The Effects of Regulated Premium Subsidies on Insurance Costs: An Empirical Analysis of Automobile Insurance

State regulation of rates is sometimes used as a means to make automobile insurance more affordable to consumers by restricting insurer profits and pricing practices. Incentive distortions arising from this type of rate regulation might lead to higher accident rates and higher insurance loss costs. Annual state‐level panel data for the time period 1980–1998 are used to investigate these effects, using empirical methods that recognize the endogenous determination of states’ regulatory choices. Results suggest that rate regulation that systematically suppresses (some or all) drivers’ insurance premiums is associated with significantly higher average loss costs and higher insurance claim frequency.     

IFRS within the Multi‐GAAP Canadian Reality: A Teaching and Learning Imperative for Intermediate Financial Accounting

Intermediate accounting instructors need to be engaged in the specific complexities and challenges of the new international financial reporting standards (IFRS) reality within the Canadian multi‐GAAP environment. Intermediate accounting courses are directly affected because they represent substantive coverage of the corporate reporting environment. In this article I make the case that these courses should primarily reflect IFRS standards in order to entrench IFRS competencies in students who wish to pursue a professional designation, to prepare students for the global environment, and to concentrate IFRS expertise issues in a robust instructor group. The competency maps of each of the three Canadian professional accounting bodies clearly reflect IFRS. Students can analyze the implications of major areas of policy differences between IFRS and private enterprise GAAP (PEGAAP) through specific targeted course coverage, but also through active learning elements, particularly research elements. This commentary reflects some of the active debate occurring regarding postsecondary curriculum as Canada adapts to IFRS and PEGAAP, and encourages action.     

Making visions visible for long-term landscape management

Results generated by planning and futures studies are often too abstract to provide a clear vision of the future to non-specialists. In this study the role of 3D visualization and the challenges in developing and communicating visible visions for our future landscapes is explored. While traditional visualization techniques have been well-known for several hundreds of years digital 3D visualizations are still not yet taken advantage of in long-term planning or in futures studies in general to their full potential. As part of an iterative consultation and participation process a long-term vision for the landscape and land management of the Alport Valley in the Peak District National Park, UK is developed in order to improve the valley's special landscape character, to enhance the valley's visual and recreational attractiveness, to regenerate the woodlands in ways that maximize the long-term benefit of ecology, wildlife and landscape and to get a good balance between wooded areas and open moorland.An early integration of 3D visualization in the planning process offers a wide range of opportunities for exploring alternative futures but it also poses challenges to the expert planners such as being able to react timely, with a high degree of realism and interactively to incorporate new inputs from participating stakeholders. Furthermore, the planner is forced to translate a vision into concrete geographically referenced data. Only then the vision can be visualized. The full potential of 3D visualizations in the planning disciplines and in futures studies is still to be explored. The visualizations could be the basis to communicate the vision - the views of the future - and to share the vision with others in order to influence future change.     

Coping with extreme climate events: Institutional flocking

The article explores the governance structures that would be needed to cope with extreme and unpredictable climate change. The impacts on the Netherlands of a Gulf Stream collapse in the Northern Atlantic are taken as a case. This hypothetical situation of serious risks and high uncertainties requires governance arrangements with high potentials for rapid and radical change. Using the metaphor of the flocking of birds, we characterize these arrangements as ‘institutional flocking’. Main features of institutional flocking are: (1) flexible opportunities for actors to swiftly respond to change through creative forms of collaboration and participation; (2) rapid and pervasive processes of learning and institutionalization of new knowledge among actors; (3) strong and institutionalized care for coherence and solidarity, to bind the various parts of the ‘flock’. We illustrate and articulate these features for two sectors in Dutch society, urban infrastructure and rural planning.     

Financial globalization, financial crises and contagion

Two observations suggest that financial globalization played an important role in the recent financial crisis. First, more than half of the rise in net borrowing of the U.S. non-financial sectors since the mid-1980s has been financed by foreign lending. Second, the collapse of the U.S. housing and mortgage-backed-securities markets had worldwide effects on financial institutions and asset markets. Using an open-economy model where financial intermediaries play a central role, we show that financial integration leads to a sharp rise in net credit in the most financially developed country and to large asset price spillovers of country-specific shocks to bank capital. The impacts of these shocks on asset prices are amplified by bank capital requirements based on mark-to-market.     

Inter-market competition for NYSE-listed securities under decimals

Blume and Goldstein (J Finance 52:221–244, 1997) suggest that quote competition between trading venues may diminish following tick size reductions. We test this suggestion by studying the competitive landscape in the NYSE-listed stocks before and after decimalization. We find that NBBO (National Best Bid and Offer) participation by non-NYSE venues declines following decimalization consistent with the prediction. At the same time, the importance of quote competitiveness in attracting order flow increases. In addition, although not as active in determining and maintaining the best quotes under decimals, non-NYSE venues become more active in price discovery. Finally, decimalization leads to lower trading costs and to smaller differences in trading costs across trading venues.     

Discussion of “decentralized capacity management and internal pricing”

Dutta and Reichelstein (2010) study the role of transfer pricing and organizational choice in providing incentives for efficient decisions on the acquisition and subsequent reallocation of capacity within decentralized firms. Their analysis suggests that transfer prices based on the historical cost of capacity facilitate the efficient allocation of resources. They also find that symmetric responsibility center structures are generally better suited for providing efficient investment incentives than hybrid organizations. An important condition for the derivation of the two results is the linearity of the shadow prices of capacity. If shadow prices are nonlinear, transfer prices should be below (above) the historical cost of capacity in order to counteract the managers’ incentives to underinvest (overinvest). Because profit center organizations can use transfer prices for mitigating the inefficiency caused by nonlinear shadow prices, they offer a natural advantage over pure investment center organizations in implementing efficient capacity decisions. Overall, these observations suggest that the curvature of profit functions is an important factor in determining the suitable instruments for decentralized capacity management.     

Discussion of: “Flattening the organization: the effect of organizational reporting structure on budgeting effectiveness”

This paper is a discussion of Hannan et al. (Rev Account Stud, 2010), wherein subordinate-participants are endowed with private information, and superior-participants can potentially affect budget requests through their ability to reject them. Their findings are of interest to research on both the design of budgeting systems and span of control. I discuss the relevance of HRT to these literatures and comment on their implementation and experimental design. Also, I offer suggestions for future research, one of which is to explicitly introduce monitoring into experiments on span of control.