Relying on the heuristic of trust: a case study

This study examines the reliance on trust as a heuristic by individuals when making personal financial decisions, using a qualitative case study. We show that in the face of complexity and choice, individual investors predominantly resorted to the heuristic of trust to make financial decisions. This demonstrates the need for industry and public policy‐makers to be aware that individuals can and will resort to simplified heuristics as a basis for financial decision‐making, particularly within an environment where substantial complexity and choice exist.     

Social capital and access to informal finance – evidence from Chinese private firms

This study investigates how firms’ social capital affects their access to informal finance. We argue that social capital helps reduce information asymmetry, increase trust between related parties and enforce lending contracts, so it has positive effects on firms’ access to informal finance. Using novel survey data of Chinese private firms, we find that firms with more social capital have more access to informal finance with lower costs. Further tests show that the effect of social capital is more significant when firms are located in regions with less developed market and lower community’s social capital and during the 2008 financial crisis.     

Accounting and Legal Implications of the Interposed Unit Trust Instrument

The application of a unit trust, within a complex group structure, to transact business and to hold other dependent operating instruments such as subordinate trusts, proprietary companies and investments in joint arrangements, raises issues touching the laws of trusts, income taxation and companies and exposes deficiencies in current accounting theory, practice and financial reporting. The use of unit trusts has off-balance sheet effects as both the trust itself and all subordinate instruments within its constellation may be effectively partitioned from those group results reported under traditional consolidation principles. The consequences of this partitioning distort the consolidation process and financial statements may then misrepresent a group's financial position. As yet, there is neither legislation nor accounting regulation providing direction in this complex area.     

Incorporating financial literacy into the accounting curriculum

Financial literacy education, or the lack thereof, has received much attention in recent years. Over the past two decades, we have witnessed the dot com bubble, corporate scandals that stirred the market, and a large recession. Because many individuals turn to accountants for financial advice, it is now more important than ever for professionals to possess a strong foundation in basic financial literacy to better serve their clients. While the responsibility of financial literacy education does not lie with one institution or one individual, multiple efforts have been put in place to provide financial literacy education to the public. The purpose of this paper is to describe how financial literacy education was successfully incorporated into the accounting classroom to provide tomorrow’s professionals with a strong foundation in financial literacy.     

传统家庭观念抑制了城镇居民商业养老保险参与吗？———基于金融信任与金融素养视角的实证分析

随着我国人口老龄化的加速和金融产品的不断创新,以商业养老保险为代表的个人养老金逐步成长为我国养老金体系的第三大支柱,为解决养老问题提供了重要渠道。但现阶段我国城镇居民的商业养老保险参与度不足,养老金融市场发展缓慢。区别于既有研究的经济理性视角,本研究从影响金融发展的文化观念视角为这一“有限参与”现象提供新的理论解析。利用CHFS 2015数据进行实证分析,本文发现“养儿防老”等传统家庭文化观念会抑制我国城镇居民的商业养老保险参与,这一影响在控制了内生性后依然显著;进一步研究发现,传统家庭观念(养儿防老等)会削弱居民的金融信任,减少居民对金融信息的关注,不利于居民金融素养的提升,进而降低其商业养老保险参与度;异质性分析表明,传统家庭观念(养儿防老等)对商业养老保险参与的负向影响在中西部地区和受教育水平偏低的群体中更加突出。本研究揭示了影响居民商业养老保险参与和我国养老金融市场发展的深层文化因素,对推进我国多支柱养老保险体系的建设也具有政策启示意义。     

Financial inclusion,financial inclusion policy and Islamic finance

Using a qualitative analysis, the paper examines the links between financial inclusion and the Islamic financial services industry in Muslim countries. The findings show that, despite growth in the financial sector in many Muslim countries over the past few decades, many individuals and firms are still financially excluded. An analysis of the use of and access to financial services by adults and firms also shows that most Muslim countries lag behind other emerging economies in both respects, with a rate of financial inclusion of only 27%. Cost, distance, documentation, trust, and religious requirements are among the important obstacles. In addition, not surprisingly, the extent of Islamic microfinance is very limited, small by international standards; it accounts for a small proportion of microfinance, about 0.5% of global microfinance, and lacks a cost-efficient service model. This study suggests that Islamic instruments for redistributing income such as awqaf, qard-al-hassan, sadaqa, and zakah, can play a role in bringing more than 40 million people, who are financially excluded for religious reasons, into the formal financial system. The Islamic financial services industry has a long way to go in improving financial inclusion in many Muslim countries due to the scale needed and its relatively weak infrastructure.     

Telling the data story the right way

Effective data-driven analyses of service-line performance require: Buy-in and agreement at the outset from all parties (hospital and physicians) on the validity of the data used to evaluate service-line performance, Actionable data and metrics relevant to physicians, with financial goals tangibly linked to clinical improvement, Transparent sharing of data with physicians to build their trust and support the case for change, A physician champion who can help validate findings and guide how data are presented, Willingness of physicians to acknowledge that the opportunity for improved margin depends largely on the variable costs that they control as individuals.     

Depositors’ trust: Some empirical evidence from Indonesia

We develop a comprehensive index, based on Robbins and Judge’s (2008) five dimensions of trust, to measure depositors’ trust in individual banks as well as trust in the banking industry and financial safety net. Using a survey of 992 retail depositors in Indonesia, we find that trust in individual banks where depositors save their money is greater than trust in the overall banking industry and financial safety net. We also find that depositors’ trust is affected by personal characteristics—for instance, women and older depositors have relatively less trust. Depositors tend to put their trust in individual banks and the financial system if they have greater trust in information conveyed by the government. Religious and economic values have positive effects on depositors’ trust at both the micro and macro levels. Our results also document that risk-taking behavior is positively associated with depositors’ trust. Furthermore, we find that more-educated depositors have significantly less trust. This finding might imply that the erosion of market discipline by depositors in a country with relatively generous deposit insurance, such as Indonesia, can be mitigated through greater financial literacy.     

Which factors support trust in the recommendation process of pension products? Trust and pension products

During the financial crisis of 2008/2009, financial institutions such as banks and insurance companies have lost trust of their customers. In the recommendation process of pension products, trust plays an important role since cash flows from retirement products accrue decades ahead. Using the results from a survey, we find that financial institutions still struggle to deliver trust to their customers when they recommend different categories of retirement products. Other recommending parties such as academic financial experts or close friends, however, are able to establish a high level of trust. We therefore investigate factors of alternative channels to establish trust such as the recommendation process or product features.

     

The determinants of recovery from the Black Saturday bushfire: demographic factors,behavioural characteristics and financial literacy

We investigate the contribution of demographic factors, behavioural characteristics and financial literacy to recovery from the financial losses inflicted by the Black Saturday bushfire. Behavioural characteristics (such as overconfidence, self-serving and loss aversion biases) in conjunction with bushfire survivors’ knowledge of financial indicators are used to determine recovery time. Data are collected through in-depth interviews with bushfire survivors, academics and experts in natural disasters. The results show that demographic, behavioural and financial literacy factors have the potential to enhance the recovery process.     

Financial literacy and the demand for financial advice

The low level of financial literacy across households suggests that they are at risk of making suboptimal financial decisions. In this paper, we analyze the effect of investors’ financial literacy on their decision to demand professional, non-independent advice. We find that non-independent advisors are not sufficient to alleviate the problem of low financial literacy. The investors with a low level of financial literacy are less likely to consult an advisor, but they delegate their portfolio choice more often or do not invest in risky assets at all. We explain this evidence with a highly stylized model of strategic interaction between investors and better informed advisors with conflicts of interests. The advisors provide more information to knowledgeable investors, who anticipating this are more likely to consult them.     

Financial outreach and household financial constraint

This paper analyses how financial outreach affects the probability of households having financial constraint (i.e. being ‘discouraged’ and ‘rejected’ for loan applications). We show that households residing in communities with more bank branches are less likely to be financially constrained. Using the distance to the closest fruit and vegetable (open) market as an instrument for financial outreach, we address the potential endogeneity problem and find our results remain robust. We further provide evidence on the negative relationship between the number of bank branches nearby and the probability of loan rejection, in particular for middle‐income young households.     

论我国农村金融抑制与金融制度创新

本文以农村金融为研究对象,以西方金融深化理论为基础,分析我国金融抑制状况,一是农村金融信贷市场存在较高的壁垒,二是农民所需资金主要来源于非正规金融机构和民间信贷,三是农村金融组织不适应农村经济发展的要求,为此,本文提出了农村金融深化的建议。     

社会信任与企业劳动投资效率

本文从非正式制度的视角,研究了社会信任与企业劳动投资效率的关系。研究发现,社会信任有助于提高企业劳动投资效率。进一步研究表明,社会信任与企业劳动投资效率的相关关系在融资约束越强以及代理冲突更严重的企业中更显著。同时,随着信息不对称程度的加大,社会信任对企业劳动投资效率的提升作用更显著。此外,社会信任对企业劳动投资效率的改善主要表现为降低劳动投资不足,且对雇佣不足与解雇过度两个方面都存在抑制作用。本文丰富了社会信任的经济后果和企业投资效率影响因素的研究,对于揭示社会信任在企业劳动投资中的作用以及提高劳动投资效率具有一定启示意义。     

Trust in cross-cultural b2b financial service relationships: The role of shared values

Trust in business-to-business supplier–customer relationships in financial services is an area of considerable research interest. The bulk of prior empirical research in this field has concentrated on trust in business relationships within a Western cultural context. However, shared values are acknowledged to be an important antecedent to trust. The premise of this study is that in circumstances where there are substantial cultural differences between parties to a supplier–customer relationship, these differences will be reflected in shared values, which will in turn be reflected in differences in the nature of trust. A qualitative study was conducted among business bankers and their corporate clients in the context of the United Arab Emirates. In all 170 respondents were interviewed; of these, 160 were paired respondents, that is, where a client and banker from the same business relationship were interviewed (yielding 80 interview dyads). Substantial differences with respect to trust were found between relationships that involved only Emiratis, those that involved Emiratis and non-Emiratis, and those that involved only non-Emiratis. For Emiratis mutual trust is substantially based on family and clan ties and exhibits strongly affective characteristics. For non-Emiratis trust is largely based on business considerations, and exhibits strongly cognitive characteristics.     

不同融资制度下的金融中介发展

在任何一种经济中都需要建立一种金融机构与证券市场能够共同发挥作用的、完善的金融体系。但是,考虑到各种经济制度建立基础和发展历史与传统上的差异,以及金融体系与企业部门之间的关系不同,各国金融体系的架构并不需要保持完全的一致。本文从不同融资制度中金融中介的作用,探讨经济中金融中介的发展。     

How Does Household Portfolio Diversification Vary with Financial Literacy and Financial Advice?

Household investment mistakes are an important concern for researchers and policymakers alike. Portfolio underdiversification ranks among those mistakes that are potentially most costly. However, its roots and empirical importance are poorly understood. I estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables. Nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes. Compared to these groups, households with below‐median financial literacy that trust their own decision‐making capabilities lose an expected 50 bps on average. All group differences stem from the top of the loss distribution.     

Corporate financial structure and financial stability

Drawing on a unique dataset of flow-of funds and balance sheet data, this paper analyzes the impact of financial crises on aggregate corporate financing and expenditure in a range of countries. Investment and inventory contractions are the main contributors to lower GDP growth after crises, with a much greater effect in emerging market countries. The debt–equity ratio is correlated with investment and inventory declines following crises. Econometric analysis suggests that financial crises have a greater impact on expenditure and the financing of corporate sectors in emerging markets than in industrial countries. Industrial countries appear to benefit from a pick-up in bond issuance in the wake of banking crises. Although companies in emerging market countries hold more precautionary liquidity, this is evidently not sufficient to prevent a greater amplitude of response of expenditure to shocks.     

我国金融市场基础设施管理:现状、难点和立法路径

随着我国金融市场的纵深化发展,金融市场基础设施因其基础服务、系统性风险管理、辅助监管以及助力金融市场开放和营商环境完善等作用而日益受到重视,并成为现代金融治理和推动金融现代化的重要内容。但我国金融市场基础设施在运行和管理过程中却存在监管分散、制度空白、支持宏观审慎监管不力等情况,各方在相关概念和标准、统筹监管、恢复与处置安排等方面难以形成法律共识。为更好发挥金融市场基础设施作用,完善制度环境,我国应从金融市场基础设施的相关概念入手,明确其稳健运行所需的保障手段,完善统筹监管框架,有效衔接其他相关法律,并通过分步走的方式填补制度空白,提高立法层级。     

Mythical representations of trust in auditors and the preservation of social order in the financial community

The present paper investigates financial practitioners’ use and perception of audited financial statements. In-depth interviews, which we conducted with Canadian institutional investors, financial analysts and bankers, indicate: (1) a firm tendency to favour the quality of management over the content of financial statements in investment decisions and recommendation processes; and (2) a fundamental scepticism regarding the work of auditors. However, representations of auditor trustworthiness abound in formal texts surrounding the financial analysis domain—as if audited financial statements and the trust they convey towards numbers are indispensable to the work of financial analysts. Based on the work of Roland Barthes, we argue that financial practitioners’ trust in auditors constitutes a mythical representation whose main function is to maintain order and reproduce status quo within the financial system.