Cross-border banking and financial stability in the EU

This paper examines the implications that alternative regulatory structures may have for resolving failed banking institutions. Emphasis on the European Union (EU), which is both economically and financially large and has several features relating to cross-border banking in the form of direct investment that may heighten the problems we consider. To ensure the efficient resolution of bank failures with minimum, if any, credit and liquidity losses a four step program should be followed. This includes prompt legal closure of institutions before they become economically insolvent, prompt identification of claims and assignment of losses, prompt reopening of failed institutions, and prompt re-capitalizing and re-privatization of failed institutions. These policies together with a prompt corrective action system could be voluntarily adopted through the use of deposit insurance premium discounts as an incentive.     

Theorising determinants of employee voice: an integrative model across disciplines and levels of analysis

This article critiques organisational behaviour (OB) research on employee voice and presents a broader‐based conceptual model that integrates ideas and concepts across employment relationship disciplines and levels of analysis. OB studies err by taking an overly individualistic, psychological, managerialist and de‐institutionalised perspective on employee voice. This criticism is documented and illustrated with numerous examples from the OB literature. To provide a constructive step forward, the article presents an enlarged model of employee voice that not only includes OB but also brings in important contributions from the HRM, industrial relations, labour economics and labour process fields. The model provides an integrative framework for theoretical and empirical studies of voice and yields a number of research and practice implications.     

Innovation killers: how financial tools destroy your capacity to do new things

Most companies aren't half as innovative as their senior executives want them to be (or as their marketing claims suggest they are). What's stifling innovation? There are plenty of usual suspects, but the authors finger three financial tools as key accomplices. Discounted cash flow and net present value, as commonly used, underestimate the real returns and benefits of proceeding with an investment. Most executives compare the cash flows from innovation against the default scenario of doing nothing, assuming--incorrectly--that the present health of the company will persist indefinitely if the investment is not made. In most situations, however, competitors' sustaining and disruptive investments over time result in deterioration of financial performance. Fixed- and sunk-cost conventional wisdom confers an unfair advantage on challengers and shackles incumbent firms that attempt to respond to an attack. Executives in established companies, bemoaning the expense of building new brands and developing new sales and distribution channels, seek instead to leverage their existing brands and structures. Entrants, in contrast, simply create new ones. The problem for the incumbent isn't that the challenger can spend more; it's that the challenger is spared the dilemma of having to choose between full-cost and marginal-cost options. The emphasis on short-term earnings per share as the primary driver of share price, and hence shareholder value creation, acts to restrict investments in innovative long-term growth opportunities. These are not bad tools and concepts in and of themselves, but the way they are used to evaluate investments creates a systematic bias against successful innovation. The authors recommend alternative methods that can help managers innovate with a much more astute eye for future value.     

Securities activities of commercial banks: Recent changes in the economic and legal environments

Despite the lack of changes in the Glass-Steagall Act, commercial banks have expanded their securities activities substantially in recent years. The increase reflects more liberal interpretations of the Glass-Steagall restrictions by the bank regulatory agencies and the courts, greater aggressiveness by the banks in searching out new areas of profitability to offset declining profitability in some traditional banking activities, advances in data processing technology that both permit the design of new securities and promise economies of scope, and increased internationalization of financial markets that provide U.S. banks with experience in securities activities abroad. As a result of the de facto dismantling of the Glass-Steagall Act that is documented in this article, de jure dismantling is less important than in the past, although it is still desirable for the sake of increased efficiency.Loyola University of ChicagoThis article was prepared to accompany the author's statement before the Committee on Banking, Housing, and Urban Affairs, United States Senate, Washington, D.C., August 6, 1987. An earlier version was presented to a conference on Future Directions in the Financial Services Industry, Georgetown University Law School, Washington, D.C., March 5–6, 1987. Sections of the article are included in a longer article, The Securities Activities of Commercial Banks: The Current Economic and Legal Environment, by the author and Larry Mote, Staff Memoranda (Federal Reserve Bank of Chicago), forthcoming. The author is indebted to Larry Mote for comments, suggestions, and corrections throughout the development of this article.     

Caveat Compounder: A Warning about Using the Daily CRSP Equal-Weighted Index to Compute Long-Run Excess Returns

This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal-weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal-weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one-third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them.     

Using Expectations to Test Asset Pricing Models

Asset pricing models generate predictions relating assets' expected rates of return and their risk attributes. Most tests of these models have employed realized rates of return as a proxy for expected return. We use analysts' expected rates of return to examine the relation between these expectations and firm attributes. By assuming that analysts' expectations are unbiased estimates of market-wide expected rates of return, we can circumvent the use of realized rates of return and provide evidence on the predictions emanating from traditional asset pricing models. We find a positive, robust relation between expected return and market beta and a negative relation between expected return and firm size, consistent with the notion that these are risk factors. We do not find that high book-to-market firms are expected to earn higher returns than low book-to-market firms, inconsistent with the notion that book-to-market is a risk factor.     

Bank contagion: A review of the theory and evidence

I am indebted to Herbert Baer, George Benston, Eli Brewer, Charles Calomiris, Mike Carhill, Robert Eisenbeis, Mark Flannery, Gillian Garcia, Randall Kroszer, Cynthia Latta, Larry Mote, Participants at presentations at Wake Forest University, Floria International University, the University of Wisconsin at Milwaukee, the University of Illinois, Colorado State University, the University of Alabama, the Comptroller of the Currency, and the southern Finance Association, and two anonymous referees for helpluf comments and discussions on early drafts.     

Collaboration and technology linkages: a strategic supplier typology

This study uses frameworks from the strategic management and operations strategy literatures to explore the relationships among collaboration, technology, and innovation in small and medium‐sized manufacturers. Statistical analysis of the responses of 200 New Hampshire manufacturing companies in four SIC code industries (fabricated metals, industrial equipment, electrical and electronic equipment, and instruments) leads to the development of a strategic supplier typology which is useful in explaining the differences in the composition and performance of various types of suppliers. Copyright © 2000 John Wiley & Sons, Ltd.