The Impact of Surplus Distribution on the Risk Exposure of With Profit Life Insurance Policies Including Interest Rate Guarantees

This article analyzes the numerical impact of different surplus distribution mechanisms on the risk exposure of a life insurance company selling with profit life insurance policies with a cliquet‐style interest rate guarantee. Three representative companies are considered, each using a different type of surplus distribution: a mechanism, where the guaranteed interest rate also applies to surplus that has been credited in the past, a slightly less restrictive type in which a guaranteed rate of interest of 0 percent applies to past surplus, and a third mechanism that allows for the company to use former surplus in order to compensate for underperformance in “bad” years. Although at the outset all contracts offer the same guaranteed benefit at maturity, a distribution mechanism of the third type yields preferable results with respect to the considered risk measure. In particular, throughout the analysis, our representative company 3 faces ceteris paribus a significantly lower shortfall risk than the other two companies. Offering “strong” guarantees puts companies at a significant competitive disadvantage relative to insurers providing only the third type of surplus distribution mechanism.     

Auditor Reputation Under Different Negligence Regimes

Do auditor reputation effects evolve the same way under precise negligence as under vague negligence? Or are there differences? We assume that investors update their beliefs on unobservable auditor quality when an auditor discloses an inaccurate report. We call this a reputation effect. A necessary condition for reputation effects to occur is that, ex ante, investors expect ‘good’ auditors to take more care than ‘bad’ auditors such that ‘good’ auditors are less likely to issue an inaccurate report. Consistent with empirical evidence, we assume that wealthier (‘good’) auditors tend to take more care than less wealthy (‘bad’) auditors. We find that under vague negligence, reputation effects will occur, inducing both types of auditor to increase the level of care taken. A ‘good’ auditor is likely to exert excessive care. Then, even in the absence of auditor risk aversion, a (properly defined) liability cap is necessary to induce efficient incentives. A contractual liability cap is preferable to a legally fixed liability cap. Under precise negligence, a ‘good’ auditor will exert the standard of due care. However, a ‘bad’ auditor will also do so if sufficiently wealthy. Consequently, ex ante, investors do not expect different levels of care to be taken or reputation effects to occur. A liability cap is not desirable. This paper highlights the importance of non‐legal sanctions in auditor liability. Finally, it links the ‘reputation’ and ‘deep pocket’ hypotheses, both of which have attempted separately in the past to explain the positive correlation between auditor size and auditor quality.     

Siemens: Maßhalten beim Moralisieren

Ohne Zusammenfassung Prof. Dr. Jochen Zimmermann ist Professor für Betriebswirtschaftslehre an der Universit?t Bremen     

Forschung und Innovation: Wo steht Deutschland?

Aufwendungen für Forschung und Entwicklung werden im Hinblick auf die internationale Wettbewerbsf?higkeit eines Wirtschafts- und Technologiestandorts als besonders bedeutsam eingesch?tzt. Wie l?sst sich der Zusammenhang zwischen Forschung und wirtschaftlicher Entwicklung empirisch nachweisen? Welchen Rang nimmt Deutschland im internationalen Vergleich der Forschungs- und Innovationsaktivit?ten ein? Welche Handlungsoptionen ergeben sich für die Wirtschaftspolitik?     

On Stephen Parsons' Philosophical Critique of Transcendental Realism

This paper replies to Stephen Parsons' critique of Tony Lawson's Economics and Reality recently published in this journal. The topics addressed include Lawson's critique of empirical realism; Lawson's definition of 'structures'; theories of truth; the relationship between mainstream economics and empirical realism; and the possibility of naturalism .     

Leveraging Green IS in Logistics

Logistics and especially road transportation account for a major proportion of global greenhouse gas emissions. Thus, increasing eco-sustainability is particularly important in this sector. Green information systems can support the transition towards more eco-sustainable business processes in logistics. To date research in Green IS has been dominated by conceptual and empirical studies, while the community has been reluctant to do design science research developing IS artifacts. Addressing this gap, we develop and evaluate a Green IS artifact for GHG emission tracking in road transportation processes – named Carbon Tracker. The design process was guided by design principles derived from prior Green IS literature. The artifact enables more eco-sustainable practices in logistics to emerge as it provides detailed information about GHG emissions that is indispensable for advanced organizational sense- and decision-making. The evaluation shows that the use of Carbon Tracker leads to more accurate and detailed information on emissions as well as more seamless and efficient workflows than today’s best-practice approaches. Thus, the paper demonstrates how Green IS can be leveraged for more eco-sustainable and efficient business processes and paves the way for further design-oriented research in the Green IS domain.