Calculating profit: A historical perspective on the development of capitalism

The paper introduces the notion of different methods of calculating and analysing profitability as signatures of capitalism at different stages of development. Its point of departure is Bryer’s thesis of the capitalist mentality, which is subject to theoretical and empirical critique and developed in new directions. Interactions between the development of the productive forces and the socialisation of capital ownership jointly impact on these signatures, such that profit calculations are historically contingent. Aspects of feudalism, particularly restrictions on usury impacted upon accounting calculation, retarding their development. In the industrial revolution calculations reflected the scale and scope of specialised investment in plant, whilst the progressive socialisation of capital prompted a separate set of calculative practices. It was only in the 20th century, with the unification of large scale industry and finance capital that the modern notion of profitability as return on capital employed finally developed.     

基于多层级委托代理的金融机构内部道德风险模型

道德风险问题是我国金融业普遍存在的问题,许多金融案件的发生无不与金融从业人员的职业道德水平有关。而目前金融系统实行的多层级委托代理经营管理模式存在制度缺陷和道德风险隐患。本文通过建立三方两阶段的博弈模型,对我国金融业中多层级委托-代理存在的道德风险给出实证分析,提出具有实践意义的建议。     

A general equilibrium model of changing risk premia: theory and tests

We derive and test a dynamic discrete-time model of asset returns.Both the risks of individual securities and equilibrium riskpremia change predictably in the model, but these changes canbe attributed to movements in the returns and prices of onlytwo well-diversified portfolios. Any other components of returnsshould be unpredictable. Using the generalized method of moments,the model is estimated and tested on portfolios of equities.We find the data supportive of the model's restrictions, evenwhen instruments designed to capture the January effect areemployed.     

A dynamic model of entrepreneurship with borrowing constraints: theory and evidence

Does wealth beget wealth and entrepreneurship, or is entrepreneurship mainly determined by an individual’s ability? A large literature studies the relationship between wealth and entry to entrepreneurship to inform this question. This paper shows that in a dynamic model, the existence of financial constraints to the creation of businesses implies a non-monotonic relationship between wealth and entry into entrepreneurship: the probability of becoming an entrepreneur as a function of wealth is increasing for low wealth levels—as predicted by standard static models—but it is decreasing for higher wealth levels. U.S. data are used to study the qualitative and quantitative predictions of the dynamic model. The welfare costs of borrowing constraints are found to be significant, around 6% of lifetime consumption, and are mainly due to undercapitalized entrepreneurs (intensive margin), rather than to able people not starting businesses (extensive margin).     

A bridge from ruin theory to credit risk

The structural model uses the firm-value process and the default threshold to obtain the implied credit spread. Merton’s (J Finance 29:449–470, 1974) credit spread is reported too small compared to the observed market spread. Zhou (J Bank Finance 25:2015–2040, 2001) proposes a jump-diffusion firm-value process and obtains a credit spread that is closer to the observed market spread. Going in a different direction, the reduced-form model uses the observed market credit spread to obtain the probability of default and the mean recovery rate. We use a jump-diffusion firm-value process and the observed credit spread to obtain the implied jump distribution. Therefore, the discrepancy in credit spreads between the structural model and the reduced-form model can be removed. From the market credit spread, we obtain the implied probability of default and the mean recovery rate. When the solvency-ratio process in credit risk and the surplus process in ruin theory both follow jump-diffusion processes, we show a bridge between ruin theory and credit risk so that results developed in ruin theory can be used to develop analogous results in credit risk. Specifically, when the jump is Logexponentially distributed, it results in a Beta distributed recovery rate that is close to market experience. For bonds of multiple seniorities, we obtain closed-form solutions of the mean and variance of the recovery rate. We prove that the defective renewal equation still holds, even if the jumps are possibly negative. Therefore, we can use ruin theory as a methodology for assessing credit ratings.      

The spirit of capitalism among the income classes

This paper tests the consumption-based capital asset model within the context of the spirit of capitalism. The spirit of capitalism asserts that consumers gain utility not just from consumption of goods and services, but also from the social status obtained from wealth. We examine two asset pricing models developed by Bakshi and Chen (1996) that employ wealth in the utility function, for households sorted by income quintiles. In the first model, households obtain utility from both consumption and the social status that comes from their own wealth. In the second model, households gain utility from both consumption and the social status obtained from their own wealth relative to the wealth of other peer households. Our results indicate that both models are inconsistent with the data regardless of income. However, using cointegration methods as a diagnostic tool, we find that the data are “loosely” consistent with the spirit of capitalism, at least for the upper income quintiles.     

The new age of capitalism : Innovation-mediated production

Capitalism is undergoing an epochal transformation from a mass-production system where the principal source of value was physical labour to a new era of innovation-mediated production where the principal component of value creation, productivity and economic growth is knowledge and intellectual capabilities. Capitalism in this new age of innovation-mediated production will require deep and fundamental changes in the organization of enterprise, regions, nations and international economic and political institutions. Survival in this new era will require the development of new organizational forms and systems, such as teams and new incentive systems, which decentralize decision making, mobilize intellectual capabilities, and harness the knowledge and intelligence of all members of the organization. This article outlines the fundamental trends emerging in this new age of capitalism and provides a detailed case-study of how one organization, a US-Japan joint venture steel mill in the USA, is organizing to meet the challenges of this new era. The conclusion outlines key lessons for the development of enterprise, regional and national strategies for both the technologically advanced countries and the developing world.     

The spirit of capitalism and expectation-driven business cycles

While news shocks are believed to be instrumental in explaining business cycles, many existing models fail to predict a boom in consumption, investment, employment, output and asset prices in response to good news about future productivity. A model with the intrinsic desire for wealth is shown to generate the aforementioned responses. A news-driven boom is explained predominantly by an expansion of labor supply and is characterized by the falling real wage. The simulated model not only captures well conventional business cycle statistics, but also reproduces countercyclical real returns and hump-shaped responses of hours and output to an unexpected technology shock.     

Accounting and the birth of the notion of capitalism

The purpose of this paper is to cast a new light on the post-Sombartian debate. As we know, Sombart (Sombart W. Der moderne Kapitalismus. München, Leipzig: Duncker and Humbolt, 1916) thought that the invention of double-entry bookkeeping was essential to the birth of capitalism. Max Weber developed the same theme, but to a lesser extent. Accounting scholars have debated the idea quite extensively during the 20th century. All these previous works have in common the fact that they address the historical question by comparing accounting practices to business practices, some of which are interpreted as capitalist. In this paper, my aim is not so much to understand the birth of capitalism, but to contribute to some understanding of the birth of the concept of capitalism itself. The concept was forged during the 19th century. At that time, capitalism and a certain kind of double-entry bookkeeping practice that was able to highlight the circuit of capital were inextricably linked. It might be suggested that this historical situation greatly helped the scholars of the period to conceptualise what they called capitalism, and it is easy to show that the notion of capitalism itself is rooted in accounting notions. I will thus argue that the history of how the concept of capitalism was invented is an example of the influence of accounting ideas on economic and sociological thinking.     

Lewis' branching poisson process model from the point of view of the theory of compound poisson processes

Abstract

1. Lewis [1] has used a composite process as a model for computer failure patterns. This model seems to be of a much wider scope of application at least after some modifications, which are discussed in this note. ¹ The present author has read Lewis [1] only in the form of a galley proof with due regard to a few corrections kindly communicated by Lewis. This note was prepared in 1964 before the publication of Lewis' paper.      

A review of human resource accounting measurement systems from a measurement theory perspective

Currently, a large number of diverse methodologies exist which apply to the measurement of human resources. This paper attempts to clarify and evaluate these methodologies by the application of a measurement theory frame of reference. The first two sections discuss the measurement theory perspective and then its application to human resource accounting. The last section focuses upon the operational steps necessary to apply measurement theory to the human resource accounting area.     

A theory of risk disclosure

In this paper, we consider the price effects of risk disclosure. We develop a model in which investors are uncertain about the variance of a firm’s cash flows and the firm releases an imperfect signal regarding this variance. In our model, uncertainty over the riskiness of a firm’s cash flows leads to a variance uncertainty premium in its price. We demonstrate that risk disclosure decreases the firm’s cost of capital by reducing this premium and that the market response to risk disclosure is small when the expected level of risk is high. Moreover, we find that firms acquire and disclose more risk information when their cash flow risk is greater than expected. Finally, we demonstrate that in a multi-asset setting, only risk disclosure concerning systematic risks will impact the cost of capital.     

A theory of loan syndication

We provide a new theory of loan syndication. Bank syndicates control sector risk by downsizing the industry when market demand fails to meet expectations.     

A lender-based theory of collateral

We consider an imperfectly competitive loan market in which a local relationship lender has an information advantage vis-à-vis distant transaction lenders. Competitive pressure from the transaction lenders prevents the local lender from extracting the full surplus from projects. As a result, the local lender inefficiently rejects marginally profitable projects. Collateral mitigates the inefficiency by increasing the local lender's payoff from precisely those marginally profitable projects that she inefficiently rejects. The model predicts that, controlling for observable borrower risk, collateralized loans are more likely to default ex post, which is consistent with the empirical evidence. The model also predicts that borrowers for whom local lenders have a relatively smaller information advantage face higher collateral requirements, and that technological innovations that narrow the information advantage of local lenders, such as small business credit scoring, lead to a greater use of collateral in lending relationships.     

A theory of banking structure

This paper proposes a theory to analyze the specialization of banking activities based upon the different functions that banks perform when rendering a variety of financial services. The functional difference in the services performed by banks is based upon two dimensions: the degree of information asymmetry involved in providing the service, and the degree of verifiability of the value of the service rendered. This has implications for the length of banking relationships and also determines whether banks develop the right degree of skill specialization and resource intensity for the existing task mix. Costly overspecialization occurs in certain deal type transactions and underspecialization occurs in relationship type transactions. The paper examines how bank-client relationships are structured and proposes an explanation for phenomena such as bank syndication. First-mover advantages and monopoly skills are also shown to be natural outcomes of the model. The analysis has implications for banking regulation, such as for the Glass–Steagall Act, in the sense that it analyzes the effects of this specialization, first enacted within the spirit of the Act.