Innovating for Good in Opportunistic Contexts: The Case for Firms’ Environmental Divergence

Journal of Business Ethics - Opportunistic behaviors are considered ethically and strategically troublesome since they disrupt otherwise mutually beneficial relationships. Previous literature has...     

The Macroeconomic Imbalance Procedure at the Heart of EU Economic Governance Reform

While the euro officially came into being in 1999, it was the introduction of euro notes and coins 20 years ago in January 2002 that made the common currency a tangible reality for European citizens. The circle of member states has since grown from 11 to 19, and a growing section of the population no longer has any personal experience with a “national” currency, yet the debate on the legal and institutional framework underpinning the common currency has never gone away.

     

Efficiency and Ethically Responsible Management

One common justification for the pursuit of profit by business firms within a market economy is that profit is not an end in itself but a means to more efficiently produce and allocate resources. Profit, in short, is a mechanism that serves the market’s purpose of producing Pareto superior outcomes for society. This discussion examines whether such a justification, if correct, requires business managers to remain attentive to how their firm’s operation impacts the market’s purpose. In particular, it is argued that the value of efficiency, despite views to the contrary, cannot be fully separated from the planning and intentions of business managers as long as those managers direct their firms in an ethically responsible fashion. This position is inspired by, and serves as a supportive clarification of Joseph Heath’s so-called “market failures approach” to business ethics.     

Corporate Finance and Sustainability: the Case of the Electric Utility Industry

The electric utility industry is in transition but needs to move even faster if the country is to meet its emissions goals. The industry has historically moved cautiously, but policies and regulatory approaches must avoid unintentionally reinforcing the status quo. Incentive‐oriented policies and redesigned regulations must balance environmental sustainability with economic sustainability. The authors draw on well‐established corporate finance principles to guide more effective policies. Shareholder‐focused utility executives must make investments conditioned by three elements: (1) the return on equity the utility can expect to make on each project; (2) the investors' required return on equity capital for each project; and (3) the size of the investment. The well‐established economic value added (EVA) model can assist policy analysis: V=(r‐k)I; where V is the shareholder value created, r is the return on equity, k is the return investors require if they are to invest in the stock, and I is the scale of the project. Any new incremental V translates into higher stock prices. All three elements of their model (i.e., risk, return, and scale) require attention by regulators and policymakers to create value for shareholders. The authors show how the right state policies could create powerful incentives for shareholder focused utility executives to support such transitions.     

Do retail mergers affect competition? Evidence from grocery retailing

This study estimates the price effects of horizontal mergers in the U.S. grocery retailing industry. We examine fourteen regions affected by mergers, including mergers in highly concentrated and relatively unconcentrated markets. We identify price effects by comparing markets affected by mergers to unaffected markets using difference‐in‐difference estimation with three different comparison groups, propensity score weights, and by using the synthetic control method. Our results are robust to the choice of control group and estimation technique. We find that mergers in highly concentrated markets are most frequently associated with price increases, and mergers in less concentrated markets are most often associated with price decreases.     

Shakeout in the early commercial airframe industry

The commercial airframe industry in the US experienced a shakeout from the early 1930s into the post‐Second World War period. Unlike shakeouts in automobiles, tyres, or televisions, the commercial airframe industry's early life cycle was affected by external factors, particularly government demand. Using newly digitized data on all planes introduced in the commercial market between 1926 and 1965, we find that commercial airframe manufacturers with bomber contracts during the Second World War were more likely to have postwar market share than firms without such contracts, controlling for plane characteristics and other forms of government contracting. We attribute the effect of bomber contracts to advantages in R&D learning capacity acquired by firms with military airframe contracts. Despite low (or zero) initial presence in the commercial market, these learning capacity advantages allowed such firms to survive the early period of the shakeout, and later to thrive.     

Three Triggers? Negative Equity,Income Shocks and Institutions as Determinants of Mortgage Default

The Journal of Real Estate Finance and Economics - In understanding the determinants of mortgage default, the consensus has moved from an ‘option theory’ model to the ‘double...     

What's on the Menu? Policies to Reduce Young People's Sugar Consumption

Young people in the UK consume far above the maximum recommended levels of added sugar. It is likely that neither they nor their parents fully take account of the future health, social and economic costs of this high sugar consumption. This provides a rationale for policy intervention. The majority of young people's added sugar consumption occurs in the home, where purchases are typically made by parents. This means that understanding the purchase decisions of adults is important for policy design, even if the policies aim to reduce the consumption of young people. We discuss the merits of popular policies, including taxes, advertising restrictions and restrictions on the availability of specific foods, and we identify promising avenues for future research.