NHH Brage (Norges Handelshøyskole)
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Why Firms Lay Off Workers Instead of Cutting Wages: Evidence From Linked Survey-Administrative Data
Get PDFWe use a novel large-scale survey of firms, implemented in Denmark in 2021 and linked to administrative data, to study why firms lay off workers instead of cutting wages. Our questions on layoffs, wage cuts, and the link between them provide new insights into firms' strategies for adjusting labor in response to adverse shocks. We find that layoffs are more prevalent than wage cuts, but wage cuts are not rare in firms experiencing revenue reduction and were used by 15% of such firms. Employers are hesitant to cut wages in many instances because they see wage cuts as a poor substitute for layoffs. First, firms report that lowering wages triggers costs through the impact on morale and quits. Comparing these costs with potential savings from wage cuts, most employers in the survey agree that a wage reduction would not have saved jobs. Second, firms report that a crisis is an opportune time for layoffs because of lower opportunity costs of restructuring and because layoffs during a crisis are perceived by workers as more fair. We find that firms that report such opportunistic layoffs are less likely to implement wage cuts
Hvordan samvarierer renter og kredittmarginer under ulike markedsforhold?
Get PDFDenne masteroppgaven undersøker dynamikken mellom renter og kredittmarginer i det norske obligasjonsmarkedet, med fokus på forskjellene i risikoegenskapene til obligasjoner med fast og flytende rente. Studien analyserer hvordan rente og kredittmargin samvarierer under ulike markedsforhold, og deler markedet inn i tre risikoklasser innen Investment Grade. Ved bruk av daglige data fra 2015 til 2024, søker oppgaven å forstå hvordan disse faktorene påvirker obligasjonspriser i under ulike markedsforhold.
Analysen benytter en indirekte tilnærming basert på prisvolatilitet for å studere samspillet mellom renteendringer og kredittmarginer. Ved å analysere prisendringer obligasjoner med fast og flytende rente, fokuserer metoden på prisvolatiliteten som indikator for samvariasjon under forskjellige markedsregimer. Denne tilnærmingen gjør det mulig å belyse hvordan rente og kredittmargin samvarierer uten behov for komplekse modeller.
Resultatene viser at de fire sentrale forklaringsvariablene forklarer en betydelig del av dynamikken i obligasjonsmarkedet. Studien avdekker en positiv samvariasjon mellom rente og kredittmargin i alle analyserte markedsforhold. Den indirekte metoden basert på prisvolatilitet har vist seg å være praktisk og anvendelig, men kan føre til feiltolkninger dersom de fire forklaringsvariablene ikke vurderes samtidig. Spesielt har obligasjoner med fast rente vist seg mer påvirket av kredittmarginendringer sammenlignet med obligasjoner med flytende rente. Videre illustrerer analysen at prisvolatiliteten kan domineres av enten rente- eller kredittmarginendringer avhengig av markedsregimet, noe som understreker behovet for ytterligere korrelasjonsanalyser. Til tross for disse begrensningene bidrar studien med ny innsikt i hvordan rente- og kredittmarginer samspiller, og gir et bedre grunnlag for å forstå risikoegenskapene til ulike obligasjonstyper under skiftende økonomiske forhold
The Impact of the CSRD on Management Control Systems: A qualitative case study on whether and how a large, multinational energy company´s MCS are affected by the CSRD
Get PDFWith the European Green Deal, the European Union (EU) aims to make Europe the first climate-neutral continent in the world by achieving net-zero greenhouse gas emissions by 2050. As part of this, the EU has recently introduced the Corporate Sustainability Reporting Directive (CSRD), mandating all large and all listed companies in the EU to comply with new, expanded sustainability reporting requirements. While the main objective appears to be improving transparency towards stakeholders, it is also stated as a tool aimed to influence corporate sustainability behaviour. However, the main findings of existing literature appear to be mixed on whether mandatory reporting requirements have real causal impacts on companies’ sustainability-related activities and performance. On this basis, we aim to investigate whether mandatory reporting under the CSRD has influenced the management control systems (MCS) in large companies.
To answer our research question, we conduct a single case study on a large multinational energy company, collecting data through multi-purpose semi-structured interviews. Using Malmi and Brown’s MCS framework to structure our findings, we find that the MCS at Energy ASA have so far remained largely unaffected following the introduction of the CSRD. While it has led to changes to administrative controls, these are mainly limited to governance structure with the purpose of ensuring compliance. The regulation has not changed their long-term planning and strategy or short-term actions. While they state to have made improvements to the internal reporting processes, this has not led to changes in the main internal indicators. Neither has it influenced their reward and compensation systems. Thus, the intended purpose of the CSRD to influence company behaviour does not seem to have materialised in practice within the company under study.
Attempting to explain our findings, two key factors are identified. First, sustainability was already well-integrated in their MCS prior to the CSRD, having started their pathway towards becoming net-zero years back. Second, the company has been engaged in sustainability reporting for more than 20 years
Rating the Raters
Get PDFThis thesis investigates the role of credit ratings in financial markets and their reliability and consistency in assessing corporate default risk. Credit ratings serve as vital tools for reducing information asymmetry between issuers and investors, influencing investment decisions, corporate financing, and regulatory frameworks. While most previous studies analyze aggregated credit ratings across agencies, this thesis adds to the literature by comparing the performance of Fitch Ratings (Fitch) and S&P Global (S&P) in assessing corporate credit risk. To achieve this, we build upon the work of Machek and Hnilica (2013) and Engelmann, Hayden, and Tasche (2003) to evaluate rating performance, using credit rating adjustments from 2014 to 2023.
The findings reveal that there are disparities between Fitch and S&P. Specifically, there are statistically significant differences in the default probabilities associated with similar ratings issued by the agencies. Furthermore, the results indicate that Fitch more frequently positions companies approaching default in the poorest rating categories, whereas S&P tends to distribute these companies more broadly across the speculative grade. Lastly, in the year leading up to default, our findings reveal that Fitch issues larger downgrades upfront, while S&P applies more gradually larger downgrades as default approaches
Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead
Get PDFDue to the increase in renewable energy production and global socioeconomic turmoil, the volatility in electricity prices has considerably increased in recent years, leading to extreme positive and negative price spikes in many electricity markets. Forecasting (the risk of) these prices accurately in advance can enable risk-informed decision-making by both consumers and generators, as well as by the grid operators. In this work, focusing on day-ahead markets, we review recent developments in how price spikes are defined, as well as which explanatory factors and methodologies have been used to forecast them. The paper identifies seven categories of influencing factors, which come with over 30 sub-classifications that can cause price spikes. In terms of methodologies, probabilistic models are being increasingly utilized to capture uncertainty in the price forecast. The review uncovers a wide range in all of these choices as well as others, which makes it difficult to compare methods and select best practices for predicting price spikes
Tax Complexity as Price Discrimination
Get PDFMost tax systems around the world are highly complex. While several economists have studied the potential costs associated with tax complexity, few have explored if complexity can also have beneficial effects. In a novel model where taxpayers can acquire costly knowledge to reduce their tax burden, we show that when elasticities of taxable income are heterogeneous, a complex tax system can act as a sorting device similar to second-degree price discrimination, where more elastic taxpayers will invest in more tax knowledge. We prove that if elasticities are increasing with income, introducing tax complexity can allow the government to raise higher tax revenues at no efficiency cost. However, we show that complexity primarily benefits the highest earners and thus exacerbates inequality. In the empirical section of our work, we study a complex tax system in Norway. Using rich register data on business owners, we demonstrate that many taxpayers make accounting decisions that cause them to pay higher taxes than would have been possible, and we quantify the exact size of this tax overpayment at the individual level. We show that overpayment tends to be larger for women, the less wealthy, and immigrants. We validate our model predictions by showing that failure to optimize is associated with a lower estimated tax elasticity
Gender Differences in Tax Evasion: Evidence from Norwegian Administrative Data
Get PDFUsing the expenditure approach and administrative data on third-party reported donations, we estimate tax evasion by gender. While men are more prone to risk taking, we find no evidence of this transferring to income underreporting among the self-employed in Norway. Instead, self-employed women evade more than men. This tendency holds when controlling for sector affiliation and using household fixed effects and event study equivalents. We find that self-employed women face lower chances of penalty taxes and lighter penalties when caught, possibly due to biased predictive models, which may explain their higher evasion rates
Competition and Price Discrimination in International Transportation
Get PDFThis paper documents price discrimination by transport companies, revealing their market power. Larger shipments of similar products sharing a container receive lower prices. A trade model with non-linear pricing of transportation rationalizes this with economies of scale and price discrimination, highlighting their distinct policy implications. To distinguish them, I test for the effect of competition on freight price variation specific to price discrimination. Using unexpected water level changes to instrument for competition in river transportation, I find increased competition causes steeper discounts for larger shipments. Thus, market power in transportation is less distortionary for larger firms gaining additional cost advantages
Fairness Preferences and Default Effects
Get PDFAn influential subset of the literature on distributional preferences studies how preferences condition on characteristics such as workers' relative productivity. In this study we establish that there are default effects when such conditional fairness preferences are measured using the "inequality acceptance" method. Depending on the default, implemented inequality decreases by over 65% and cross-country differences are not observed. To organize the data, we develop a simple framework in which agents form a reference point based on a combination of the distribution suggested by their fairness ideal and the default. We use this framework to illustrate that choice data from different defaults is needed to separately identify the fairness ideal and effect of the default, and discuss best practices for measuring fairness preferences