Too-Big-To-Fail: Why Megabanks Have Not Become Smaller Since the Global Financial Crisis?

ABSTRACT

More than ten years after the global financial crisis, what has happened to the ‘too-big-to-fail’ (TBTF) banks whose reckless behavior was among its preconditions, but which received public support and guarantees in the midst of that crisis? Insofar as this too-big-to-fail status helped create the crisis and then imposed costs on the rest of society, we would expect these banks to have shrunk. We investigate the evolution of 31 global-TBTF banks and find that their overall size has hardly recorded any substantial change. However, there is no sense of urgency in the flourishing post-crisis literature on TBTF banks about the need to contain their size; the prevalent view therein is that if properly regulated, the risks that arise from a financial system dominated by TBTF banks are manageable. This view rests on the same overly narrow theoretical underpinnings whose flaws were exposed in the crisis. We argue that too-big-to-fail banking is embedded in a set of self-reinforcing policies—consolidation, balance-sheet support through quantitative easing, favorable regulations, bank lobbying, and geo-economic and geo-political considerations—which explain why these banks have not shrunk and why they remain a threat to financial stability, well after the lessons of the crisis should have been learned.     

AN ANALYSIS OF SUPPLY CHAIN COLLABORATIONS AND THEIR EFFECT ON PERFORMANCE OUTCOMES

This research examined how operational outcomes, relational outcomes and business performance are affected by a collaboration project between buyers and suppliers in a supply chain. It is hypothesized that interdependence of knowledge and process, supply chain partner insight, and the level of collaboration between the firms affect the outcomes of a collaboration project. Survey data from buyers and suppliers from a wide range of industries and organizations were used in this analysis. Among these participants, higher levels of collaboration led to improvements in operational and relational outcomes, which together led to improvements in asset utilization, competitive position, organizational performance, and profitability.     

Motivations and Use Context in Mobile Tourism Shopping: Applying Contingency and Task–Technology Fit Theories

Mobile tourism shopping is an emerging market, but there is little theoretically based research on the topic. This study investigates the impact of motivations (value, enjoyment, time saving and mobility) on consumer satisfaction by applying contingency and task–technology fit theories in the mobile tourism shopping context. The results show that value and enjoyment have significant effects on satisfaction. Use context is found to have a full mediating role between time saving and satisfaction as well as between mobility and satisfaction. This study offers theoretical and practical contributions to the tourism literature and mobile tourism industry. Copyright © 2013 John Wiley & Sons, Ltd.     

Investor Overreaction to Earnings Surprises and Post‐Earnings‐Announcement Reversals

Prior literature suggests that the market underreacts to the positive correlation in a typical firm's seasonal earnings changes, which leads to a post‐earnings‐announcement drift (PEAD) in prices. We examine the market reaction for a distinct set of firms whose seasonal earnings changes are uncorrelated and show that the market incorrectly assumes that the earnings changes of these firms are positively correlated. We also document that positive (negative) seasonal earnings changes in the current quarter are associated with negative (positive) abnormal returns in the next quarter. Thus, we observe a reversal of abnormal returns, consistent with a systematic overreaction to earnings, rather than the previously documented PEAD. Additional analysis indicates that financial analysts similarly overestimate the autocorrelation of these firms, although to a lesser extent. We also find that the magnitude of overestimation and the subsequent price reversal are inversely related to the richness of the information environment. Our results challenge the notion that investors recognize but consistently underestimate earnings correlation and provide a new perspective on the inability of prices to fully reflect the implications of current earnings for future earnings. That is, we show that investors predictably overestimate correlation when it is lacking, but underestimate it when it is present.     

Diminishing effects of location? Some evidence from Swiss municipalities, 1950–2000

This paper analyzes how location has affected, in the second half of the twentieth century, the population growth of 2889 municipalities in Switzerland. The analysis demonstrates the temporal relativity of location attributes, even for small territorial divisions, such as the Swiss cantons. However, we also show that, both absolute and relative location attributes have weakened over time as population growth predictors, apparently due to improving road infrastructures, and growing motorization. The study has been made possible by a detailed historical population and accessibility database available for Swiss municipalities. To the best of our knowledge, no database of such scope and quality is available for any other European country.     

Why do employees keep choosing the high-premium health care plan? An investigation of the financial consequences and logic of employee health care plan selections

In 1991, Dannon employees had the choice to stay with their current health care plan or switch to a new plan which offered a lower premium and less hospital cost coverage that better fit the needs of most employees. Both plans were the same in all other respects. Only 25% of employees chose the new lower-premium plan over the old plan. This article reports a collaborative effort between The Dannon Company and Cornell University's Center for Advanced HR Studies to identify the patterns of employee choices, and the effects of those choices on the actual costs that employees incurred. The actual decisions of 287 Dannon employees were examined, and the out-of-pocket costs that they actually incurred in the two years after the plan was introduced were calculated. © 1996 by John Wiley & Sons, Inc.     

Safety behavior and consumer responses to cigarette lighter safety mechanisms

This paper analyzes consumer responses to lighter child-resistant mechanisms using an original sample of 200 households with young children. Results from an in-house placement of lighters indicate that the child-resistant mechanism would diminish consumer care. The child-resistant device reduced risk perceptions, parental concern with lighter safety, the assessed need for precautions, and consumer care. The results provide the most detailed empirical evidence of the mechanisms driving the diminished safety precautions in response to technological improvements in safety. The overall efficacy of the mechanism, however, is sufficient to generate a safety improvement despite the diminished care.