Social networks in the global banking sector

We show that banks with shared social connections partner more often in the global syndicated loan market and that central banks in the network play dominant roles in various interbank transactions, indicating that social connections facilitate business connections. However, more centralized banks in the network also contribute significantly to the global systemic risk. Moreover, we find the soft information generated by social networks is particularly valuable when potential partners operate under different accounting and regulatory standards. Finally, we show that the recent banking crisis significantly limited the positive soft information effects of social networks in the global banking system.     

Financial statements based bank risk aggregation

One of the major challenges involved in risk aggregation is the lack of risk data. Recently, researchers have found that mapping financial statements into risk types is a satisfactory way to resolve the problem of data shortage and inconsistency. Nevertheless, ignoring off-balance sheet (OBS) items has so far been regarded as the usual practice in risk aggregation, which may lead to deviations in conclusions. Hence, we improve the financial statements based risk aggregation framework by mapping OBS items into risk types. Based on 487 quarterly financial statements from all 16 listed Chinese commercial banks over the period 2007–2014, we empirically study whether the overall impact of OBS activities and the individual impact of each of the OBS risk types on total risk depend on bank size. Moreover, this research divides the sample into two subsets, during and after the subprime crisis, to find out how the subprime crisis affects risks of Chinese banks. Our empirical results show that although OBS credit risk is positively linked to total risk while OBS operational risk is negatively linked to total risk for both large and small banks, the overall impact of OBS activities on total risk depends on bank size. The overall OBS activities are positively related to the large bank’s total risk while they are negatively related to the small bank’s total risk. Besides, we also found that it is the increase of liquidity risk and market risk that leads to the larger total risk of Chinese banks during the subprime crisis.     

New development: Unified scores of governance capacity using a Bayesian latent variable analysis

A plethora of governance measures has been developed to assess governance capacity in different countries. Choosing one indicator over another involves discretionary decision issues. This article presents a new unified measure of governance capacity for the administrative and political dimensions. The unified measure provides a more accurate understanding of governance than single indices.     

Examining the disclosures on the websites of English credit unions

This paper examines the disclosures made on English credit unions’ websites. Credit unions without a website are presumed to be small. Community credit unions with websites tend to offer basic services with a limited range of products that may appeal to poorer members of society. Occupational credit unions appear more likely to have a greater range of products.     

Societal trust and corporate tax avoidance

Using an international sample of firms from 25 countries and a country-level index for societal trust, we document that societal trust is negatively associated with tax avoidance, even after controlling for other institutional determinants, such as home country legal institutions and tax system characteristics. We explore the effects of two country-level institutional characteristics—strength of legal institutions and capital market pressure—on the relation between societal trust and tax avoidance. We find that the relation between trust and tax avoidance is less pronounced when the legal institutions in a country are stronger and is more pronounced when the capital market pressure is stronger. Finally, we examine the relation between societal trust and tax evasion, an extreme and illegal form of tax avoidance. We show that societal trust is negatively related to tax evasion and the negative relation is less pronounced when legal institutions are stronger.     

Population Aging and the Possibility of a Middle-Income Trap in Asia

We present three conditions for a demography-driven middle-income trap and show that many economies in East, South, and Southeast Asia satisfy all of them. The conditions involve (1) the support ratio of workers to consumers has an impact on economic growth, (2) economic development accompanies more investment in human capital and lower fertility due to the quantity–quality trade-off, and (3) a current low level of fertility corresponds to very low support ratios for keeping up with frontier economies in the long run. Panel analysis for 178 countries shows that (1) and (2) are satisfied for Asia with higher elasticity than others. As for (3), we set up a dynamic model for simulations, showing that approximately two-third of Asia’s developing countries have an unsustainable level of support ratios, implying possibility of a middle-income trap due to future demographic headwinds.     

Can employee ownership and human resource management policies clash in worker cooperatives? Lessons from a defunct cooperative

The article analyzes the interaction between employee ownership, HRM policies and practices, and HRM outcomes in what was the world's biggest industrial worker cooperative for decades, and now defunct, Fagor Electrodomésticos. Using longitudinal internal data and detailed interviews with key stakeholders, this paper sheds light on how employee ownership conditioned HRM policies. HRM outcomes—such as job satisfaction and absenteeism—are also analyzed over a long period of time. Chronic nepotism when recruiting new members, failures in the training policy, impoverished and Taylorist working systems, and reverse dominance hierarchies are analyzed as factors that increased free riding and caused low satisfaction and the disengagement of working members. This case study contributes to the literature on HRM and worker cooperatives as it provides some insights that are rarely found in that literature. It also provides guidance to worker cooperatives about increasing the fit between employee ownership and HRM policies and outcomes.     

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.     

Advertising, Its Determinants, and Market Structure

This study derives a formal model of firm advertising behavior and applies it to the industry level to figure out the relationship between advertising and market structure. The firm advertising model shows that both consumer preference andfirm-specific advertising competence jointly determineprofit-maximizing advertising intensity. At the industry level, advertising intensity is represented multiplicatively by consumer preference and a measure of market structure, which reflects the joint distribution of the levels of advertising competence and market shares among firms. The new market structure measure suggests that those single-dimensional measures of market structure such as seller concentration and the Herfindahl index are inadequate in explaining interindustry differences in advertising intensity, and that the long-debated advertising-concentration relationship differs depending primarily on the appropriability of advertising. An empirical analysis of 426 five-digit Korean manufacturing industries shows that an inverted U-shaped relationship between the Herfindahl index and industry advertising intensity is observed for consumer goods industries but a lazy J-shaped relationship for producer goods industries.