Trust in,trust out: a real cost of sudden and significant financial loss

This study examines the loss of trust that occurs when individuals suffer from sudden and significant financial loss. We use a qualitative case study to show that individuals lose trust in a range of parties, including financial advisors, banks, credit providers, government and perhaps most damagingly of all, oneself. Such outcomes are concerning as all financial services are based on trust between various parties, and trust is important in making financial decisions. A lack of trust can lead to poorer individual and societal outcomes. It also suggests that trends to financial self‐sufficiency have risks, which impact well beyond monetary losses.     

FINANCIAL LITERACY AND PENSION INVESTMENT DECISIONS

The call for enhanced financial literacy amongst consumers is a global phenomenon, driven by the growing complexity of financial markets and products, and government concerns about the affordability of supporting an ageing population. Worldwide, defined benefit pensions are giving way to the risk and uncertainty of defined contribution superannuation/pension funds where fund members now make choices and decisions that were once made on their behalf. An important prerequisite for informed financial decision‐making is adequate financial knowledge and skills to make competent investment decisions. This paper reports the findings of an online survey of the members of a large Australian public sector‐based superannuation fund and shows that although respondents generally understand basic financial matters, on average, their understanding of investments concepts, such as the relationship between risk and returns, is inadequate. These results highlight the need for education programs focusing specifically on developing fund members’ investment knowledge and skills to facilitate informed retirement savings decisions.     

Financial inclusion,financial inclusion policy and Islamic finance

Using a qualitative analysis, the paper examines the links between financial inclusion and the Islamic financial services industry in Muslim countries. The findings show that, despite growth in the financial sector in many Muslim countries over the past few decades, many individuals and firms are still financially excluded. An analysis of the use of and access to financial services by adults and firms also shows that most Muslim countries lag behind other emerging economies in both respects, with a rate of financial inclusion of only 27%. Cost, distance, documentation, trust, and religious requirements are among the important obstacles. In addition, not surprisingly, the extent of Islamic microfinance is very limited, small by international standards; it accounts for a small proportion of microfinance, about 0.5% of global microfinance, and lacks a cost-efficient service model. This study suggests that Islamic instruments for redistributing income such as awqaf, qard-al-hassan, sadaqa, and zakah, can play a role in bringing more than 40 million people, who are financially excluded for religious reasons, into the formal financial system. The Islamic financial services industry has a long way to go in improving financial inclusion in many Muslim countries due to the scale needed and its relatively weak infrastructure.     

Financial literacy and the demand for financial advice

The low level of financial literacy across households suggests that they are at risk of making suboptimal financial decisions. In this paper, we analyze the effect of investors’ financial literacy on their decision to demand professional, non-independent advice. We find that non-independent advisors are not sufficient to alleviate the problem of low financial literacy. The investors with a low level of financial literacy are less likely to consult an advisor, but they delegate their portfolio choice more often or do not invest in risky assets at all. We explain this evidence with a highly stylized model of strategic interaction between investors and better informed advisors with conflicts of interests. The advisors provide more information to knowledgeable investors, who anticipating this are more likely to consult them.     

Social Ties and the Demand for Financial Services

This paper studies the importance of social interactions for the adoption of financial services among young adults. Specifically, we investigate whether, how, and why financial decisions among interacting agents are correlated. We exploit a unique dataset of friendship networks in the United States and a novel estimation strategy that accounts for possibly endogenous network formation. We find that not all social contacts are equally important: only long-lasting relationships influence financial decisions. Moreover, this peer influence exists only in cohesive social structures. This evidence is consistent with an important role of trust in financial decisions. When agents consider whether or not to adopt a financial instrument, they face a risk and may place greater value on information coming from agents they trust. These results can help explain the importance of face-to-face social contacts for financial decisions.     

An Experimental Examination of US Individual Donors’ Information Needs and Use

This paper adopts an internet‐based experiment to investigate whether and how individual donors use nonprofit organizations’ financial and nonfinancial information when making their donation decisions. Using undergraduate students in the United States (US) to proxy for individual donors, our results indicate that individual donors are more likely to acquire nonfinancial information, such as nonprofit organizations’ goals, outcomes, programs and missions, than financial information. Donors integrate nonfinancial information into their decisions as their actual donations are significantly correlated with such information. Our results also indicate that while individual donors acquire financial efficiency measures, including the program expense ratio and fundraising expense ratio, they do not seem to integrate such information into their decisions as their actual donations are not significantly correlated with the efficiency information. This study contributes to the nonprofit literature and research domain focusing on charitable giving and donor preferences.     

The Puzzle of Financial Reporting and Corporate Short‐Termism: A Universal Ownership Perspective

This study considers the controversy surrounding financial reporting and corporate short‐termism as a puzzle. The question remains as to why corporate managers and investors persist in exhibiting behaviours that trade off long‐term value creation for meeting short‐term financial targets. Using inter‐temporal choice theory, the myopia characterising decision‐making is entirely rational, given the set of incentives faced. This study views the puzzle through the prism of universal owners (pension and superannuation funds), arguing that the investment policies or ‘mandates’ implemented by these financial behemoths is the source of the myopic behaviour. The paper explores a range of policies that universal owners may consider implementing to ensure that the payoffs to corporate managers and investors are optimised through the pursuit of long‐termism.     

Do investors prefer borrowers from high level of trust cities? Evidence from China’s P2P market

This study explores the effects of trust on individuals’ access to the peer-to-peer (P2P) lending market. We use data collected from the P2P lending market and the China General Social Survey and find that borrowers from cities with high trust have high borrowing success rates, thereby indicating that lenders prefer high social trust. Results in the successful sample indicate that borrowers with high regional trust also receive low loan costs and large loan amounts. Regression of trust and default proves that borrowers from cities with high social trust have minimal default rates, which may be the channel of our conclusion. Results remain unchanged when using slope and river length as instrumental variables. This research further shows that personal heterogeneity, including income level, whether borrowers work in state-owned enterprises or state agencies, and whether the fund is used for development purposes, affects the impact of social trust. In addition, the conclusions continue to be robust after replacing the explanatory variable, control variable, and sample. Finally, this study determines that fairness plays a consistent role with trust, but happiness plays an opposite role.     

Health status and portfolio choice: Is their relationship economically relevant?

Recent empirical work on individual portfolio choice focuses on the role of the individual's health in making financial decisions. The key idea is that, through precautionary saving or reducing investors' time horizon, health issues make people choose safer financial portfolios. This paper questions the empirical relevance of the link between health and portfolio choice, measured as stockownership and overall fraction of risky securities held. We handle with caution the findings from previous papers and ask whether data from the first wave of the Survey of Health, Aging and Retirement in Europe (SHARE) are able to clarify some of our doubts. We find that only poor self-reported health negatively impacts the portfolio choice, while other health measures (chronic conditions, limitations in daily activities of life, mental health) are irrelevant for investment decisions.     

Trust,happiness, and households’ financial decisions

A recent line of research highlights trust as an important element guiding the decision of households to invest into risky financial assets and insurance products. This paper contributes to this literature by identifying happiness as another key driver of the same decision. Using detailed survey data from a sample of Dutch households, we show that the impact of happiness on households’ financial decisions works in the opposite direction and is more economically important compared to trust. Specifically, happiness leads to a lower probability of investing into risky financial assets and having insurance, while trust has the usual positive effect found in the literature. Furthermore, the negative effect of happiness on the ownership of risky financial assets is about 6% higher compared to the positive equivalent of trust. Similarly, the negative effect of happiness on the ownership of insurance is 3% higher than the positive effect of trust.     

Accounting Discretion in Fair Value Estimates: An Examination of SFAS 142 Goodwill Impairments

This study examines Statement of Financial Accounting Standards 142 adoption decisions, focusing on the trade‐off between recording certain current goodwill impairment charges below the line and uncertain future impairment charges included in income from continuing operations. We examine several potentially important economic incentives that firms face when making this accounting choice. We find evidence suggesting that firms' equity market concerns affect their preference for above‐the‐line vs. below‐the‐line accounting treatment, and firms' debt contracting, bonus, turnover, and exchange delisting incentives affect their decisions to accelerate or delay expense recognition. Our study contributes to the accounting choice literature by examining managers' use of discretion when adopting a mandatory accounting change and by developing and testing explicit cross‐sectional hypotheses of the determinants of firms' preferences for immediate below‐the‐line versus delayed above‐the‐line expense recognition.     

Participation in risky asset markets and propensity for financial planning: a missing link?

This study examines whether the association between financial literacy and participation in risky asset markets is robust to variation on a more innate level: the propensity for financial planning. I find that individuals’ propensity for financial planning is strongly positively related to stock market participation as well as membership in a voluntary workplace retirement savings scheme. This result holds when controlling for financial literacy and a range of demographic and control variables in a multivariate regression setting. Importantly, the positive association between financial literacy and risky asset market participation also persists, suggesting that these two variables operate through separate channels.     

ON THE LINKAGE BETWEEN FINANCIAL RISK TOLERANCE AND RISK AVERSION

We explore the linkage between financial risk tolerance (FRT) and risk aversion. To do this, we obtain FRT scores from a psychometrically validated survey and conduct a battery of online lottery choice experiments involving the same nonstudent participants. We contrast: real and hypothetical payoffs, low and high stakes, decisions involving gains and losses, and order effects. Our key finding is that the two approaches to analyzing decision making under uncertainty are strongly aligned. We present evidence that this is particularly the case for the female participants in our sample and when high‐stake gambles are employed.     

Stock price firm‐specific information on the choice of stock payment in mergers and acquisitions

Previous studies on the choice of stock payment in M&A mainly focus on managerial private information. This study shows that managers also learn new firm‐specific information from financial markets in making this decision. The acquirer's stock price firm‐specific information increases the stock‐payment‐to‐Q sensitivity. The target's stock price firm‐specific information decreases the stock payment probability. Further analyses on deal and firm characteristics as well as shareholder wealth in stock mergers support the managerial learning argument. Overall, this study highlights a new set of information that affects the form of merger payment in mergers and acquisitions.     

Fundamental Investors Reduce the Distraction on Management from Random Market “Noise”: Evidence from France

The authors find that financial markets have real effects on corporate decisions but that, unfortunately, some temporary market enthusiasm, unrelated to firm intrinsic value, may cause management to make value‐destroying decisions as the result of random and uninformed stock market volatility. In particular, they are prone to making bad decisions after stock market overreactions to “surprise” earnings announcements. This study shows a positive effect of greater long‐term ownership on French listed firms. Fundamental investor ownership reduces the degree of market mispricing which serves long‐run shareholder value maximization. A fundamental investor is one that, on average, hold his shares for at least two years, is in the top quartile of a firm ownership, and has an active allocation strategy. They are about 8% of all investors. Compared to non‐fundamental investors, fundamental investors hold their positions on average three times longer and have positions 1.5 times larger. Fundamental investors are more present in firms which have more liquid stocks, which pay dividends, and which are relatively poorer performers and have relatively lower market‐to‐book than their industry peers.     

基于Multi-Agent银行准备金模型的研究与实现

论文将金融市场视为一个复杂的非线性系统,将基于多智能体的建模理论和方法应用于金融市场的复杂性研究中,研究了通过计算机仿真技术来模拟简单的市场,讨论了基于Multi-Agent的银行准备金模型的实现,并对仿真的数据进行了分析.最后分析了系统存在的缺点和需要改进的地方,以及对未来计算金融的展望.     

论《公司金融》与《财务管理》本科教学差异——内容侧重和教学法的选择

《公司金融》与《财务管理》在目前的本科课程教学中往往混为一谈，侧重点不清，让学生无所适从。基于我国的现状，《公司金融》课程在理论讲授上应该注重与金融资产定价和金融市场学理论的结合，要注重宏观经济与公司治理环境的分析。而实务方面则更应强调对财务资料运用计量经济学方法检验与分析。《财务管理》课程则更应重视案例分析与启发式教学，并可大力推进任务驱动教学法与全英教学模式。     

The perils of overconfidence: Why many consumers fail to seek advice when they really should

Consumers regularly make decisions. Some of these decisions are relatively simple, such as a selecting a jam or a coffee, where the choice is entirely subjective. Others, such as investment decision-making, are risky, complex, consequential, and there is a normatively optimal choice. Seeking advice from an expert is a reasonable solution in these circumstances, and yet a minority of investors turn to a professional for advice. As an alternative to human advisors, technology is increasingly being harnessed to provide effective and low-cost advice to assist consumers in making decisions. In a retail context, these are shop bots and search engines often used on a mobile phone while shopping. In an investment context, these are frequently referred to as “robo-advisors”. Examining consumer intention to seek advice in an investment context, the current study demonstrates that, among numerous factors examined, unfounded confidence was the best indicator of consumer reluctance to seek advice. Robo-advisors, as artificial intelligence agents providing financial literacy instruction and impartial expert advice, may offer a solution.     

Infrastructure Finance and Industrial Takeoff in England

That financial matters did not constrain industrial takeoff in the UK is generally accepted in the historical literature; in contrast, contemporary empirical analyses have found evidence that financial development can be a causal determinant of economic growth. We look to reconcile these findings by concentrating on a particular aspect of industrializing UK where inefficiencies in finance could have had bite: the finance of physical infrastructures. We document the historical record and develop the importance of spatial disaggregation and spillovers in both technological and financial development. We develop a simple model that captures the nature of infrastructure finance within a theory of endogenous growth where financial costs are endogenous. We argue that the conception of the finance‐growth nexus as a largely static, aggregative phenomenon misses out a good deal of complexity and we relate that complexity to a number of implications for regulation of both financial systems and the emergence of infrastructures.