Investors as Stewards of the Commons?

The author makes the case that business generally, not just government, should assume responsibility for social and environmental problems. The Sustainable Development Goals (SDGs) formally recognize the role of the private sector in addressing some of the world's most pressing environmental and social challenges. What started as a corporate social responsibility movement now a focuses on integrating positive social impact into the core mission of the organization. Encouragingly, studies document that improving firm performance on business‐relevant ESG issues has a positive association with future financial performance. Investors can enable better societal outcomes by exercising ‘voice’ and voting rights in corporate governance. He acknowledges that competitive businesses face a “commons” or “free‐rider” problem where a defector avoids the full cost of his actions. Overcoming this problem requires legally sanctioned collaboration between business enterprises and large institutional shareholders, particularly pension funds. He also acknowledges that the corporate level free‐rider problem has a counterpart that at the investor level. Investor engagement with companies involves resources, money and time. It is no simple matter to justify increased costs in the context of asset managers that compete on the basis of low management fees, such as index funds. Collaboration between companies can mitigate some of these free riding problems. Large institutional investors with long time horizons and significant common ownership across different companies may have the best opportunities for collaboration. But, smaller activist funds and retail investors also have an important role in pushing large institutional investors to engage. While it is unlikely that investors will be able to solve all of the pressing societal problems, progress can be made.     

Strategy implementation as fantasising – becoming the leading bank

In this empirical case study we explore the fantasy nature of strategy work and propose fantasising as a framework contributing to the nascent literature dealing with the previously overlooked fantasy nature of strategy. More specifically, our interest is on examining how the meaning of official strategy gets constructed as it is being implemented, as well as and how and why the perceptions may evolve during implementation. Our data consists of official strategy documents and interviews from Finland's largest financial services group and its largest unit. The interviews cover all organisational levels, enabling us to reveal the variations of perceptions of strategy as it is being implemented. The data analysis is carried out by means of qualitative interpretation. According to our findings, the main goal of becoming the leading bank, as outlined in the official strategy, had been adopted throughout the organisation hierarchically. However, conceptions of what would constitute ‘a leading bank’ varied, especially horizontally. The plausibility of the official strategy is constructed through rational techniques (e.g. numerical ‘objective’ accounting information) intertwined with storytelling. As a result we propose that strategy implementation may best be understood as fantasising involving two forms: functional (explicit, short-term-oriented) and symbolic (metaphorical, long-term-oriented). We offer fantasising in these two forms as an addition to fantasy-oriented strategy literature for further exploration to better understand the nature of strategy work.     

Firms as liquidity providers: Evidence from the 2007–2008 financial crisis

Using a supplier–client matched sample, we study the effect of the 2007–2008 financial crisis on between-firm liquidity provision. Consistent with a causal effect of a negative shock to bank credit, we find that firms with high precrisis liquidity levels increased the trade credit extended to other corporations and subsequently experienced better performance as compared with ex ante cash-poor firms. Trade credit taken by constrained firms increased during this period. These findings are consistent with firms providing liquidity insurance to their clients when bank credit is scarce and offer an important precautionary savings motive for accumulating cash reserves.     

The role of the corporate income tax as an automatic stabilizer

This paper analyses the effectiveness of the corporate income tax as an automatic stabilizer. It employs a unique firm-level data set of German manufacturers combining financial statements with firm-specific information about credit market restrictions. The results show that approximately 20 per cent of all firms report both positive taxable income and capital market restrictions. Taking account of the income tax rates and the size differences of the firms, we find that demand stabilization through the corporate income tax amounts to about 8 per cent of an initial shock to gross revenues. This stabilization effect varies over the business cycle and tends to increase during cyclical downturns.     

New development: Wang Anshi's Wanyanshu as the origins of modern public management?

The drive for efficiencies across all areas of public spending in the UK has accelerated the need for improvements in service performance. This article considers how police performance might be improved through the adoption of a ‘Lean’ philosophy. This is seen as a potential driver for internal police improvements and is made in response to the government's call for reform and to address the challenges of a decrease in future police funding.     

Where is the ethical knowledge in the knowledge economy?: Power and potential in the emergence of ethical knowledge as a component of intellectual capital

There is a growing discussion of intellectual capital and the knowledge economy more generally within the accounting literature. This literature, however, has focused narrowly on the considerable discrepancy between book and market values and the inability of traditional accounting concepts and methods to deal with the intangible nature of key sources of corporate competitive advantage. This essay contributes to this literature by providing a broadly poststructuralist reading of the emergence of ethical knowledge as a component of intellectual capital, a category of asset that has almost been completely overlooked within the extant accountant literature on the knowledge economy. The paper does three things. Firstly, it draws on a broad review of the accounting literature to explore how intellectual capital is being defined and constructed within that literature. Secondly, it provides a poststructural analysis of the way ethical knowledge emerged within the intellectual capital statements of an early innovator in Intellectual Capital reporting. Finally, the paper tentatively hints towards the moral and civic potential of alternative conceptualisations of ethical knowledge networks at the margins of the knowledge economy and considers some areas for further research in this regard.     

Communicating the ‘migrant’ other as risk: space,EU and expanding borders

Forced migration and border spaces as fault lines posing risks to society through the notion of ‘Othering’, remain under-explored in risk literature. With Europe facing its biggest humanitarian crisis with forced migration and displacement due to conflict zones, the borders of the European Union have received renewed attention in media. Refugees and the displaced are often depicted as ‘migrants’ and are seen as transgressing borders as illegitimate entities. Although increasing attention has been paid to border patrol and issues of securitization since 9/11, the ‘migrant’ body as ‘risky body’ in political and policy discussions is under-conceptualized and theorized in risk literature. We examine political discourses of the UK Government to discern how the migrant and the expanding borders of the EU are framed as forms of societal and economic risk and equally how these are mitigated with and through the discourse of space and borders. We take a constructionist approach to the ‘migrant’ problem in the EU and UK where risk is socially constructed through political discourse.     

Business as Usual? An Institutional View of the Relationship Between Management Control Systems and Strategy

The relationship between management control systems (MCS) and strategy has received considerable attention in the management control literature. Contingency‐based approaches, however, have traditionally dominated this research, with limited attention devoted specifically to how MCS and strategy may combine in organisations operating within highly institutionalised environments. Adopting an institutional perspective, the current study is based on interviews with CEOs and senior executives in 32 Australian Not‐for‐Profit organisations. Our findings indicate a tendency for these organisations to decouple informal control from MCS, producing a ‘business as usual’ mentality via the pervasive informal approach to control, supplanting contingency‐based predictions relating to MCS‐strategy relations.     

Does the ECB act as a lender of last resort during the subprime lending crisis?: Evidence from monetary policy reaction models

We investigate whether the ECB aligns its monetary policy with financial crisis risk in EMU member countries. We find that since the outbreak of the subprime crisis the ECB has significantly increased net lending and reduced interest rates when banking and sovereign debt crisis risk in vulnerable EMU countries (Greece, Ireland, Italy, Portugal, and Spain) increases, while no significant effect is identified for the pre-crisis period and relatively tranquil EMU countries (Austria, Belgium, France, Germany, and the Netherlands). These findings suggest that the ECB acts as a Lender of Last Resort for vulnerable EMU countries.     

Does prevention as an investment strategy explain the intention to purchase guarantees for unit-linked life insurance?

The present paper examines the relationship between prevention as an investment strategy and the perceptions about unit-linked insurance on the intention to purchase interest rate guarantees for such products. We propose a framework in which the relationship between adopting prevention as an investment strategy, and the intention to purchase interest rate guarantees is moderated by the level of financial literacy of the individual and this interaction is mediated by the perceptions regarding unit-linked insurance. We find support for our conceptual model by testing it on a sample of 1017 financial decision makers in Germany using a moderated mediation analysis. The paper therefore offers insights into the decision-making process of financial consumers in Germany and presents practical implications for designing products for age-old provision.     

Does the Stock Market See a Zero or Small Positive Earnings Surprise as a Red Flag?

This study shows that firms collectively incur a cost for managing earnings and analyst expectations to meet earnings forecasts. We compare the coefficient in the regression of abnormal stock returns on earnings surprise (the earnings response coefficient [ERC]) across ranges of earnings surprises. The ERC for earnings surprises in the range [0, 1¢] is significantly lower than ERCs for earnings surprises in adjacent ranges for firm-quarters in the early and mid 2000s, but not for those in the 1990s. The results are robust to controlling for the sign of estimated discretionary accruals and the trajectory of analyst earnings forecasts. We further find that investors are right to be skeptical about earnings surprises in the range [0, 1¢]. The relation of future earnings surprise with current earnings surprise is more negative for current earnings surprises in that range than for those in any other range. Evidence also suggests analysts react negatively to earnings surprises in that range.     

A new closed-form solution as an extension of the Black–Scholes formula allowing smile curve plotting

In this paper, as a generalization of the Black–Scholes (BS) model, we elaborate a new closed-form solution for a uni-dimensional European option pricing model called the J-model. This closed-form solution is based on a new stochastic process, called the J-process, which is an extension of the Wiener process satisfying the martingale property. The J-process is based on a new statistical law called the J-law, which is an extension of the normal law. The J-law relies on four parameters in its general form. It has interesting asymmetry and tail properties, allowing it to fit the reality of financial markets with good accuracy, which is not the case for the normal law. Despite the use of one state variable, we find results similar to those of Heston dealing with the bi-dimensional stochastic volatility problem for pricing European calls. Inverting the BS formula, we plot the smile curve related to this closed-form solution. The J-model can also serve to determine the implied volatility by inverting the J-formula and can be used to price other kinds of options such as American options.     

IPSAS or IFRS as the Framework for Public Sector Financial Reporting? New Zealand Preparers’ Perspectives

The last 30 years have seen public sector accounting in many countries undergo considerable change. More recently, some governments adopted accrual accounting and International Public Sector Accounting Standards (IPSAS), some adopted modified International Financial Reporting Standards (IFRS) while others continued with cash‐based accounting. New Zealand (NZ) has, for more than two decades, followed a sector neutral approach to financial reporting and standard setting where the same accounting standards were applied to all entities in all sectors: for‐profit, not‐for‐profit and the public sector. This period included the adoption of IFRS by for‐profit entities with minor modifications for the public sector. The suitability of IFRS for the public sector has been questioned and, recently, standard setters in NZ decided to adopt a sector‐specific standard‐setting approach with multiple tiers for each sector. The for‐profit sector will continue to follow IFRS but reporting standards for the public sector will be based on IPSAS. In this period of change we sought the views of preparers of public sector financial reports regarding the users of such reports and their preferences for the public sector reporting framework. We also sought the views of the preparers regarding the usefulness of each financial statement for users, and whether the benefits of reporting by their organisations exceeds the costs. The findings indicate support for maintaining IFRS as a basis for reporting in the NZ public sector. However, IPSAS modified to NZ conditions is also perceived as an acceptable option by respondents in this study. The income statement is, in the opinion of the respondents in this study, the most useful statement while cash flows appear to hold little value. A high proportion of respondents believe that the benefits of reporting exceed the costs, which contradicts the view that such reports are mainly compliance documents that provide little value. This finding contributes to the continuing debate on costs versus benefits on the recent introduction of IPSAS as the reporting framework for the public sector and the perceived appropriateness of IPSAS in public sector reporting.     

Executive flight simulator as a learning tool in new companies’ resource planning based on the balanced scorecard

In many cases, a deficient strategic planning in new companies has led entrepreneurs to take inadequate initial decisions that, in the long term, reflect consequences in the failure of many new businesses. The objective of this article is to propose an executive flight simulator, which will help to identify and evaluate the different development strategies for resources of a new manufacturing company, under the four perspectives of the balanced scorecard, educating the user on the impact that these would have in the main performance indicators. The simulator is designed utilizing the focus of system dynamics to be used didactically in master's degree programs in administration, by entrepreneurs or in executive development programs.     

THE CHINESE NATIONAL WHO SURFS THE SEA OF FINANCE IN ASIA——The Cover Personage incarnates the elegant Chinese national as the first Ranking Vice President of the ADB,famous economist and Financier active in the international financial arena

Lin Zexu,a patriot,thinker and national hero,who served as Governor for Hu Guang and Governor for Liang Guang and in other positions in Qing Dynasty,composed a couplet for self-motivation."Vast is the sea which embraces flows from millions of rivers;and upright is the precipice which rises single-mindedly to the zenith."He encouraged himself by this couplet to be magnanimous,receptive,and upright and to be a man of unbending principle.This is a motto which Jin Liqun has followed the first day he took office in Asian Development Bank (ADB),to guide his work and the way he conducts himself in this community.He practices in accordance with this principle as he carries out the mandate of this multilateral financial institution.Jin Liqun has won the accolade that he is     

Asian Financial Cooperation as Seen From Europe

In fact, I am convinced that steps to promote the Asian bond market have the potential to make a contribution to monetary and financial cooperation in Asia that goes beyond simply deepening and enhancing the efficiency of today's bond markets. Let me explain what I have in mind by looking at Asian monetary cooperation through the European rear-view mirror. In doing so, I will first make some broad-brush comparisons between Asian and European developments and then present some observations on the forces that, in my mind, have driven the process of cooperation in Europe - leaving it to you to decide whether a similar development could be expected in Asia.     

GARCH in question … and as a benchmark

GARCH models of volatility are ubiquitous. Over the past twelve years, the GARCH industry has produced an almost infinite number of volatility time series from an extremely wide range of return series. The main purpose of this paper is to revisit the notion of volatility. Although we stop just short of questioning the necessity (and certainly the success) of GARCH, we demonstrate that for at least one type of data—long term interest rates—it is possible to essentially reproduce GARCH volatility time series with simple moving averages of deviations from mean return. We also demonstrate (empirically) a functional relationship between GARCH(1,1) parameters and the optimal moving average window width. At the present time these results are based on the utilisation of GARCH volatility as a benchmark against which we select the optimal number of terms in the simple moving average representation. One possible avenue of research that might lead to the removal of this requirement is suggested. An interesting applied result that emerged from our analysis is this: from 1952 to the present, USA interest rate volatility has the highest overall cross-correlation with the interest rate volatilities of other countries.     

Why do firms appoint CEOs as outside directors?

Companies actively seek to appoint outside CEOs to their boards. Consistent with our matching theory of outside CEO board appointments, we show that such appointments have a certification benefit for the appointing firm. CEOs are more likely to join boards of large established firms that are geographically close, pursue similar financial and investment policies, and have comparable governance to their own firms. The first outside CEO director appointment has a higher stock-price reaction than the appointment of another outside director. Except for a decrease in operating performance following the appointment of an interlocked director, CEO directors do not affect the appointing firm's operating performance, decision-making, and CEO compensation.