GERMAIN Laurent

In this thesis, we propose to examine several modern theories of the firm. The objective is to study the results suggested by recent studies on topics such as dividend policies, agency problems, or corporate finance, and tested on modern organizations. In this respect, we study in particular firms that were listed in Paris at the beginning of the 20th century. First, we focus on the general context of agency theory, and try to examine whether this model could be applied to firms in the period before the First World War. We thus show that this was the case. Recent studies of these firms have shown that what are now called "agency problems" were already a major risk for them. Moreover, the contemporary writings of these firms at the beginning of the twentieth century or earlier had perfectly identified these problems as being major for them but also for potential investors ready to participate in their financing. In this general context of information asymmetry and the potentially severe "agency problems" resulting from it, we also question the financing of innovation and thus the contribution of financial markets to their growth. We show that the innovative firms of the time (i.e. the firms of the 2nd Industrial Revolution) benefited from a mixed support from the Parisian stock markets. If we measure this potential support by Tobin's Q, these firms of the 2nd IR benefited from advantageous conditions for their financing. On the contrary, if measured by the dividend rate, this support is much less clear: firms that had already found financing had to remunerate their shareholders: in particular, they had to distribute dividends to them. The last parts of this thesis thus study the dividend policies implemented by firms in Paris at the beginning of the 20th century. We first study the dividend policies actually implemented and show that these dividends were paid in order to reduce agency costs, and in particular in order to reduce speculative monitoring costs. Second, we compare these actual policies to those set by a statutory profit distribution rule, which determined the allocation of a certain amount of profits to shareholders. This comparison could allow us to estimate whether and to what extent those who "controlled" the firm strictly followed this rule, and whether they did not use possible exceptions to it to extract private profits at the expense of outside and minority shareholders. We show that they allocated a share of profits consistent with that expected on average by all shareholders. While several interpretations of this phenomenon are possible, one explanation could lie in the fact that the statutory rule was a good way to limit conflicts between those shareholders who controlled the firm and the others.

Over the centuries, financial institutions have shaped the financial landscape and influenced economic activity. The objective of this thesis is to highlight, from a theoretical point of view, the fundamental limitations of modern institutions and to deduce the implications for the future role of these institutions.The first chapter proposes an analysis of clearing houses. Following the financial crisis of 2008, financial authorities around the world have implemented regulations imposing central clearing on most derivatives. We show that central clearing requires a higher level of liquidity than bilateral clearing.The second chapter presents a continuous time learning model that is supposed to represent the learning process of an institution with respect to a hidden information held by the market. The last chapter introduces and analyzes the Lightning Network which is a payment network based on the Blockchain. It allows users to transfer value instantly without the need for a trusted third party. We discuss the implications about the structure of this payment network as well as its ability to take an important place in the financial landscape.

No summary available.

We analyze the result of \ud allowing a risk averse trader to split his order among \ud risk averse market makers. We find that the market makers’ aggregate expected utility of profit can increase with the number of market markers and \ud that the aggregate liquidity always increases with it.\ud Despite this latter finding, \ud we show that the cost of trading for the traders increases with the number of \ud market makers as measured by their aggregate expected utility of profit. The \ud larger the market makers’ risk aversion, the bigger that cost is. We also find \ud that when the number of market makers tends to infinity, their aggregate expected utility of profit tends to zero. We also obtain that the market makers’ \ud individual and aggregate expected utility of profit can increase with their risk \ud aversion and that the trader’s expected utility of profit can increase or decrease with the market makers’ risk aversion. We offer a potential answer to \ud the ongoing debate concerning the dealers’ competitiveness. Indeed, risk \ud aversion reduces competition between market\ud makers as it acts as a commitment for market makers to set higher prices. This commitment is higher the \ud higher the risk aversio.

No summary available.

This thesis studies the behavior of investors through their performance and expectations during the 2008-2011 financial crises and their beliefs. It consists of three chapters. In the first chapter, we review the existing literature on individual investors' performance, behavioral biases and preferences. We show the main shortcomings in terms of individual investors' performance as well as their main behavioral biases. We also highlight the contribution of neuroscience to the understanding of individual investors' behavior. In the second chapter, we study the impact of the 2008-2011 financial crises on the performance of individual investors and their expectations of their financial intermediaries in four different countries: Germany, Belgium, Luxembourg, and France. We also make a comparison according to the level of wealth of investors within each country but also globally. Our data comes from questionnaires distributed to asset managers at the largest banks in the countries considered, as well as from historical market data for each of these countries. We show that the wealthiest investors are the least risk averse both before and after financial crises, regardless of the country considered. We also find that they adopt the least conservative investment strategies. Finally, we find a significant change in investors' expectations of their financial intermediaries, demanding more transparency and better customer service, regardless of wealth level. We also show that these expectations can be contradictory, especially among the least wealthy investors. In the third chapter, we provide an experimental test of belief formation among individual investors based on the Brunnermeier and Parker (2005) model. We use an experiment with two identical lotteries except for their skewness. We show that participants in this experiment experience anticipatory emotions once they learn about the lottery they will play. These emotions are formed from the second minute of waiting and remain stable until they become aware of their winnings. Moreover, these anticipatory emotions are as strong as those felt once they know their winnings. Finally, we show that lottery participants with positive skewness have less self-regulation capacity than other subjects. The emotions they feel are stronger and more persistent than in the others.

No summary available.

No summary available.

This thesis studies the impact of board composition on the financial performance of a company. It is composed of three chapters. In the first chapter, we review the literature on boards of directors. We point out the evolution of corporate governance over the last decades, and show how board effectiveness has become a major topic in this field of research and an important concern of shareholders and regulators. In particular, after presenting the theoretical framework of governance, we present the results of academic articles studying the impact of board composition on firm performance. In the second and third chapters, we study the impact of the presence of different types of directors on the board. In the second chapter, we propose a theoretical model to try to understand and determine the impact of employee representation on the board of directors on the firm's shareholder value and on its investment horizon. Our results suggest that employee representation can be viewed as a choice between liquidity and information for shareholders. We show that when employee representatives sit on the board of directors of a firm, the firm is more likely to invest in long-term projects than a firm without employee representation. We also show that since employees have access to valuable internal information, their presence on the board of directors can increase the shareholder value of the firm. Thus, we propose a model of employee representation consistent with some empirical studies. In the third chapter, we empirically study the impact of political connections on the interest rate of bank loans using a sample of loans involving firms in several countries. While this topic has already been widely addressed, we propose a new definition of political connection that we subdivide into two categories, depending on the high or low media exposure of politicians. The most high-profile politicians are also those for whom the risk of being suspected of conflict of interest or ethical misconduct is the greatest, and for whom the cost of a scandal is the highest. We therefore discriminate between political connections involving high-profile politicians and those involving lower-level politicians. This division is based on the assumption that the most exposed politicians have the most to lose from a scandal, have the least room for maneuver as business leaders, and are therefore the least likely to impact firm performance. Our results support the relevance of such a redefinition of the political connection according to the visibility of the politicians involved. In particular, we show that politically connected firms that borrow from politically connected banks do so at significantly lower rates than unconnected firms, and that this effect is larger when the borrower's connection is through a less exposed politician. Our results suggest that the effect is even stronger if the bank is also connected through a less exposed politician. Furthermore, we show that politically connected firms borrow significantly less from banks connected through a highly exposed politician. Finally, our results suggest that this effect is stronger in the run-up to elections, a time when it is particularly costly for a politician to be suspected of misconduct.

This paper analyzes a multi-auction setting in which informed strategic agents are endowed with heterogeneous noisy signals about the liquidation value of a risky asset. One result is that when the variance of the noise is small the competition between traders takes the form of a rat race during all the periods of trading. As we increase the level of the noise in the traders’ signals, a waiting game phase appears and the intensity of the rat race, observed only at the last auctions, decreases. In sharp contrast with the previous literature, when the variance of the noise is very large, we only observe a waiting game.

This research analyzes the influence of institutional context on the relationship between strategic choices and performance of Chinese business groups, especially for diversification and internationalization strategies. From a theoretical perspective, this study updates the knowledge on the influence of the institutional context of the Chinese market. Thus, we deepen the understanding of how institutional voids and institutional transition in the Chinese market shape the strategic behavior of business groups and especially their diversification decisions. Moreover, the analysis of the internationalization process of Chinese multinationals requires the use of other theoretical frameworks than those proposed by the literature studying Western firms. Therefore, this study proposes a model based on the institutional factors that determine the global competitiveness and internationalization-performance relationship of Chinese multinationals. This research also confirms that, unlike developed market MNCs that can deploy their competitive advantages in host countries, the internationalization of Chinese MNCs is a process of learning and acquiring strategic assets to create new competitive advantages in order to narrow the competitive gap with developed market MNCs. From the empirical point of view, the analysis of Chinese business groups shows that: (1) Specialization and internationalization create value for Chinese business groups. (2) Unrelated diversification has a negative effect on group performance. (3) For the relationship between internationalization and performance, this research found an inverted U-shaped relationship as well as a negative association between institutional distance between China and host countries and the performance of Chinese multinational business groups.

As a result of the aggravation of catastrophic risks, we have witnessed for almost two decades an exceptional mutation and evolution of financial intermediation, in particular that related to the insurance and reinsurance sectors. This thesis takes a close look at the insurance and reinsurance markets, mainly in Europe, and provides an assessment of their performance in the presence of major natural and technical catastrophes, identified as major risks. Each of the chapters proposes an analysis of the impact of major losses on the performance of European insurers, by testing the robustness of their loss ratio (chapter 1) and by studying the variability of their stock returns (chapter 2). An extension of this study consists in conducting an international comparison with the American and Japanese insurance markets (chapter 3). In all three chapters, we have taken into account the role of regulation in each market.

This study investigates the role of institutional context in the strategy-performance relationship for Chinese business groups, particularly for diversification and internationalization. Theoretically, by demonstrating the current developments in China regarding political systems, market openness, product, capital and labor markets, we deepen the understanding about how institutional voids and institutional transition in the Chinese market shape the strategic behavior of Chinese business groups. Empirically, based on 186 observations of Chinese business groups from 2008 to 2010, we found that: (1) For both domestic and multinational groups, unrelated diversification is shown as having a destructive effect on performance. (2) Related diversification is profitable for domestic business groups. (3) Conversely, multinational business groups should increase their specialization level to outperform in the international market. Furthermore, for the internationalization-performance relationship, we found an inver.

This thesis aims to study corporate governance in Malaysia. We examine the determinants of board structure, the regulatory framework, the impact of corporate governance reform and the role of Datukship in Malaysian boards. The first chapter discusses the literature applied to our topic. The second chapter examines the impact of corporate governance reforms in Malaysia. We study the trends and determinants of board structure and the level of compliance of firms with the Malaysian Corporate Governance Code (the Code) requirement. We find that board independence is increasing, that board structures correlate with the level of operation of firms, and that the level of compliance of Malaysian firms is higher than that of UK firms. The third chapter is an event study that measures the effects of the announcement of the adoption of the Code. Our results suggest that the market reacts positively to the reform. Government-linked companies (GLCs) react positively to the announcement but the effect is more moderate for non-GLCs. The fourth chapter presents a new approach to study the role of Datuk directors. Datuk, is an honorary title granted by the Kings in Malaysia. The objective of this chapter is to study whether the presence of Datuk in a board of directors benefits the board and improves the financial performance of the firm.

This thesis deals with models of price dynamics in financial markets. It focuses in particular on the revelation of information in markets and the possible distortion of their interpretation on stock prices that can lead to the formation of speculative bubbles. The first two chapters present a review of the literature and an extensive summary of the main results of our thesis. In particular, we develop the notions of informational efficiency, behavioral finance and Bayesian equilibrium. The third chapter presents investors who can split their orders among several market makers. Since all market makers are risk averse, they trade on an informational basis and on an optimal level of risky assets to hold. We show that the more risk averse the market makers are, the less liquidity they provide. Moreover, competition between markets is not automatically to the advantage of investors. In chapter four, we confront rational informed agents with overconfident agents and agents who trade based on the stock market trend. We establish that feedback increases price volatility and is the main cause of speculative bubble formation. Overconfident agents increase price quality in the presence of feedback. Chapter five is a generalization of the Kyle (1985) model with multiple insiders who have heterogeneous noisy signals. We establish that the efficiency of such a market is very strong and that signals must be more accurate the more auctions or insiders there are.

This thesis focuses on the revelation, transmission and perception of information on stock prices. It deals mainly with the impact of public information reported by the media. The first chapter is a literature review presenting the theoretical framework of our research. First, we review the theory of market efficiency and its limitations, and present the methodology of event studies. Then, we present a synthesis of the work on the impact of information on prices, with particular emphasis on the role played by the media and financial analysts in the dissemination of this information. The second chapter presents an empirical study, which verifies whether the recommendations of financial analysts disseminated by the German daily press, and concerning companies listed on the DAX30 (from September 2000 to April 2002), have an impact on stock prices, and whether this impact varies according to the type of media: general daily press, financial press and television program. Our results are consistent with the literature and show that, most of the time, the market has integrated the information before the day the recommendation is broadcast. However, for some media and for some types of recommendations, we still observe a significant impact on the date of broadcast. However, the expected gains from building a trading strategy on these recommendations are relatively modest and, given the transaction costs, do not seem sufficient to "beat" the market. The efficiency hypothesis therefore does not seem to be really challenged. The third chapter examines the effect of the number of recommendations on the evolution of prices. The underlying hypothesis is the "truth effect", documented in psychology, which shows that repeated information is perceived as more credible. The study covers the period from September 2000 to April 2002 and concerns DAX 30 companies. The results show that the number of recommendations published in the media (indicator of media coverage) has a significant influence on the variation of Tobin's Q (indicator of value change), positively for the number of recommendations to buy and negatively for the number of recommendations to sell. The direction of this relationship is, however, ambivalent because the change in value also seems to affect the number of recommendations published: the perception of investors and that of analysts through their recommendations broadcast in the media (except for sell recommendations broadcast by television) seem to support each other. In chapter 4, we analyzed how the stock market perceives the duopoly competition between Airbus and Boeing through the study of order announcements published in the press and their impact on the stock prices of the two competitors. This work is the first to our knowledge to make a direct link between individual sales and market value. Our results show that order announcements benefit the seller more than the competitor, and that there is some symmetry in the impact of order announcements on the firm concerned and its competitor.

This research is part of the microstructure theory. The first chapter is a review of the literature on the revelation of information during the pre-opening of order-driven markets and on information selling models. The second chapter proposes a theoretical analysis of the pre-opening mechanism of order-driven markets. The model of vives (1995) where investors observe only one signal, before the beginning of the game, is extended to the more general case where they receive a series of signals during the game. The speed of information revelation is then significantly higher. In the third chapter, a model is proposed for a financial intermediary who, on the one hand, carries out transactions for his own account and, on the other hand, manages the funds of a client. This management of funds can be interpreted as an indirect sale of information. Information selling contracts allow the informant to credibly commit to adding noise to the market and thus increase the total profits of both the client and the informant. In the last chapter, the previous study is generalized to the case of an oligopoly of information sellers. In this context, the paradox of Grossman and Stiglitz (1980) is reversed: when the acquisition of information is free, prices are no longer informative at all because the number of sellers is infinite in equilibrium. On the other hand, the greater the cost of acquiring information, the greater the information content of prices. Finally, the expected profits of information sellers remain positive even when their number tends towards infinity.