An expectations-driven interpretation of the “Great Recession”

The boom-years preceding the “great recession” were a time of rapid innovation in the financial industry. We explore the idea that both the boom and eventual bust emerged from overoptimistic expectations of efficiency-gains in the financial sector. We treat the bankruptcy costs facing intermediaries in a costly state verification problem as a stochastic process, and model the boom-bust in terms of an unfulfilled news-shock where the expected fall in costs are eventually not realized. In response to a change in expectations only, the model generates a boom-bust cycle in aggregate activity, asset prices and leverage, and a countercyclical credit spread.     

Private placement,share prices,volume and financial crisis: An emerging market study

Firms are increasingly resorting to private placements in recent years, yet there is no published study of emerging markets. There is a unique opportunity to study this behavior during a severe financial crisis, when firms resorted to private placements to recover financially distressed firms. Our analysis using data over fifteen years shows (a) a significant 2–3% positive share price reaction, affirming asymmetric information effect, (b) a significant volume activity, and (c) the price impact is different across a period of a major financial crisis. If the proceeds from placement are earmarked for investment, share price is negatively (positively) correlated during the crisis (non-crisis) periods. Our finding on regulation is inconsistent with prior reports in developed markets: this is explained by the stricter restrictions on trading of private issues in emerging market. These results provide modest new contributions to the literature on private placements.     

Topical coverage in internal auditing: academic versus practitioner perceptions

This study reports the results of research that investigates whether a gap may exist between academic content and practitioner needs in the area of internal auditing within the USA. Questionnaires were sent to internal auditing faculty and practitioners to identify and quantify the perceived importance of 25 different internal auditing topics, as well as the use of case studies and practitioner classroom visits as pedagogical techniques. Groups were in substantial agreement on the relative importance of the topics. However, some specific topic differences were noted, with educators placing more importance on items including engagement planning, preliminary surveys, audit programmes, risk management and fraud. Practitioners placed more importance on the qualities desired in staff internal auditors, Certificate in International Auditing (CIA) examination preparation, and computer auditing. In addition, there was considerable agreement between the two groups on the use of case studies in the classroom, as well as classroom visits from practicing internal auditors.     

Talent or Not? Employee Reactions to Talent Identification

In this article, we examine the effect of talent identification on employee attitudes. Building on social exchange theory, we analyze the association between employees' perceptions about whether or not they have been formally identified as “talent” and the following attitudinal outcomes: commitment to increasing performance demands, building skills, and supporting strategic priorities; identification with the unit and the multinational enterprise; and turnover intentions. Our analyses of 769 managers and professionals in nine Nordic multinational corporations reveal a number of differences between employees who perceive that they have been identified as “talent” and those who either perceive that they have not been identified or do not know whether they have been identified. We found only limited differences between the two latter categories.     

Production economies of small depository institutions in the post-FIRREA era: evidence from cooperative banks

To evaluate the effects of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 on the cost behaviour of thrift institutions, this study examines the economies of scale and scope of cooperative banks for the years 1992–94. The findings provide evidence of economies of scale and scope over the period under study. In addition, the results suggest the presence of product-specific economies of scale and scope with respect to a few of the products included in the portfolios of the samples. Some policy implications are drawn based on the findings.