Trust in Companies and in CEOs: A Comparative Study of the Main Influences

Trust is a crucial factor for the long-term economic success of a company. However, not only does the company establish trust, but the CEO representing the company builds up trust as well and, therefore, also influences the company’s success. Our study examines how different dimensions of trust (i.e., ability, integrity, benevolence, and information quality) influence the degree of overall trust in a company and in CEOs. Nevertheless, dimensions that influence trust in a CEO can be completely different to those influencing trust in companies. Companies and CEOs that act on an international level can hardly be experienced individually, and thus people get information about the company via media use. Therefore, additionally we examine which kind of media is used for getting information about a company or CEO and whether a relationship exists between media use and trust. Findings from a survey in Switzerland (n = 245) show that companies are more trusted than CEOs and that the items which influence overall trust differ between CEOs and companies. Social responsibility as a benevolence item is important for both groups. Regarding information on different media channels, users of traditional media like newspapers, TV, and radio are most critical regarding trust in companies and CEOs.     

Purchasing Competence: A Stakeholder‐Based Framework for Chief Purchasing Officers

A specific research stream within the purchasing and supply management literature focuses on the development of purchasing competence frameworks. We apply stakeholder theory and multiple methods of data collection to develop and confirm a hierarchy‐specific purchasing competence management framework for Chief Purchasing Officers and validate it using confirmatory factor analysis on empirical data from 124 multinational companies. The results reveal a significant relationship between Chief Purchasing Officers purchasing management competence and different purchasing performance measures confirming the appropriateness of stakeholder theory for such a competence framework.     

Toward Transparency: New Approaches and Their Application to Financial Markets

The Asian financial crisis in the late 1990s not only highlightedthe welfare consequences of transparency in the financial sectorbut also linked this relatively narrow problem to the broadercontext of transparency in governance. It has been observedthat objections to transparency, often on flimsy pretexts, arecommon even in industrialized countries. This article arguesthat transparency is indispensable to the financial sector anddescribes its desirable characteristics: access, timeliness,relevance, and quality. The authors emphasize the need to weighthe costs and benefits of a more transparent regulatory policy,and they explore the connection between information imperfections,macroeconomic policy, and questions of risk. The article arguesfor developing institutional infrastructure, standards, andaccounting practices that promote transparency, implementingincentives for disclosure and establishing regulations to minimizethe perverse incentives generated by safety net arrangements,such as deposit insurance. Because institutional developmentis gradual, the authors contend that relatively simple regulations,such as limits on credit expansion, may be the most reasonableoption for developing countries. They show that transparencyhas absolute limits because of the lack of adequate enforcementand argue that adequate enforcement may be predicated on broaderreforms in the public sector.      

DEFAULT RISK PREMIA IN THE NEAR-CASH INVESTMENT MARKET: THE CASE OF AUCTION RATE PREFERRED STOCK VERSUS COMMERCIAL PAPER

Auction rate preferred stock (ARPS) is often regarded as an alternative to other near-cash instruments such as commercial paper while the dividend exclusion for ARPS offers tax advantages to corporate purchasers. The mean default risk premium for ARPS, relative to commercial paper, is estimated at 83 basis points during stable financial markets. This default premium appears to surge during unstable equity markets, having jumped by 192 basis points in November 1987. Lower-rated ARPS shows even larger changes, with yields 40–50 basis points above yields on high-rated ARPS, adjusted for the normal risk premium differential. The perceived risk change of ARPS underscores how quickly market participants re-evaluate default risk, and even the importance of the priority order among debt and equity claimants. Findings suggest ARPS and commercial paper are not an acceptable substitute for commercial paper during times of unsettled equity markets.     

Expectative land rights, house consolidation and cemetery squatting: Some perspectives from Central Java

With more than 40% of the urban population of the Third World living in informal settlements, quasi- and extralegal adaptations have been utilized to appropriate land for housing. The most direct of these — squatting — has its inherent risks, however, for those who wish to improve their dwellings. Research has shown that house consolidation is more a function of resident perceptions than of strict legal categorization. This paper reports how such perceptions have triggered a greater rate of house consolidation among Javanese cemetery squatters than that in an adjoining area with formal land tenure.     

THE RELATIONSHIP BETWEEN FINANCIAL PERFORMANCE AND STOCK MARKET BASED MEASURES OF CORPORATE DIVERSIFICATION

This study examines the relationship between corporate diversification and financial performance. The use of a stock market based measure of diversification allowed a much larger database than in previous studies and overcame the subjective nature of measuring internal diversification. Because previous researchers found that firm size affected performance, size was controlled in this analysis. The authors conclude that there is no statistically significant relationship between the degree of internal diversification and financial performance.     

The Compatibility of Laissez-faire With Distributive Justice

At least some of the more prominent proponents of laissezfaire advocate governmental intervention for the purpose of comprehensively and substantially redistributing income in order to achieve distributive justice. It is questionable, however, that a laissez-faire system would function in the way that is described by these same proponents if a leveling of income of the sort advocated were to be instituted. This is so because the postulates of human behavior on which the proper workings of the system are based would be rendered ineffectual as a consequence of such intervention. Indeed, if a system of laissez-faire is to work well, there is required a certain ethos which precludes significant intervention in the name of distributive justice.