The gender gap of earnings mobility is less expressed for younger cohorts of German employees. The increase of the gender gap of earnings dynamics in the course of the work career indicates continuing heterogeneity of labor market behavior and outcome of women and men which contribute to persistent economic and social stratification.

Purpose – While previous studies have highlighted opportunities, this chapter sheds light on the negative effects of globalization that mature European multinational enterprises (MNEs) encounter.

Design/methodology/approach – We develop an extended network perspective to argue that globalization has resulted in several network-related threats for mature European MNEs.

Findings – European MNEs encounter three types of negative effects. First, globalization has caused local problems to increasingly spill over to other parts of MNE networks. Second, globalization has bred or strengthened countervailing powers, such as emerging-market MNEs, supranational governmental bodies, and international non-governmental organizations, which have eroded the power of mature European MNEs by entering their networks. Third, while globalization has caused the economic networks of MNEs to expand, it has made critical production factors scarcer since the availability of labour, land and natural resources has not increased accordingly. We conclude that globalization acts as a double-edged sword, which has not only offered opportunities for mature European MNEs but has also led them to experience important new and intensified threats.

Social implications – Earlier studies have shown that globalization can have positive effects for MNEs and negative effects for the sovereignty of nation states, domestic employment and the natural environment. The findings of the present study imply that globalization can also backfire on mature MNEs, thereby undermining their competitive position or even jeopardizing their continuity.

Originality/value – The negative effects of globalization for MNEs have remained understudied. Our contribution is to systematically analyze the neglected yet important ‘dark side of globalization’ that mature European MNEs encounter.

We investigate the link between firm volatility and risk-taking (RT) among 4232 institutions across 11 countries during the period of 2000–2017 and find RT is negatively correlated with volatility measures. Second, a decomposition of the primary risk measure, the Z score and Merton distance-to-default, reveals that high RT contributed to lower stock return volatility mainly through better corporate governance, firm size, higher information efficiency, and strong BOD. Third, Australia firms engage in more RT compared to other countries. Finally, majority of the selected countries show the negative impact of RT in firm volatility in the pre-crises period (2002–2006) and during the crises period (2007–2009) but not in the post-crises period (2010–2014).

To study the determinants and effects of “Operational” exchange rate exposure resulting from the mismatch between cost and revenues of the firms by using data on 500 Indian firms.

We conduct detailed empirical analysis of the determinants of firm level exposure and their impact using panel regression techniques and conduct several robustness tests to confirm the validity of these results.

Among other factors, exchange rate volatility appears as a significant determinant of average firm level exposure with the direction of relationship supporting the presence of “Moral Hazard” in firm’s risk-taking behavior. Further large “operational” exposure is associated with significantly lower output growth, profitability, and capital expenditure during episodes of large currency depreciation at the firm level.

This paper leaves several questions to be answered. Further research is called for to explore the nature of distortions in the production process encouraged by exchange rate volatility and their impact on firm level productivity. Looking at the relationship between the use of financial and operational hedges is another fruitful area of future research.

Our results have important implications for policy makers worried about mitigating the impact of exogenous shocks. Implicit and explicit guarantees with regards to the value of exchange rate tend to raise the vulnerability of the economy to exchange rate shocks at same time that they encourage capital expenditures and possibly output growth during “normal” times. Our findings indicate that the policy makers must take into account the incentive effects of their intervention in foreign exchange markets.

Unlike the existing papers in the literature, we use a measure of “operational” currency exposure based on foreign currency revenues and costs of firms. In most of the existing papers the focus is on the mismatch between the currency denomination of assets and liabilities. Little attention has been paid to the currency mismatch between costs and revenues of the firms. Such “operational” mismatches are potentially equally important and deserve attention of policy makers and academics alike.

This paper analyzes the roles of idiosyncratic risk and firm-level conditional skewness in determining cross-sectional returns. It is shown that the traditional EGARCH estimates of conditional idiosyncratic volatility may bring significant finite sample estimation bias in the presence of non-Gaussianity. We propose a new estimator that has more robust sampling performance than the EGARCH MLE in the presence of heavy-tail or skewed innovations. Our cross-sectional portfolio analysis demonstrates that the idiosyncratic volatility puzzle documented by Ang, Hodrick, Xiang, and Zhang (2006) exists intertemporally. We conduct further analysis to solve the puzzle. We show that two factors idiosyncratic variance and individual conditional skewness play important roles in determining cross-sectional returns. A new concept, the “expected windfall,” is introduced as an alternate measure of conditional return skewness. After controlling for these two additional factors, we solve the major piece of this puzzle: Our cross-sectional regression tests identify a positive relationship between conditional idiosyncratic volatility and expected returns for over 99% of the total market capitalization of the NYSE, NASDAQ, and AMEX stock exchanges.

Does the adoption of the Enterprise Risk Management (ERM) improve bank profitability? Does ERM also reduce bank risk? By analyzing a sample of banks located in European emerging markets between 2005 and 2013, the aim of this chapter is to empirically investigate the determinants of firm performance, both in terms of bank profitability and risk, with respect to the adoption of Enterprise Risk Management (ERM). In order to capture the effect of the ERM program adoption on banks’ performance, we both use market-based measures as well as accounting-based indexes. Following the seminal literature on the topic (Aebi, Sabato, & Schmid, 2012; Eckles et al., 2014; Ellul & Yerramilly, 2013; Hoyt & Liebenberg, 2003, 2011; Lin, Wen, & Yu, 2012; Pagach & Warr, 2010), we adopt a binary proxy variable, that is, the appointment of a Chief Risk Officer (CRO), to define whether the firm is currently undertaking an ERM program. Our results show that a post-ERM firm experiences an increase in the risk-adjusted profits and a reduction of the overall risk.

A substantial literature examines the effect of high-performance workplace practices on various outcomes for firms and workers. However, little attention has been paid to the effect of broad job design on product quality or financial performance. And with rare exception, the empirical literature on outcomes from high-performance work practices treats those practices as exogenously determined. This chapter seeks to address these two shortcomings in the existing literature. Using a nationally representative cross-section of British employers in 2004, we measure the effect of multiskilling on establishment-level labor productivity, product quality, and financial performance. We find that treating multiskilling as an endogenous choice of employers in empirical models of organizational performance has significant implications for the results. In particular, the estimated (positive) effect of multiskilling on labor productivity vanishes when we treat multiskilling as an endogenous choice of employers. Treating multiskilling as an endogenous choice changes its estimated effect on product quality from zero to positive and substantially increases the estimated magnitude of its (positive) effect on financial performance.

Effective internal control over financial reporting (ICFR) should either prevent or enable correction of any material misstatement in a firm’s financial statements. Independent auditors, guided by professional standards, prepare an ICFR audit report, which provides a gauge by which the public can evaluate the reliability of a firm’s financial information. A firm manager may be tempted to misstate financial statements if he/she perceives a substantial reward for doing so. This study examines whether managers and firms are rewarded for misstating their financial statements in situations where there are incentives to do so, specifically, when an industry-leading peer is fraudulently inflating its reported earnings. The authors test to see if managers experience an increase in compensation as a result of misstatement. The authors also test to see if their firms benefit from misstating via changes to their cost of capital. Results suggest that neither managers nor their firms benefit from managing earnings by misstating financial statements. These findings are important, because a manager who ex ante understands that misstating will not lead to benefits personally or his/her firm is less likely to misstate in the first place.

Financial analysts act as crucial conduits of information between firms and stakeholders. However, comparatively little is known about how these information intermediaries evaluate the believability and importance of corporate disclosures. We argue that a firm’s level of managerial discretion, or latitude of executive action, acts as a cue for financial analysts, which helps them interpret and respond to voluntary management earnings forecasts. Our study provides strong, robust evidence that financial analysts find management forecasts significantly less believable in low-discretion than in high-discretion environments, and therefore tend to be much less responsive to these forecasts. We also show that managerial discretion is especially impactful on analysts’ responses in those circumstances where analysts are typically most uncertain about how to interpret management forecasts.