Exogenous Events Research Articles

Do Free Trade Regimes and Common Currency Drive Export Growth?

It is believed that in many countries export activities could enhance countries' capabilities. It is also believed that trade liberalization or common currency could be an export driver. This paper examines the impact of trade liberalization and common currency on EU countries' export growth. The methodology applied in this research is constructed using specifics of the data that arise from a natural experiment. We examined how exogenous events like joining the EU, WTO, EFTA or becoming a member of Eurozone change the environment, in which countries trade. The results using an unbalanced panel data consisting of 28 EU countries for the period 1995-2015 revealed that membership in WTO instantly increases export by 12.5-13.5%, but has no extra effect in longer period; membership in the EU and EFTA has effect on export with a time lag and common currency did not affect export growth at all.

How valuable are independent directors? Evidence from external distractions

We provide new evidence on the value of independent directors by exploiting exogenous events that seriously distract independent directors. Approximately 20% of independent directors are significantly distracted in a typical year. They attend fewer meetings, trade less frequently in the firm's stock, and resign from the board more frequently, indicating declining firm-specific knowledge and a reduced board commitment. Firms with more preoccupied independent directors have declining firm valuation and operating performance and exhibit weaker merger and acquisition (M&A) profitability and accounting quality. These effects are stronger when distracted independent directors play key board monitoring roles and when firms require greater director attention.

SME policies as a barrier to growth of SMEs

We investigate whether firms have incentives to retain their status as small and medium enterprises (SMEs) to benefit from various SME policies. To examine this issue, we use the exogenous changes in the SME Basic Act in Japan. The SME Basic Act describes aims of SME policies in Japan, which involve enhancing the growth of SMEs using policy. The Act also contains the requirements and definitions of SMEs that are the target of the policies. Only firms that satisfy the definitions of SMEs under the SME Basic Act can participate in the SME policy programs in Japan. The requirements regarding capital stock in the SME Basic Act were changed in 1999. By focusing on the change in the requirements for capital stock as an exogenous event, we show that firms are less likely to increase their capital stock so that they can continue to satisfy the requirements that retain their status as SMEs. Furthermore, firms that increase their capital stock increase their size. As firms have a disincentive to increase capital stock so that they can keep their SME status, this indicates that the SME requirements are significant constraints on firm growth. Many studies show that individual SME policies (such as R&D subsidies and public credit guarantees) stimulate firm growth and activities that are consistent with the aim of these SME policies. Although the purpose of the SME Basic Act is the enhancement of the growth of SMEs, we show that the requirements under this law impede the growth of SMEs.

Real time transit demand prediction capturing station interactions and impact of special events

Demand for public transportation is highly affected by passengers’ experience and the level of service provided. Thus, it is vital for transit agencies to deploy adaptive strategies to respond to changes in demand or supply in a timely manner, and prevent unwanted deterioration in service quality. In this paper, a real time prediction methodology, based on univariate and multivariate state-space models, is developed to predict the short-term passenger arrivals at transit stations. A univariate state-space model is developed at the station level. Through a hierarchical clustering algorithm with correlation distance, stations with similar demand patterns are identified. A dynamic factor model is proposed for each cluster, capturing station interdependencies through a set of common factors. Both approaches can model the effect of exogenous events (such as football games). Ensemble predictions are then obtained by combining the outputs from the two models, based on their respective accuracy. We evaluate these models using data from the 32 stations on the Central line of the London Underground (LU), operated by Transport for London (TfL). The results indicate that the proposed methodology performs well in predicting short-term station arrivals for the set of test days. For most stations, ensemble prediction has the lowest mean error, as well as the smallest range of error, and exhibits more robust performance across the test days.

Patent Disclosure and Price Discovery

We focus in this study on the exogenous event of the enactment of American Inventor’s Protection Act of 1999 (AIPA), which disseminates timely, detailed, and credible public information on R&D activities through pre-grant patent disclosures. Exploiting the staggered timing of patent disclosures, we identify a significant improvement in the efficiency of stock price discovery. This improvement is stronger when patent disclosures reveal firms’ successful, new, or technologically valuable inventions. This improvement is more pronounced for firms in high-tech or fast-moving industries, or with a large institutional ownership or analyst coverage. We also find stock liquidity rises and investors’ risk perception of R&D drops after the enactment of AIPA. Our results highlight the importance of timely, detailed, and credible disclosures of R&D activities in alleviating the information problems faced by R&D-intensive firms.

Planning and acting framework under robot operating system

A well-known Operating System (OS) in the field of robotics is the Robot Operating System (ROS), which provides a set of tools and software libraries that are used to build many modern robotics systems. A planning system is concerned with generating a sequence of actions (plan) that can then be used by the robotic system to achieve its tasks. However, autonomous systems cannot depend only on planning systems to accomplish such tasks. In order to support such systems, it is necessary to develop an acting system, whose role is to complement the planning system by endowing the robotic system with additional flexibility to accomplish its tasks. In this paper, a state-of-the-art framework, RosPlanAct, is described. This architecture is used for embedding task planning and acting systems into the ROS. The planning section uses the environment model (planning domain) and the task specifications (planning problem) to generate an appropriate sequence of actions (plan) for any robot tasks. Then, the acting part of the system receives this plan and acts upon its schedule to achieve the specified task. Throughout this paper, there are three main issues that the actor must cope with to avoid failure. These issues are plan refinement, re-planning, and reacting to exogenous events. The specification of the RosPlanAct architecture and a case study in autonomous mobile robot are explained. The case study involves an autonomous vehicle in scenarios that clearly demonstrate the flexibility, stability, and robustness of the presented approach.

Debt administration in Small Island‐States

AbstractPublic debt management is an infrequent focus of public administration studies. Yet without appropriate debt management, administrators have few financial resources for public service provision. Island‐state administrators face an enhanced service provision challenge. The peculiarity of island‐state economies, the unpredictability of exogenous events and the state's endogenous choices increase debt administration's importance. Via its focus on debt management office location and the administrative constraints posed by brain drain, transparency and regionalization, this paper goes beyond typical debt management studies to engage debt administration spaces. The result is a framework for studies of debt administration in Small Island‐States.

Social Security Reform and Personal Saving: Evidence from Brazil

The population aging process has caused a financial imbalance in the social security systems of countries based on pay as you go system, as is the case in Brazil. To face this challenge, the Brazilian governments have undertaken several reforms since the 1988 Constitution. Confronting the life cycle hypothesis, the aim of this paper is to estimate the causal effects of Social Security Reforms on the Likelihood of Saving in Brazil by exploring two exogenous events, the 41th (of 2003) and 47th (of 2005) Constitutional Amendments, that reduced the expectations of benefits only for public servants. Using data from the House Budget Surveys, the results of differences-in-differences models show that the reform increased in a range of 2.1 to 2.9 percentage points in the probability of saving of the treated group. The results are in line with the recent literature indicating that reforms contribute to an increase in personal savings.

Do Female Executives Prioritize Corporate Social Responsibility?

ABSTRACTHow do female executives view corporate social responsibility (CSR)? Previous studies have reported mixed findings on the relationship between female executives and CSR. We select a sample of Chinese listed firms and use propensity score matching to construct a new sample of firms and evaluate the gender transition (from male to female) of chief executive officers or board chairpersons (executives) who are randomly assigned to firms (i.e., the gender transition of executives is regarded as an exogenous event). Subsequently, we use a difference-in-differences approach to identify the pure effect of female executives on CSR. Our results indicate that female executives are more likely to encourage CSR reporting. Moreover, we suggest that the mechanism behind female executives prioritizing CSR is altruism preference rather than risk aversion preference.

Does the Stock Market Make Firms More Productive?

We test the hypothesis that greater stock price informativeness (SPI) leads to higher firm-level productivity (TFP). Management, directly or indirectly, learns more from more informative stock prices, so that more informative stock prices should make firms more productive. We find a positive relation between SPI and TFP. The relation is stronger for smaller, younger, riskier, less capital-intensive, and financially-constrained firms. Product market competition and better governance amplify the relation, while diversification weakens it. We address endogeneity concerns with fixed effects, instrumental variables, and the use of brokerage house research department closures and S&P 500 additions as plausibly exogenous events.

What Really Matters in CEO Succession? Evidence from Sudden CEO Deaths

Chief executive officers (CEOs) are arguably the most important individuals in a firm and when they need to be replaced, the decision to pick a successor can have long-lasting implications. Understandably, the succession literature is a vast field, yet most studies are plagued by endogeneity issues, as any planned succession is a choice by the firm and thus subject to self-selection. We exploit the exogenous event of a sudden CEO death and employ a difference-in-differences method to approach more causal inferences about how the CEO succession impacts firm performance. Our results show that effects are strongest in the medium run (up to five years) where we find a positive effect on accounting performance and Tobin's Q which is intensified by large cash holdings and attenuated by high levels of entrenchment.

Blessing in Disguise? Environmental Shocks and Performance Enhancement

This study examines the consumer satisfaction and performance of firms in the service sector in response to reputation shocks caused by random and exogenous air pollution events. The study incorporates machine learning techniques, such as social media sentiment analysis and topic modelling, to analyze review texts and show that pollution shocks during haze episodes lead to significant decreases in consumer satisfaction, which can be explained by the changes in consumers’ mood rather than service quality. Moreover, while the level of consumer satisfaction immediately reverts to and then exceeds previous levels after the haze dissipates, such improvement in service quality is not persistent in the long run. The underlying mechanism is that firms with managers closely monitoring customer reviews and actively responding to negative feedback show significant improvements following a temporary reputation crisis due to a pollution shock. Our findings provide novel empirical evidence on how drivers of organizational reputation change in times of crisis and highlight the importance of realizing deficiencies in operation even in the absence of negative shocks.

Investing in a random start American option under competition

In this paper we develop a model to determine the value of the opportunity to invest in a random start American real option. In contrast to a typical American option, the random start option only exists if an exogenous event occurs materializing the American option to invest. In addition, the effect of competition is also considered in the model. A higher risk of competition and a higher probability of the exogenous event promotes investment. Uncertainty has a non-monotonic effect on investment timing.

Global civil society and the test of Kyoto: A theoretical extension

What determines how successful global civil society is in promoting international governance norms within nation-states? Studies attribute the varied effectiveness of civil action to the capacity of non-governmental groups and organizations, the nature of global regimes that generate such norms, domestic political landscapes, or combinations of these factors. Yet, empirical cases, analyzed in this article, suggest that global civil society may lose or gain in domestic effectiveness even when these determinants remain stable. Using primary and secondary data on Kyoto Protocol negotiations in Japan, Canada, and Australia, we argue that changes in the Kyoto stances of these three countries between 2005 and 2012 stemmed from the realignment of domestic political actors engaged in the contestation of the protocol alongside civil society. Our data reveal that exogenous natural and political events led to shifts in the positions of local political elites, media, and the energy industry. As a result, the pro-Kyoto coalition, headed by global civil society, either lost or gained in bargaining power vis-à-vis the counter-coalition. We, therefore, theorize realignment as a mechanism that connects exogenous events to the changing effectiveness of global civil society. Theoretically, our study emphasizes the importance of embedding civil action into its concrete socio-historical contexts and advocates for a process-oriented study of agentic social change.

From a Community of Economics to a Community of Values

The transition from an economic community to a community of values is at the heart of the evolution of the European integration project. While recognizing that the Maastricht Treaty （1993） ushered in the start of a new phase of integration, and the Lisbon Treaty （2009） represents the de jure constitutionalization of a specific set of EU values, this article argues that that shift continues to remain incomplete. As part of this evolution, the Lisbon Treaty also referred to “the religious organizations”, and religion in general as part of this community of values, for the first time while simultaneously ensuring that the principle of secularism remains firmly embedded as a key ingredient of a community of values. Thus, while the recognition of religion marked a significant moment, the fact that religious groups are deemed part of civil society, on an equal basis with all other organizations subject to the rule of law at the European level, continues to highlight the significance of secularism. Thus, this clearly means that developments do not represent any kind of return to the days of antiquity where religious organizations enjoyed a privileged status as they sought to build a community of faith. Simultaneously, the EU has also sought to stay away from hinting at any particular type of unified secular system, for example, French laïcité, multilaterarism, state church, etc. Despite all these interesting and important developments, questions about how the EU has reacted to exogenous events such as Turkey and the Arab Spring and endogenous events tied to Poland and Hungary’s illiberal turn remain given that Article 2 （TEU） talks about the importance of ‘…freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities…’. In order to herald the arrival of a consolidated community of values, it would appear that the gap between the legal text and the political and social reality needs to be bridged. The challenges ahead, not least when it comes to defending human rights or democracy, remain significant.

Asian option as a fixed-point

We characterize the price of an Asian option, a financial contract, as a fixed-point of a non-linear operator. In recent years, there has been interest in incorporating changes of regime into the parameters describing the evolution of the underlying asset price, namely the interest rate and the volatility, to model sudden exogenous events in the economy. Asian options are particularly interesting because the payoff depends on the integrated asset price. We study the case of both floating- and fixed-strike Asian call options with arithmetic averaging when the asset follows a regime-switching geometric Brownian motion with coefficients that depend on a Markov chain. The typical approach to finding the value of a financial option is to solve an associated system of coupled partial differential equations. Alternatively, we propose an iterative procedure that converges to the value of this contract with geometric rate using a classical fixed-point theorem.

Modeling citation dynamics of “atypical” articles

Modeling and predicting citation dynamics of individual articles is important due to its critical role in a wide range of decisions in science. While the current modeling framework successfully captures citation dynamics of typical articles, there exists a nonnegligible, and perhaps most interesting, fraction of atypical articles whose citation trajectories do not follow the normal rise‐and‐fall pattern. Here we systematically study and classify citation patterns of atypical articles, finding that they can be characterized by awakened articles, second‐acts, and a combination of both. We propose a second‐act model that can accurately describe the citation dynamics of second‐act articles. The model not only provides a mechanistic framework to understand citation patterns of atypical articles, separating factors that drive impact, but it also offers new capabilities to identify the time of exogenous events that influence citations.

Land financing and economic growth: Evidence from Chinese counties

How does land institution affect economic growth? This paper proposes a simple model showing that, in an institution that land is owned and supplied by the state, local governments tend to increase investment in infrastructure when holding a larger share of land conveyance revenue in the total revenue. The main channel is that land conveyance revenue serves as a signal of credit quality of local governments. To test the model of land financing, this paper employs an exogenous event of the deregulation of local government debt in China in 2009. Using county-level data in China, empirical results suggest that counties with a higher initial share of land conveyance revenue were growing faster after 2009. The land-financing effect was persistent and even stronger during 2009 to 2014. Results are robust using geographic plainness as the instrumental variable measuring the amount of developable land resources. There is also consistent evidence on the growth of night light intensity.

The role of algorithmic trading in stock liquidity and commonality in electronic limit order markets

Using the adoption of the Arrowhead trading platform in January 2010 as an exogenous event, we investigate the effects of algorithmic trading on stock market liquidity and commonality in liquidity under different market conditions on the Tokyo Stock Exchange. After controlling for endogeneity, we find algorithmic trading increases stock liquidity by narrowing spreads and increasing market depth. Furthermore, algorithmic trading increases commonality in liquidity at both high and low frequency. These findings appear to arise due to the reduction in monitoring costs. Further analysis reveals that, following large market declines, the effect of algorithmic trading on spreads and market depth weakens while the effect on commonality in stock liquidity intensifies.

The effects of supply chain disruptions caused by the Great East Japan Earthquake on workers

The Great East Japan Earthquake affected not only local workers employed by establishments that were directly damaged, but also those of their trading partners through supply chain disruptions. I estimate the effect of such indirect shocks to workers on their job separation, inter-industry mobility, geographical relocation, and employment status in the following years. I find that such shocks increased job separation in the study period. This increased job separation did not increase inter-industry mobility, but rather induced relocation to other prefectures. The effect on employment status was mixed: although the self-reported indicator of being affected by the earthquake is significantly correlated with negative outcomes such as high unemployment, the proxy for the production decline at the prefecture-industry level is uncorrelated with employment status. This result implies that people who faced a negative employment shock may have attributed it to the exogenous event, which may cause substantial bias in the self-reported data on the effect of disasters.