Essays on risk-taking in corporate finance

This thesis consists of three independent essays on risk-taking in corporate finance. The first essay explores how community-level social capital (CSC), framed as a cultural characteristic of individuals born in different provinces of Italy, affects investment behavior in equity crowdfunding. Results show that investors born in high-CSC provinces invest more money in ventures characterized by an enhanced risk profile. Observed risk-taking is theoretically linked to higher generalized trust endowed to people born in high-CSC areas. The second essay focuses on how convexity of Chief Financial Officers’ stock options affects their hedging decisions in the oil and gas industry. Highly convex CFOs hedge less commodity price risk, even if the Chief Executive Officer’s incentives are consistent with a more conservative hedging strategy. Finally, the third essay is a systematic literature review on how different sources of compensation-based risk-taking incentives of Chief Executive Officers affect decision-making in corporate finance.

Essays on Bank Risk

This PhD Thesis is composed of three chapters, each discussing a specific type of risk that banks face. The first chapter talks about Systemic Risk and how banks get exposed to it through the Interbank Funding Market. Exposures in the said market have Systemic Risk implications because the market creates linkages, where the failure of one party can affect the others in the market. By showing that CDS Spreads, as bank risk indicators, are positively related to their Net Interbank Funding Market Exposures, this chapter establishes the above Systemic Risk Implications of Interbank Funding. Meanwhile, the second chapter discusses how banks may handle Illiquidity Risk, defined as the possibility of having sudden funding needs. Illiquidity Risk is embodied in this chapter through Loan Commitments as they oblige banks to lend to its clients, up to a certain amount of funds at any time. This chapter points out that using Securitization as funding facility, could allow the banks to manage this Illiquidity Risk. To make this case, this chapter demonstrates empirically that banks having an increase in Loan Commitments, may experience an increase in risk profile but such can be offset by an accompanying increase in Securitization Activity. Lastly, the third chapter focuses on how banks manage Credit Risk also through Securitization. Securitization has a Credit Risk management property by allowing the offloading of risk. This chapter investigates how banks use such property by looking at the effect of securitization on the banks’ loan portfolios and overall risk and returns. The findings are that securitization is positively related to loan portfolio size and the portfolio share of risky loans, which translates to higher risk and returns. Thus, this chapter points out that Credit Risk management through Securitization may be have been done towards higher risk taking for high returns.

Do Academic and Private Entrepreneurs differ? An empirical analysis of the Micro-Foundation of Entrepreneurial Orientation

This Doctoral Thesis focuses on the study of individual behaviours as a result of organizational affiliation. The objective is to assess the Entrepreneurial Orientation of individuals proving the existence of a set of antecedents to that measure returning a structural model of its micro-foundation. Relying on the developed measurement model, I address the issue whether some Entrepreneurs experience different behaviours as a result of their academic affiliation, comparing a sample of ‘Academic Entrepreneurs’ to a control sample of ‘Private Entrepreneurs’ affiliated to a matched sample of Academic Spin-offs and Private Start-ups. Building on the Theory of the Planned Behaviour, proposed by Ajzen (1991), I present a model of causal antecedents of Entrepreneurial Orientation on constructs extensively used and validated, both from a theoretical and empirical perspective, in sociological and psychological studies. I focus my investigation on five major domains: (a) Situationally Specific Motivation, (b) Personal Traits and Characteristics, (c) Individual Skills, (d) Perception of the Business Environment and (e) Entrepreneurial Orientation Related Dimensions. I rely on a sample of 200 Entrepreneurs, affiliated to a matched sample of 72 Academic Spin-offs and Private Start-ups. Firms are matched by Industry, Year of Establishment and Localization and they are all located in the Emilia Romagna region, in northern Italy. I’ve gathered data by face to face interviews and used a Structural Equation Modeling technique (Lisrel 8.80, Joreskog, K., & Sorbom, D. 2006) to perform the empirical analysis. The results show that Entrepreneurial Orientation is a multi-dimensional micro-founded construct which can be better represented by a Second-Order Model. The t-tests on the latent means reveal that the Academic Entrepreneurs differ in terms of: Risk taking, Passion, Procedural and Organizational Skills, Perception of the Government, Context and University Supports. The Structural models also reveal that the main differences between the two groups lay in the predicting power of Technical Skills, Perceived Context Support and Perceived University Support in explaining the Entrepreneurial Orientation Related Dimensions.

International Agricultural Trade under Regulatory Asymmetry: An Economic Analysis of SME Export Behavior

Over the last three decades, international agricultural trade has grown significantly. Technological advances in transportation logistics and storage have created opportunities to ship anything almost anywhere. Bilateral and multilateral trade agreements have also opened new pathways to an increasingly global market place. Yet, international agricultural trade is often constrained by differences in regulatory regimes. The impact of “regulatory asymmetry” is particularly acute for small and medium sized enterprises (SMEs) that lack resources and expertise to successfully operate in markets that have substantially different regulatory structures. As governments seek to encourage the development of SMEs, policy makers often confront the critical question of what ultimately motivates SME export behavior. Specifically, there is considerable interest in understanding how SMEs confront the challenges of regulatory asymmetry. Neoclassical models of the firm generally emphasize expected profit maximization under uncertainty, however these approaches do not adequately explain the entrepreneurial decision under regulatory asymmetry. Behavioral theories of the firm offer a far richer understanding of decision making by taking into account aspirations and adaptive performance in risky environments. This paper develops an analytical framework for decision making of a single agent. Considering risk, uncertainty and opportunity cost, the analysis focuses on the export behavior response of an SME in a situation of regulatory asymmetry. Drawing on the experience of fruit processor in Muzaffarpur, India, who must consider different regulatory environments when shipping fruit treated with sulfur dioxide, the study dissects the firm-level decision using @Risk, a Monte Carlo computational tool.

Physical model of PD behavior and relevant damage growth from micro-cavities in polyethylene-based material under AC voltage

In the framework of developing defect-based life models, in which breakdown is explicitly associated with partial discharge (PD)-induced damage growth from a defect, ageing tests and PD measurements were carried out in the lab on polyethylene (PE) layered specimens containing artificial cavities. PD activity was monitored continuously during aging. A quasi-deterministic series of stages can be observed in the behavior of the main PD parameters (i.e. discharge repetition rate and amplitude). Phase-resolved PD patterns at various ageing stages were reproduced by numerical simulation which is based on a physical discharge model devoid of adaptive parameters. The evolution of the simulation parameters provides insight into the physical-chemical changes taking place at the dielectric/cavity interface during the aging process. PD activity shows similar time behavior under constant cavity gas volume and constant cavity gas pressure conditions, suggesting that the variation of PD parameters may not be attributed to the variation of the gas pressure. Brownish PD byproducts, consisting of oxygen containing moieties, and degradation pits were found at the dielectric/cavity interface. It is speculated that the change of PD activity is related to the composition of the cavity gas, as well as to the properties of dielectric/cavity interface.

Food safety and zoonotic enteric pathogens: sources, risk factors and transmission routes of human salmonellosis and campylobacteriosis

Salmonella and Campylobacter are common causes of human gastroenteritis. Their epidemiology is complex and a multi-tiered approach to control is needed, taking into account the different reservoirs, pathways and risk factors. In this thesis, trends in human gastroenteritis and food-borne outbreak notifications in Italy were explored. Moreover, the improved sensitivity of two recently-implemented regional surveillance systems in Lombardy and Piedmont was evidenced, providing a basis for improving notification at the national level. Trends in human Salmonella serovars were explored: serovars Enteritidis and Infantis decreased, Typhimurium remained stable and 4,[5],12:i:-, Derby and Napoli increased, suggesting that sources of infection have changed over time. Attribution analysis identified pigs as the main source of human salmonellosis in Italy, accounting for 43–60% of infections, followed by Gallus gallus (18–34%). Attributions to pigs and Gallus gallus showed increasing and decreasing trends, respectively. Potential bias and sampling issues related to the use of non-local/non-recent multilocus sequence typing (MLST) data in Campylobacter jejuni/coli source attribution using the Asymmetric Island (AI) model were investigated. As MLST data become increasingly dissimilar with increasing geographical/temporal distance, attributions to sources not sampled close to human cases can be underestimated. A combined case-control and source attribution analysis was developed to investigate risk factors for human Campylobacter jejuni/coli infection of chicken, ruminant, environmental, pet and exotic origin in The Netherlands. Most infections (~87%) were attributed to chicken and cattle. Individuals infected from different reservoirs had different associated risk factors: chicken consumption increased the risk for chicken-attributed infections; animal contact, barbecuing, tripe consumption, and never/seldom chicken consumption increased that for ruminant-attributed infections; game consumption and attending swimming pools increased that for environment-attributed infections; and dog ownership increased that for environment- and pet-attributed infections. Person-to-person contacts around holiday periods were risk factors for infections with exotic strains, putatively introduced by returning travellers.