Survive the economic downturn: operating flexibility, productivity, and stock crash
Journal of Operations Management, 2025

Yang Li, Xiaojun Wang, Fangming Xu, Tuan Ho Operating flexibility supports a firm's resilience strategy during challenging times by enabling them to promptly cut down operating costs associated with unproductive resources. We employ a real options model to formalize this insight. Our empirically grounding analytics motivate a firm-level proxy for downscale operating flexibility (FLEX), which effectively captures the adjustment frictions across different contexts of firms' operations. Using U.S. data between 1961 and 2020, we show that operating flexibility mitigates the risk of stock price crashes, especially during periods of economic recession. Consistent with the loss-curtailment mechanism, the operating flexibility effect is more pronounced for firms with lower productivity/profitability or higher operating leverage and is further amplified during longer and more severe recessions. Managers may avail themselves of our well-tested empirical measure of operating flexibility to guide their efforts in building a more resilient operations structure.

Evolutionary multi-objective optimisation for large-scale portfolio selection with both random and uncertain returns
IEEE Transactions on Evolutionary Computation, 2025

Weilong Liu, Yong Zhang, Kailong Liu, Barry Quinn, Xingyu Yang, Qiao Peng With the advent of Big Data, managing large-scale portfolios of thousands of securities is one of the most challenging tasks in the asset management industry. This study uses an evolutionary multi-objective technique to solve large-scale portfolio optimisation problems with both long-term listed and newly listed securities. The future returns of long-term listed securities are defined as random variables whose probability distributions are estimated based on sufficient historical data, while the returns of newly listed securities are defined as uncertain variables whose uncertainty distributions are estimated based on experts’ knowledge. Our approach defines security returns as theoretically uncertain random variables and proposes a three-moment optimisation model with practical trading constraints. In this study, a framework for applying arbitrary multi-objective evolutionary algorithms to portfolio optimisation is established, and a novel evolutionary algorithm based on large-scale optimisation techniques is developed to solve the proposed model. The experimental results show that the proposed algorithm outperforms state-of-the-art evolutionary algorithms in large-scale portfolio optimisation.

Why are corporations terminated? A century of evidence from the Netherlands
Business History, 2025

Christopher L. Colvin, Abe de Jong, Philip T. Fliers, Florian Madertoner We identify all 196 Dutch exchange-listed corporations that halted their operations and ceased to exist between 1903 and 1996. We then explain these terminations using unique hand-collected accounting and governance data and regression techniques suited to long-run comparative analysis. Although Dutch bankruptcy laws remained unchanged across the twentieth century, patterns of corporate exit shifted markedly: shareholder-induced voluntary liquidations predominated before WWII, while creditor-driven bankruptcies became the norm thereafter. Our analyses suggest this transformation reflected a broader redefinition of corporate purpose, from a liberal shareholder-centric model before WWII, to a stakeholder-focused paradigm that emerged among Dutch business leaders in the post-war period. We further find that the Dutch government’s industrial policy initiatives in the 1970s did not succeed in reducing corporate failures. Our findings underscore how shifts in corporate purpose can fundamentally reshape business outcomes, even in the absence of formal legal changes.

Nonstandard errors
Journal of Finance, 2024

Albert J. Menkveld, Anna Dreber, Felix Holzmeister, Juergen Huber, Magnus Johannesson, Michael Kirchler, Sebastian Neusüß, Michael Razen, Utz Weitzel, Fincap Team, Fearghal Kearney, Tony Klein, Liangyi Mu In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.

Why did shareholder liability disappear?
Journal of Financial Economics, 2024

David A. Bogle, Gareth Campbell, Christopher Coyle, John D. Turner Why did shareholder liability disappear? We address this question by looking at its use by British insurance companies until its complete disappearance. We explore three possible explanations for its demise: (1) regulation and government-provided policyholder protection meant that it was no longer required; (2) it had become de facto limited; and (3) shareholders saw an opportunity to expunge something they disliked when insurance companies grew in size. Using hand-collected archival data, our findings suggest investors attached a risk premium to companies with shareholder liability, and it was phased out as insurance companies expanded, which meant that they were better able to pool risks.

British CEOs in the twentieth century: aristocratic amateurs to fat cats?
Business History Review, 2024

Robin J. C. Adams, Michael Aldous, Philip T. Fliers, John Turner This article uses a prosopographical methodology and new dataset of 1,558 CEOs from Britain’s largest public companies between 1900 and 2009 to analyse how the role, social background, and career pathways of corporate leaders changed. We have four main findings: First, the designation of CEO only prevailed in the 1990s. Second, the proportion of socially elite CEOs was highest before 1940, but they were not dominant. Third, most CEOs did not have a degree before the 1980s, or professional qualification until the 1990s. Fourth, liberal market reforms in the 1980s were associated with an increase in the likelihood of CEO dismissal by a factor of three.

Corporate taxes, leverage, and investment: evidence from Nazi-occupied Netherlands
Economic History Review, 2024

Philip T. Fliers, Abe de Jong, Bert Kramer We examine the Netherlands around the Second World War, where the occupying Nazi regime overhauled the country's corporate tax regime and introduced a profit tax of 55 per cent. We estimate that the new tax regime cost investors at least 300 million guilders, an amount equivalent to 5 per cent of Dutch GDP in 1940. We demonstrate that the tax introduction changed the financing of Dutch businesses. In particular, we find strong evidence that debt financing increased because it provides a tax shelter. The changes in taxation also led to an after-tax reduction in the cost of debt, which had large real effects on firm investment. After the end of the war, firms with more leverage had higher capital expenditures.

The anatomy of a bubble company: the London Assurance in 1720
Economic History Review, 2024

Graeme Acheson, Michael Aldous, William Quinn The London Assurance Company (LA), which incorporated during the bubble of 1720, experienced more dramatic price movements in its shares than the South Sea Company. This paper examines how incorporating during the bubble affected its long run performance. We show that the bubble in the Company’s share price was partly attributable to changes in market structure during the share issuance process. As a result of the bubble, the Company’s original subscribers, who had been curated for expertise and political connections, overwhelmingly exited during 1720 and were replaced by unsuccessful speculators. Analysis of LA shareholder behaviour up to 1737 suggests that this loss of shareholder expertise had detrimental consequences for the Company’s performance. These results demonstrate how a bubble in the shares of a newly created company can lead to an exodus of value-adding investors, damaging the company’s long-term prospects.

Three centuries of corporate governance in the United Kingdom
Economic History Review, 2024

John D. Turner As articulated by Adam Smith, one of the central issues facing companies is that managers will not run the business in the interests of its owners and will misuse resources. This ultimately has a detrimental consequence for the wealth of the nation. This survey reviews the nature and evolution of the corporate governance of UK public companies over the past 300 years. It makes two principal arguments. First, because the separation of ownership and control was one of the rationales for the introduction of the corporate form, we should not be surprised that corporate ownership has generally been diffuse. Second, over time, the way in which owners ensure that managers act in their interests has gradually changed from a system in which shareholders monitored and exercised voice to one where there was more reliance on external forces and exiting ownership.

Are the good spared? Corporate social responsibility as insurance against cyber security incidents
Risk Analysis, 2023

Vassiliki Bamiatzi, Michael Dowling, Fabian Gogolin, Fearghal Kearney, Samuel Vigne Despite the increasing consensus that socially responsible behaviour can act as insurance against externally induced shocks, supporting evidence remains somewhat inconsistent. Our study provides a clear demonstration of the insurance-like properties of corporate social responsibility (CSR) in preserving corporate financial performance (CFP), in the event of a data (cyber) breach. Exploring a sample of 230 breached firms, we find that data breaches lead to significantly negative CFP outcomes for low CSR firms, with the dynamic being particularly pronounced in consumer-sensitive industries. Further, we show that firms increase their CSR activities in the aftermath of a breach to recover lost goodwill and regain stakeholder trust. Overall, our results support the use of CSR as a strategic risk-mitigation tool that can curtail the consequences of data breaches, particularly for firms operating in consumer-centric environments.

Bubbles in History
Business History, 2023

William Quinn, John Turner Bubbles have become ubiquitous. This ubiquity has stimulatedresearch over the past three decades into bubbles in history. In this article, weprovide a systematic overview of research into historical bubbles. Our analysisreveals that there is no coherent approach to the study of bubbles and much ofthe debate has unhelpfully focussed on the rationality/irrationality dichotomy.We then suggest a new framework for the study of historical bubbles, whichhelps us understand the causes of bubbles and their economic consequences. Weconclude by suggesting ways in which business history can contribute to thestudy of historical bubbles.