Can position limits restrain ‘rogue’ trading?

This paper studies the imposition of position limits on commodity futures from the perspective of curbing excessive speculation and thus manipulation. We present a simple general equilibrium model in a static rational expectations framework and agent heterogeneity to illustrate that excessive speculation serves to enrich other agents at the expense of the speculator. Position limits, on the contrary, are not only superfluous, but also counter-productive, as they exacerbate market power and lead to a deterioration in efficiency. Position limits not only reduce social welfare but also cannot restrain market manipulation.     

The ‘Wild Cards’ of European futures: Planning for discontinuities?

The use of Wild Cards has been extensively developed in the corporate world, particularly by companies dealing with strategic commodities in global markets, i.e., the nexus between warfare, oil, and energy use. One of the purposes of Wild Cards is to test the ability of a system - usually a large organisation - to react to unforeseen but high-impact events. The work presented in this article was undertaken in the context of the project on ‘Spatial Scenarios’ for the European Spatial Planning Observation Network (ESPON) Programme. In this project, four Wild Cards were introduced: “an era of energy scarcity”, “the demise of Europe's social security system”, “the gulf stream stops”, and “the dollar goes down the drain”. These Wild Cards were introduced to investigate how external events may have asymmetric impacts across the European territory, to include some reflections on themes that were not included in the integrated scenarios, and to raise awareness of the fact that today's policy choices have to be evaluated not only in the light of current policy goals but also in the light of possible, sometimes dramatic, future events. In this way the Wild Cards helped to highlight the potential impact of external events on the territorial development of Europe and their particular impact on the internal disparities between the regions.     

What's a business for?

In the wake of the recent corporate scandals, it's time to reconsider the assumptions underlying American-style stock-market capitalism. That heady doctrine--in which the market is king, success is measured in terms of shareholder value, and profits are an end in themselves--enraptured America for a generation, spread to Britain during the 1980s, and recently began to gain acceptance in Continental Europe. But now, many wonder if the American model is corrupt. The American scandals are not just a matter of dubious personal ethics or of rogue companies fudging the odd billion. And the cure for the problems will not come solely from tougher regulations. We must also ask more fundamental questions: Whom and what is a business for? And are traditional ownership and governance structures suited to the knowledge economy? According to corporate law, a company's financiers are its owners, and employees are treated as property and recorded as costs. But while that may have been true in the early days of industry, it does not reflect today's reality. Now a company's assets are increasingly found in the employees who contribute their time and talents rather than in the stockholders who temporarily contribute their money. The language and measures of business must be reversed. In a knowledge economy, a good business is a community with a purpose, not a piece of property. If, like many European companies, a business considers itself a wealth-creating community consisting of members who have certain rights, those members will be more likely to treat one another as valued partners and take responsibility for telling the truth. Such a community can also help repair the image of business by insisting that its purpose is not just to make a profit but to make a profit in order to do something better.     

What is in a name? A rejoinder to Ziauddin Sardar's ‘the namesake’

Names are not merely labels. They have meaning and significance, my own life has been shaped by my name. So what we call our schoalrly pursuits and practice is important. I do prospective, not futures studies. This essay explores the significance of the term ‘prospective’ and suggests that it has aspirations of becoming a discipline.     

What's the matter with business ethics?

The more business ethics secures its status in campuses across the country, the more bewildering it appears to actual managers. It's not that managers dislike the idea of doing the right thing. As University of Toronto Assistant Professor Andrew Stark argues, far too many business ethicists just haven't offered them the practical advice they need. Before business ethics became a formal discipline, advocates of corporate social responsibility claimed that the market would ultimately reward ethical behavior. But ethics and interests did not always intersect so fruitfully in the real world. And when they did not, managers were left in the dark to grope for the right ethical course. In the 1970s, the brand-new field of business ethics came onto the scene to address this issue. Critical of the "ethics pays" approach, academics held that ethics and interests can and do conflict. Still, scholars took an equally unrealistic line. To them, a manager's motivation could be either altruistic or self-interested, but never both. In short, ethicists still weren't addressing the difficult moral dilemmas that managers face on a day-to-day basis, and only recently have they begun to do so. After some initial stumbles, ethicists are getting their hands dirty and seriously considering the costs of doing the right thing. Finally, a new business ethics is emerging that acknowledges and accepts the messy world of mixed motives. As a result, novel concepts are springing up: moderation, pragmatism, minimalism, among others.(ABSTRACT TRUNCATED AT 250 WORDS)     

Is American business working for the poor?

At first glance, poverty seems to have little to do with business. When most people--managers included--think about poverty, they assume that people are poor because they are isolated from the mainstream economy, not productive participants in it. But according to Harvard University professors Mary Jo Bane and David Ellwood, this is a misleading image of the true face of poverty in the United States today. Most poor adults--and a full 90% of poor children--live in families where work is the norm, not the exception. Poor people often work or want to work. But at the low-wage end of the American economy, having a job is no guarantee of avoiding poverty. Poverty is a business issue, then, because the American poor are part of the American work force. And this poses a problem for managers. In a more competitive and fast-changing economic environment, the performance of companies increasingly depends on the capabilities of their employees. In response to this human-resource challenge, more and more managers are embracing the language of "empowerment". And yet how can low-wage employees believe empowerment when their experience of work is, quite literally, impoverishment? It is unlikely that American companies can create the work force of the future with the poverty policies of the past. Fortunately, there are some simple policy mechanisms that can assist the working poor without putting an undue burden on business. Enacting them, however, requires managers to see poverty policy as one part of a national human-resource strategy that links the strategic concerns of companies to a broad social agenda.     

Can science be a business? Lessons from biotech

In 1976, Genentech, the first biotechnology company, was founded by a young venture capitalist and a university professor to exploit recombinant DNA technology. Thirty years and more than 300 billion dollars in investments later, only a handful of biotech firms have matched Genentech's success or even shown a profit. No avalanche of new drugs has hit the market, and the long-awaited breakthrough in R&D productivity has yet to materialize. This disappointing performance raises a question: Can organizations motivated by the need to make profits and please shareholders successfully conduct basic scientific research as a core activity? The question has largely been ignored, despite intense debate over whether business's invasion of basic science-long the domain of universities and nonprofit research institutions- is limiting access to discoveries, thereby slowing advances in science. Biotech has not lived up to its promise, says the author, because its anatomy, which has worked well in other high-tech sectors, can't handle the fundamental challenges facing drug R&D: profound, persistent uncertainty and high risks rooted in the limited knowledge of human biology; the need for the diverse disciplines involved in drug discovery to work together in an integrated fashion; and barriers to learning, including tacit knowledge and murky intellectual property rights, which can slow the pace of scientific advance. A more suitable anatomy would include increased vertical integration; a smaller number of closer, longer collaborations; an emphasis by universities on sharing rather than patenting scientific discoveries; more cross-disciplinary academic research; and more federal and private funding for translational research, which bridges basic and applied science. With such modifications, science can be a business.     

Do equity financing cycles matter? evidence from biotechnology alliances

In periods characterized by diminished public market financing, small biotechnology firms appear to be more likely to fund R&D through alliances with major corporations rather than with internal funds (raised through the capital markets). We consider 200 alliance agreements entered into by biotechnology firms between 1980 and 1995. Agreements signed during periods of limited external equity financing are more likely to assign the bulk of the control to the larger corporate partner, and are significantly less successful than other alliances. These agreements are also disproportionately likely to be renegotiated if financial market conditions subsequently improve.     

Voluntary hospices in England: A viable business model?

This article is concerned with how the UK Government's End of Life Care Strategy seeks to draw upon the capacity and additional choice provided by voluntary charitable hospices in England. Constructing a hospice financial business model we consider the extent to which the policy intersection outlined in the Governments End of Life Care Strategy between Primary Care Trust (PCT) commissioning and the contribution of voluntary hospices is now robust or fragile going forward. Analysis in this paper reveals how charitable income streams donated to voluntary hospices are significant relative to government funding but that this income is uncertain and volatile. Hospices trustees thus maintain balance sheet reserves and invest in capital markets to secure additional financial leverage. In this paper we argue that this serves to recycle and amplify financial uncertainty at a time when the demand for palliative care will increase. The UK population is ageing and hospices are under pressure to provide increased scope for end of life care. Government policy must address the contradictory forces that operate within the hospice business model to secure the capacity to deliver palliative care and patient choice going forward.     

Does familiarity with business segments affect CEOs' divestment decisions?

We examine the impact of familiarity with business segments on CEOs' divestment decisions. We find CEOs are less likely to divest assets from familiar than from non-familiar segments. We attribute this effect to CEOs' comparative information advantage with respect to familiar segments. Consistent with this information advantage, we document that the familiarity effect is particularly strong in R&D intensive industries. We further find the familiarity effect to be most pronounced for longer-tenured CEOs who have built up sufficient political power over the course of several years in office to enable implementation of their preferred divestment choices. We also document the value effects of divestments and show that familiarity affects returns on divestment announcements.     

Who owns the long term? Perspectives from global business leaders

Day-to-day management is challenging enough for CEOs. How do they manage for the long term as well? We posed that question to four top executives of global companies. According to Maurice Levy, chairman and CEO of Publicis Groupe, building the future is really about building the present and keeping close to the front line--those who deal with your customers and markets. He also attributes his company's success in large part to knowing when to take action: In a market where clients' needs steer your long-term future, timing is everything. UPS Chairman and CEO Mike Eskew emphasizes staying true to your vision and values over the long run, despite meeting obstacles along the way. It took more than 20 years, and many lessons learned, to produce consistent profits in what is today the company's fastest-growing and most profitable business: international small packages. Wulf H. Bernotat, CEO of E.ON, examines the challenges facing business leaders and politicians as they try to balance energy needs against potential environmental damage. He calls for educating people about consumption and waste, and he maintains that a diverse and reliable mix of energy sources is the only way to ensure a secure supply while protecting our environment. Finally, Marianne Barner, the director of corporate communications and ombudsman for children's issues at IKEA, discusses how the company is taking steps to improve the environment and be otherwise socially responsible. For example, it's partnering with NGOs to address child labor issues and, on its own, is working to help mitigate climate change. IKEA's goals include using renewable sources for 100% of its energy needs and cutting its overall energy consumption by 25%.     

What business are you in? Classic advice from Theodore Levitt

For all the talk about management as a science, experienced executives know that strategic decisions and tactics depend heavily on context. No one understood this better than Theodore Levitt (1925-2006). A Harvard Business School professor renowned as a founder of modern marketing, he sought above all to use his knowledge to serve the needs of businesspeople. In a series of powerfully insightful--and delightfully written--essays in Harvard Business Review, he provoked readers to reexamine their settled thinking about vital issues so that they could better meet the needs of customers. Levitt had the gifts of provocation and generalization, offering ideas that startled readers but compelled them to think creatively and intelligently about their companies. Writing in a period when business was held in far less esteem than it is today, he rejected the easy contempt that many intellectuals had for managers and consumers. Levitt carried that practical approach to his tenure at Harvard Business Review from 1985 to 1989. As one of HBR's most intellectual and most populist chief editors, he understood that the magazine's main purpose was to serve as a kind of sophisticated translation, clarifying authors' raw-and sometimes rough-ideas for impatient, time-pressed readers. This tribute, a look into one of business's great minds, offers excerpts from six of Levitt's most influential HBR articles: "Marketing Myopia" (July-August 1960) "After the Sale Is Over..."(SeptemberOctober1983) "Marketing Success Through Differentiation-of Anything" (January-February 1980) "Production-Line Approach to Service" (September-October 1972) "The Globalization of Markets" (May-June 1983) "Creativity Is Not Enough" (May-June 1963).     

Does goodwill pressure drive business restructuring based on subsidiary disposal?

This study investigates whether the existence of goodwill influences firms to remove subsidiaries from consolidation to reduce the pressure from potential impairment loss. Using a sample of Chinese A-share listed companies between 2007 and 2018, we find that the magnitude of goodwill is associated with firms' decisions to dispose of their merged subsidiaries. Also, the likelihood of disposing of subsidiaries is higher among firms with greater impairment probability due to a larger amount of goodwill and lower profitability. Additionally, we observe that firms may simultaneously employ both disposal strategies and impairment write-offs to reduce goodwill pressure. In the cross-sectional analyses, we find that the effect varies between SOEs and non-SOEs. Our findings present the real effect of goodwill impairment on companies' decision-making and provide insights into the impact of accounting practices on firms' investment strategies.     

Can banks monitor small business borrowers effectively using hard information?

We investigate whether banks rely on hard information to monitor small business borrowers and to what extent hard information is credible. Using Japanese firm-level data, we show that banks reduce the amount of lending to defaulting firms if the firms are financially distressed and suffer operating losses. In contrast, banks do not significantly reduce the amount of lending to defaulting firms with low levels of leverage and high profitability. This implies that banks mitigate type II errors if they receive default signals using the hard information of informationally opaque small businesses.     

Origin matters: How does institution imprint affect family business TFP?

Initial imprint rooted in family business origin renders us great support to identify how current institution conditions and then governance characteristics influence productivity. This study investigates an underexplored institutional imprint effect moulded amid the central planning-to-market orienting transition—the lasting influence of family business origin. Focusing on China, we find that restructured family firms have higher TFPs compared with their entrepreneurial counterparts, thanks to institutional imprint differences. The effect is causal and barely varied with CEO's professional capacity and economic policy uncertainty. The imprints of institutional environment in founding phase and incurred current behavior preferences contribute to divergent productivities, isolating the effect of intervention from the alternative explanation about resource endowment discrepancy across restructured and entrepreneurial family firms.     

Credit risk and the business cycle: What do we know?

We perform a meta-regression analysis to characterize the relationship between ex post credit risk, measured through non-performing loans and real GDP growth. Although the prior empirical literature reveals a statistically significant inverse association, the precise effect of growth performance to credit quality diverges and remains subject to several qualifications. Using estimates from 56 studies and applying a Bayesian meta-regression analysis we explore the systematic patterns of the heterogeneity in the reported estimates. According to our evidence, the specification form as well as features related to the type of data, and the sample period are factors that systematically influence the estimated results.