Stefan Stöckl

Value Orientation in Process Management

There is no doubt that at least since the 1990s process orientation has evolved into one of the central paradigms of organizational design. Since then, all process management subtasks have matured. Process management decisions, however, lack economic foundation. They are usually based on qualitative or technical criteria or on plausibility considerations that do not necessarily comply with typical objectives in a market economy. Consequently, design alternatives are hardly comparable and an integrated valuation of a company’s assets is impossible. The status quo is astonishing for several reasons: First, process management decisions usually imply investment projects with different risk/return positions and capital tie-up. Second, the need for designing processes according to their contribution to corporate objectives has been explicated repeatedly. Third, the paradigm of value-based management is an accepted theoretical framework from economic research that enables to consistently valuate the risk/return effects of decisions across functional areas, hierarchy levels, and asset classes. This suggests the hypothesis that process management in general as well as the goal orientation of process management decisions in particular have evolved almost independently of value-based management. In the paper at hand, this hypothesis is confirmed based on a sample of process management publications. We therefore explicate the research gap as regards value orientation in process management. In order to bridge the gap between value-based management and process-oriented organizational design, we transfer economically well-founded objective functions to process management decisions.

Economic Development Matters: A Meta-Regression Analysis on the Relation between Environmental Management and Financial Performance

Although the existing body of empirical literature on the relation between corporate environmental performance (CEP) and corporate financial performance (CFP) is continuously growing, results are still inconclusive about this fundamental question in industrial ecology. Comparisons are difficult because of various estimation methods as well as the overall heterogeneous and complex interaction between the two constructs, but especially because of country‐specific data sets. Consequently, we raise the question of whether regional differences are the driving force buried underneath the inconclusiveness. Therefore, the aim of this article is to explore this heterogeneity by aggregating 893 existing results from 142 empirical primary studies that are based on more than 750,000 firm‐year observations. Our findings suggest a convex impact of a countrys economic development on the magnitude of the CEP‐CFP effect (i.e., the effect is positive in developing countries, disappears in emerging countries, and is again positive in highly developed countries). We also find that the overall positive relation strengthens for market‐based CFP measures and diminishes for countries with civil law systems, firms from the service sector, reactive environmental activities, and process‐based CEP measures. Further, several aspects of the examined data sample and the inclusion of relevant control variables explain heterogeneity in previous research results.

If, When, and How Financial Decisions Affect Firm Value: A Meta-Analysis

We study the nexus among risk management, capital structure, and firm value by aggregating the existing competing explanations into a new integrated theoretical model, which we test by means of meta-analysis based on 411 empirical studies. We find that capital structure mediates the relation between risk management and firm value. Hence, risk management positively affects leverage by providing greater debt capacities. Further, leverage has a negative impact on firm value. Therefore, managers should leave debt capacities unused but should instead use additional internal funds, made available via from risk management, for carrying out profitable projects and research and development activities.

Fitting Generalized Hyperbolic processes - New insights for generating initial values

ABSTRACT The fitting of Lévy processes is an important field of interest in both option pricing and risk management. In literature, a large number of fitting methods requiring adequate initial values at the start of the optimization procedure exists. A so-called simplified method of moments (SMoM) generates by assuming a symmetric distribution these initial values for the Variance Gamma process, whereby the idea behind can be easily transferred to the Normal Inverse Gaussian process. However, the characteristics of the Generalized Hyperbolic process prevent such an easy adaption. Therefore, we provide by applying a Taylor series approximation for the modified Bessel function of the third kind, a Tschirnhaus transformation and a symmetric distribution assumption, a SMOM for the Generalized Hyperbolic distribution. Our simulation study compares the results of our SMoM with the results of the maximum likelihood estimation. The results show that our proposed approach is an appropriate and useful way for estimating Generalized Hyperbolic process parameters and significantly reduces estimation time.

Recovery Rate in the Event of an Issuer’s Insolvency — Empirical Study on Implications for the Pricing of Credit Default Risks in German Corporate Bonds

According to the Jarrow–Turnbull model, coupon bonds are valuated as a portfolio of zero-coupon bonds that, in the event of insolvency, pay a recovery rate at the end of their term. However, when it comes to valuations, the German insolvency law differs in certain respects. To find out whether a model adapted to the German insolvency law will prove to be more empirically robust, an empirical study of 103 corporate bonds was carried out over more than 800 trading days.

Pricing fx forwards in OTC markets - new evidence for the pricing mechanism when faced with counterparty risk

By using daily foreign exchange (fx) market data for five major currency pairs, this article shows that, especially since the beginning of the financial crisis, pricing of fx forwards has not matched the pricing formula derived from the covered interest rate parity (CIP). This corresponds to previous empirical results. Therefore, the CIP leads to systematic over- or underpricing. Overall, four statistically significant explanatory factors for this systematic over- or underpricing have been identified – the volatility in the difference between the interest rate levels, the spot price, the fx forward spread and the counterparty risk. In particular, the high significance of the counterparty risk demonstrates that pricing models for fx forwards should be reviewed.