Der neue Standard zur bilanziellen Abbildung von Versicherungsverträgen (IFRS 17) – Eine kritische Analyse der Auswirkungen auf die Versicherungsbranche

The new standard for the accounting of insurance contracts (IFRS 17) will entail substantial changes for the insurance industry. In the following article the new standard is critically analyzed. First and foremost the coming valuation model, the so-called building block approach, is presented which will be the basis for all insurance contracts within the scope of IFRS 17. (For certain insurance contracts, especially those with direct participation features, or for less complex or short-term insurance contracts, there are some modifications.) To be more precise, IFRS 17 introduces an enterprise-specific valuation approach that is grounded on the so-called fulfilment value. This fulfilment value is determined by four separate building blocks (fulfilment-cashflow, discount rate, risk margin and contractual service margin), which will be addressed in detail. Finally, major changes in performed accounting practices that insurance enterprises are confronted with and will have to adapt to in their financial statements and accounts are pointed out.     

Minimum return guarantees,investment caps,and investment flexibility

We study the merits of capped retirement products with guarantee for investors who have the flexibility to dynamically adjust their investment strategy. All contracts under consideration are fairly priced such that the net profit of the provider is zero. Without the rider, an expected utility maximizing CRRA investor does not want an investment cap. Here, she commits herself to a strategy a priori. With the flexibility rider, the optimization problem changes and the optimal strategy is a response to an exogenously set price. A fair pricing then anticipates the optimal response of the investor. We show that the maximum expected utility of the investor can, for anticipated fairly priced products, be obtained for a finite cap. Thus, a capped product design can give a Pareto improvement to the otherwise uncapped contract version.     

Me or information technology? Adoption of artificial intelligence in the delegation of personal strategic decisions

Artificial intelligence is revolutionizing the way we do business. Whereas both the adoption of technological innovations and strategic decision making have been subject to prior research, this experimental study is first to combine both. To understand the impact of choice complexity and cognitive perceptions on the willingness to delegate a strategic decision to an algorithm, we conducted an experiment with 310 participants. We find that although choice complexity has no effect, participants with low levels of situational awareness are more likely to delegate. The findings augment research on choice complexity in decision making by emphasizing the relevance of cognitive perceptions.     

The multiple filter test for change point detection in time series

A framework for the detection of change points in the expectation in sequences of random variables is presented. Specifically, we investigate time series with general distributional assumptions that may show an unknown number of change points in the expectation occurring on multiple time scales and that may also contain change points in other parameters. To that end we propose a multiple filter test (MFT) that tests the null hypothesis of constant expectation and, in case of rejection of the null hypothesis, an algorithm that estimates the change points.The MFT has three important benefits. First, it allows for general distributional assumptions in the underlying model, assuming piecewise sequences of i.i.d. random variables, where also relaxations with regard to identical distribution or independence are possible. Second, it uses a MOSUM type statistic and an asymptotic setting in which the MOSUM process converges weakly to a functional of a Brownian motion which is then used to simulate the rejection threshold of the statistical test. This approach enables a simultaneous application of multiple MOSUM processes which improves the detection of change points that occur on different time scales. Third, we also show that the method is practically robust against changes in other distributional parameters such as the variance or higher order moments which might occur with or even without a change in expectation. A function implementing the described test and change point estimation is available in the R package MFT.     

Dinge, die meine Eltern nicht sehen sollten

Every successful communication process requires a certain degree of self-disclosure. However, both in real life and on social network sites like Facebook, self-disclosure does not imply a total sacrifice of privacy. People rather tend to disclose one part of the self while keeping another one protected. In doing so, it is less important where the protective line is drawn, but that a line is drawn at all. This basic principle of conditional self-disclosure can be applied in diverse strategies. An online survey among German Facebook users (n = 684) examined this assumption. Items for a scale of subjective privacy regulation were derived from Burgoon’s four dimensions of privacy. Based on user’s varying emphasis on these privacy dimensions, seven different types of privacy management could be distinguished. Among these, six different strategies of conditional self-disclosure were observed (?chatty“, ?blogging“, ?networking“, ?sorting“, ?passive“, and ?inexperienced“). Only ?careless“ users did not follow our expectations, attaching none of the measured protective conditions to their self-disclosure.     

Corporate Taxation of Heterogeneous Firms and the Welfare Effects of Labour Unions

This paper examines the welfare effects of powerful labour unions when the government levies a uniform tax rate – as is currently the case in most OECD countries – and firms are heterogeneous with respect to productivity. I show that an increase in the bargaining power of labour unions can decrease the welfare loss generated by restriction of the tax policy and provide conditions under which powerful labour unions decrease the likelihood that firms will move abroad. I also reproduce the well‐known effect whereby powerful labour unions decrease corporate tax rates if firms are mobile.     

DETERMINANTS OF PUBLIC PENSION PLAN INVESTMENT RETURN. The role of fund value maximization and public choice theory

Public pension plans are a major type of institutional owner during the new era of investor capitalism, yet little is known about them. Based upon fund value maximization (FVM) and public choice theory (PCT), we develop hypotheses on the determinants of plan performance as measured by plan annual investment return. FVM espouses that the plan's fund or investment portfolio will be invested to maximize return for a given level of risk, while PCT holds that agency costs are significant in the public sector, and will have a negative effect on plan return. Using biennial pension plan data for 1992–96 for several hundred plans, we found that fund value maximization has a much greater influence on plan performance, but that plan performance is also subject to agency costs associated with public choice theory.     

Is investment decision-making influenced by perceptions relating to auditors’ client dependence and amount of audit fees?

The objectives of this study are to examine whether investing decisions are affected by knowledge about the auditor's revenue dependence on a client and whether the amount spent by a company on audit fees affects decisions to invest in the company. A behavioral experiment is conducted where risk assessments and investing decisions are made for four hypothetical investing scenarios. The study finds that investing decisions are affected by knowledge about an auditor's revenue dependence on a client, but are not affected by knowledge about the size of a client's audit fees.