Finance and development: Is Schumpeter’s analysis still relevant?

In recent years, numerous studies have been published highlighting the role of financial structures in the development process of contemporary economies. In these recent studies, there is always a reference to the pioneering work of Schumpeter; in particular in the writings of Rajan and Zingales [Rajan, R., Zingales, L. 2003a. Banks and markets: The changing character of european finance, NBER Working Paper Series, No. 9595, March; Rajan, R., Zingales, L. 2003b. The great reversal: The politics of financial development in the twentieth century, Journal of Financial Economics 69, 5–50; Rajan, R., Zingales, L. 2003c. Saving Capitalism from Capitalist, Crown Business Division of Random House, New York], important elements of Schumpeter’s theoretical framework are used. These works afford us an interesting opportunity to re-evaluate the importance of Schumpeter’s contribution. The thesis put forward in this paper is that while they do indeed highlight important elements of Schumpeter’s theory, Rajan and Zingales do not take the implications thereof into account and, furthermore, they neglect certain fundamental aspects of the Schumpeterian analysis that are closely connected with the parts that they consider. This renders their work incomplete, and prevents their analysis from achieving the coherence of Schumpeter’s theory.     

Industry concentration,excess returns and innovation in Australia

This paper examines market concentration and stock returns on the Australian Securities Exchange. We find that dominant companies operating in concentrated industries in Australia are able to generate significant risk‐adjusted excess stock returns. Our results for Australian data are opposite to that found by Hou and Robinson (2006) for United States market data. Hou and Robinson reason that United States firms which operate in concentrated industries are insulated from competitive pressures, have lower levels of innovation (Arrow, 1962) and therefore experience lower profitability and stock returns. By contrast, the Australian data show a significant and positive relationship between concentration and innovation expenditure. Therefore, the excess stock returns of dominant companies in Australia are consistent with previous research linking innovation expenditure with excess stock returns. We hypothesize that the apparent contradiction of our results compared with Hou and Robinson (2006) for the United States market is resolved by an examination of the differences in size and competition in United States and Australian industries and the consequent differential ability of dominant companies in the two countries to generate monopoly rents and invest in ‘Schumpeterian’ (Schumpeter, 1942) innovation.     

Economic growth potential creating a real put and the resulting valuation of the firm

What do innovative new firms in our dynamic economy do to the value of existing firms? Using Schumpeter’s creative destruction idea, we expand the valuation model to incorporate these dynamics. Our model shows that these dynamics should have a greater effect on smaller firms, those in closer to perfect product market competition and those with less financial market following, as they get less market feedback for warning of new competition. This additional consideration in valuation is named the “real put” as it is an optionagainst value. Simply stated, it is an amount subtracted from a firm’s market value of capitalized earnings, plus any growth potential (that might create destructive competition against other producers) to get its net value. Following Schumpeter, new entrepreneurs and larger firms that mimic existing entrepreneurs are the innovators of new products and services. They create the real put against value in their potential competitors. We empirically test this using Morningstar’s “moat” classification of firms. We find firms with “wider moats” meaning greater product market power have much lower delisting rates that indicate smaller puts against value being exercised. While we are not the first in finance to view Schumpeter’s ideas, this is the first paper to consider its direct effect on valuation.     

Environmental Disclosure and the Cost of Equity: The French Case

What is the impact of voluntary corporate environmental disclosures on the cost of equity? The present study will attempt to answer this question. The empirical research is based on companies listed in the French SBF 120 stock market index. In 2006, most of these companies devoted a section of their annual report to environmental actions, yet fewer than 20% of them actually published a separate report dedicated to the issue of sustainable development. Regardless of the selected medium, the environmental topics receiving the most attention in corporate reporting are pollution, natural resources and recycling. The determinants associated with environmental disclosure are: company size, financial leverage, and the number of financial analysts monitoring company stock. This study does not lead to concluding that companies disclosing environmental information necessarily lower the cost of equity.     

The politics of anticipation: On knowing and governing environmental futures

In this article we describe how the historical emergence and rise of future studies, since the founding issue of Futures in 1968, has been intricately connected to the emergence and development of environmental anticipation as discourse and practice. We trace a dialectical and inter-twined relationship between technologies of environmental anticipation and forecasting, and technologies of anti-environmentalist anticipation and counter-intervention, one which we argue shapes not only the contemporary politics of anticipation, but in a very material sense, the future conditions of biological and social life on Earth. In so doing we want to address the possible contributions that the field of futures studies can make to reimagining collective agency and ways of being on Earth, whilst reflecting critically upon its genealogical relations to the political reason and strategic horizons of powerful fossil fuel interests, from the crisis of the 1970s to the present. The article also offers a more in-depth contextualization to the other articles in this special issue of Futures on “The Politics of Environmental Anticipation”. The aim is to bring to the fore the role that social scientists play in environmental anticipation − i.e. drawing attention to the fact that the future could always have been otherwise.     

The necessary characteristics of environmental auditors: a review of the contribution of the financial auditing profession

The business community faces many pressures from the green consumer, environmental groups, employees and investors to accept its environmental accountabilities and to provide information about its environmental performance. This information is becoming increasingly important to a broad range of corporate stakeholders because it is a key resource in managing a business’s response to the issue of environmental accountability. Businesses need to ascertain whether potential responsibilities for environmental implications on business are considered within their companies. A number of arguments have emerged concerning the relevance of the financial auditing profession in contributing to this area of environmental concerns. The paper is principally concerned with (1) reviewing the literature in an attempt to answer the questions: (i) can the financial audit profession make a contribution in the area of environmental audits? (ii) are financial auditors in a position to assess environmental implications for business and take part in environmental auditing? (2) The paper goes on to suggest a general framework of the necessary characteristics of environmental auditors.     

金融中介发展与经济增长研究述评

根据熊彼特的经济发展理论,金融中介发展通过发现并支持企业家的创新而有利于长期经济增长.理论研究方面,已有文献主要从金融市场信息甄别成本降低、缓解消费信贷约束、分散创新风险等方面对金融发展促进经济增长的渠道展开论证.实证研究方面,这个领域早期的经验研究大多基于发达国家的截面数据,一般发现金融中介发展与经济增长正相关;上世纪90年代以来的研究则开始注重利用面板数据技术,控制估计方程中不可观测的异质性、度量误差、共时联立等内生性问题,已经发现一些支持金融中介发展有利于经济增长的经验证据,但在有关具体传导机制的识别上存在分歧.     

Towards the age of corporate responsibility? Emerging challenges for the business world

The article seeks to show how the issue of ethical corporations can be examined and challenged through the concept of corporate responsibility. Corporate responsibility first emerged as a term around 10 years ago with the rise of environmental reporting systems. At that time, the UNCED summit in Rio boosted the general level of consciousness concerning these issues and the first business-driven international organisation to tackle the field, Business Council for Sustainable Development, emerged. Globalisation, which by any indicators accelerated enormously during the 1990s, has challenged corporations to consider responsibility in a new light. The evolution and spread of a global network of finance have increased the need for transparency and responsibility, at the same time as the shift from ‘international’ to ‘global’ signified the gradual breakdown of old institutions and the emergence of new ones. This article evaluates how corporations have responded to this challenge and postulates, in the light of increasing pressures on human and natural conditions, a coming ‘Age of Responsibility’ that will set corporate responsibility a basis for any action in business world.     

Observations on the Schumpeterian swarming of innovations

The hypothesis that depressions trigger innovations is examined first on theoretical grounds, and then with a random sample of 120 innovations. Radical product innovations, the alleged basis for new ‘Schumpeterian’ industries, indeed cluster around the 1930s crisis, but are closely associated with the less severely hit modern industries. Process innovations and less radical product changes are associated more with periods of prosperity. The final section considers whether new ‘Schumpeterian’ industries are a precondition for, or the result of, economic upswings.     

Causal mechanisms of long waves

Previous research on the causes of economic growth maintains that long waves of economic development arise as a result of Schumpeterian innovation. This paper builds on this research by introducing four primary causal mechanisms for the long wave of economic development. The causal mechanisms are classified based on level of analysis. The paper argues that describing causal mechanisms by level of analysis allows researchers to more easily draw from various fields and establish needed consensus in long wave theory.     

Africa's dilemma in the transition to the new information and communication technologies

The emergence of the new information and communication technologies (ICTs) has dramatically altered theoretical and practical assumptions about the role of the communication media in socioeconomic development. Today, the role of ICTs in developed and developing societies remains a subject of debate, and Africa has been caught in the middle of this debate. Advocates of ICTs, for instance, point to how the West experienced the impact of industrial technology and found it to be an indispensable tool for development. If the new technologies are good for the West, will the same hold true for the developing world? For Africa, the question is a difficult one: will the new information and communication technologies launch Africa on the path of socioeconomic development or will they subject Africa to a new form of dependence? This article argues that the communication technology which will be adopted by Africans, irrespective of how the West moves, will be the one that is easily accessible and which poses no challenge to sociocultural practices. That communication technology of the future will be the telephone.     

Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory

This paper argues that long-run trends in R&D and TFP are more supportive of fully endogenous "Schumpeterian" growth theory than they are of semi-endogenous growth theory. The distinctive prediction of semi-endogenous theory that sustained TFP growth requires sustained growth of R&D input is not supported by co-integration tests and forecasting exercises, as TFP growth has been stationary even though the growth rate of R&D input has fallen three-fold since the early 1950s. In contrast, the prediction of Schumpeterian theory that sustained TFP growth requires a sustained fraction of GDP to be spent on R&D is not contradicted by similar tests.     

湖北失地农民社会保障问题探析——基于宜昌、随州、十堰三地的调研数据

摘要：近些年,湖北省提出打造中部崛起重要战略支点的目标,工业化、城镇化迅速推进。而作为九省通衢的湖北大量承接广东等沿海地区“腾笼换鸟”转移的劳动密集型产业。在上述内外因素催生之下,湖北省出现了一波土地征用的高潮期并伴随大量失地农民的出现。本文基于对宜昌、随州、十堰三市失地农民生活状况的一次调研结果,梳理了湖北失地农民补偿安置和社会保障方面的问题,对造成目前失地农民保障不力的原因进行了分析,并提出完善失地农民社会保障制度的一些政策建议。     

THE BALANCED CAPITAL STRUCTURE

At leading companies, financial executives are becoming business partners rather than just scorekeepers. In this environment, capital structure can be a source of competitive advantage, and financial strategy issues are critical: Should your company buy back shares or issue stock, grow internally or join the M & A boom, issue fixed-rate debt or stay floating? These decisions must be addressed one company at a time, balancing the competing priorities of cost, risk, and flexibility. The most important issue, target leverage, depends on the company's desired risk profile, growth plans, and debt cost considerations. But market conditions are also very important: Can the company access the equity market? How will a repurchase announcement be interpreted? Market conditions also affect the raising of debt capital. Rather than maintaining a constant mix of fixed- to floating-rate debt, companies should shift the mix during high- or low-yield environments. Many other financing issues will effectively be decided by market convention. For example, meeting a company's needs with respect to seniority, maturity structure, call flexibility, and financial covenants is often accomplished simply by choosing the market that most closely matches the firm's cost and risk preferences.     

Accounting and sustainable development: An exploration

As the social and environmental impacts of human activity have become more evident, the role of sustainable development as an organising principle in a variety of policy contexts and over multiple scales has become central. There are, at least, two implications that emerge from this observation. First, morally infused problems that need to be addressed have become more intractable, requiring innovation in our modes of thinking. Second, new spaces have emerged where the academy might explore how knowledge is created, validated and translated (or not) alongside policy and practice settings. One outcome of these trends has been the emergence of a stream of work (sustainability science) which investigates how disciplines might develop knowledge that progresses sustainable development. The aim of this paper, in line with the focus of the special issue, is to explore what possibilities emerge for accounting in light of a sustainability science approach. To achieve this end the paper starts with an exploration of the frustrations expressed in the literature over the perceived lack of progress made by social and environmental accounting towards addressing sustainable development. The paper then introduces sustainability science with the aim of imagining how an accounting for sustainable development might emerge. The paper closes with two illustrations of how a sustainability science approach to accounting could develop.     

Commodity markets through the business cycle

From 2008 to 2011, commodity markets experienced growing attention from the banking industry for various reasons: the summer 2008 oil price swing, the price surge in an ounce of gold, or sharp variations in agricultural prices. As a consequence, can we hypothesize the existence of a global connection between commodities and economic cycles? If these recent events suggest that commodity markets are strongly related to the business cycle, this evidence goes nevertheless against the widespread intuition that commodity markets are a strong source of diversification in a standard cash–bond–equity portfolio. Based on a data-set from 1990 to present, this paper investigates this issue by (i) looking at the reaction of commodity markets to economic news, and (ii) using a Markov regime-switching model to analyse economic regimes and commodity markets as an asset class.     

A research note on standalone corporate social responsibility reports: Signaling or greenwashing?

Over the past two decades, more and more U.S. firms are voluntarily issuing costly standalone Corporate Social Responsibility (CSR) Reports. Nevertheless, firms’ motivations for issuing standalone CSR Reports are not clear. In this paper, we consider two different explanations: signaling and greenwashing. The first explanation, signaling, proposes that firms use standalone CSR Reports as a signal of their superior commitment to CSR, which suggests firms with stronger social and environmental records will be more likely to issue standalone CSR Reports as compared to those without. The second explanation, greenwashing, proposes that firms use standalone CSR Reports to pose as “good” corporate citizens even when they do not have stronger social and environmental records. To provide insight into these explanations we compare the CSR performance scores of firms that issue CSR reports to those firms that do not. We control for firm size, leverage, profitability and industry. We find that firms that voluntarily issue standalone CSR Reports generally have higher CSR performance scores, which suggests that firms are using voluntary CSR Reports to publicize stronger social and environmental records to stakeholders.     

Recent long-wave theories: A critical survey

The author gives a critical overview of some recent long-wave theories, which, although not complete, does seek to diminish the present confusion in the literature and to emphasise the complementary character of the different approaches. A classification scheme is developed, based on the alternating scarcity and abundance of production factors in the upswing and downswing phases of the long wave. In this way theories have been classified as: those which consider the role of innovation (ie entrepreneurship) as crucial (Schumpeter and Mensch); the capital theories (Mandel and Forrester); the labour theory (Freeman); and the raw materials and food-stuffs theory (Rostow). The importance of institutional and social changes is emphasised.     

Political Sustainability and the Design of Environmental Taxes

This paper studies the issue of political support for environmental taxes. The environmental tax is determined by majority voting, given a refund rule that specifies the allocation of tax proceeds. The refund rule is chosen by a welfare-maximizing constitutional planner. We show that: (i) The equilibrium tax rate is increasing in the proportion of tax reductions based on wage incomes. (ii) If labor and capital income taxes are reduced in the same proportion, to keep the government's budget balanced, majority voting yields a rate of environmental taxation that is lower than the optimal (Pigouvian) level. (iii) To mitigate this negative bias, the government reduces wage taxes by a higher proportion than capital income taxes. (iv) The final outcome will either be the Pigouvian tax or else all reductions will be given in wage taxes. This depends on individuals' preferences for the polluting good as well as wage and capital income distributions.     

The Relevance of Stock and Flow-Based Reporting Information In Assessing the Likelihood of Emergence from Corporate Financial Distress

A number of recent studies have shown that earnings information is less useful and value relevant when firms are financially troubled. This finding has given rise to the consideration of alternatives. In this paper, we examine the contributions of book value-based proxies (normal earnings and abandonment value) and flow-based proxies (earnings and operating accruals) to the assessment of the likelihood of emergence from financial distress. Our prior reasoning is that while book value-based proxies may provide information about potential future cash resources, flow-based proxies, because they capture the progress of reorganization efforts underway, as opposed to mere potential, should be relatively more useful in assessing the likelihood of emergence from distress. Our findings are consistent with this explanation. We document that the primary predictors of emergence are flow-based proxies—in particular, cash from operations, net of earnings.