EDHEC Leadership & Corporate Governance Research Centre

A new Research Centre at EDHEC Business School

The purpose of the EDHEC Leadership & Corporate Governance Research Centre is to respond to a very concrete question posed by top management teams: How to create or to develop the legitimacy to lead in a context, that of governance reform, in which executive power is questioned.

The mission of the EDHEC Leadership & Corporate Governance Research Centre is to shed light on strategic leadership and corporate governance in an era of governance and executive power reform. This mission leads to the production of academic knowledge on the human side of corporate governance i.e. on strategic leadership, top management team legitimacy and corporate governance practices, and also the development of leadership seminars designed to prepare top executives and future top managers and their teams to respond to the managerial challenges of corporate governance.

From an academic point of view, and in contrast to the mainstream of corporate governance, the EDHEC Leadership and Corporate Governance Research Centre looks into positive practices of corporate governance (i.e. ethical, exemplary, collaborative, authentic, productive practices) particularly those which provide top executives with the suitable legitimacy to govern organisations with high performance and ethics. To do so, it relies not only on the classic works on strategic leadership but also on recent research into the psychology of legitimacy and authority. The goal: to define, document, and gauge managerial legitimacy, a key component of corporate performance but largely neglected by work on corporate governance.

The EDHEC Leadership & Corporate Governance Research Centre works with top managers and their teams to identify those practices that either strengthen or undermine the legitimacy required of successful leaders. Their research is qualitative and draws on the daily experience of managers and looks at what it is possible to improve (practices, representations and structures) for high performance teams and organisations.

[More : EDHEC Leadership & Corporate Governance Research Centre]

Interview :
Valérie Petit, director of the EDHEC Leadership & Corporate Governance Research Centre

1. What is the particular approach of the EDHEC Leadership & Corporate Governance Research Centre?
Our approach is at once managerial, political, and positive: three adjectives for three neglected dimensions of governance, three adjectives that set us apart from other centres for research into corporate governance.

1. A managerial approach because our work is devoted to management teams. They are both the object of our research and the main intended beneficiaries of the applications it leads to. We study how they acquire and how they develop their strategic leadership, that is, their ability to manage the parties to governance reform.
   
   
2. A political approach because, by nature, corporate governance is a political matter: it will be necessary to define who has the legitimacy to govern the company and how this legitimacy is acquired. Today, management is going through a crisis of legitimacy that calls for new readings and new management practices at the top of the organisational chart. It’s the core of our research programme, which builds on classic work on management leadership as well as on more recent work on the psychology of legitimacy and authority.
   
   
3. A positive approach because, reversing the reigning paradigm in the field of corporate governance and a certain common sense, we focus on the positive practices and behaviour of management teams (that is, collaborative, productive, ethical, exemplary) and on the means of fostering them for fairer and more efficient governance.
   Our credo sheds light on the reason for and social usefulness of our work: companies need legitimate leaders and leaders need new legitimacy practices.

2. Would you introduce your team and the research done by its members?
We are a team of six EDHEC professors. I oversee the management and growth of the centre, while Jean-Luc Arrègle is the academic director.

The strength of our team is above all its multi-disciplinarity. The centre brings together professors in management (Valérie Petit, Sylvie Deffayet), in strategy (Jean-Luc Arrègle, Isabelle Mari), in law (Björn Fasterling), and in marketing (Véronique Boulocher), who approach governance by looking into those involved in it, its structures, its rules, and its representations.

This multi-disciplinarity is perhaps surprising in an academic world where specialisation is still the watchword, but for us it is the key to relevance, because it reflects the multi-dimensional nature of our research theme. Indeed, if you ask the manager of a company what his profession is you certainly wouldn’t expect him to respond: “I am a strategist, finance specialist, or jurist” because you know that the general manager is precisely a combination and a transcending of these functional talents in a form of managerial excellence commonly referred to as leadership. Our team reflects the object of our research: it integrates the management disciplines necessary to understand the activities and environment of the management teams, but ultimately it focuses on management leadership.

It is through our main research programme, whose aim is to define and measure managerial legitimacy, that this multi-disciplinarity comes to the fore. The definition of legitimacy that we offer today is the fruit of group research and discussion of nearly two years. It will be spelled out in the centre’s first position paper, planned for this Christmas.

3. So what are the broad themes for the EDHEC Leadership & Corporate Governance Research Centre?
The work of the EDHEC Leadership & Corporate Governance Research Centre revolves around six themes.

1. Managerial legitimacy and corporate governance: how to measure and foster the legitimacy of management teams (Jean-Luc Arrègle, Valérie Petit)
2. Strategic leadership: management styles and corporate performance (Valérie Petit)
3. Management teams and family governance: the specificities and best practices of family corporate governance (Isabelle Mari)
4. Ethics and rules of management: the impact of structures and governance rules on the parties involved in governance (Björn Fasterling)
5. Images, representations, and reputations of corporate leaders: transformations and the effects on the image of corporate leadership (Véronique Boulocher)
6. Relationship and collaboration of corporate leadership with its managers: building bridges between top and middle management (Sylvie Deffayet)

4. What is legitimacy for you?
Legitimacy is the acknowledgment (formal/informal; explicit/implicit) of the right of the leader to steer the company. A leader’s legitimacy is acknowledged when (1) his great expertise, (2) his personal leadership, and (3) his exemplarity (that is, coherence between the two preceding dimensions and the ethics of the corporate leadership) are acknowledged by those who work with him or for the organisation he heads. As a subjective acknowledgment, then, legitimacy is always fragile. The development of the legitimacy of corporate leadership presupposes then that leadership will work to integrate these three dimensions, showing a grasp of situations and of governance relationships and being aware of the intrinsic fragility of any legitimacy acquired.

5. For whom is the research done at the EDHEC Leadership & Corporate Governance Research Centre? What is its purpose?
Our research is of interest to leadership teams that are seeking new means of managing in-house and outside parties: with our publications or with our courses, we offer them new readings and best practices that will make it possible for them to create or to regain legitimacy and thus the backing that will enable them to lead.

Our research is likewise of interest to those who hire, advise, or train leadership teams. We elaborate means of evaluating legitimacy and leadership that can contribute to the hiring and evaluation of leadership teams.

Finally, it seems to me that more broadly we are all affected by changes to the leadership professions, by the reform of corporate governance, and, in general, by the way power in companies is and will be exercised.

Focus:
An excellent inaugural entering class for the PhD in Finance

Presented in April 2008, EDHEC’s doctoral programme in finance has been greeted enthusiastically by recent university graduates and by established professionals, and in October 2008 fifteen excellent doctoral students will begin the programme.

Preparation for academic careers in top research institutions and for positions of great responsibility in finance, the EDHEC PhD in Finance develops over three years the knowledge and tools necessary to undertake research projects that will make possible true innovation in finance.

It relies on a faculty team of world-renowned specialists in financial economics, asset management, and quantitative methods, and it is enriched by the resources and industry partnerships of the EDHEC Risk and Asset Management Research Centre. The members of the teaching faculty are top EDHEC researchers and affiliate professors from major research universities (Chicago GSB, The Wharton School of the University of Pennsylvania, Columbia University, Princeton University, Duke University).

With its residential and executive tracks, and its teaching conditions, dissertation direction, and financial aid tailored to each participant, the programme is suitable both for recent university graduates and for established professionals.

The presentation of the EDHEC PhD in Finance in the international press and the information sessions in Paris, London, and New York revealed great interest in the novel concept of this doctoral programme and its two tracks.

Over the last six months, EDHEC has fielded more than 800 requests for information, 500 of them for the executive track alone. To respond to the exceptional interest shown by professionals, the opening of the executive track—planned initially for the second entering class—was brought forward one year.

The number—nearly one hundred—and the high quality of the applications made it possible to build an entering class with an excellent academic background and a great variety of professional experience.

The four doctoral students on the residential track have an average age of twenty-six and come from Africa (Cameroon), Latin America (Colombia), Asia (Thailand), and Europe (Germany). Recent graduates in engineering, economics, and finance and holders of university and grand école master’s degrees (Ecole Polytechnique, EDHEC Business School, Universidad de los Andes, Thammasat University), they have acquired initial experience either in industry or in academic research centres. The doctoral students on the residential track will work three days a week as research assistants at the EDHEC Risk and Asset Management Research Centre and, as such, will enjoy significant financial aid, all while contributing, in synergy with their dissertation, to work at the heart of the concerns of the finance industry.

The professionals who will begin the EDHEC PhD in Finance in October 2008 will be able to profit from and deepen their expertise without interrupting their careers, as the residential obligations on the executive track are limited to forty-three days over the three years.

The professionals admitted to the programme have an average of fifteen years of working experience and have positions in general management (20%), financial management (13%), business unit management (40%), portfolio management (13%), and research and consulting (13%). Professionals of ten nationalities will be present—the most heavily represented countries are the United States (40%), France (20%), and India (13%)—and they work in Europe (40%), North America (27%), Asia (13%), and the Middle East (13%). The majority of these experienced professionals work for such large financial institutions as ABN AMRO, American Express, AXA Investment Managers, Barclays Global Investors, Deutsche Bank, Franklin Templeton Investments, Kredietbank, and Société Générale, but also for firms specialised in alternative asset management and the provision of financial services.

These professionals have solid academic backgrounds: they have studied finance (53%), business (20%), science and engineering (13%), and international affairs (7%); their average GMAT score is 668. They have master’s degrees (93%) and doctorates (7%) from such high-quality institutions as UC Berkeley, BITS Pilani, Chicago GSB, Columbia University, EDHEC Business School, Imperial College, and the London School of Economics.

The research proposals submitted by the accepted applicants attest to the great seriousness of their professional development plans and deal with such diverse subjects as portfolio management with derivatives, index and benchmark construction, uncertainty and statistical noise in portfolio construction, inclusion of alternative classes and strategies in asset allocation, pricing of exotic products, asset-liability management, dynamic allocation, behavioural finance, and macro-economic analysis of financial markets.

The programme will kick off on EDHEC’s Nice campus in mid-October 2008. During the first of the four residential weeks of the university year, the fifteen students in the programme will take two of the required courses and participate in their first monthly research workshop, the first steps in a demanding learning process leading to the highest possible distinction for finance professionals.

PUBLICATIONS

• EDHEC Publications
• Academic Publications

EDHEC PUBLICATIONS

Hedge Fund Analysis: Reading the Multi-Factor Tea Leaves

During the last few years, there has been growing interest in the use of factor models for performing risk and exposure analysis of hedge funds. While interpreting directional and spread related factors in this context is fairly straightforward, interpreting non-linear options exposures often is not. Given the variety of activities that can produce options exposures, the interpretation of multi-factor output in this regard can be more of an art than a science. This paper explores the variety of hedge fund manager activities that can drive options exposures in multi-factor analysis and the considerations that must be made in analyzing and interpreting these exposures.

David Kuenzi (March 2008) "Reading the Multi-Factor Tea Leaves", EDHEC Risk Asset Management Research Centre, EDHEC Working Paper.
[More]

Transparency and Accountability

In this paper, we analyze the rules and the practices of disclosure by parliamentarians in 126 countries. The analysis is based on a multi-year study of the laws governing financial and business disclosure of parliamentarians, including implementation and compliance. We pay attention to 1) the existence of disclosure mandates, 2) public availability of disclosures by law and in practice, 3) the extent of the information being disclosed, and 4) actual compliance with disclosure rules. We use this information to construct several indices of political transparency for sample countries, and to assess both their determinants and their effect on corruption.

S. Djankov, La Porta R., Lopez-de-Silanes F., Shleifer A. (July 2008) "Transparency and Accountability", EDHEC Risk Asset Management Research Centre, EDHEC Working Paper.
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ACADEMIC PUBLICATIONS

Revue Française de la Comptabilité

Touron P., P. Foulquier: "Consolidation, vers une réforme du modèle comptable ?", Revue Française de Comptabilité, September 2007.
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Review of Finance

De Winne R., C. D'Hondt: "Hide-and-Seek in the Market: Placing and Detecting Hidden Orders", Review of Finance, September 2007.
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Total Quality Management & Business Excellence

Bescos P-L., E. Cauvin, C. Decock-Good, A. Westlund: "Characteristics of Performance Measures for External Reporting", Total Quality Management & Business Excellence, December 2007.
[More]

Finance, Contrôle, Stratégie

Meschi P-X., E. Metais: "Expérience, oubli organisationnel et motifs de désinvestissement des acquisitions internationales : le cas des acquisitions françaises aux Etats-Unis (1988-2004)", Finance, Contrôle, Stratégie, December 2007.

Journal of Banking & Finance

Li X., J. Miffre, C. Brooks, N. O'Sullivan: "Momentum profits and time-varying unsystematic risk", Journal of Banking and Finance, April 2008.
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Journal of Alternative Investments

Till H.: "Amaranth Lessons Thus Far", Journal of Alternative Investments, Spring 2008.
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Amenc N., F. Goltz : "Revisiting the Limits of Hedge Fund Indices: A Comparative Approach", Journal of Alternative Investments, Spring 2008.
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Kat H., J. Miffre: "The Impact of Non-normality Risks and Tactical Trading on Hedge Fund Alphas", Journal of Alternative Investments, Spring 2008.
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Journal of Public Economics

Chéron A., J-O Hairault J-O, F.Langot: "A quantitative evaluation of payroll tax subsidies for low-wage workers: An equilibrium search approach", Journal of Public Economics, April 2008
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Review of Financial Studies

Chabi-Yo Y., R. Garcia, E. Renault: "State Dependence Can Explain the Risk Aversion Puzzle", Review of Financial Studies, April 2008.
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Journal of Management Information Systems

Josserand E., M. Charki: "Online Reverse Auctions and The Dynamics of Trust", Journal of Management Information Systems, Spring 2008.
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Banques & Marchés

Capocci D.: "Comparative Analysis of Hedge Fund Returns. Do some hedge funds consistently outperform others?", Banques & Marchés, May-June 2008.
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D'Hondt C.: "Which Execution Improvement for Orders on Euronext?", Banques & Marchés, July-August 2008.
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Concurrences

Manara C.: "Musique en ligne, interopérabilité et avantage concurrentiel", Concurrences, May 2008.
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Revue Française de Gestion

Very P., B. Monnet: "Quand les organisations rencontrent le crime organisé", Revue Française de Gestion, May 2008.
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Annales d'Economie et de Statistique

Arouri M.: "L'Intégration Boursière Internationale : Tests et Effets sur la Diversification", Annales d'Economie et de Statistique, Spring 2008.
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Journal of Economic Literature

LaPorta, R.; F. Lopez-de-Silanes, A. Shleifer: "The Economic Consequences of Legal Origins", Journal of Economic Literature, June 2008.
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Journal of Financial Economics

Djankov S., F. Lopez-de-Silanes, R. LaPorta, A. Shleifer: "The law and economics of self-dealing", Journal of Financial Economics, June 2008.
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Economics Bulletin

Arouri M., CX Liu: "Stock craze: an empirical analysis of PER in Chinese equity market", Economics Bulletin, July 2008.
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Economie et Prévision

Chéron A., F. Langot: "Équilibre général stochastique et dynamique non-walrasienne du marché du travail", Economie et Prévision, July 2008.
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RESEARCH CENTRES

News

LegalEDHEC Research Centre news.
Cédric Manara, professor of law at EDHEC and member of the LegalEDHEC Research Centre, was invited to speak at the Assises du Numérique (digital technology gathering), presided over by Eric Besson. His video presentation dealt with the possibility of a French search engine to rival Google.
[More : Watch the video - In French]
Björn Fasterling presented his works at the 9th International Conference on Corporate Governance - Making Capital Markets Work through Corporate Governance, in London, 18 and 19 September 2008.
Christophe Roquilly, director of the LegalEDHEC Research Centre, has been nominated to the Scientific Committee for drawing up a white paper on the digital risks for business leaders in Europe.

EDHEC affiliated Professor Dominic O’Kane publishes a new book on Credit Derivative modelling.
Dominic O’Kane, affiliated Professor of Finance at EDHEC Business School has released a new book entitled “Modelling Single-Name and Multi-Name Credit Derivatives”.
Published by Wiley, this book presents an up-to-date, comprehensive, accessible and practical guide to the models used to price and risk-manage credit derivatives. It is both a detailed introduction to credit derivative modelling and a reference for those who are already practitioners.
[More]

Conference presentations by Stéphane Gregoir
Stéphane Gregoir, head of the EDHEC Economics Research Centre, participated recently in two European conferences. He presented at the Bocconi School in Milan on 27 August for the 63rd edition of the European Meeting of the Econometric Society. The title of his presentation was “Testing in vector autoregressions with possibly seasonally and non-seasonally (co-)integrated processes. On 12 September 2008, Stéphane also participated in the NSF-NBER time series conference that was held at the University of Aarhus in Denmark. Stéphane’s presentation was titled “Towards Identification of Shocks in State Space Models: A Framework and Some Applications.”

Philippe Foulquier to participate in the Pricewaterhouse Coopers-Les Echos conference
On 24 October 2008, Philippe Foulquier, professor of accounting at EDHEC Business School and director of the Financial Analysis and Accounting Research Centre, will participate in the Pricewaterhouse Coopers-Les Echos conference, the theme of which is IFRS financial services. Created and led by the experts from the banking and insurance departments of the PricewaterhouseCoopers, this first edition of the IFRS Financial Services Day will cover more than 150 frequently asked questions. Philippe will respond in the form of a video interview to a question about the influence of the financial crisis on the insurance industry and what lessons can be learned for the future.

Creation of a new research chair
The EDHEC Risk and Asset Management Research Centre and ORTEC Finance have announced the creation of a new research chair in private asset/liability management. This chair will be overseen by a joint ORTEC/EDHEC committee and will lead to a three-year programme of research. In year one, research will focus on the superiority of asset/liability management in private wealth management. Particular attention will be paid to the notion of life cycle allocation explored in the academic literature for some ten years, especially by John Campbell and Luis Viceira. New research over the three years of the project will look into the weaknesses in current wealth management practices and the means of compensating for them with private asset/liability management best practices; it will also examine the consequences of high rates of inflation on private asset/liability management.

"Asset-Liability Management and Institutional Investment Management" Research Chair
In partnership with BNP Paribas Investment Partners
This research chair will be piloted by a joint BNP Paribas AM/EDHEC committee and will give rise to a major three-year research programme. The EDHEC Risk and Asset Management Research Centre’s research team, under the responsibility of the centre’s scientific director, Lionel Martellini, will examine dynamic allocation strategies in asset-liability management in order to formulate an integrated ALM model.

"MiFID & Best Execution" Research Chair
In partnership with CACEIS, NYSE Euronext et SunGard
The CACEIS, NYSE Euronext and SunGard "MiFID & Best Execution Research Chair" is under the scientific responsibility of Jean-René Giraud, Director of Development at the EDHEC Risk and Asset Management Research Centre and Research Associate in charge of the "Best Execution and Operational Performance" research programme. The themes of MiFID and Best Execution are thought to be among the most significant industry challenges for the near future, justifying the need for academic research to be carried out to support industry developments.

"Financial Engineering and Global Alternative Portfolios for Institutional Investors" Research Chair
In partnership with Morgan Stanley Investment Management
The objective of the chair is to research new forms of welfare-improving financial innovation through the engineering of alternative solutions for institutional portfolios.

EVENTS

Miffre and Till Commodities Investing Seminar
21-22 October 2008 - New York.
Designed and delivered by two leading experts in the theory and practice of commodities trading and alternative investment, this intensive seminar equips participants with a comprehensive overview of natural resources markets, a thorough understanding of the importance of commodities as an asset class, and the state-of-the-art techniques for designing futures programmes and implementing institutional commodity investments.
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In the Media ...

In the international press there were several mentions of EDHEC in the Financial Times, with first of all a presentation of the third issue of the Alpha League Table, devoted to Swiss asset management firms. One of the points of Véronique Le Sourd’s study on socially responsible investment was also taken up, as were two presentations by Lionel Martellini, professor of finance at EDHEC Business School.

The results of the EDHEC European ETF Survey, a survey of 230 European asset managers and institutional investors, were also widely taken up by the international press.

In France, several EDHEC professors appeared in the press, with an interview with Noël Amenc, professor of finance and director of the EDHEC Risk and Asset Management Research Centre, in the Nouvel Economiste, and the appearance of Stéphane Gregoir in L’Expansion.

All EDHEC citations are available in the EDHEC Press Review.

Prizes, awards, and appointments...

EDHEC and the accounting, law, and finance department are pleased to announce the arrival of four professors, with Abraham Lioui, Devraj Basu, and Iliya Komarev as full-time professors and Frédéric Palomino as an affiliate professor.

Abraham Lioui has a doctorate in management sciences from the Université de Paris 1-Sorbonne. At the same time, he studied financial mathematics and earned a master’s in probability from the Université Paris VI. Before coming to EDHEC, he was a professor at Bar-Ilan University in Ramat-Gan, Israel and co-head of the economics department.
[More : Abraham Lioui's CV - PDF]

Devraj Basu has a doctorate in mathematics from the University of Indiana (United States). Devraj Basu was assistant professor of finance at Cass Business School, City University, London, as well as at Warwick Business School in Coventry (UK). His research deals with asset pricing, asset allocation, and several aspects of real time finance.
[More : Devraj Basu's CV - PDF]

Iliya Komarev has a DEA in management sciences from the IAE of Bordeaux and a doctorate in management sciences from the Université Montesquieu de Bordeaux IV. His dissertation is titled “La place des budgets dans le dispositif de contrôle de gestion : une approche contingente.” He has taught part-time at several schools and universities. [More : Iliya Komarev's CV - PDF]

Frédéric Palomino has a DEA in finance from the Université de Paris IX Dauphine and a PhD in economics from the European University Institute. His dissertation dealt with speculation and market selection with imperfect competition. He also holds an "habililation à diriger des recherches".
[More : Frédéric Palomino's CV - PDF]

As part of the development of EDHEC’s research centres, Lionel Escaffre will join the financial analysis and accounting research centre as an affiliate researcher. He has a doctorate in management sciences and is an auditor at the Paris appeals court. Mr. Escaffre has been an accounting and auditing specialist since 1998.
[More : Lionel Escaffre's CV - PDF]

A new applied research manager has joined the EDHEC Risk and Asset Management Research Centre. Samuel Sender, holder of a degree statistician-economist’s degree from the ENSAE, is a specialist in risk and capital. Samuel will be in charge of the follow-up of the research projects and studies done at the centre.
[More - Samuel Sender's CV - PDF]