Electricity Markets in a Time of Change: A Call to Arms for Business Research

Europe’s clean energy transition is imperative to combat climate change and represents an economic opportunity to become independent of fossil fuels. As such, the energy transition has become one of the most important, but also one of the most challenging economic and societal projects today. Electricity systems of the past were characterized by price-inelastic demand and only a small number of large electricity generators. The transition towards intermittent renewable energy sources changes this very paradigm. Future electricity systems will consist of many thousands of electricity generators and consumers that actively participate in markets, offering flexibility to balance variable electricity supply in markets with a high spatial and temporal resolution. These structural changes have ample consequences for market operators, generators, industrial consumers as well as prosumers. While a large body of the literature is devoted to the energy transition in engineering and the natural sciences, it has received relatively little attention in the recent business research literature, even though many of the central challenges for a successful energy transition are at the core of business research. Therefore, we provide an up-to-date overview of key questions in electricity market design and discuss how changes in electricity markets lead to new research challenges in business research disciplines such as accounting, business & information systems engineering, finance, marketing, operations management, operations research, and risk management.

Information Asymmetries and Intra-Company Monitoring: an Empirical Analysis of Nonlinear Relationships Between Company Characteristics and the Size of the Internal Audit Function

The internal audit function (IAF) has become one of the main pillars of good corporate governance. Empirical findings show that the size of the IAF varies considerably across companies. This study analyzes the relationships between selected company characteristics as determinants of intra-company information asymmetries and the size of the IAF as an indicator of intra-company monitoring. We test these relationships by analyzing comprehensive survey data obtained from chief audit executives from 283 Austrian, German, and Swiss companies. Using a nonparametric regression approach, we identify significant nonlinear relationships between company characteristics and IAF size. The empirical analysis identifies threshold levels for several metric company characteristics, such as the number of employees and the number of subsidiaries, whose relationships with the size of the IAF change its intensity.

Spillover Effects from the Volkswagen Emissions Scandal: An Analysis of Stock and Corporate Bond Markets

This study examines spillover effects following Volkswagen’s admission of emissions cheating. We first estimate initial operational losses of 8.45% of Volkswagen’s equity market capitalization on the date before the announcement, reputational losses up to five times these losses, and significant negative shocks to its stocks and bonds. Analyzing spillover effects from this shock beyond the usually only measured losses in equity value, we find significant negative net spillover effects to European competitors and suppliers in both stock and bond markets. Studying the economic effects in more detail, we show that Volkswagen’s total losses of 27.4 billion euros in terms of changes in equity market values over the first five event days are almost entirely composed of abnormal losses. Furthermore, competitors (suppliers) overall suffered 18.3 (12.6) billion euros of abnormal losses during this time, with 60% (69%) of the firms exhibiting negative changes, especially European competitors and suppliers connected to Volkswagen. These figures are further increased by negative bond market value changes. Overall, our results strongly emphasize that neglecting debt holders losses can lead to an underestimation of such events.

Does Weather Still Affect The Stock Market?

This paper examines the impact of weather phenomena on the German stock market, evaluating cloud cover, humidity, air pressure, precipitation, temperature, and wind speed as weather variables. We use stock market data (returns, trading volume, and volatility) from the DAX, MDAX, SDAX, and TecDAX for the period from 2003 to 2017 and show, with modern time-series (GARCH) models that air pressure is the only weather variable that exerts a potentially consistent effect on the stock market. Air pressure reduces the trading volume on the SDAX and TecDAX, and changes in air pressure lead to increases in returns on the DAX, MDAX and SDAX. The effects of the other weather variables show no clear pattern and are critically discussed. In addition, this article contains an overview of the historical research results on the effects of weather on stock markets.

Learning to Litigate: the Relationship Between Past Litigation Experience and Litigation Outcomes in the Chinese Intellectual Property System

Intellectual property (IP) and the protection of IP is of increasing importance to firms’ competitiveness, and firms must be able to defend their IP when it is infringed upon. In most markets, IP and the defense of IP is a stringent legal process, but in developing markets and markets undergoing changes, this is not necessarily so. The Chinese IP system and protection is comparatively new, and the system is still under development. In this study, we analyze the relationship between firms’ previous litigation experience and litigation outcomes using a sample of 10,211 court cases tried in China between 2001 and 2009. We find that despite litigation being a rare event for most firms, plaintiffs’ prior litigation experience and especially prior successful litigation experience or experience with specific case types is related to their likelihood of a positive outcome. However, plaintiffs’ successful application of prior litigation experience is contingent on the type of litigation case.

Organizational Psychological Capital in Family Firms: the Role of Family Firm Heterogeneity

Organizational psychological capital—comprising hope, confidence, resilience, and optimism—is a vital resource for family firms in times of stress. Surprisingly, whether and how family firm idiosyncrasies impact organizational psychological capital remains unclear. Considering the theoretical paradigm of socio-emotional wealth, we investigate two important family firm characteristics as antecedents of organizational psychological capital: the family involvement in the top management team and the generation of the family firm. We further propose that these relationships are moderated by a board of directors’ tenure. Based on an empirical analysis of listed U.S. family firms, our results confirm a negative relationship between family membership in the top management team and organizational psychological capital. In addition, we find that descendant family firms exhibit higher levels of organizational psychological capital than founder family firms. The results also confirm the moderating role of board tenure. This study works toward a more holistic view of family firm heterogeneity and specifically how different types of family involvement shape a firm’s positive strategic resources.

Entrepreneurs’ Exit Strategy Intentions and Their Final Exit Paths

This paper explores entrepreneurs’ initially intended exit strategies and compares them to their final exit paths using an inductive approach that builds on the grounded theory methodology. Our data shows that initially intended and final exit strategies differ among entrepreneurs. Two groups of entrepreneurs emerged from our data. The first group comprises entrepreneurs who financed their firms through equity investors. The second group is made up of entrepreneurs who financed their businesses solely with their own equities. Our data shows that the first group originally intended a financial harvest exit strategy and settled with this harvest exit strategy. The second group initially intended a stewardship exit strategy but did not succeed. We used the theory of planned behavior and the behavioral agency model to analyze our data. By examining our results from these two theoretical perspectives, our study explains how entrepreneurs’ exit intentions lead to their actual exit strategies.

The Impact of Executives’ Gender, Financial Incentives, and Shareholder Pressure on Corporate Social and Ecological Investments

Archival research suggests that female executives have an impact on corporate decision-making and generally finds positive associations between female board representation and Corporate Social Responsibility (CSR) performance. However, archival research does not reveal why female executives decide differently in the context of CSR. As this is our starting point, we conduct an experiment and examine executives’ decision-making in terms of CSR investment. While female executives seem to be more oriented towards social and ecological practices, we find strong evidence that participants’ real-world incentive program mainly drives their CSR decision-making. We also examine if selected gender-specific character traits (risk propensity, sustainability attitude, and empathy) cause gender differences in executives’ CSR decision-making. In an exploratory analysis, we furthermore show that executives’ risk propensity affects their CSR decision-making conditional on the level of shareholder pressure they face. Our study contributes to the literature on executives’ decision-making and to the CSR literature by enhancing our understanding of determinants of executives’ CSR decision-making.