The magic of branding: The role of ‘pledge’, ‘turn’ and ‘prestige’ in fostering consumer trust in financial services

The purpose of this article is to study the impact of brand image on consumer trust through empirical investigation in the context of the financial services sector. While trust helps to bind consumers to brands, a strong brand image works like magic in reducing consumers’ risk perception and promoting trust. This study analyses how brand image influences consumers’ trusting intention through operationalising an interdisciplinary brand-trust model. Constructs and measures were drawn from interdisciplinary brand and trust literature and tested through employing EFA, CFA and structural equation modelling. Data were collected through a quantitative survey of 300 financial services consumers. Using the analogy of a magic trick, the study unveils the key role of financial services branding in engendering consumer trust in the ‘pledge’ or ‘prestige’ parts of the trick but not in the ‘turn’. The research contributes to the convergent and mutually inclusive theories of trust and branding as well as services marketing literature. For managers and policymakers in the financial services sector the findings will help them to effectively manage brand image and foster consumers’ trusting intention.     

Spanish healthcare public private partnerships: The ‘Alzira model’

Global infrastructure reports suggest that, in the wake of the fiscal crisis, healthcare PPPs are seen as a growing area as governments switch attention to social welfare projects. Spain is unique in having had a PPP hospital in operation for over a decade which is funded through a capitation fee. This paper takes a critical approach to evaluate this project, with our analysis showing that the original project could never have been viable and that the renegotiation of the contract has been costly to the government. Viewing the contract through a financialised lens we can see how this contract has been used to ‘make up’ a market for the private delivery of public healthcare in Spain. We also call into question the role of the Spanish savings banks in financing this type of project, which has now been replicated with further hospitals in Spain and Portugal, as well as in developing countries such as Lesotho.     

‘Optimal’ probabilistic and directional predictions of financial returns

This paper examines the probability of returns exceeding a threshold, extending earlier work of Christoffersen and Diebold (2006) on volatility dynamics and sign predictability. We find that the choice of the threshold matters and that a zero threshold (leading to sign predictions) does not lead to the largest probability response to changes in volatility dynamics. Under certain conditions there is a threshold that has maximum responsiveness to changes in volatility dynamics that leads to ‘optimal’ probabilistic predictions. We connect the evolution of volatility to probabilistic predictions and show that the volatility ratio is the crucial variable in this context. The overall results strengthen the arguments in favor of accurate volatility measurement and prediction, as volatility dynamics are integrated into the ‘optimal’ threshold. We illustrate our findings using daily and monthly data for the S&P500 index.     

The effect of banks’ financial reporting on syndicated-loan structures

We explore how an accounting measure of information asymmetry between lead and participating lenders influences syndication structures by examining whether lead lenders’ commercial and industrial (C&I) loan-loss provision validity affects the fraction of loans they retain. We first conduct multiple tests showing that C&I provision validity reflects banks’ underlying screening and monitoring effectiveness. We then find lead lenders’ loan share decreases with C&I provision validity, but not with non-C&I provision validity. Consistent with an information effect, we further find this association is attenuated by (i) alternative information sources about the borrowers and (ii) previous lead/participant relationships and participant/borrower relationships.     

The IPO of Industrial and Commercial Bank of China and the ‘Chinese Model’ of privatizing large financial institutions

We examine the privatization process of the Industrial and Commercial Bank of China (ICBC), the largest bank in the world by market capitalization, and its dual initial public offerings (IPOs) in the Hong Kong and Shanghai Stock exchanges in 2006. The Chinese government retains majority equity ownership of ICBC while foreign institutional investors hold minority equity stakes. Other large financial institutions went through the same reform process and have similar, post-IPO ownership structures. The largest Chinese banks, as a group, outperformed their counterparts from other emerging and developed markets before and during the 2007–2009 financial crisis. We argue that the ‘Chinese model’ of privatizing and managing large financial institutions can be advantageously used in other countries.     

The impact of intangibles on firms’ financial and market performance: UK evidence

This study provides empirical evidence about the effect of intangible assets on firms’ current and future financial and market performance by utilizing a sample the UK FTSE 150 nonfinancial companies. Generally, the findings of this examination reported a strong evidence on the role of intangibles in boosting firms’ performance. In particular, the results indicate that while goodwill (GW) does have a statistically positive effect on firms’ current and future performance, research and development (R&D) is only associated with firms’ future performance. The results of the current research is consistent with the market-based and resources-based theories which posits that intangible investments are the main driving factors of wealth creation in the long-run; Specifically, R&D operations can create new technologies and products that would enhance firms’ performance and value. In addition, the results reveal that both GW and R&D can explain variations in firms’ financial performance measures suggesting that such investments can enhance firms’ earning leading to capitalization such earnings in the market value. Finally, the results of this research provide practical implication for policy makers and managers.     

Assessments of ‘Greenhouse Insurance’: A Methodological Review

In this paper I review methodologies to assess strategies of greenhouse gas emissions reduction by installing existing technologies and by investing in research and development of advanced technologies, expressed as ‘greenhouse insurance’ by Manne and Richels (Buying greenhouse insurance: the economic costs of CO₂ emissionlimits. The MIT Press, Cambridge, 1992), under several sorts of uncertainty. While the authors of some advanced studies have applied exogenous and endogenous stochastic processes to deal with the uncertainty in their mathematical models on the economic assessment of climate change, this review points out some room for improving these approaches in ways that will result in more reasonable hedging strategies to cope with uncertain climate change, taking into account up-to-date research trends.     

Challenges and opportunities in disclosure research—A discussion of ‘the financial reporting environment: Review of the recent literature’

Beyer et al. (2010) review the financial reporting literature related to voluntary and mandatory firm disclosures, and sell-side analyst reports. The discussion summarizes their approach, highlights some of their main conclusions, and presents alternative ideas about promising avenues for future research.     

Fluctuations and response in financial markets: the subtle nature of ‘random’ price changes

Using trades and quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delilcated interplay between two opposite tendencies: long-range correlated market orders that lead to super-diffusion (or persistence), and mean revrting limit orders that lead to sub-diffusion (or anti-persistence). We define and study a model where the price, at any instant, is the result of the impact of all past trades, mediated by a non-constant ‘propagator’ in time that describes the response of the market to a single trade. Within this model, the market is shown to be, in a precise sense, at a critical point, where the price is purely diffusive and the average response function almost constant. We find empirically, and discuss theoretically, a fluctuation-response relation. We also discuss the fraction of truly informed market orders, that correctly anticipate short-term moves, and find that it is quite small.     

A commentary on ‘The long road to publishing: A user-friendly exposé’

Many of the pressing questions currently facing accounting education researchers are best addressed through experimental research. For example, experiments are useful in testing the effect of innovative educational practices on student learning. The purpose of this paper is to briefly review the literature addressing sources of invalidity which may cloud the results of experiments and describe several procedures which are helpful in controlling for these sources of invalidity. Examples are provided, from published accounting education research studies, which illustrate how researchers have attempted to address several of these threats to validity. Experiments must be carefully planned and designed, so the experiment on completion fulfills the objectives of the researcher. Although experiments are more difficult to conduct in the educational environment than in a scientist's laboratory, many procedures are available to assist accounting education researchers in designing tightly controlled experiments.     

The cost of firms’ debt financing and the global financial crisis

We provide an assessment of the determinants of the risk premium paid by non-financial corporations on long-term bonds. By looking at 5500 issues over the period 2005–2012, we find that in recent years the sovereign debt market turbulence has been a major driver of corporate risk. Compared with the three-year period 2005–2007 before the global financial crisis, in the years 2010–2012 Italian, Spanish and Portuguese firms paid on average between 70 and 120 basis points of additional premium due to the negative spillovers from the sovereign debt crisis, while German firms received a discount of 40 basis points.     

Entry and capital structure mimicking in concentrated markets: The role of incumbents’ financial disclosures

We examine whether the public availability of product market incumbents' financial disclosures leads to greater capital structure mimicking of incumbents by entrants. Exploiting a change in disclosure enforcement for German private firms in the mid-2000s, we find entrant-incumbent mimicking rises substantially in concentrated markets once incumbents' financial statements are publicly available. Additional tests exploring potential mechanisms are more consistent with interfirm learning underlying the effect than alternative channels. Our findings shed light on the effects of competitor financial statement disclosure on private firms’ initial financing decisions and highlight how capital structure dependencies among peer firms arise.