Junior Management Science, Volume 8, Issue 1, March 2023

An Empirical Analysis of European Credit Default Swap Spread Dynamics

Leon Specht, Leibniz-Universität Hannover (Master thesis)
Junior Management Science 8(1), 2023, 1-42

I analyze the dynamics of European credit default swap spreads by estimating CDS spreads via an extension of the structural credit risk models by Black and Cox (1976) as well as Leland (1994), the so called CreditGrades model proposed by Finger et al. (2002). Using two different procedures in approximating the asset volatility surface of obligors, the models are calibrated by means of historical equity volatility and volatility extracted out of at-the-money options. I discover that model performance strongly depends on the distribution of input parameters clustered by economical sectors. Model spreads exhibit significant correlation with market spreads and seem to predict market spreads contingent on sectors and model calibration techniques. The gap between model and market spreads, derived model spreads and empirical market spreads are analyzed by running panel regressions in fashion of Collin-Dufresn et al. (2001) and Bedendo et al. (2011). These show that times of disconnectedness between credit and equity markets, model inherent misspecifications as well as possible market inefficiencies can contribute to the inability to estimate spreads reliably. Robustness checks show that determinants of gap, model and market spreads are sector specific, time varying and tenor dependent.

Keywords: Credit Risk; Credit Risk Modelling; Structural Models; Credit Risk Management; Quantitative Finance.

DOI: https://doi.org/10.5282/jums/v8i1pp1-42

From investor to entrepreneur – An explorative study of the entrepreneurial behaviour of investor-entrepreneurs

Moritz Setzer, Technische Universität München (Master thesis)
Junior Management Science 8(1), 2023, 43-67

Research on entrepreneurial types argues that differences in decisions and actions of novice and habitual entrepreneurs can be attributed to prior experience and social ties. However, other forms of resource acquisition than business ownership experience are neglected in previous studies. This study investigates this research gap by exploring the entrepreneurial behavior of novice investor-entrepreneurs, first-time founders who have previously worked in venture capital or private equity. Drawing on a cross-sectional approach with 13 semi-structured interviews, this paper investigates whether investorentrepreneurs have already acquired the necessary resources relevant for new venture foundations in their role as investors. This study reveals that investor-entrepreneurs differ from other first-time entrepreneurs in several aspects. It shows that the differences can mainly be attributed to skills and knowledge already acquired through the job as an investor. In fact, venture capital experience seems to be more helpful for a venture’s early foundation than private equity experience. The study discusses the implications of these findings for the literature on entrepreneurial types and their differentiation, thereby challenging existing differentiation and classification approaches.

Keywords: Investor-entrepreneur; Entrepreneurial types; Novice; Habitual.

DOI: https://doi.org/10.5282/jums/v8i1pp43-67

The role of management control systems in reducing and preventing managerial misreporting: A critical analysis

Michael Keck, Heinrich-Heine-Universität Düsseldorf (Master thesis)
Junior Management Science 8(1), 2023, 68-95

To manage the company efficiently, management control systems depend on truthful information from their employees. In contrast to the classical principal-agent theory, in which managers represent purely self-interested individuals, behavioral science research has shown that honesty preferences play a role in managers‘ decisions. The aim of this thesis is to investigate how management control systems can contribute to reducing and preventing managerial misreporting through a clever design of control instruments. The object-of-control framework of Merchant/Van der Stede (2017) is used in the context of this study. Based on literature, formal and informal control instruments are examined for their potential to bring truthful reporting in the interest of the company. The results show that management control systems can contribute to reducing and preventing managerial misreporting through a clever design of the control instruments, and that companies can benefit from managers’ honesty preferences. The management control system should take care to behave fairly toward managers itself and, in particular, implement measures that improve social norms for honesty in the company, thereby creating a mutual-monitoring effect. Since control instruments can also have a negative impact on truthful reporting if they are poorly designed, companies should ensure that their management control system is holistically designed.

Keywords: Managerial misreporting; management control system; honesty; disclosure; formal and informal controls.

DOI: https://doi.org/10.5282/jums/v8i1pp68-95

Going-Concern-Opinion – A Critical Analysis of Determinants and Consequences

Niklas Behne, Universität Hamburg (Master thesis)
Junior Management Science 8(1), 2023, 96-122

The auditor’s assessment and reporting of significant uncertainties regarding the going concern is an important source of information for the stakeholder of an entity. Therefore, this paper analyzes and evaluates the determinants that lead to the so-called going-concern-opinion (GCO) as well as the consequences of a GCO for the company and the auditor. The results indicate that it is more likely for a company to receive a GCO when it is in a weaker economic situation, has a more independent audit committee and has an effective internal control. For companies, the GCO results in a negative market reaction and worse lending conditions. Furthermore, after a GCO an auditor switching is more likely, and the auditor receives less audit fees. In the case of an erroneously omitted GCO the auditor is confronted with the risk of litigation and the loss of his reputation. This systematic overview can be used as basic for regulatory efforts and educate the practice about potential consequences of a GCO.

Keywords: Continuation of the company; Going-Concern-Opinion; Auditor’s report; Financial statement audit.

DOI: https://doi.org/10.5282/jums/v8i1pp96-122

Impact of Team Agility on Team Effectiveness: The Role of Shared Mental Models, Team Empowerment, and Team Reflexivity

Fabio Krüger, Technische Universität München (Master thesis)
Junior Management Science 8(1), 2023, 123-147

While more and more organizations are adopting team agility as a new work approach to cope better with change, research still lacks a proper understanding of the human-side of team agility. To investigate the effectiveness and the human-side of team agility, this study builds on the IMO-framework. Team agility is investigated as the input factor, shared mental models (SMM) and team empowerment as mediators, team performance and team satisfaction as outcomes and team reflexivity as moderator between the relationships of mediators and outcomes. Data was collected from 23 agile working teams (− = 3.48). Using linear regression both hypotheses, that team agility positively impacts SMM and team empowerment, were supported. This study found a significant total model effect for the relationship between team agility and team performance mediated by both, SMM and team empowerment. This study contributes to a better integration of the agile and teamwork literatures by identifying the roles of SMM and team empowerment on team effectiveness in an organizational context of team agility, as facilitating emergent team states.

Keywords: Agile work; team agility; team effectiveness; shared mental models; team empowerment.

DOI: https://doi.org/10.5282/jums/v8i1pp123-147

Promoting Transparency or Harming Shareholders? U.S. Market Reaction to the Regulation of Proxy Advisors

Julian Schneider, Ludwig-Maximilians-Universität München (Bachelor thesis)
Junior Management Science 8(1), 2023, 148-162

The SEC’s decision to regulate proxy advisors triggers conflicting reactions. The intended increased transparency for shareholders is opposed to higher costs for obtaining information. This paper addresses the question of whether shareholders perceive the regulation of proxy advisors positively as an added value or negatively as a cost. An event study is used to examine market reactions to eleven events that influenced the likelihood of regulation adoption. The event study reveals a negative overall market reaction, suggesting that shareholders view regulation less as an added value through increased transparency and more as a detriment through added costs. Reactions to events that increase (decrease) the likelihood of adoption tend to be negative (positive). Moreover, market reactions are stronger the lower the share of institutional investors in a company. This paper contributes to the debate on proxy advisor regulation by being the first to provide empirical evidence on how shareholders respond to regulation.

Keywords: Proxy advisors; corporate governance; event study; information intermediaries.

DOI: https://doi.org/10.5282/jums/v8i1pp148-162

Memory asymmetries in experiential and material purchases: The role of self-expression

Anna Bogner, Technische Universität München (Master thesis)
Junior Management Science 8(1), 2023, 163-187

To date many studies have investigated the different potentials of material and experiential purchases on making consumers happy. There is a strong recommendation to prefer experiential purchases when seeking happiness, the so called “experiential advantage”. But do experiences always make people happier as compared to material purchases? This study proposes a memory asymmetry in experiential and material purchases as a main antecedent of reported consumer happiness in favor of experiential purchases. Employing a mixed online experiment, especially the role of self-expression in that context was investigated. Germanspeaking respondents indicated that when equally self-expressive, both material and experiential purchases can contribute to their happiness in the same degree. Nevertheless, an interesting finding was that there is a significant preference to use experiential purchases for conveying a person’s true self to someone else. The heavier use of self-expressive purchases in socialization can explain why it is easier to recall self-expressive experiential than self-expressive material purchases. This memory asymmetry results in self-expressive experiential purchases being more frequently recalled than self-expressive material purchases when asked to intuitively recall a purchase that has contributed to one’s happiness. Thus, that might be a reason why scholars have observed the “experiential advantage”. The results are discussed as well as their meaning for different areas. Finally, recommendations for future research are offered.

Keywords: Material possessions; experiential advantage; memory asymmetry; happiness; self-expression.

Critical analysis of the VAT treatment of vouchers since the annual Tax Act 2018

Carina Menhofer, Hochschule für angewandte Wissenschaften Augsburg (Master thesis)
Junior Management Science 8(1), 2023, 188-218

Vouchers are used in many different ways in numerous sectors and, in addition to the classic target group of end consumers, can now be observed throughout the entire service chain. The issuance of vouchers enables companies to generate liquid funds without providing any service immediately, so they have become very important for the economy. In the past, the VAT treatment of vouchers was characterized by legal uncertainties due to a lack of harmonization. The so-called Voucher Directive was intended to standardize the VAT treatment of vouchers within the EU member states. The aim of this paper is to analyze the implementation of the Voucher Directive into national law with the Annual Tax Act 2018 as well as the corresponding letter of the German Ministry of Finance with regard to its application in practice. In doing so, the scientific literature, case law, legislation and administrative regulations on the VAT treatment of vouchers are consulted. The work gives an overview of the tax treatment and points out problem areas as well as structuring possibilities. In this context, the temporary VAT reduction in connection with the Corona crisis and its effects are also addressed. The results show that an European regulation on the VAT treatment of vouchers is in principle to be viewed positively. However, numerous legal uncertainties remain with regard to the classification of vouchers and its assessment in general.

Keywords: VAT; single purpose voucher; multi purpose voucher; voucher directive.

DOI: https://doi.org/10.5282/jums/v8i1pp188-218

Is Cash (the only) King? – A critical analysis of the relevance of Cashflow figures according to IAS 7

Jonas Pütter, Heinrich-Heine-Universität Düsseldorf (Bachelor thesis)
Junior Management Science 8(1), 2023, 219-236

When accountants or academics state „Cash is King“, they usually want to emphasize the practical relevance of Cashflow figures for external addressees of annual financial statements. In particular, Cashflow figures are considered relatively free from accounting policy measures and therefore appear to be particularly suitable indicators for measuring corporate success. Within this article, the actual relevance of Cashflow figures according to IAS 7 is evaluated. For this purpose, the influence of accounting policy measures on Cashflow figures according to IAS 7 is assessed. In addition, literature is examined that directly compares the ability of Cashflow figures and earnings figures to represent the success of a company. An important result of this article is that companies reduce the informative value of their Cashflow statement, when they decide to use the indirect method for the Cashflow from operating activities. For this reason, an obligation to use the direct method, when presenting the Cashflow from operating activities, would be desirable.

Keywords: IAS 7; Cashflow; Cashflow statement; accounting policy.

DOI: https://doi.org/10.5282/jums/v8i1pp219-236

Do birds of a feather always flock together? A multidimensional examination of homophily in crowdfunding

Markus Klepsch, Technische Universität München (Master thesis)
Junior Management Science 8(1), 2023, 237-269

Homophily—the tendency of individuals to associate with similar others—is one of the most persistent findings in research on interpersonal interaction. Literature has recently also studied the impact of homophily in crowdfunding markets (Greenberg & Mollick, 2017). While these results offer valuable insights into the dimension sex, homophily is a multidimensional con-struct in theory (McPherson, Smith-Lovin, & Cook, 2001). Therefore, I employ homophily theorizing by analyzing to what extent homophily influences backers‘ choices in crowdfunding regarding five different sociodemographic dimensions. To test my hypotheses, I drew upon a unique dataset of roughly 3.5 million backings made on the crowdfunding platform Indie-gogo. My results suggest that individuals make homophilic choices with respect to age, sex, occupation, and location. While my findings thus confirm that, in large, homophily plays an essential role in individual choices, I extend the literature by showing that it is not always as clear-cut. The more complex the dimension, the more difficult it is to judge. Specifically, I show that in the dimension race, where a plethora of possible combinations leads to a certain degree of complexity, there is no simple ‘yes’ or ‘no’ answer to whether homophily influences the decision. Instead, significant differences can be observed depending on the specific race under consideration.

Keywords: Crowdfunding; Indiegogo; Homophily.

DOI: https://doi.org/10.5282/jums/v8i1pp237-269