From crinkly sheds to fashion parks: the role of financial investment in the transformation of retail parks

The retail park is one of the most ubiquitous and significant forms of off-centre retailing in the UK. Originally designed as low-cost accommodation for 'bulky goods', retail parks now include high-rent 'fashion parks' which are eagerly sought by institutional investors for long-term ownership. This paper explains why retail-park ownership, originating in the early 1980s in one-off schemes by locally based property developers, has become the province of major property companies, financial institutions, and asset managers. Growth in rents and capital values has been fuelled by increasing institutional investment, and by fears of a growing scarcity of high-quality developments because of town-planning restrictions. This pressure is now leading to attempts to realize the full capital value of older developments, through processes of 'active management' by the new breed of retail-park owners. In turn, this is leading to increasingly rapid changes of retail occupiers, involving in some cases the expulsion of the original 'bulky goods' retailers for whom retail parks were created. A parallel with the 'Wheel of Retailing' model of institutional change is suggested.     

TRANSMISSION OF CONDITIONAL STOCK RETURN VOLATILITY ACROSS NORTH AMERICAN MARKETS: Evidence from Pre- and Post-NAFTA

There has been considerable interest in whether stock market volatility is predictable and the extent to which cross-market relationships exist. This article examines the transmission of conditional stock price return volatility across the U.S., Canadian, and Mexican markets. Using daily data over the period 6/2/92-10/28/99 we provide empirical evidence on the extent to which cross-market relationships exist in the pre- and post-NAFTA periods.     

Using Organizational Architecture to Lead Change

Effective leadership involves more than developing and communicating the right strategic vision for the company. To encourage employees to carry out the corporate vision, companies must ensure consistency among the following three main components of their organizational architecture: (1) the allocation of decision‐making authority; (2) performance measurement systems; and (3) reward systems. The authors illustrate the application of this framework with the case of Xerox's (eventually) successful attempt to create a customer‐oriented workforce in the 1980s. But a more effective demonstration of the importance of these principles, as the authors go on to suggest, might well be the same company's well‐known failure to harvest the commercial promise of the many inventions by its research group in Palo Alto, one of which became the basis for Steve Jobs' success at Apple. This organizational framework is especially useful for evaluating the likely effects of major corporate initiatives such as “Six Sigma” or the “Balanced Scorecard.” For example, it could be used to help top management determine whether, and under what circumstances, decentralization is likely to improve decision‐making and performance, as well as the changes in the firm's performance management and incentive systems that would be required to make decentralization work. Finally, the authors apply the framework to another important leadership issue: corporate ethics. Since the scandals of the early 2000s and the passage of Sarbanes‐Oxley, many, if not most, U.S. companies have issued formal codes of conduct, appointed ethics officers, and instituted training programs in ethics. But a key question for top management is whether the incentives established by the company's organizational architecture reinforce or undermine the code of conduct. Ensuring consistency in organizational design is an important leadership function—one that is critical to encouraging ethical behavior as well as the pursuit of shareholder value.     

Regulatory Capital of Financial Institutions: A Comparative Analysis

This study analyzes regulatory capital requirements of banks, thrifts and securities firms. Regulatory capital has traditionally guarded against credit risk and has been set on an asset‐by‐asset basis. Regulators now recognize the need to guard against a wider range of risks and to measure risk in a portfolio context rather than on an asset‐by‐asset basis. However, the measurement of portfolio risk in the presence of a wide variety of financial instruments and the complexity of financial institutions requires a level of sophistication that regulators are unlikely to possess. Consequently, it is important to reassess the purpose of regulatory captial. Regulatory capital now guards against the failure of the entire financial institution, while regulatory responsibility extends only to the insurance fund that guarantees bank deposits or brokerage accounts. Narrowing the regulatory focus to protect only insured accounts would reduce the need to consider all the activities of a financial instituion as is now necessary in order to establish regulatory capital.     

Corporate Insurance Strategy: The Case of British Petroleum

The authors provide a fundamental rethinking of how corporations should evaluate various kinds of risks and risk management solutions—a rethinking that leads to a major shift in British Petroleum's approach to insuring property and casualty losses, product liability suits, and other insurable events. Conventional corporate practice—and until the early 1990s (when this article was written) the longstanding policy of BP and most large oil companies—was to insure against large losses while self‐insuring against smaller ones. In this article, the authors explain why BP has chosen to go against the conventional wisdom and instead buy insurance for mainly smaller losses while self‐insuring larger ones. The BP decision came down to factors affecting the market supply of insurance as well as the corporate demand for it. On the demand side, the authors demonstrate that the primary source of demand for insurance by large public companies is not, as standard insurance textbooks assume, to transfer risk away from the corporation's owners. Because corporate stockholders and bondholders effectively manage the effects of such risks by diversifying their own portfolios, the corporate demand for insurance in BP's case stems from the insurers' comparative advantage in evaluating and monitoring BP's smaller risks and in processing claims. On the supply side, the authors explain why the capacity of insurance companies and markets to underwrite very large or highly specialized exposures—when compared to the industry expertise and financial resources of companies like BP—is quite limited, and likely to remain so. Since premiums would be experience‐rated and prior years' losses simply rolled into the following years' premiums, there would be no effective transfer of risk, and so no gain to BP from buying insurance.     

The characteristics of derivatives users: An analysis of the thrift industry

This paper compares the characteristics of derivatives users and non-users, using data from U.S. savings associations during 1993–1994. Unlike prior studies, the data used in this analysis are market values of assets and liabilities. Market values were obtained from the base case (no interest rate change) in the Office of Thrift Supervision's (OTS) Net Portfolio Value Model. This model calculates the value of all of a thrift's positions to calculate the value at risk. We determine the consistency of theories of derivatives use with the characteristics of derivatives users.