Abstracts Track 2021

Area 1 - Accounting and Finance

Nr: 5

Selling, General, and Administrative Cost Behavior of Family Firms


Menachem (Meni) Abudy and Efrat Shust

Abstract: Understanding cost behavior, that is, the manner in which the cost structure of a firm is affected by changes in its business activity, is essential for gaining insights into the financial performance of firms. Anderson, Banker, and Janakiraman (2003) argue that the intentional nature of resource adjustment may generate asymmetric cost behavior, and demonstrate that costs are sticky on average. That is, costs tend to increase more when revenues rise than to decrease when revenues fall by an equivalent amount. This study investigates whether family ownership affects selling, general and administrative cost behavior. Family firms are an important part of the global economy. According to the Family Firm Institute (2008), family businesses generate an estimated 70–90% of global gross domestic profit annually. Furthermore, such firms firms have unique characteristics that may affect the manner in which their cost structure responds to changes in business activity, namely, fewer owner–manager agency problems than non-family firms, strong motivation to preserve the long-term prosperity of the firm and less focus on short-term profitability. These features are expected to decrease cost stickiness of family firms. The empirical analysis uses a sample of all firms listed on the Tel-Aviv Stock Exchange in the years 2006–2015. Israeli firms provide a good setting for an empirical examination of the effects of family ownership because they are mandated to report explicitly family relationships among all stakeholders, directors, and managers as an integral part of the annual financial statements they file. We meause stickiness using the standard regression introduced in Anderson, Banker, and Janakiraman (2003). Estimation results indicate that family firms exhibit anti-sticky cost behavior, as opposed to non-family firms that demonstrate cost stickiness. That is, their costs tend to increase less when revenues rise than to decrease when revenues fall by an equivalent amount. This result is robust to alternative definitions of family firms. The results are also preserved for a subsample of firms that switched ownership status (i.e., from family owned to non-family owned and vice versa). Further inquiry reveals that anti-sticky cost behavior is focused in family firms with active family involvement, that is, where the family member serves as an officer or chairperson of the firm. Finally, we test the effect of other known determinants of asymmetric cost behavior and find that managers’ optimism mitigates anti-sticky cost behavior and that successive sales decrease does not affect this behavior.

Nr: 6

The Winner Takes It All: Investor Sentiment and the Eurovision Song Contest


Menachem (Meni) Abudy, Yevgeny Mugerman and Efrat Shust

Abstract: Investor sentiment is broadly defined as a belief about future cash flows and investment risks that is not justified by the known facts. The literature shows, both theoretically (e.g., Barberis et al., 1998; Shleifer & Vishny, 1997) and empirically (e.g., Hirshleifer & Shumway, 2003; Saunders, 1993) that investor sentiment can affect asset prices. One of the prominent circumstances in which sentiment affects prices is when there is an unpredicted change in investor mood. Prior studies examining these circumstances generally focus on international events, finding significant negative stock market returns following a country’s loss and no significant positive stock market return after a country’s victory (e.g., Edmans, Garcia, & Norli, 2007). This study examines whether there is an effect of investor sentiment on stock market returns through examining a widely viewed international cultural event—the Eurovision Song Contest. The Eurovision is an annual international song competition organized by the European Broadcasting Union (EBU). Approximately 40 countries, mostly European, participate in the Eurovision. Each country sends a delegation that represents it in the contest. The contest attracts a great deal of public interest in the participating countries and enjoys huge viewership. Unlike international sports tournaments in which winning means remaining and continuing to compete in the tournament until there is one ultimate winner in the final match, in the Eurovision’s final, the participants compete consecutively during one evening and the winner is announced that evening. The fact that one participant wins and all others lose on the same day leads us to hypothesize that a Eurovision victory improves investor mood in the winning country, thus generating positive stock returns. To study the change in investor mood following the Eurovision final, we analyze daily stock returns of 40 capital markets of the participating countries for the period 1985-2018. The empirical analysis reveals that unlike international sports tournaments – in which a significant negative stock market return is recorded following a country’s loss and no significant positive stock market return after a country’s win – a victory in the Eurovision causes a positive and significant abnormal stock market reaction in the winning country on the first trading day after the victory. This finding is robust to numerous alternative regression specifications. Moreover, The results indicate that the abnormal positive market reaction is reversed several trading days afterwards, consistent with market fluctuations that stem from investor sentiment.

Nr: 8

The Value of Corporate Cash Holdings during the Covid-19 Pandemic


Jan Pieter Veerhoek

Abstract: We investigate the value of corporate cash holdings for US firms during the recent COVID-19 pandemic, using a unique, text-based measure of its impact at the firm level. We find that the value of cash increased during the pandemic period, but not in the first quarter of 2020 when the value of cash significantly decreased. The increase in cash value in the second and the third quarter of 2020 was smaller for firms which were more negatively exposed to the COVID-19 pandemic. A tentative explanation for these findings is that large cash holdings reflect agency costs, which are amplified by the COVID-19 pandemic because the pandemic reduces investment opportunities.

Area 2 - Economics

Nr: 4

Exchange Rate Volatility and Economic Growth in Developing Economies: A Literature Review


Hector Romero, Josefa Ramoni-Perazzi, Eddy Fajardo and Valentina Gómez-Patiño

Abstract: The present literature review aims to identify the effects of exchange rate volatility on economic growth in developing economies. This topic is of particular interest to developing countries, due to the fragility of institutions and underdevelopment of financial markets. To comprehend this phenomenon, a search is performed in the Scopus database of articles related to this subject for the period 2001-2020. Six (6) main channels for the transmission of exchange rate volatility on the level of economic activity are identified, among which are capital flows and direct foreign investment, the impact on international trade, as well as the incidence and effectiveness of monetary and exchange policy. In addition, it is established that current empirical contributions on the subject are focusing on the impact of exchange rate volatility on industrial production and price dynamics in developing economies.

Area 3 - Management

Nr: 7

Digitalization in Health Networks: A Meso-level Analysis of Intellectual Capital for Providing Effective Healthcare Policies and Monitoring KPIs Dashboard


Andrea Caporuscio, Francesco Schiavone and Daniele Leone

Abstract: The present article provides a conceptual analysis about the role of intellectual capital to drive the construction of a reliable monitoring systems in order to increase the effectiveness of healthcare policies. Specifically, it explores the building of a monitoring key performance indicators (KPIs) dashboard in the health networks. The goal of this paper seeks to improve healthcare policies by developing an integrated conceptual framework that affirms the centrality of intellectual capital in setting a multi group criteria decision-making (MGCDM) dashboard for tiding up a very fuzzy decision process in cancer network. we follow a conceptual approach. First, we performed an integrative literature review in order to identify the importance of knowledge in the health networks Second, we started from theoretical speculations in order to develop a conceptual framework. In doing so we have elected four main dimensions that drive the digitalization development: technological, referring to structural capital, organizational referring to relational capital and environmental human dimensions referring to human capital. The originality of the model lies in its specific focus on facing the complexity and the heterogeneity that irremediably affects the decision-making process. A intellectual capital-driven dashboard allows cancer network managers to deal with the digitalization in a very broad and successful way.