John R. Graham, Sonali Hazarika, Krishnamoorthy Narasimhan Is the corporate board an asset or a burden when responding to an economic downturn? The authors study what board characteristics were most valuable during the 1930–1938 Depression era, when the corporate sector was shocked by an unprecedented downturn. They found that complex firms exhibited a positive relation between board size and firm value and that simple firms exhibited a negative relation between board size and firm value. The authors suggest that simple firms with large boards or those with a larger number of outside directors did not downsize adequately in response to the severe economic contraction; they invested more (or shrank less) and used more debt during the 1930s. The authors also find that companies with properly aligned governance structures were more likely to replace the company president after poor performance. The insight for management: Size your board according to your company's complexity in order to make appropriate corporate investment and debt usage during downturns to maintain firm value. Julie Wulf, Harbir Singh How do acquirers retain successful target chief executive officers (CEOs)? The authors investigate the conditions under which CEOs are retained in a sample of mergers in the 1990s and find greater retention of better-performing and higher-paid CEOs when the acquirer's governance provisions support managers and when the acquirer's CEO owns more equity. Making commitments to retain and motivate successful top managers is a challenge when contracts are not enforceable, so it is not common for acquirers to retain target CEOs. The insight for management: Acquirers are more likely to retain top CEOs when their governance environment maintains managerial discretion. Kay Giesecke, Baeho Kim, Shilin Zhu How does one measure and price the correlated default risk in portfolios of credit-sensitive assets such as loans and corporate bonds? Dynamic, intensity-based point process models are widely used in conjunction with Monte Carlo simulation for performing computations in these models. The authors evaluate two simulation algorithms for such models. Their algorithms extend the conventional modeling approaches to include unbounded event intensity, which is a common case. The insight for management: New models can help to better assess default risk for loans and corporate bonds. Andrea Lodi, Silvano Martello, Michele Monaci, Claudio Cicconetti, Luciano Lenzini, Enzo Mingozzi, Carl Eklund, Jani Moilanen How can mobile data providers affordably provide high-quality service when faced with dramatic growth in demand? One of the most important trends shaping the mobile industry is the growth of mobile broadband data. The number of broadband data subscribers is forecast to exceed one billion users in 2012. For communication service providers the rapid subscriber growth has meant a tremendous increase in traffic volumes in their networks. Researchers for Nokia Siemens Networks solved the downlink subframe allocation problem in Mobile WiMAX. This highly complex problem had to be solved extremely quickly to be useful. The authors created two highly efficient heuristics that were developed to handle the system practically. The insight for management: Algorithms can offer significant capacity gain in Mobile WiMAX systems that translate to increased operator revenues. Alexandar Angelus How should managers manage inventory when surplus of stock can be sold (i.e., disposed of) in the secondary markets? The presence of a secondary market complicates the structure of the system, thus complicating the inventory and replenishment optimal policy. The author suggests that it is not optimal to both sell off excess stock and replenish inventory. The insight for management: Companies seeking to enter or develop secondary markets for supply chains should consider advanced inventory management policies. Onur Boyabatlı, L. Beril Toktay How does a firm make capacity investments in an uncertain environment and with imperfect capital markets? Furthermore, what type of capacity should a company invest in: flexible or fixed? The authors consider the effect of capital market imperfections that impose financing frictions on the firm. Interestingly, the authors demonstrate that imperfect capital markets may directly affect capacity investment and technology choice. The insight for management: Strategic capacity decisions can be directly affected by imperfect capital markets. Vishal Gaur, Sridhar Seshadri, Marti G. Subrahmanyam Do innovations in capital markets permit investments in real assets that would otherwise not occur because they are too costly to finance? In other words, do such innovations impact real investment decisions? The authors consider the role of an intermediary in creating a market by purchasing claims against these cash flows, pooling them, and selling primary or secondary securities to the investors. The authors find that projects are undertaken because of the intermediary's actions. They also determine the structure of the new securities created by the intermediary and identify how it exploits the arbitrage opportunities available in the market. The insight for management: Financial intermediaries have implications for valuation of real investments, synergies among them, and their financing mechanisms. Kristine Watson Hankins How do financial firms manage risk? The author investigates how firms manage risk by examining the relationship between financial and operational hedging using a sample of bank holding companies. Capital market imperfections make cash flow volatility costly; do financial firms consider this cost or focus exclusively on managing tradable exposures? The authors document that acquisitions provide operational hedging by reducing potentially costly volatility. In addition, the acquisition's level of operational hedging decreases financial hedging. The insight for management: Firms manage aggregate risk, not just tradable exposures, and operational hedging can substitute for financial hedging. Jeremy Berkowitz, Peter Christoffersen, Denis Pelletier The authors investigate disaggregated profit and loss (P/L) and value-at-risk (VaR) forecasts obtained from a large international commercial bank. The data set includes the actual daily P/L generated by four separate business lines within the bank. The authors assessed the accuracy of VaR forecasts by observing each business line daily for at least two years. The insight for management: More accurate VaR forecasting methodologies can improve bank cash flow planning and improve financial performance for banks while mitigating risk. Ankur Goel, Genaro J. Gutierrez What are the optimal procurement distribution policies in a supply chain for a commodity? The authors consider a firm that procures and distributes a commodity from spot and forward markets under randomly fluctuating prices. They develop a model that allows one to compute procurement and distribution policies, and they explore the value of the commodity's market in providing managers with additional flexibility in procurement and information on price dynamics generated through the trading of futures contracts. The insight for management: The presence of the commodity market and the information that it conveys may lead to significant reductions in inventory-related costs; however, to obtain these benefits, both the spot procurement flexibility and the term structure of prices generated by the commodity market must be incorporated in the formulation of the operating policy.