Community care in England,Scotland and Wales

How far does the writ of Whitehall and Westminster really run? An analysis of community care shows that a policy common to successive Governments has been interpreted in radically different ways in England, Scotland and Wales. Can this lack of uniformity be turned to advantage?     

Pension Funds and the U.K. Economy

Abstract

The paper considers the impact of U.K. defined benefit (DB) pension plan unding and investment on the U.K. economy. It suggests that many conventional theories are based on incomplete or inconsistent economics. In particular, the author suggests that:

? An economy cannot really gain competitive advantage from high returns on the domestic assets in which pension funds invest.

? DB liabilities are essentially similar for most schemes and can be closely matched with bonds.

? Funding pension liabilities has no primary impact on individuals’ consumption and saving or on firms’ capital investment.

? Pension funds are not natural investors in the equity of new ventures.

The conclusion of the paper is that the most significant impact of pension funds on the U.K. economy relates to the costs imposed by extreme mismatching between their financial assets and liabilities. The author argues that such risks can, in essence, “crowd out” entrepreneurial risk. He asserts that the U.K. economy would gain from greater focus on the matching of these assets and liabilities, and that the best way to stimulate enterprise is by eliminating the frictional costs in the economy arising from current practices.     

Export Competition and the Remission of Domestic Environmental Taxes

We consider the use of border adjustments to compensate exporters for domestic environmental taxes imposed on an intermediate good. A model of successive oligopoly is used to consider the appropriate border adjustments. In this set-up, the relative importance of the forward incidence of the environmental tax and the backward incidence of the remission play a key role. The results highlight that the simple rule employed by GATT/WTO to set the export remittance equal to the level of the environmental tax is likely to be inappropriate.JEL Code: H87, Q38     

The Impact of Environmental Regulation on Productivity and Exports: A Firm-Level Evidence from China

Abstract

This paper investigates the influence of environmental regulation on firm performance, as captured by firm productivity and firm exports. We first construct a Melitz-style model investigating the causal effects of environmental regulation on firm productivity and firm exports, and then test the theoretical predictions using firm-level data over the period 2005–2009. The theoretical and empirical investigation suggests that environmental regulation promotes firm productivity slightly with a lagged effect, has a harmful impact on firm exports, and has a U-shaped relationship with firm exports. China is to the far left of the inflection point, but this U-shaped relationship is not present at firms in clean industries and clean regions.     

Note on a new method of construction of mortality tables when the number of lives exposed to risk is unknown

Abstract

It has been known for some time that the d^bx column in a mortality table can be considered as a compound frequency curve with a limited number of maxima and minima. From a theoretical point of view this is of course a self evident conclusion which follows directly from the so-called genetic theory of frequency originally introduced by Laplace. He showed that any frequency distribution can be considered or generated as the sum of a very large number of elementary errors, referrable to several sources of error, each group or error having its own peculiar law of error. While the pure theory of the generation of frequency curves from such secondary sources of elementary errors is simple enough, the inverse and essentially practical problem of decomposing a compound frequency curve into its component or constituent elements is by no means simple and often presents great difficulties, especially if certain restrictions are imposed upon the component curves. An example of such restrictions would be the requirement that all the component curves should be normal Laplacean probability curves.     

Financial Regulation,Exchange Rate Exposure,and Hedging Activities: Evidence from Korean Firms

ABSTRACT

In this article, we attempt to estimate whether firm-specific exchange rate exposures affected by hedging activities can be improved through financial regulation or supervision. To analyze this, we compose three-step estimations by using a sample of KOSPI 200 firms during 1,803 trading days between 2005 and 2012. We first estimate the relationship between exchange rate exposure and hedging activities and see whether financial regulation had any effect on hedging activities. Furthermore, using TSLS analysis, we estimate the effect of hedging activities on exchange rate exposure, which is caused by tightened financial regulation in the form of corporate governance. We report the following findings. First, firms are less likely to be exposed to exchange risk with more hedging activities. Second, corporate governance has a strongly positive effect on the hedging activities. Firms use more hedging tools when they have a strong structure of shareholder’s protection, clear outside ownership, and a better monitoring system; but the relationship becomes weaker in times of crisis.     

Regulatory pressure and fire sales in the corporate bond market

This paper investigates fire sales of downgraded corporate bonds induced by regulatory constraints imposed on insurance companies. As insurance companies hold over one-third of investment-grade corporate bonds, the collective need to divest downgraded issues may be limited by a scarcity of counterparties. Using insurance company transaction data, we find that insurance companies that are relatively more constrained by regulation are more likely to sell downgraded bonds. Bonds subject to a high probability of regulatory-induced selling exhibit price declines and subsequent reversals. These price effects appear larger during periods when the insurance industry is relatively distressed and other potential buyers' carpital is scarce.     

Spillover of corporate governance standards in cross-border mergers and acquisitions

In cross-border acquisitions, the differences between the bidder and target corporate governance (measured by newly constructed indices capturing shareholder, minority shareholder, and creditor protection) have an important impact on the takeover returns. Our country-level corporate governance indices capture the changes in the quality of the national corporate governance regulations over the past 15 years. When the bidder is from a country with a strong shareholder orientation (relative to the target), part of the total synergy value of the takeover may result from the improvement in the governance of the target assets. In full takeovers, the corporate governance regulation of the bidder is imposed on the target (the positive spillover by law hypothesis). In partial takeovers, the improvement in the target corporate governance may occur on voluntary basis (the spillover by control hypothesis). Our empirical analysis corroborates both spillover effects. In contrast, when the bidder is from a country with poorer shareholder protection, the negative spillover by law hypothesis states that the anticipated takeover gains will be lower as the poorer corporate governance regime of the bidder will be imposed on the target. The alternative bootstrapping hypothesis argues that poor-governance bidders voluntarily bootstrap to the better-governance regime of the target. We do find support for the bootstrapping effect.     

Efficient Factor Models For Yield Curve Dynamics

Abstract

This paper derives a class of efficient factor models that bridge a gap between factor models and Heath-Jarrow-Morton models. These efficient factor models provide arbitrage-free dynamics for the yield curve, can be readily extended to fit the current yield curve, and have closed-form formulas for pricing default-free zero-coupon bonds. The short rate is a state variable in these efficient factor models. There are no restrictions imposed on the functional form of the volatility of the short rate except for certain technical conditions to ensure the solvability of the associated stochastic differential equations. The stochastic volatility of the short rate can be one of the state variables. The paper also presents a closed-form solution for default-free discount bond prices in the Malkiel model and provides a new method to derive the Ritchken-Sankarasubramanian model.     

Asymptotics of bond yields and volatilities for extended CIR models under the real-world measure

ABSTRACT

The Cox–Ingersoll–Ross CIR short rate model is a mean-reverting model of the short rate which, for suitably chosen parameters, permits closed-form valuation formulae of zero-coupon bonds and options on zero-coupon bonds. This article supplies proofs of the formulae for the expected present value of payoffs under the real-world probability measure, known as actuarial valuation. Importantly, we give formulae for asymptotic levels of bond yields and volatilities for extended CIR models when suitable conditions are imposed on the model parameters.     

Three bags full,minister: How the London electricity board fixed tariffs for 1984/85

Not before time, the Government have been thinking how to restructure relations with the nationalised industries. A Treasury consultation paper (see also page 8) suggests that, among other measures, the Government are seeking to make board chairmen and members more ‘accountable’ ‐ in practice, more ‘sackable’ ‐ than at present. The following account of how one board reacted to a Treasury‐imposed policy decision ‐ the raising of electricity tariffs from 1 April 1984 ‐suggests that, if anything, boards need to be given greater, not less, protection against political interference.

Unhappy at the way the London Electricity Board agreed to the 2 per cent rise, the London Electricity Consultative Council, as was its right under the Electricity Act 1947, protested to the Electricity Council. This account is a summary of the evidence submitted by the Consultative Council at a formal hearing before the Electricity Council on 25 April 1984. It was given to us by Alex Henney, who was at the time chairman of the Consultative Council and ex‐officio member of the London Electricity Board. Later in the year, the Minister for Consumer Affairs declined to renew Henney's appointment as chairman of the Consultative Council, and refused to give reasons.

For further background to the tariff increase and the way in which it was imposed upon an unwilling industry, see Public Money, June 1984 page 41, and Anthony Harrison's article in Public Money, December 1984, and particularly pages 44–45.     

The choice of stratification points

Abstract

Extract

The importance of the problem of the optimum choice of stratification points, when conducting stratified sampling on a univariate population, has been pointed out by Dalenius (1950, 1957) In a simplified form, this problem may be given the following mathematical formulation.     

The Shift to Defined Contribution Pension Plans

Abstract

There has been a strong shift away from defined benefit (DB) pension plans toward defined contribution (DC) pension plans in the United States over the last 20 years. A variety of reasons for this shift have been proposed. In another paper in this issue, Krzysztof Ostaszewski presents a new hypothesis to explain the shift to DC plans in the United States. He argues that the decline in importance of DB plans is due to a shift in the way relative returns to macroeconomic factors of production, that is, capital and labor, are being rewarded in the national economy.

This paper attempts to test the Ostaszewski hypothesis using Canadian data. In Canada there has been only a slight decrease in DB plan coverage. It is shown that the Ostaszewski theory does not fit the Canadian experience well. Instead, it is argued that pension regulation and tax legislation play a crucial role in pension design and reform. It is also argued that the difference in pension regulation and taxation in Canada versus the United States has directly influenced plan sponsors in considering their pension objectives, costs, and risks. Differences in the proportion of the workforce that is unionized may also be important. The paper concludes that pension regulation and taxation are more important variables than are macroeconomic reward systems in the use of DB versus DC pension plans.     

Contracting out of a state pension scheme

Abstract

The title of this paper is not common in actuarial literature, but the subject is one which has become familiar to every Briton in the last two years and which is essentially actuarial. The phrase "contracting out" has become English shorthand for an arrangement by which a private pension scheme may decide that it will not join a State pension scheme, usually because it already provides equal or better benefits. If the private scheme "contracts out" it will be excused the payment of contributions and will, of course, forgo the benefits.     

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Croatia

Abstract

We examine the changes in Croatian accounting regulation, in the context of 2013/34/EU Directive implementation and analyse indirect effects of IFRS on national reporting regulation for non-listed companies. The main goal is to determine the level of conformity between Croatian accounting rules and IFRS as adopted by EU. Analysis shows that IFRS are used in the great extent as a source for provisions in Croatian Financial Reporting Standards (CFRS). There are only a few major differences between Croatian financial reporting standards and IFRS. However, there are a number of IFRS standards that are considered not to be relevant in the context of CFRS, as CFRS are intended to be used only by SMEs. Nevertheless, the management is permitted to use provisions and guidance from IFRS, if CFRS provisions are not applicable to a certain transaction or event.     

The Extra‐Territoriality of the Statutory Stay in an English Administration – Revisited

This note is written by way of an addendum to the author's article on the extra‐territorial scope of the stay imposed in an English administration which was published in this journal last year. 1 In that article, it was argued that the stay imposed in an English administration should be treated by the English courts as applying without territorial limitation but that the courts should nonetheless grant leave to proceed in other jurisdictions in any case where there is no sufficient connection with England. The purpose of this note is to reconsider the issue in the light of the decision of the Privy Council in Stichting Shell Pensioenfonds v Krys 2 on anti‐suit injunctions, where judgement was given some months after publication of the original article. It is suggested that the decision in Shell as to the circumstances in which an anti‐suit injunction will be granted has significantly narrowed the issue but that extra‐territoriality would nonetheless still be a desirable development.     

Coping with Suicide Attacks: Lessons from Israel

This article describes research on the challenges that suicide attacks and other mass casualty attacks have posed to policy-makers and first responders in Israel. The authors describe a model of response to attacks which focuses on defensive responses to terrorism: prevention, crisis management and reconstruction. The authors draw out the lessons for other countries and discuss the problems that still need to be addressed in order to cope effectively with current and future terrorist attacks.     

On the asymptotic behavior of the mixed poisson process

Abstract

The recent note by Pfeifer (1982) suggests that it might be useful to point out the intuitive nature of the limit theorems in question.     

The effects of power relationships: knowledge,practice and a new form of regulatory capture*

Abstract

In the wake of disasters, criticism tends to target regulatory failures and regulatory capture. In this status quo, the roles of regulators are black-boxed and criticism fails to explore what has been happening within and around regulatory institutions. This paper explores how relationships between regulators of hazardous industry and those who interact with them affect regulatory practice. Actor-network theory was utilised to generate findings drawn from a study of the Australian pipeline industry in order to reveal perspectives and the approaches of regulators in regulating pipeline risks. The findings indicate that pipeline regulators have a particular logic in practicing risk analysis. This paper argues that such a logic can be theorised as a new form of regulatory capture that limits the way regulators regulate risks and constrains the potential of regulatory outcomes. It is urged that a new form of logics of practice needs to be developed so as to improve the process of risk regulation in preventing catastrophic accidents.     

Improving Skewness of Mean-Variance Portfolios

Abstract

The widely accepted belief that asset returns and insurance product line margins are not normally distributed has motivated the use of skewness (or higher than second-order moments) in the context of optimal risk-reward portfolio allocation. Here we propose an optimization-based methodology to substantially improve the skewness of portfolios in the mean-variance efficient frontier. Unlike other related methods, the proposed methodology is very intuitive, noniterative, and simple to implement, and it can be readily and efficiently carried out using state-of-the-art optimization solvers. These characteristics should be very appealing to risk managers.