The Current State of Genetic Testing

Recent advances in genetic technology and progress in the multinational Human Genome Project are providing scientists with the ability to look into and manipulate the very makeup of life: the DNA molecule. We can already examine many dozens of plant and animal genes for disease producing abnormalities. In the near future, we will have the ability to alter specific genes in living tissue. This genetic technology holds great promise in our quest for preventing, diagnosing, treating, and predicting disease, not just in humans, but in all forms of life.

But there are some problems. Philosophically many are not ready for the implications of this technology. There are social and ethical issues that have not been well addressed, and which have, in part, resulted in an unprecedented amount of legislative activity over the past four years aimed at restricting access to and use of genetic information. The ability of the U.S. insurance industry to risk-select may be severely hampered if these restrictions are widely applied.     

Application of Coherent Risk Measures to Capital Requirements in Insurance

Risk measurements go hand in hand with setting of capital minima by companies as well as by regulators. We review the properties of coherent risk measures and examine their implications for capital requirement in insurance. We also comment on the specific risk-based capital computations.     

Cash-Flow Valuation and Value at Risk

The cash-flow valuation method (CFVM) has been developed in Canada for the valuation of insurance company annuity products. Its range of application is expected to be extended shortly to the valuation of most other life insurance company products. The CFVM is based on the use of “best-guess” assumptions, supplemented by specific provisions for adverse deviations. In this paper, special attention is paid to the calculation of the provision for adverse deviations with respect to the interest rate risk. We show that the determination of this provision is the analog for life insurance and annuity policy liabilities of the calculation by banks of Value at Risk (VaR) with respect to portfolios of securities held for trading.     

An examination of the equity market price linkage between Australia and the European Union using leveraged bootstrap method

The paper examines the equity market price interaction between Australia and the European Union – represented by the UK, Germany and France – based on the Toda–Yamamoto causality test, which is bootstrapped with leveraged adjustments. A new information criterion is used to choose the optimal lag order. Weekly MSCI data covering the period 1988 to 2001 is used, divided into two subperiods to allow for a structural break arising from the ERM crisis of 1992. Results show that, during the period before the ERM crisis, no significant causal links exist between Australia and any of three EU countries. During the period after the ERM crisis, Australia also had no causal links with Germany and France but it had with the UK, with causality running from the UK to Australia but not vice-versa. Thus, Australian investors may find the German and French, but not the UK, equity markets, attractive venues for their international diversification. German and French, but not British, investors may also obtain the same benefit from the Australian equity market.     

Benchmarking Risk Management Within the International Water Utility Sector. Part I: Design of a Capability Maturity Methodology

Risk management in the water utility sector is becoming increasingly explicit. However, due to the novelty and complexity of the discipline, utilities are encountering difficulties in defining and institutionalising their risk management processes. In response, the authors have developed a sector specific capability maturity methodology for benchmarking and improving risk management. The research, conducted in consultation with water utility practitioners, has distilled risk management into a coherent, process‐based framework. We identified eleven risk management processes, and eight key attributes with characterise the extent to which these processes are defined, controlled and institutionalised. Implementation of the model should enable utilities to more effectively employ their portfolio of risk analysis techniques for optimal, credible and defensible decision making.     

Boards,Executive Excess Compensation,and Shared Power: Evidence from Nonprofit Firms

We investigate how executives, the board, and excess compensation jointly affect the performance of nonprofits. Since the common measure of nonprofit performance often includes salaries, we also use expenses that directly benefit the targeted population. Our results suggest that above average compensation for executives is associated with poor firm performance. However, the negative relation of CEO pay to performance occurs for firms with only one executive, the CEO. We conclude that a powerful CEO with autonomy can harm firm performance, but other executives can mitigate these agency problems. The board also appears to monitor direct community benefits more than indirect benefits.     

Contemporary University Strategising: The Financial Imperative

This paper examines the financially focused strategies now evident amongst institutions competing for space in the global higher education system. In their search for increasing financial self‐sufficiency, universities and other higher education providers are examined for their primary competitive strategies. The study provides comprehensive evidence of their cost and operating efficiency strategies, facilitated by increasingly pervasive financial performance accountability systems. The primary operational strategies of teaching and research are found to have been transmogrified into strategies of customised education and research that is primarily focused upon and measured in terms of its funds generation. These trends contribute to complex performance management and accountability challenges as universities’ senior managers balance their internal financial ambitions with the expectations of external stakeholders, while simultaneously projecting sanitised imagery through corporate public relations strategies.     

An Investigation of the Relationship between Use of International Accounting Standards and Source of Company Finance in Germany

This study examines the relationship between use of international accounting standards and companies’ source of finance. We investigate the proposition contained in Nobes’ (1998) model that postulates outsider companies (those with a higher level of public finance) in weak equity–outsider markets (capital markets where public equity finance is not the dominant source of finance) are more likely to change their type of accounting system from one focused on information for creditors and tax authorities to one that meets the needs of external financiers. We found strong support for Nobes’ model. Using 408 German listed companies at 1999, we observed that companies with more outsider finance (the proportion of shares held by outsiders and the presence of public debt) were more likely to use international standards (U.S. GAAP or IAS). The results indicate the importance of controlling for source of finance at the company rather than country level in cross‐country studies investigating the benefits of adoption of international standards.