Dodd–Frank and risk in the financial services industry

We present evidence that discretionary risk taking by financial institutions has declined following the passage of Dodd–Frank. The largest institutions experience the greatest reduction in risk consistent with the legislation’s objective of reducing systemic risk and an ultimate goal of ending the too-big-to-fail doctrine. Analysis of a sample of banks, the most highly regulated financial institutions, reveals that banks exhibiting characteristics consistent with riskier business strategies prior to Dodd–Frank experience the greatest risk reduction. Further, banks that alter their business practices by increasing their capital ratios and reducing their level of non-performing loans following the law’s passage are shown to experience the greatest reduction in risk. Our results point to the efficacy of Dodd–Frank in reducing risk in the financial system.     

Board Structures Around the World: an Experimental Investigation

We model and experimentally examine the board structure–performancerelationship. We examine single-tiered boards, two-tiered boards,insider-controlled boards, and outsider-controlled boards. Wefind that even insider-controlled boards frequently adopt institutionallypreferred rather than self-interested policies. Two-tiered boardsadopt institutionally preferred policies more frequently buttend to destroy value by being too conservative, frequentlyrejecting good projects. Outsider-controlled single-tiered boards,both when they have multiple insiders and only a single insider,adopt institutionally preferred policies most frequently. Inthose board designs where the efficient Nash equilibrium producesstrictly higher payoffs to all agents than the coalition-proofequilibria, agents tend to select the efficient Nash equilibria.     

Using proportional modeling to evaluate irrigator preferences for market‐based water reallocation

Irrigators’ policy preferences for water reallocation programs usually take the form of proportional data, where one option will be relatively more or less favored than another in the composition of a government's total budget apportionment to address water reform. This study applies a zero‐one inflated beta regression to model Murray–Darling Basin irrigators’ preferences for market‐based water policy programs. Market‐based arrangements are more likely to provide efficient solutions to water reallocation problems, particularly where future uncertainty and appropriate pricing induce irrigator preferences for such programs. Our modeling of drivers of irrigator preferences for government expenditure on market‐based programs identified different determinants of zero (a corner solution) and proportional outcomes for the reallocation of Murray–Darling Basin water. In addition, the proportional modeling identifies some variables (namely, state regional influences, the type of farm production and recent debt, low income, or water allocation stressors) that increase engagement with market‐based programs. Interestingly, while price variables are important and statistically significant, they appear to be less relevant to program engagement than other influences.     

Knowledge sharing in heterogeneous teams through collaboration and cooperation: Exemplified through Public–Private-Innovation partnerships

According to literature on teams and group learning it is important for heterogeneous teams to share knowledge, through the use of different forms of interaction. However, little is known about how different forms of interaction influence knowledge sharing and secure progress during innovation processes. In order to achieve an increased understanding, literature concerning teams and group learning are integrated within a case study of Public–Private-Innovation partnerships (PPI). Specifically, the distinction between different forms of interaction, such as collaboration and cooperation is used to clarify how knowledge sharing and progress are influenced during innovation processes. Three PPI projects have been chosen due to the particularly challenging nature of their composition; consisting of heterogeneous members from both the public and private sectors with dissimilar logics. Overall, our findings point out that 1) those heterogeneous teams that are able to continually integrate their team members' heterogeneous knowledge through a balanced use of collaborative and cooperative interaction forms seem to secure progress during the innovation process, and that 2) those heterogeneous teams that are able to continually re-establish a shared knowledge base, when it has been challenged by a critical incident, seem able to achieve progress during innovation processes.     

Terrorism and Stock Market Sentiment

This paper examines the effects of terrorism on stock market sentiment by focusing on the behavior of expected probability density functions of the FTSE 100 index around terrorist attacks. We find that terrorism has a strong adverse impact on stock market sentiment. In particular, terrorist attacks are found to cause a pronounced downward shift in the expected value of the FTSE 100 index and a significant increase in stock market uncertainty. Furthermore, our results show that the expected FTSE 100 probability densities became significantly more negatively skewed and fat‐tailed in the immediate aftermath of terrorist acts.     

Three problems in applying contestability to regulated markets

The theory of contestable markets emphasizes that the ease of entry rather than the number of existing firms forces incumbents to set prices at optimal levels. The policy implications of this work contrast sharply with past U.S. regulatory and antitrust policies, legitimizing increased industry concentration and decreased regulation. This paper explores three factors that influence the desirability of regulation or antitrust policy despite the apparent existence of a contestable market time lags, technological change, and cyclical macroeconomic fluctuations. Time lags enable incumbents to earnsupra-normal profits and take last-minute action to forestall entry. New technologies can create sunk costs that reduce the contestability of a market. Recessions can depress capital markets, raising the cost of exit, while expansion creates opportunities for entry without threatening monopolistic prices. These shortcomings limi the ability of contestability theory to provide guidelines for the regulation of actual industries.     

Deregulation, Mergers, and Cost Savingsin Class I U.S. Railroads, 1974-1986

In this paper we attempt to disentangle the effects of deregulation on rail costs from those directly attributable to mergers. We estimate that cost reductions obtained from mergers ranged from a high of 33% for the Burlington Northern to a low of a 3% cost increase for the CSX. However, firms not engaged in significant merger activities experienced similar cost differentials indicating that consolidation was not a prerequisite for cost savings. We conclude that although mergers did confer some benefits on the participating firms, they were not a prerequisite for railroads being able to achieve substantial cost savings.     

Examining the Relationships Between Monitoring and Incentives in Corporate Governance*

abstract Agency theory focuses on monitoring and incentives as two solutions to agency problems. Prior research suggests that monitoring and incentives may act either as substitutes or as complements, and that the context of the agency relationship plays a major role in determining the direction of the relationship between them. In a corporate governance setting, we contend that board information and boards' usage of CEO control mechanisms are best viewed as complements. Thus, we hypothesize that boards' information gathering behaviour will be positively related to boards' usage of CEO control mechanisms. Using primary and secondary data from 149 US firms, we find that increases in boards' information gathering are associated with increases in boards' usage of managerial controls. These findings suggest that information and managerial control mechanisms act as complements in the governance context, and that boards take a variety of actions to protect the interests of shareholders.     

Reconstructionism in Technology Education

This paper points out that technology education has historically had many principles and practices which reflect an underlying philosophy, but that the philosophy has not been made explicit by many technology education practitioners. As philosophy helps technology educators understand alternatives, make decisions and take action in both curriculum and instruction, it is important for technology educators to ask philosophical questions at the onset of their work to understand the implications of their actions. A brief discussion about some of the philosophies that inform educational practice in North America provides a background for an analysis of the different philosophies in relation to technology education, and provides insight into the significance of reconstructionism, an outgrowth of pragmatism, as a philosophy in which to frame and describe technology education. This is illustrated through several examples of a reconstructionistic approach to technology education.     

Partner Type Diversity in Alliance Portfolios: Multiple Dimensions,Boundary Conditions and Firm Innovation Performance

Our research extends the current knowledge based view on the configuration of alliance portfolios and their deployment in different external knowledge environments. We study these alliance portfolios in a longitudinal sample (1996–2010) for over three thousand firms that operate in a large number of industries in the Netherlands. Our findings indicate that partner type variety and partner type relevance, as different dimensions of partner diversity in alliance portfolios, both have an inverted U‐shaped association with firm innovation performance. However, alliance portfolios characterized by both high partner type variety and high relevance cause inferior innovation performance. Different external knowledge environments, characterized by different levels of industry modularity and scope of knowledge distribution, moderate the inverted U‐shaped associations of partner type variety and relevance in alliance portfolios with firm innovation performance in opposing directions. While for partner type variety, a high level is found to be optimal in environments with greater modularity or broader scope of knowledge distribution, for partner type relevance it turns out that a low level is optimal under more modular industry conditions.