Preferential Trade Liberalization Under Cournot Competition

Suppose a country imports a homogeneous good from n foreign countries/producers and wants to eliminate tariffs on imports from m < n of them. If foreign producers differ in their marginal costs, which ones will be among the m that are granted free trade? This paper shows, among other things, that under constant marginal cost and fairly general assumptions about demand it will be the least efficient producers.     

Reverse convertible bonds analyzed

We study the pricing of reverse convertible (RC) bonds. These are bonds that carry high coupon payments. In exchange, the issuer has an option at the maturity date to either redeem the bonds in cash or to deliver a pre‐specified number of shares. We find that Dutch plain vanilla and knock‐in RC bonds are, on average, overpriced by almost 6%. This overpricing is confirmed in a model‐free analysis with respect to option‐ and bond‐pricing models. We find that rational factors explain 23% of the documented overpricing. In addition, we find that the combination of financial marketing, framing, and the representativeness bias further increases our ability to explain the documented overpricing to more than 35%. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:895–919, 2009     

Alexander von Hoffmann (1924–2006)

Ohne Zusammenfassung     

Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds

We study the money flows into and out of socially responsible investment (SRI) funds around the world. In their investment decisions, investors in SRI funds may be more concerned with ethical or social issues than with fund performance. Therefore, SRI money flows are less related to past fund returns. Ethical money is less sensitive to past negative returns than are conventional fund flows, especially when SRI funds primarily use negative or Sin/Ethical screens. Social attributes of SRI funds weaken the relation between money inflows and past positive returns. However, money flows into funds with environmental screens are more sensitive to past positive returns than are conventional fund flows. Stock picking based on in-house SRI research increases the money flows. These results give evidence on the role of nonfinancial attributes, which induce heterogeneity of investor clienteles within SRI funds. We find no evidence of a smart money effect, as the funds that receive more inflows neither outperform nor underperform their benchmarks or conventional funds.     

Corporate morality called in question: The case of Cabora Bassa

This article presents a case study of a big German enterprise (Siemens) facing a large wave of public critique and protest activities. The public was concerned about the political circumstances surrounding the construction of the Cabora Bassa hydroelectric dam in Mozambique in which Siemens was largely involved.This study reports the escalating protest against the firm over three years (1970–1972) and the firm's responses during that period. The analysis of the case focusses on the behaviour of the firm which is interpreted in the light of the business social responsibility doctrine. The article proposes that the firm experienced a legitimation crisis and responded by reorienting its philosophy of business.Georg Schreyögg is Professor of Management at the Department of Business at Fern Universität Hagen. He has written five books on Quality of Working Life, Organizational Theory and Business Strategy, and several articles, published in various business journals. His recent research has addressed strategic control.Horst Steinmann is Professor of Management at the faculty of business at Universität Erlange-Nürnberg. He has written several books and a number of articles. His most recent research interest focusses on business ethics and the philosophy of dialogue.Our case is based on an analysis of documents and on interviews. Because the project received wide public interest, many documents, handbills, memoranda, articles, etc. were available. In addition, we had access to internal Siemens documents (letters, internal memoranda, policy statements, delivered opinions, etc.). Much of the material was filed in the Cabora Bassa archive of Siemens which was kindly opened to the researchers. Reconstructing the flow of events was facilitated by interviews with Siemens managers then responsible for the project. The company approved of the publication of the internal memoranda and data cited. Special thanks are due to Wilhelm Forstmann for his support and his willingness to answer all our questions in a series of interviews.