Capital Structure,Management Ownership and Large External Shareholders: A UK Analysis

This paper examines empirically the effects of management ownership and ownership by large external shareholders on the capital structure of the firm from an agency theory perspective. The paper extends the US literature on the topic by examining the effect of interactions between management ownership and ownership by large external shareholders on the capital structure of UK firms. For a sample of UK firms, the paper provides empirical evidence that suggests the debt ratio is positively related to management ownership and negatively related to ownership by large external shareholders. Furthermore, the presence of a large external shareholder acts to negate the positive relationship between debt ratios and management ownership; in the presence of a large external shareholder, no significant relationship between debt ratios and management ownership exists. These findings are consistent with the hypothesis that the presence of large external shareholders affects the agency costs of debt and equity.     

‘A Land of Milk and Honey’? Reengineering the ‘Past’ and ‘Present’ in a Call Centre*

ABSTRACT This article explores how managers, in the Call Centre of a Bank, (re)defined, and drew boundaries around ‘past’ cultural conditions, in relation to the introduction of a Business Process Reengineering (BPR) regime. Managers represented the ‘past’ negatively, in terms of conflict and coercion, whilst the ‘present’ was largely described as a Shangri‐La of teams and consensus. This eschewing of the ‘past’ and sublimation of the ‘present’ stood in opposition to the representations of the staff. Both the ‘staff’ and ‘managers’ seemed to reject or embrace discourses that challenged or coincided with their understanding of how things are or should be. In view of this, their understanding of the past/present is inseparable from a consideration of power and identity. The article examines the interplay between discourses and individuals, arguing that it is bound up with fear and anxiety, hope and aspiration, memory and nostalgia, among other, everyday life experiences.     

Preferences, Property Rights, and Anonymity in Bargaining Games

Research on ultimatum and dictator games has found that because of "fairness" first movers in such games offer more than noncooperative game theory predicts. We find that if the right to be the first mover is "earned" by scoring high on a general knowledge quiz, then first movers behave in a more self-regarding manner. We also conducted dictator double blind experiments, in which the experimenter could not identify the decision maker. The results yielded by far our largest observed incidence of self-regarding offers, suggesting that offers are due to strategic and expectation considerations. Journal of Economic Literature Classification Numbers: C78, C91.     

Do American and European Industrial Organization Economists Differ?

This paper compares results from two surveys among American and European industrial organisation (IO) economists on various IO and broader economic issues. Although differences between the two groups are generally rather small, some systematic differences seem to exist. These differences are more pronounced when judgments about the efficacy of government policies and the workings of the market are concerned than when judgments about methodology and the present and future state of the IO field are concerned. American IO economists tend to exhibit more confidence in the market's capability to allocate resources than their European counterparts.     

The Ethics of Managerial Compensation: The Case of Executive Stock Options

This paper examines the ethics of contemporary managerial compensation in the context of executive stock options. Economic considerations would dictate that executive stock options should be adjusted to eliminate the effect of overall stock market movements which are beyond the control of the executive. However, in practice, most executive stock options are not adjusted to control for these outside factors. Agency considerations are the most likely culprit. Adjusting for the influence of outside factors, such as a generally rising stock market, from executive stock options sets a higher bar for managers to reach. Furthermore, traditional accounting standards permitted firms that did not adjust options to avoid reporting options as expenses. This presents CEOs and boards of directors with a major ethical dilemma. On the one hand, their duty to their shareholders and stakeholders dictates that executive stock options should be adjusted to eliminate outside noise from unrelated movements in the overall stock market. However, financial statements are presented in the language of accounting. If the overwhelming majority of the users of a language define a particular item in one way, then to deviate from the norm implies that the recipient of such a deviant statement may not properly interpret the statement. Likewise, if the standard practice is for firms to use unadjusted options and thus under-report expenses, to deviate from this industry norm risks that users of financial statements would not properly interpret the financial statements, with perhaps negative consequences for the shareholders. In short, if “everyone else does it,” then it could be wrong for an individual firm to deviate from the norm as that would harm the shareholders. James J. Angel is an Associate Professor of Finance at the McDonough School of Business at Georgetown University. He is a financial expert whose research focuses on the operation of financial markets in the United States and other countries. He currently serves on the OTCBB Advisory Board, and he has served as Chair of the Nasdaq Economic Advisory Council. He earned his undergraduate degree from the California Institute of Technology, his MBA from the Harvard Business School, and he earned his Ph.D. in Finance from the University of California at Berkeley. Douglas M. McCabe is a Professor of Management at the McDonough School of Business at Georgetown University. He serves on the Editorial Boards of 20 scholarly journals, including Research on Ethical Issues in Organizations, JAI Press as well as the Employee Responsibilities and Rights Journal. Considered by the media to be an expert in his field, he has appeared more than 200 times on international (CNN), national (ABC, NBC, and CBS), and local television and radio. He holds a Ph.D. from Cornell University and is a member of Phi Beta Kappa.     

‘The Rise and Fall of TQM’: the Vision,Meaning and Operation of Change

The vision of TQM promises unity, teamworking, autonomy and empowerment. This article explores how this vision was contradicted by organisational restructuring and the hierarchical imposition of redundancies and contingent employment insecurity in a medium sized bank. As a result it was found that the meaning and legitimacy of TQM for both employees and many managers was called into question.     

The Demand for Hedging with Futures and Options

The optimal hedging portfolio is shown to include both futures and options under a variety of circumstances when the marginal cost of hedging is nonzero. Futures and options are treated as substitute goods, and the properties of the resulting hedging demand system are explained. The overall optimal hedge ratio is shown to increase when the marginal cost of trading options is reduced. The overall optimal hedge ratio is shown to decrease when the marginal cost of trading futures is decreased. One implication is that hedging demand can be stimulated by a reduction in the perceived cost of trading options through the education of hedgers about options and the initiation of programs such as the Dairy Options Pilot Program. The demand approach is applied to estimate optimal hedge ratios for dairy producers hedging corn inputs in five regions of Pennsylvania. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:693–712, 2001     

Electricity Merger Analysis: Market Screens, Market Definition, and Other Lemmings

Much discussion and effort have been devoted to the use of market power screens to detect market power that might arise from existing generation asset portfolios or utility acquisition of new generation assets. The quest is to find the “Holy Grail”: a market power detection mechanism that minimizes the costs to all parties involved while finding the majority of market power exercises. This article contends that market power screens should be utilized with caution in policy and litigation applications because while they meet the criteria of minimizing enforcement costs, they are often unable to detect many types of market power exercises that an electric utility might undertake. The article begins with a discussion of the polestar for all screens—the Department of Justice/Federal Trade Commission Horizontal Merger Guidelines—and its limitations. Next, the article examines the accidentally correct, absolutely incorrect, and other outcomes that arise from the application of screens using FERC’s merger policy statement, “contestable load” analysis, and other examples. The Article concludes by noting that many types of market power exercises are undetectable with market power screens, and that better approaches would increase the probability of detection, given the low level of penalty current imposed upon those that wield market power.     

Seven tools for creating adaptive policies

Experience demonstrates that policies crafted to operate within a certain range of conditions are often faced with unexpected challenges outside of that range. The result is that many policies have unintended impacts and do not accomplish their goals. Adaptive policies are designed to function more effectively in complex, dynamic, and uncertain conditions. Based on over a dozen case studies on public policies relating to agriculture and water resources management in Canada and India, we conclude that there are seven tools policymakers should follow to create adaptive policies. Adaptive policies anticipate and plan for the array of conditions that lie ahead: (#1) using integrated and forward-looking analysis; (#2) monitoring key performance indicators to trigger built-in policy adjustments; (#3) undertaking formal policy review and continuous learning; and (#4) using multi-stakeholder deliberation. But not all situations can be anticipated. Unknown unknowns and deep uncertainty will always be part of policymaking. Adaptive policies are able to navigate toward successful outcomes in settings that cannot be anticipated in advance. This can be done by working in concert with certain characteristics of complex adaptive systems and thereby facilitating autonomous actions among stakeholders on the ground. To a degree, adaptive policy tools #3 and #4 can be used toward this purpose, but most directly, such autonomous tools include: (#5) enabling self-organization and social networking; (#6) decentralizing decisionmaking to the lowest and most effective jurisdictional level; and (#7) promoting variation in policy responses. This paper elaborates on these seven tools as a pragmatic guide for policymakers who find themselves working in highly complex, dynamic, and uncertain settings.