Stochastic reserve losses,bank credit expansion and Bayesian information

In standard bank credit expansion models the optimal amount of new demand deposits to create is derived for a given level of uncertainty of reserves losses. In this paper, I analyze in detail, the microeconomics of bank credit expansion in which the degree of uncertainty is a decision variable for the bank to determine. First, the role of information in adjusting the bank's expected profit is established and its impact on demand deposit creation is discussed. I then derive the optimal demand for information and its comparative static behavior is examined. Finally, I discuss the major implications of considering the level of uncertainty as a decision variable in the bank credit expansion literature.     

Regulating the electricity supply industry by valuing environmental effects : How much is the Emperor wearing?

All approaches to the comparison of disparate environmental effects suffer in common from several intractable problems. Difficulties are posed by the obscurity, complexity, uncertainty and unquantifiability of many effects. Incommensurate indices and discrepant frames of reference exacerbate the analyst's predicament. Although increasingly influential, the monetary valuation literature tends to neglect these problems. Important recent valuation studies are found to be partial in scope, mutually inconsistent and misleadingly presented. The theoretical framework of valuation is itself argued to be profoundly flawed, being unidimensional, sociocentric and opaque in character. It is concluded that there exist preferable and more effective analytical options.     

Worker co-operatives: A dream with jagged edges?

The authors of this paper argue that worker co-ops need to be valued as an improvement in the quality of working life, yet all too often they and the agencies which support them are caught up in a “numbers game” of trying to maximise the number of jobs created in order to justify funding. It is important not to under-estimate the problem of under-capitalisation in co-ops, the stresses of establishing a new business for those with no management experience, and the cost and time needed for training. Co-ops are more an experiment in a new labour process than an easy cure for a dying economy.     

Reviews

GRAND STRATEGY OR DRAINING LAKE WINDERMERE WITH A TEASPOON?

Chandler, J.A. and Lawless, P. 1985: Local Authorities and the Creation of Employment. Aldershot: Gower, £14.50 hardback only.

HOW IT'S DONE IN HAMMERSMITH.

Allan, M., Fenton, M. and Flockhart, A. 1985: Creating a local economic development network. A case study of Hammersmith and Fulham. Dundee Park Place Publishing/The Planning Exchange, £7.50 paperback.

ENTREPRENEURSHIP FOR THE UNEMPLOYED?

Nabarro, R., Davies, R., Cobbold, C. and Galley, N., 1986: Local enterprise and the unemployed. London: Calouste Gulbenkian Foundation. £4.00 plus 60p postage.

THE CO-OP BANK LOOKS AT CO-OPS.

P. A. Management Consultants Ltd. and Co-operative Bank plc, 1985: Workers Co-operatives Past, Present and Future. Manchester: P. A. Management Consultants (Manchester), £20.00.

HOUSING LAND: ARE PLANNERS LOSING THEIR GRIP?

Rydin, Yvonne, 1986: Housing Land Policy. Aldershot: Gower, £15.00 cloth.

MONETARISTS LOOK AT LIVERPOOL.

Liverpool Research Group in Macroeconomics, 1986: Merseyside Economic Prospect Vol. 1, No. 1 February 1986. Liverpool: University of Liverpool, £6.00.

THE FORGOTTEN DEPRIVATION OF RURAL AREAS.

Association of District Councils, 1986: The Rural Economy At The Crossroads—A Review of Rural Needs and Problems in the '80s. ADC,

9 Buckingham Gate, London SW1E 6LE. £5.00.

THE LONDON FINANCIAL STRATEGY.

Greater London Council, 1986: London Financial Strategy London: Greater London Council, £3.50 (now available from London Strategic Policy Unit, 20 Vauxhall Bridge Road, London SW1).     

Cost of equity capital,control divergence,and institutions: the international evidence

This study investigates the governance role of a country’s legal and extra-legal institutions in explaining the variations in firms’ cost of equity capital induced by concentrated ownership structures from 21 countries. Using four implied cost of equity proxies, the results show that the large ownership-control divergence of the ultimate owner has a positive and significant impact on the firm’s cost of equity capital. The finding lends support to the entrenchment effect in that the concentrated ownership structure increases the firm’s external financing cost. Further analyses demonstrate that the higher equity cost induced by the ultimate ownership structure is significantly reduced by a country’s stronger legal and extra-legal institutions, highlighting the governance role played by a country’s institutions in reducing the firm’s external financing cost.     

Corporate Governance in Mexico

This paper looks broadly at the theme of corporate governance in Mexico. It begins with a brief analysis of the historical corporate governance model in Mexico, including the governance structures, the banking and financial systems, ownership and control patterns, industrial policy, and industrial relations. The paper then examines how and why these various aspects of corporate governance have been changing with processes of economic liberalization currently under way. Finally, it analyzes the consequences of changes in the model of corporate governance for the country's development (e.g. increased consumer goods for middle class consumers, increased disclosure by domestic corporations, less support for corporate social programs, etc.).     

Race and the Dynamics of Men’s Mobility into Management from Working Class Jobs

Within the context of the “particularistic mobility thesis” we examine African American/White differences in the incidence, determinants and timing of mobility into management at a refined level, namely, when groups share similar “rank and file” and “elite blue collar” working class jobs. Findings from a Panel Study of Income Dynamics sample of men support theory and indicate that from both job categories, African Americans, relative to Whites, have lower rates of mobility, reach management through a route that is relatively formal and structured by a traditional range of stratification-based causal factors and take longer to reach management. Further, as predicted by theory, racial disadvantage experienced by African Americans are greater among those tracked from rank and file than elite blue collar jobs. Discussed are implications of the findings for understanding African American disadvantage in the American labor market on both an intra-and inter-generational basis.     

Measuring a contract's breadth: A text analysis

We use a computational linguistic algorithm to measure the topics covered in teacher contracts. Topic modeling metrics are used to assess a contract's expansiveness. Our topic, diversity measurement, is then related to the prevalence of support staff. If more specialized services are provided, then contracts should be broader as they cover more employment relationships. We confirm a strong, statistically significant relationship and, thus, have a valid measurement of contract breadth.     

Lead independent directors and accruals quality

We investigate the association between firms having a lead independent director (LID) who serves on the audit committee and accruals quality using a sample of 32,346 observations during 2001–2018 period. Our results suggest that firms with an LID who serves on the audit committee are associated with higher accruals quality. The results suggest that these firms are associated with an increase in accruals quality equal to 6.60% of the accruals quality metric's median value. We also find that as board size increases, the positive influence of an LID on accruals quality weakens—but only for firms with an LID who does not serve on the audit committee. Supplemental analyses indicate that our inferences still hold when using a changes model, when examining a firm's initial adoption or elimination of the LID position, and when using an entropy balancing approach.