Limits to International Banking Consolidation

Heterogenous banking supervision and regulation is often considered as the most important impediment for Pan-European Bank mergers. In this paper we identify other more fundamental reasons for a limited degree of cross-country integration in retail banking. We argue that the distribution of regional liquidity shocks may pose a natural limit to the extent of cross-border bank mergers. The paper derives the impact of different underlying stochastic structures on the optimal structure of cross regional bank mergers. Imposing a symmetry restriction on the underlying stochastic structure of liquidity shocks we find that benefits from diversification and the costs of contagion may be optimally traded off if banks from some but not from all regions merge. Under an additional monotonicity assumption full integration is only desirable if the number of regions with diverse risks is sufficiently large. We would like to thank the anonymous referee, Marc Flannery, Frank Heid, Michael Koetter, Rowena Pecchenino and the editor, George Tavlas, as well as the conference participants of the 4th INFINITY Conference Dublin for helpful comments. The views expressed here are those of the authors and not necessarily those of the Deutsche Bundesbank.     

Estimating discrete dividends by no-arbitrage

We develop and showcase a simple no-arbitrage methodology for the valuation of discrete dividend payments, based exclusively on market prices of options via the put-call parity. Our approach integrates all available option market data and simultaneously calibrates the market-implied discount curve, thus ensuring consistency across spot and derivative markets. We illustrate our method using stocks of European blue-chip companies.     

Impediments to Communication in Financial Institutions: Implications for the Risk Management Organization

This article investigates the question of how risk management should be embedded in a financial firm’s hierarchy. We answer this question by combining capital market theory with game-theoretic thinking. We develop a theory for the integration of risk management into an organization, based on private information and differences in preferences. Our model compares the payoffs from uninformed decision-making, solo decision-making, joint voting decision-making, and coordinated decision-making when information about a project’s expected return and risk is dispersed in the organization. Our findings have a number of implications for the organization of risk management.     

Which hotel guest segments reuse towels? Selling sustainable tourism services through target marketing

ABSTRACT

This paper reviews and evaluates the wide range of supply and demand side measures employed and tested to reduce the environmental impacts of tourist accommodation. It focuses on the importance of understanding market segments and their pro-environmental behaviour by exploring the personal and travel characteristics significantly associated with pro-environment beneficial change, empirically investigating hotel guest characteristics associated with higher towel reuse. Towel use per day, per room, is modelled according to the number of adults in the room, the number of children, and the type and origins of guests. Observed actual towel use by 204 travel parties spending 480 nights in a four-star hotel in Slovenia reveals key personal and travel characteristics of hotel guests which are predictive of towel reuse: their country of origin, booking methods used, being a business traveller and not being a family. Results point to a-priori market segments which could be given booking preference in periods of high demand to reduce hotel environmental footprints. Results also point to promising leverage points for interventions designed to modify the behaviour of hotel guests on site. The approach and methodology used could be applied to marketing pro-environmental concepts more widely across other sustainable initiatives.     

New Competences for Crisis Times

In general, people always try to achieve their goals in several aspects of their lives such as the studies, jobs, and leisure time. Unfortunately, goals are not always achieved. Sometimes people simply give up on achieving them, or on other occasions, goals are not achieved completely (later, more costly, and to a lesser extent than desired). The principal objective of the present paper is to identify which variables determine success while people try to achieve their own goals. In order to analyze this fact, the authors will define a sample of university students, taking as a goal their current situation, defining the maximum quality of not staying down or not having more than two subjects left to pass. A questionnaire will be developed in order to identify which variables are more important to achieve goals. Answers from the students will permit one to know the importance given to the different variables by them, as well as how students manage these variables in order to achieve their goals. Moreover, a mathematical model will be used to evaluate what is the influence and relevance of each variable to achieving personal goals.     

Wealth inequality and credit markets: evidence from three industrialized countries

Economic theory predicts that changes in the distribution of wealth in an economy affect real interest rates if capital markets are imperfect. We investigate this link for the US, the UK, and Sweden, using multivariate time series analysis that explicitly allows for feedback effects between wealth inequality and real interest rates. Our estimates yield that, over the course of the twentieth century, decreases in wealth inequality led to significant declines in real interest rates. Our results therefore point to the importance of capital market imperfections that arise from moral hazard. They put to question the empirical relevance of a negative interest rate effect of inequality that may arise in variants of these models with high inequality, heterogeneous agents or adverse selection.     

The impact of mood on personality measures

This article reports an experiment conducted to estimate whether and how subjects' mood states would influence their scores on three personality measurement scales. The three scales were Larsen's (1984) Affect Intensity Measure, Scheier & Carver's (1985) Life Orientation Test, and Leary et al.'s (1986) Objectivism Scale (the third scale was included only for control purposes). Four experimental groups were exposed to a very negative, mildly negative, neutral or positive mood-inducing film. Significant differences in scores between groups were found for the first two scales. This indicates that the scales are unstable measurement instruments in the presence of mood variations, and the appropriateness of employing these measurement scales in mood studies can thus be questioned.