Conflicts of Interest in Financial Intermediation

The last years have seen a surge of scandals in financial intermediation. This article argues that the agency structure inherent to most forms of financial intermediation gives rise to conflicts of interest. Though this does not excuse scandalous behavior it points out market imperfections. There are four types of conflicts of interest: personal-individual, personal-organizational, impersonal-individual, and finally, impersonal-organizational conflicts. Analyzing recent scandals we find that all four types of conflicts of interest prevail in financial intermediation.     

Managing Institutional Complexity: A Longitudinal Study of Legitimacy Strategies at a Sportswear Brand Company

Multinational corporations are operating in complex business environments. They are confronted with contradictory institutional demands that often represent mutually incompatible expectations of various audiences. Managing these demands poses new organizational challenges for the corporation. Conducting an empirical case study at the sportswear manufacturer Puma, we explore how multinational corporations respond to institutional complexity and what legitimacy strategies they employ to maintain their license to operate. We draw on the literature on institutional theory, contingency theory, and organizational paradoxes. The results of our qualitative longitudinal study show that managing corporate legitimacy is a dynamic process in which corporations adapt organizational capacities, structures, and procedures.     

Prinzipien der Inflationsprognose

Die einzelnen Notenbanken gehen bei ihrer Inflationsprognose zwar in Abhängigkeit von den jeweiligen Gegebenheiten unterschiedlich vor, bei den Grundprinzipien der Prognose herrscht jedoch in den Industrieländern im Wesentlichen Übereinstimmung. Wie wird Inflation prognostiziert? Sollte man sich bei Prognosen auf den jeweiligen Inflationsindikator du jour oder ein einzelnes Prognosemodell verlassen, oder sollte man ein looking at everything und einen multiparadigmatischen Ansatz verfolgen? Dr. Guido Zimmermann, 35, ist Mitarbeiter der Volkswirtschaftlichen Abteilung der DekaBank in Frankfurt. Der Autor vertritt hier seine persönlicheAuffassung.     

The importance of the institutional environment on multifunctional farming systems in the peri-urban area of Brussels

The influence of local and regional policies on the uptake of multifunctional farming systems is analysed. The conceptual framework of how regional and local policies can influence farmers’ behaviour is empirically verified by analysing data on uptake of diversification and environmental management by farmers located in the Brussels’ peri-urban area. In a two-stage model, farmers’ participation and behaviour to influence local policy-makers is also examined. It has been found among other things that, in a municipality that attaches greater importance to environmental issues, the uptake of agri-environmental measures is higher and that promotion of local agriculture will encourage farmers to start processing or selling products on their farms.     

The mediterranean policy of the EC— The case of industry

The European Community faces the task of reformulating its Mediterranean policy in the light of the rather disappointing experience with the “Global Mediterranean Policy” adopted in 1972, the effects of the southward enlargement of the Community and the changed world economic climate. The article that follows discusses the experiences to date, the scope for action and possible guidelines for a future Mediterranean policy in the industrial sphere.     

Measuring farm sustainability and explaining differences in sustainable efficiency

A major objective of European agricultural policy is to have a sustainable and efficient farming sector that is applying environmentally-friendly production methods. Policy makers aim to combine a strong economic performance and a sustainable use of natural resources. Therefore, it is important to measure and to assess farm sustainability. For a large dataset of Flemish dairy farms, a valuation method that is based on the concept of opportunity costs is used to calculate and analyze differences among the sample farms with respect to the creation of “sustainable value”. But more important than measuring the creation of sustainable value is to analyze differences in sustainable efficiency. Therefore, sustainable efficiency measures are calculated and differences in sustainable efficiency are explained. Using panel data, an effect model captures the determinants of sustainable efficiency of the studied farms. The empirical model shows that, in general, larger farms have a higher sustainable efficiency. Also farmer's age and dependency on support payments proved to be determining characteristics for observed differences in sustainable efficiency.     

For how long to tie your hands? Stable relationships in an unstable environment

The Kreps–Wilson–Milgrom–Roberts framework is one of the most renowned ways of modeling reputation-building. Once the number of repetitions of the game is considered as a choice variable, such a framework can fruitfully be employed to study the optimal length of the commitment to a relationship. We analyze a model where a principal plays with an agent a finitely repeated trust game, characterize the optimal length of the relationship between principal and agent when the principal’s preferences on the agent’s type stochastically change over time and show that a commitment to a stable relationship may be optimal (even) in very unstable environments.      

R&D AND ECONOMIC GROWTH IN A CASH‐IN‐ADVANCE ECONOMY

R&D investment has well‐known liquidity problems, with potentially important consequences. In this study, we analyze the effects of monetary policy on economic growth and social welfare in a Schumpeterian growth model with cash‐in‐advance (CIA) constraints on R&D investment, consumption, and manufacturing. Our main results can be summarized as follows. Under the CIA constraints on R&D and consumption (the CIA constraint on manufacturing), an increase in the nominal interest rate decreases (increases) R&D and economic growth. We also analyze the optimality of Friedman rule and find that Friedman rule can be suboptimal due to a unique feature of the Schumpeterian model.     

CSR Business as Usual? The Case of the Tobacco Industry

Tobacco companies have started to position themselves as good corporate citizens. The effort towards CSR engagement in the tobacco industry is not only heavily criticized by anti-tobacco NGOs. Some opponents such as the the World Health Organization have even categorically questioned the possibility of social responsibility in the tobacco industry. The paper will demonstrate that the deep distrust towards tobacco companies is linked to the lethal character of their products and the dubious behavior of their representatives in recent decades. As a result, tobacco companies are not in the CSR business in the strict sense. Key aspects of mainstream CSR theory and practice such as corporate philanthropy, stakeholder collaboration, CSR reporting and self-regulation, are demonstrated to be ineffective or even counterproductive in the tobacco industry. Building upon the terminology used in the leadership literature, the paper proposes to differentiate between transactional and transformational CSR arguing that tobacco companies can only operate on a transactional level. As a consequence, corporate responsibility in the tobacco industry is based upon a much thinner approach to CSR and has to be conceptualized with a focus on transactional integrity across the tobacco supply chain. Guido Palazzo is Assistant Professor for Business Ethics at the University of Lausanne (Switzerland). He graduated in Business Administration at the University of Bamberg (Germany) and earned his PhD in Political Philosophy (1999) from the University of Marburg (Germany). His research interests are in Corporate Social Responsibility, Corporate Branding, Democratic Theory, and Organizational Ethics. Ulf Richter is a doctoral student at the University of Lausanne. He is writing his thesis on Corporate Social Responsibility, conceptualizing the concept from a multidisciplinary perspective. He has studied in Germany, Peru and the US, and graduated from the European Business School, Oestrich-Winkel, majoring in International Management and Real Estate.     

Automated Integration of Enterprise Accounting Models Throughout the Systems Development Life Cycle

This paper summarizes and projects research in the field of automated software engineering as that work has been applied to the domain of accounting-centered enterprise models. In particular, we review the basic concepts and goals of the REA (Resource–Event–Agent) accounting model and speculate on its past, present, and future use as an embedded domain theory of enterprise economic activity within computer-aided systems engineering (CASE) tools. The REA CASE tools reviewed here include ones like REAVIEWS, CREASY, and REAtool that have already been built plus others like REACH, FREACC, and REAVERSE that have been specified only in theory. The entire systems development life cycle is used as a discussion vehicle to treat these tools and projected future work in an integrated way.