Subprime governance: Agency costs in vertically integrated banks and the 2008 mortgage crisis

Research summary: This study uses the 2008 mortgage crisis to demonstrate how the relationship between vertical integration and performance crucially depends on corporate governance. Prior research has argued that the vertical integration of mortgage origination and securitization aligned divisional incentives and improved lending quality. We show that vertical integration improved loan performance only in those firms with strong corporate governance and that this performance‐integration relationship strongly decreases and actually reverses as governance quality decreases. We interpret these findings as suggesting that the additional control afforded by vertical integration can, in the hands of poorly monitored managers, offset gains from aligned divisional incentives. These findings support the view that corporate governance influences the strategic outcomes of a firm, in our case, by influencing the effectiveness of boundary decisions. Managerial summary: One of the unanswered questions of the 2008 mortgage crisis is why some firms produced toxic mortgages and others did not. Many have argued that vertically integrated banks—banks that both originated and securitized mortgages—had incentives to monitor themselves and thereby avoid overaggressive lending and outright fraud. Yet many of the worst lenders, such as Washington Mutual and New Century Financial, were in fact integrated. This study shows that the behavior of these firms critically depended on their corporate governance. We find that poorly monitored executives used their additional control over the integrated businesses to issue low quality loans that supported short‐term growth. Our results suggest that governance is a crucial prerequisite for financial services, particularly for firms whose managers control multiple, interrelated businesses. Copyright © 2015 John Wiley & Sons, Ltd.     

Reducing tourism's threats to biodiversity: effects of a voluntary sustainability standard and training program on 106 Latin American hotels,lodges and guesthouses

The tourism industry can negatively affect wildlife, plants and natural ecosystems through habitat destruction, pollution, over-exploitation of natural resources and visitor impacts to sensitive ecosystems. One approach to mitigate such threats is the application of voluntary sustainability standards, supported by training of tourism enterprises and verified by external audits. The Rainforest Alliance standard defines 78 criteria (requirements) for sustainable environmental, social and business practices, and has been adopted by over 600 tourism enterprises – including hotels, lodges and tour boats – in 12 countries. We examined the performance of 106 hotels in six Latin American countries against 29 of the sustainable tourism criteria most directly related to biodiversity conservation. Independent audits were used to assess hotel performance at baseline followed by a repeat assessment after training, about two years later. Mean conformance with the 29 biodiversity criteria increased significantly during this interval, from 44% to 58%. Improvements were greatest for businesses in the lowest third of performance at baseline (laggards) and smallest for hotels in the highest third (leaders). The results indicate that a voluntary sustainability standard and training program can serve both to recognize existing good actors and to drive incremental improvement in enterprises that were previously less sustainable.     

Sustainability Development and the Quality of Assurance Reports: Empirical Evidence

There is a rising trend among companies to publish their sustainability or corporate social responsibility (CSR) reports. Assurance of these reports is a valuable voluntary tool to provide them with higher credibility. Nonetheless, the quality of assurance reports differs in practice and the objective of this paper is to provide evidence in this new area of research. Indeed, we are pioneers in developing an index to measure the quality of assurance reports. We choose the Spanish setting because it is the worldwide leading country as regards CSR reporting (KPMG, 2011; Sierra et al., 2012). We have found evidence on the determinants for CSR reporting posited by existing literature that have an impact on (a) the decision of companies to publish their CSR reports, (b) the decision to assure the CSR report or not and (c) the decision to hire the assurance services from an auditor or a consultant and the subsequent quality of the assurance report. Last but not least, our results from a sample of 161 CSR assurance reports evidence that assurance reports are of fairly acceptable quality, according to the index proposed. Furthermore, the value of the quality index is significantly higher if the assurance services are provided by an auditor (as opposed to a consultant) and if the CSR reporting company is larger. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Ethnic Identity in Advertising: A Review and Meta-Analysis

The corpus of research on ethnic identity in advertising indicates that (1) ethnic identity influences commonly examined attitudinal and purchase-intention outcomes, and (2) attitudes toward both the actor(s)/model(s) and the ad moderate attitudes toward brands depicted in ethnically resonant ads. Individual studies often differ by measurement type (i.e., single-item measure versus multi-item scale), study design (i.e., experiment versus survey), and diversity of respondent sample. Seemingly, ethnic-identity effects are greater for studies that relied on single-item measures, experimental designs, and more diverse samples. Implications and future research directions are suggested.     

Sports Marketing

Although text messaging as a communication tool in society is rampant, research on its effects within print advertisements is lacking. To help fill this void, we employ three between-subject experiments (i.e., Study 1: text message vs. no text message; Studies 2 and 3: text message vs. traditional language). We posit that using text message copy in print ads is a unique (as grounded in distinctiveness theory) and fitting (as grounded in communication trust theory) approach to commune with targeted viewers and, therefore, should lead to favorable advertising outcomes. The experimental results confirm this notion. For example, responses concerning ad novelty, attention toward the ad, attitude toward the ad, purchase intention, and perceived brand trust are more favorable toward the text message condition ads. Implications and directions for future text message-related research are discussed.     

An Examination of Emotional Information Management in Gift Giving and Receipt

Gift giving is prominent in marketplace exchanges and has robust emotional implications for both the giver and recipient. For example, prior to and during the selection of a gift, the giver endures positive and negative emotions, as he/she grapples with selecting the perfect gift, and ponders if the recipient will actually cherish the purchased item. During this dynamic exchange process, emotional recognition, management of emotions, emotional empathy, and anticipated elation are oft experienced by both the giver and recipient. However, research examining such emotions quantitatively in a gifting context is scant and models of these faculties in the gift‐giving milieu are nonexistent. To help fill this research fissure, four studies are developed; they, in general, investigate determinants of feelings linked with the gestation, prestation, and reformulation stages of the gift‐giving event. Specifically, Study 1 (giver's perspective) and Study 2 (receiver's perspective) reveal a mediation void in the models tested. Heeding these results, Study 3 (gift given) and Study 4 (gift received) introduce anticipated elation as a key factor between the aforementioned emotive factors and the emotional responses inherent in the gift‐giving stages, among others. Managerial implications and future research directions are offered.     

Clinical and economic benefits of professional CGM among people with type 2 diabetes in the United States: analysis of claims and lab data

Background: It is estimated that one in 10 people in the US have a diagnosis of diabetes. Type 2 diabetes accounts for 95% of all cases in the US, with annual costs estimated to be $246 billion per year. This study investigated the impact of a glucose-measuring intervention to the burden of type 2 diabetes.

Objective: This analysis seeks to understand how professional continuous glucose monitoring (professional CGM) impacts clinical and economic outcomes when compared to patients who are not prescribed professional CGM.

Methods: This study utilized a large healthcare claims and lab dataset from the US, and identified a cohort of patients who were prescribed professional CGM as identified by CPT codes 95250 and 95251. It calculated economic and clinical outcomes 1 year before and 1 year after the use of professional CGM, using a generalized linear model.

Results: Patients who utilized professional CGM saw an improvement in hemoglobin A1C. The “difference-in-difference” calculation for A1C was shown to be –0.44%. There was no statistically significant difference in growth of total annual costs for people who used professional CGM compared to those who did not ($1,270, p?=?.08). Patients using professional CGM more than once per year had a –$3,376 difference in the growth of total costs (p?=?.05). Patients who used professional CGM while changing their diabetes treatment regimen also had a difference of –$3,327 in growth of total costs (p?=?.0023).

Conclusion: Significant clinical benefits were observed for patients who used professional CGM. Economic benefits were observed for patients who utilized professional CGM more than once within a 1-year period or who used it during a change of diabetes therapy. This suggests that professional CGM may help decrease rising trends in healthcare costs for people with type 2 diabetes, while also improving clinical outcomes.     

Unbundling tolls from contracts: a new road PPP model

Considerable evidence from different countries has revealed important shortcomings in most road public–private partnership (PPP) models. In this paper a new PPP model is presented that overcomes some of the problems found in PPP road contracts. The new model is based on separating user tolls from the fees paid to PPP contractors and setting up new institutional arrangements to oversee PPPs.     

Eco-efficiency of intensification scenarios for milk production in New Zealand

New Zealand (NZ) dairy farms used to be the lowest input and most efficient dairy farms of the world. However, intensification of the traditional pasture-based system has occurred over the last decade and has not always been accompanied by increased efficiency. The purpose of this paper is to produce an updated reference of the eco-efficiency of NZ dairy farm systems and to analyse the implications of intensification on their eco-efficiency. Results for an average NZ dairy farm system were compared with those for three dairy farmlet systems representing a wide range in intensification practices. A low input system (LI) (no N fertiliser, no brought-in feed supplement, stocking rate of 2.3 cows/ha) was compared with an N-fertilised farm system (NF) (170 kg fertiliser-N/ha/year, 3 cows/ha) representing a first level of intensification and with an N-fertilised and maize silage supplemented system (NFMS) (170 kg fertiliser-N/ha/year, 13 t DM maize silage/ha/year, 5.2 cows/ha), representing a possible future intensification option. Their eco-efficiency in terms of milk production and land use was compared using Life Cycle Assessment (LCA) methodology. NZ dairy farm systems rely on favourable temperate climate conditions and long-term perennial ryegrass/white clover pasture, to achieve eco-efficient milk production and land use compared to European systems. However, intensification of NZ dairy farms was shown to be detrimental to their eco-efficiency in terms both of milk production and land use functions and could greatly reduce their advantage compared to European systems. The eco-efficiency of LI was very high whatever the functional unit which is remarkable from an LCA perspective. NF and NFMS had a similar eco-efficiency except for energy use which corresponded to the most critical hot spot of NFMS. All studied NZ systems presented some areas for improvement where some new technologies available for dairy farms might play a promising role in the future. Finally, it should be highlighted that the comparison with European studies based on the literature available needs validation through a more comprehensive study using harmonised methodology and assumptions across countries.