What we do and do not know about convertible bond financing

We review the literature on the issuance motives, shareholder wealth effects, and design of convertible bonds. Empirical studies on convertible debt issuance mainly focus on testing the predictions of four traditional theoretical models based on convertibles' potential to mitigate agency or adverse selection costs, and obtain mixed evidence. Recent studies on shareholder wealth effects of convertible bond issues highlight the need to control for arbitrage-related short selling and post-issuance risk changes. Studies on the determinants of convertible bond design uncover earnings management, as well as catering incentives to convertible arbitrage funds, as important determinants of innovations in convertible bond characteristics. Overall, our review indicates that recent empirical research on convertible debt provides valuable insights into issue motives and determinants of financial innovations, but also considers the broader question of how investor demand characteristics impact corporate finance decisions. We conclude with an overview of potential research questions to be addressed by future research on hybrid securities.     

Modelling the emergence of the interbank networks

Interbank contagion has become a buzzword in the aftermath of the financial crisis that led to a series of shocks to the interbank market and to periods of pronounced market disruptions. However, little is known about how interbank networks are formed and about their sensitivity to changes in key bank parameters (for example, induced by common exogenous shocks or by regulatory initiatives). This paper aims to shed light on these issues by modelling endogenously the formation of interbank networks, which in turn allows for checking the sensitivity of interbank network structures and hence, their underlying contagion risk to changes in market-driven parameters as well as to changes in regulatory measures such as large exposures limits. The sequential network formation mechanism presented in the paper is based on a portfolio optimization model, whereby banks allocate their interbank exposures while balancing the return and risk of counterparty default risk and the placements are accepted taking into account funding diversification benefits. The model offers some interesting insights into how key parameters may affect interbank network structures and can be a valuable tool for analysing the impact of various regulatory policy measures relating to banks’ incentives to operate in the interbank market.     

Natural Disaster Insurance and the Equity-Efficiency Trade-Off

This article investigates the role of private insurance in the prevention and mitigation of natural disasters. We characterize the equity‐efficiency trade‐off faced by the policymakers under imperfect information about individual prevention costs. It is shown that a competitive insurance market with actuarial rate making and compensatory tax‐subsidy transfers is likely to dominate regulated uniform insurance pricing rules or state‐funded assistance schemes. The model illustrates how targeted tax cuts on insurance contracts can improve the incentives to prevention while compensating individuals with high prevention costs. The article highlights the complementarity between individual incentives through tax cuts and collective incentives through grants to the local jurisdictions where risk management plans are enforced.     

A contingency theory perspective on the risk management control system within Birmingham City Council

In recent years the topic of risk management has moved up the agenda of both government and industry, and private sector initiatives to improve risk and internal control systems have been mirrored by similar promptings for change in the public sector. Both regulators and practitioners now view risk management as an integral part of the process of corporate governance, and an aid to the achievement of strategic objectives.The paper uses case study material on the risk management control system at Birmingham City Council to extend existing theory by developing a contingency theory for the public sector. The case demonstrates that whilst the structure of the control system fits a generic model, the operational details indicate that controls are contingent upon three core variables—central government policies, information and communication technology and organisational size. All three contingent variables are suitable for testing the theory across the broader public sector arena.     

Investigating explanatory theories on laypeople’s risk perception of personal economic collapse in a bank crisis – the Cyprus case

We investigate the explanatory power of decision, psychometric, and trust theory to describe laypeople’s risk perception of personal economic collapse in a bank crisis. The aim of this investigation is to improve the understanding of the effects of national initiatives for crisis fighting taken to prevent systemic risk. Using a stratified sample of 738 Cypriote citizens, we conducted an investigation in Cyprus in the spring of 2013 when the country was facing a bank crisis. At that point in time, the Cypriote Government had imposed capital controls to prevent a bank run. We find that decision theory variables alone have low explanatory value on laypeople’s risk perception, and that laypeople’s risk perception in this situation is affected primarily by psychometric variables. Further, confidence in one’s own bank also explains risk perception. Our findings contribute novel knowledge about risk perceptions in a financial crisis, with practical crisis management implications for regulators.     

The role of financial journalists in the expectations channel of the monetary transmission mechanism

Monetary policy relies on managing the inflation expectations of the public in order to influence prices (inflation). Relying on the South African experience, we argue that most of the general public are exposed to the communication of the South African Reserve Bank (SARB) only via the media. This state of affairs is fairly typical around the globe. We explored the role and biases of the journalists in transmitting the SARB’s communications to the rationally inattentive general public. Our aim was to obtain insights about the factors that influence media articles that deal with monetary policy issues. Using interviews and qualitative content analysis, we explored the extent of the journalists’ knowledge about inflation and monetary policy, their views concerning the credibility of the SARB, the sources of information they use, and the constraints and incentives they face in writing their articles.     

Bank funding stability,pricing strategies and the guidance of depositors

Banks face a ‘behavioralization’ of their balance sheets since deposit funding increasingly consists of non-maturing deposits with uncertain cash flows exposing them to asset liability (ALM) risk. Thus, this study examines the behavior of banks’ retail customers regarding non-maturing deposits. Our unique sample comprises the contract and cash flow data for 2.2 million individual contracts from 1991 to 2010. We find that contractual rewards, i.e., qualified interest payments, and government subsidies, effectively stabilize saving behavior and thus bank funding. The probability of an early deposit withdrawal decreases by approximately 40%, and cash flow volatility drops by about 25%. Our findings provide important insights for banks using pricing incentives to steer desired saving patterns for their non-maturing deposit portfolios. Finally, these results are informative regarding the bank liquidity regulations (Basel III) concerning the stability of deposits and the minimum requirements for risk management (European Commission DIRECTIVE 2006/48/EC).     

Beyond under the dome: an environmental documentary amplified public risk perception about air pollution in China

Abstract

Air pollution is a major environmental problem in China and it poses serious risks to public health. Based on the social amplification of risk framework (SARF), this study examines how media, in particular, an impactful environmental documentary titled Under the Dome, influenced Chinese citizens’ risk perception about air pollution. Survey results showed that exposure to the documentary amplified risk perception and risk perception was significantly related to viewers’ information seeking behaviors, policy support, and individual mitigation action about this issue.     

Associations between risk judgments and demand for transport risk mitigation

The present study tested a hypothesized model regarding associations between risk sensitivity, risk perception, transport priorities, worry, and demand for risk mitigation in transport. An additional aim was to investigate differences in risk perception, worry, risk sensitivity, transport priorities, and demand for risk mitigation in age-groups, gender, and educational levels. A mail survey was conducted in a representative sample of the Norwegian public over 18?years (n?=?1947) in 2008. The response rate was 31%. The results showed that transport priorities were the strongest predictor of demand for risk mitigation. Risk perception seems to be mediated by worry. Risk sensitivity was directly associated with transport risk perception and, not as predicted, also directly with demand for risk mitigation. The two youngest age-groups (18–30 and 31–50?years) perceived the probabilities of transport accidents in private transportation as significantly larger and also judged other nontransport risks to be larger than those over 50?years of age. The youngest age-group was more worried about injuries from private transportation, but reported lower demands for risk mitigation. The findings merit further research into the relationship between risk perception and demand for risk mitigation. The results indicated that younger individuals were more worried about injuries and assessed the probability of accidents to be larger, while they report a lower demand for risk mitigation compared to older age-groups.     

企业风险管理中的风险沟通机制研究

ERM是当今企业风险管理的核心标准,风险沟通是风险管理的重要方法,但企业风险沟通的研究尚不完备。本文将社会公共领域的风险沟通理论与COSO框架下的企业风险管理相结合,提出了一个风险沟通的理论假说,以全面风险感知、相互信任、伙伴关系和双向沟通模式作为该假说的四大支柱,以全面综合的方法,从企业内部(纵向)和企业外部(横向)两个维度构建了企业风险沟通体系,期望能够为企业层面的风险沟通发挥积极的作用。     

Who is afraid of the Ebola outbreak? The influence of discrete emotions on risk perception

The appraisal tendency framework (ATF) suggests that discrete emotions mediate the relationship between cognitive appraisals and behaviors. Based on the ATF, this study analyzed and found that fear, anger, anxiety, disgust, and sadness were positively related to the US public’s risk perception about the Ebola outbreak. Fear was also found to inhibit the degree to which systematic processing of the relevant risk information influenced participants’ support for institutional mitigation measures such as sending more health professionals to help countries in West Africa deal with the Ebola outbreak. The result partially confirms the ATF and offers important practical implications in regard to the communication of emergent public health crises.     

Chief Executive Officer Incentives,Monitoring, and Corporate Risk Management: Evidence From Insurance Use

Corporate governance and risk management issues have received prominent publicity in recent years following several major company failures such as Bear Stearns and Lehman Brothers. While prior studies have examined this issue within the context of derivatives’ trading, little is known regarding the linkage between corporate governance and alternative corporate risk management activities such as insurance. Using a detailed firm survey conducted by the World Bank (2004) , we examine the impacts of various governance monitoring mechanisms and chief executive officer (CEO) characteristics on the corporate insurance decision. Overall, our results suggest that both monitoring mechanisms and managerial incentives induce the corporate purchase of property insurance. However, the purchase of property insurance for managerial self‐interest is only prevalent in firms subject to lax monitoring, and the determinants of insurance purchases are more in line with the prediction of the economic theory in firms with strong monitoring. In addition, our study contributes a number of new insights into the determinants of corporate purchase of property insurance.     

What's in a frame? Social organization,risk perception and the sociology of knowledge

A central problem in the sociology of knowledge has been to show that sane people can intelligibly have quite different alternative understandings of the same problem, such as a kind of risk, without abandoning the idea that there is a real problem about which to disagree, and to show the social basis of both plurality and viability. In recent decades, attempts to make this problem tractable have focused on the idea of a ‘frame’. Theories of frames offer accounts of the range of content, as distinguished from theories of processes of diffusion, of which risk amplification theory is the best known example. In this article, several theories of frames – those of Goffman, D'Andrade, Moscovici, Gamson, Schön and Rein, and of prospect theory – found are to be inadequate, because of their lack of clarity and plausibility in their answers to four key questions: ‘what is the relationship between sense‐making and bias?’, ‘how are frames to be individuated?’, ‘where do frames come from?’, and ‘how far and how can people move between frames?’. The article makes the case for a neo‐Durkheimian institutional theory developed by Douglas and others. This approach derives frames as concrete applications to specific contexts from thought styles, which are in turn the product of solidarities or institutional styles of social organization, because it can offer clear, testable, parsimonious hypotheses with which to answer these four questions. The theory therefore provides an account of the institutional logic of framing, and presents reasons for preferring this to non‐institutional approaches such as the various kinds of cognitivism. The article offers three conceptual innovations with which to develop the neo‐Durkheimian theory, in order better to deal with the crucial fourth question about the scope for mobility between frames. These innovations and some specific hypotheses about the scope for mobility between frames are supported by consideration of some exploratory qualitative empirical research on privacy risk perception. The theory provides a more satisfactory strategy for tackling the core problem than most others, by showing plurality to be limited, by showing clear and specific social bases for plurality of frames, by neither wholly endorsing nor wholly rejecting any basic bias, and by showing that their conflictual and systemic interdependence is what makes for viability.     

创新信用衍生工具 提升风险管理能力——巴塞尔协议Ⅲ背景下的CRM

最新公布的巴塞尔协议Ⅲ,要求银行业充分吸取金融危机教训,切实加强信用风险管理。中国银行间市场推出的信用风险缓释工具,具有多项创新价值,发挥了本土市场成功经验。从微观角度,该工具有助于提高信用风险动态管理能力、丰富资本管理手段、支持逆周期管理和灵活平衡集中度;从宏观角度,该工具有助于打造渐进式风险管理机制、强化资本约束并带动市场基础建设。为进一步推进中国信用衍生产品市场发展,建议发挥商业银行的主导作用和非银行机构的辅助作用,完善交易机制、定价机制和会计处理,创新清算机制,并纳入银行自身风险管理流程。     

The two faces of social capital in private flood mitigation: opposing effects on risk perception,self-efficacy and coping capacity

Impacts of flooding are expected to increase, most notably in residential areas. As a consequence, private households are increasingly encouraged to engage in private flood mitigation complementary to public measures. Despite the growing literature on private flood mitigation, little is known about how social capital influences households’ perception of and coping with flood risks. This study draws on survey data of 226 flood-prone households in two Austrian Alpine municipalities, both recently affected by riverine flooding. We show that social capital cuts both ways: on the positive side, social capital increases perceived self-efficacy and provides critical support during and most notably after flood events. On the negative side, social capital reduces flood risk perceptions of private households. While social ties are effective when responding to and recovering from floods, the expectation of social support downplays risk, making precautionary action by households less likely. The results also show that flood-affected households receive more social support than they provide to others. In the long-run, this can lead to a problematic reciprocity imbalance, challenging the long-term stability of the interpersonal exchanges underlying social capital. Among the various sources of social support, informal social networks (neighbours, friends and relatives) provide the most important workforce in the response and recovery phase of a flood event. It is therefore crucial for flood risk management to recognise and promote the protective quality of social capital alongside conventional structural and non-structural measures.     

Engineered nanomaterials: risk perception,regulation and insurance

Concerns surrounding the health risk of engineered nanomaterials, effective regulation and the lack of specifically tailored insurance products for the nanotechnology sector are putting the industry’s long-term economic viability at risk. From the perspective of the underwriter, this article speculates on the relationship between risk perception, regulation and insurability. In the nanotechnology sector, regulators are currently failing to keep pace with innovation, and insurers generally lack guiding principles for underwriting occupational risk from nanomaterial exposure. Such vulnerabilities when combined with misguided risk perceptions can lead to the overpricing of risk transfer and ill-conceived regulatory initiatives, thus potentially exhausting resources and stifling innovation in the sector. In the absence of well-developed regulatory protocols, the insurance industry has, and will continue, to occupy a key role as an effective lobby in terms of improved risk management practice. We suggest that the insurance industry will increasingly rely on control banding frameworks and ‘risk mitigation at source’ methods developed in conjunction with their clients to manage severe acute diversifiable risks. Long tail risk will continue to represent a serious challenge to insurers and regulators. In the meantime, insurers will have to bridge their current needs with improvised solutions. As an example of one possible solution, we outline a framework that utilizes financial instruments to hedge an insurer’s exposure to uncertain estimates of these long-term risks.     

'New security' risks and public educating: the significance of recent evolutionary brain science

The response to 'new security' risks requires significant changes in public behaviour, and the legitimization of unpopular government policies. Public Educating (public information/public education) is one means to achieve this. The need is reflected in initiatives such as environmental education, development education, health promotion, and the Public Understanding of Science. Current strategies are often based on commercial advertising, but mass communications theory does not directly encompass influencing perception , which is necessary to create awareness of the new 'invisible' risks. Recent evolutionary brain science is providing fresh and relevant insights into our species perception deficits, which can inform a more effective approach to Public Educating. This paper first places risk within the context of the post-Cold War 'global security' agenda. It proposes a theoretical framework - 'brain lag' - to explain perceptual deficits in relation to this agenda, which draws on theories of information, adaptation and denial, and an understanding of the human senses including time-scale-latency. Fundamental areas of evolutionary perception are proposed which are relevant across the agenda: fear and disgust, number perception, and cheating. This leads to a core concept for Public Educating about new security risks, 'enhanced difference', and a set of hypotheses that can be applied to text or image.     

In our ivory towers? The research-practice gap in management accounting

This study reports on an investigation of 64 senior management accounting academics from 55 universities in 14 countries about the extent to which academic management accounting research does, and should inform practice. Drawing on the diffusion of innovations theory as a point of departure, and based on evidence obtained from a questionnaire survey and subsequent interviews, our findings reveal the prevalence of two broad schools of thought. One school, represented by the majority of senior academics, holds that there is a significant and widening ‘gap’ between academic research and the practice of management accounting, and that this gap is of considerable concern. In contrast, the other school holds that a divide between academic management accounting research and practice is appropriate, and that efforts to bridge this divide are unnecessary, untenable or irrelevant. From this empirical evidence, we advance a conceptual framework distinguishing between the ‘type’ of academic research undertaken, and the ‘users’ of academic research, and on the basis of this framework, contend that framing the relationship between academic research and practice as a ‘gap’ is potentially an oversimplification, and directs attention away from the broader but fundamental question of the role and societal relevance of academic research in management accounting.     

Citizen views about public meetings

The current study seeks to demonstrate that a citizen views about public meeting structure and related groups matter in predicting satisfaction with public engagement and willingness to attend future meetings. Public health agencies frequently use public meetings to communicate risk information, but relatively little social science research has examined how potential meeting participants view them. Using survey data (N?=?866) collected in seven US communities where health agencies were investigating possible local cancer clusters and holding public meetings to communicate with local residents, the current study replicates and extends an earlier inquiry related to citizens satisfaction with public meetings used for risk communication. Whereas previous research found that expectations, health agency credibility, and risk perceptions predicted satisfaction with public meetings, the current results did not show a significant relationship between agency credibility, risk perceptions, and satisfaction. Further, the results suggest it may make sense to consider ‘views about public meetings’ as a single measure that includes citizens’ structural expectations for meetings. Finally, the current study finds that views about public officials and views about meetings relate to individuals’ willingness to attend future meetings. Additional variable development and modeling research is suggested.     

Organisational risk perception and transformations in India’s nuclear establishment

The discourse on nuclear power and risk has shifted over the last few decades from security concerns emanating from nuclear weapons to threats to public safety in the event of industrial nuclear accidents. While the main focus of existing scholarship has been on public risk perceptions, comparatively little is known about organisational risk perceptions and the factors that influence organisations’ willingness to accept the incalculable risks of nuclear power. This paper provides insights into how the nuclear establishment in India thinks about risk. Drawing on interviews with the senior management of nuclear organisations, the analysis shows that organisational risk perception is not merely a human construct or the outcome of simple technical cost-benefit rationalities. It is the result of interactions between material and ideational conditions of risk. These conditions are expressed through three core organisational narratives: (1) the growth imperative, (2) technological nationalism and (3) faith in systems and technology. While there is generally a strong consensus on these narratives within and among the nuclear organisations in India, the data also show that organisations are not homogenous entities. Instances of self-critique and reflexivity exist which could open new spaces for change towards a more inclusive organisational discourse on nuclear risk in India.