Director Ownership and Voluntary Segment Disclosure: Hong Kong Evidence

Weakness of corporate governance and lack of transparency are often considered causes of or contributors to the Asian Financial Crisis. Publicly listed companies in Hong Kong, like other Asian firms, have concentrated director ownership. The study uses voluntary segment disclosure above the benchmark minimum as a proxy for transparency and examines its relationship to the ownership structure and composition of corporate boards in Hong Kong. We find that: (1) high (concentrated) board ownership explains the extent of low voluntary segment disclosure and this negative relationship is stronger when firm performance is very poor; (2) the contribution of non‐executive directors to enhance voluntary segment disclosure is effective for firms with low director ownership but not for concentrated‐ownership firms. These results have implications for policy makers and regulators in the Asia‐Pacific region striving to improve governance and transparency.     

Backup coverage models in nature reserve site selection with spatial spread risk heterogeneity

Set covering and maximal covering problems are well-known integer programming models in location analysis. Such models have also been used in reserve site selection modeling. They aim at selecting sites to conserve species, sometimes reflecting a desire to group protected sites together or to separate sites. This paper uses such models but considers the case of land heterogeneity in terms of the risk of large disturbances that threaten species even within a reserve, such as fires, diseases, pests or invasive species. It removes the classical assumption of homogeneous land sites and considers both adjacency in areas with a low risk of multi-parcel disturbance and distance between sites in areas with a high risk of a large destructive event. The models are explored in a stylized data set and applied to a portion of the state of Oregon with comparison between the standard covering models in homogeneous and heterogeneous risk settings.     

Fear and risk in the audit process

Relying on an ethnographic study conducted in the French branch of a big audit firm and using a psychodynamic perspective to interpret the collected data, we show that auditors’ sense of comfort (Pentland, 1993) arises only at the end of the audit process, and that the rest of the time, public accountants are inhabited primarily by fear. Fear plays a crucial but ambivalent role in auditing. On one hand, auditors and audit firms cultivate this feeling through informal and formal techniques to stimulate vigilance, encourage self-surpassment, mitigate the anesthetizing effect of habit and maintain reputation. On the other hand, audit teams’ members strive to alleviate their fear in order to form and convey their conclusions with a certain degree of comfort. In the field, driven by fear, they manage to finally become comfortable either by mobilizing their ‘practical intelligence’ (an intelligence of the body which helps them handle that which, in their mission, cannot be obtained through the strict execution of standardized procedures) or by adopting defensive strategies (such as distancing themselves from work-related problems, mechanically applying audit methodologies or relaxing their conception of a job well done). Fear and risk are closely related phenomena. Michael Power (2007a, p. 180) notes that ‘the significant driver of the managerialization of risk management is an institutional fear and anxiety’. Yet the experience of fear and the role that fear plays in risk management processes is most often overlooked in the literature. In this respect, our study contributes to ‘emotionalize’ and challenge the cognitive and technical orientation adopted by most academics and regulators in their understanding of audit risks and auditors’ scepticism. We also discuss a number of avenues for future research with a view to encouraging further examination of the role that emotions play in the audit process.     

The stability of decision making in committees: The one-core

We study the stability of decision making in committees. A policy proposal introduced by a committee member is either adopted or abandoned in favor of a new proposal after deliberations. If a proposal is abandoned, it is in spite of the committee member who introduced it, who does not cooperate in any effort to defeat it. Shenoy (1980) proposes the one-core as a solution concept for this game, and shows that this solution may be empty. We provide a necessary and sufficient condition for the existence of a stable policy under the majority rule. This result highlights a trade-off between the size of a committee, the number of competing policy options, and the existence of a stable outcome. Our findings imply a tension between political stability and the existence of a large number of competing interests in democracies.     

Much ado about nothing? The controversy over the validity of the Coase theorem

The controversy over the theoretical validity of the ‘Coase theorem’ is closely linked to the controversy over the correct statement of it, since the principal need is to determine what valid generalizations can be made on the basis of Coase’s 1960 Coase, R. H. 1960. “The Problem of Social Cost.” Journal of Law and Economics 3:1–44.[Crossref], [Web of Science ®] , [Google Scholar] examples. The present article does not aim to review the content of the controversy as such, but rather to question the reasons behind it: why so much noise about a proposition that is patently unrealistic (because of its assumption of zero transaction costs)? I argue that the prominence of the controversy, namely of the question of the validity (and statement) of the ‘Coase theorem’, can be analytically explained by the roles this ‘theorem’ plays in microeconomics: it is critical (of the standard theory of market failures), heuristic (drawing out the consequences of the efficiency assumption), and normative (conveying an optimistic view of the efficiency of exchange). I stress that these roles depend on the nature of the exchange defined in the formulation of the ‘theorem’. And I conclude that they rest upon the cooperative bargaining version, and therefore on an optimistic belief in the ability of people to find efficient agreements.     

Mutual impacts of product standardization and supply chain design

This paper deals with two major issues for industries; the product design and the supply chain design. These problems are usually solved separately, but in recent years, approaches were proposed to tackle these two problems together. In this paper, we investigate more precisely the links between the standardization of products or components, and the design of the supply chain. First, we show on a little example that there is a great interest to consider simultaneously these two decisions, and that solving these interdependent problems separately could result in a suboptimal, or even a bad, decision. Then, on a simplified problem issued from an industrial case study, we outline the impact of standardization choices on the structure of the supply chain and the gain that can be obtained from solving the problem as a unique compound optimization model. To illustrate the solutions of the problem, we propose graphics in order to visualize, in function of quantities and/or transportation costs, the best decision for the product standardization and for the supply chain design. Graphics also permit to anticipate the impacts of a variation of either quantities or transportation costs, from a specific situation. Such graphics they could be used in a decision aid tool to help companies in their choices. Finally, we show that costs and supply chain structure are highly impacted.     

An Alternative View on Regulatory Distortions in a Competitive Financial Services Industry

We present an alternative view on regulatory distortions in the banking industry. We use the duopoly model developed by Boot, Dezelan, and Milbourn (BDM, 2000), where a bank with low monitoring costs faces a bank with high monitoring costs. We show that when the initial level of the capital requirement is low, an increase of the minimum ratio between capital and total assets causes a higher decrease in profits at the bad bank than at the good bank. This finding contrasts with BDM's theorem 1, which predicts that a regulation imposing an identical increase in production costs on both banks will cause a greater loss in profits at the good bank than at the bad bank. We also look at the impact of an increase in the minimum ratio between capital and total assets on the profits of a representative bank in three other competitive environments identified in BDM. We find that the decrease in the representative bank's profit caused by an increase in the capital requirement is larger when the bank faces competition from an unregulated firm than when it faces a regulated competitor or no competitor at all. This result is consistent with BDM's theorem 2.     

The use of workload information to control job lateness in controlled and uncontrolled release production systems

The performance of a workload dependent scheduling and due date assignment rule is investigated. The rule uses time-phased workload information and time-phased capacity information. Performance comparisons are made with a rule that uses only time-aggregated workload information. The performance for two methods of releasing jobs to the shop is investigated: an uncontrolled method where the jobs are released at random, and a controlled method where jobs are released to maintain a specific workload norm. Computer simulation is used as the research tool. The mean and standard deviation of lateness are used as performance measures.The results indicate that the use of time-phased workload information may decrease the variance of the lateness, as compared with the use of time-aggregated workload information only. However, the magnitude of the effect depends on the type of sequencing rule used. Furthermore, if time-phased information is used, control of the mean lateness requires that the amount of capacity available for loading used in the loading procedure differs from the amount of capacity actually available for production. It is shown that by selecting adequate parameter values, both a constant mean lateness and a small variance of lateness can be obtained with this type of assignment rule.These results are valid for both types of release situations. So even in the case where the workload of the shop is under strict control, and the mean operation flow time does not, therefore, vary, the use of time-phased workload information can decrease the variance of the lateness.     

On Efficient Child Making

This paper is devoted to the study of the Pareto-efficiency of the competitive equilibrium for an overlapping generations economy with endogenous fertility. Pareto-efficiency needs a reformulation when fertility is endogenous. Then it is proved that a competitive equilibrium that converges in over-accumulation is non-Pareto-efficient. However, we provide an example in which a competitive equilibrium that converges in under-accumulation is non-Pareto-efficient. Finally, we give a general condition that ensures the Pareto-efficiency of the competitive equilibrium. This paper was presented at the conference “Irregular Growth”: Beyond Balanced Growth” , Paris, June 2003. The current version of this paper was completed after Philippe Michel’s sudden death. Bertrand Wigniolle wants to express his deep sorrow for the loss of a close friend and an excellent economist, from whom he learned a lot over the years. The authors would like to thank Tapan Mitra for helpful comments. They also are grateful to Claire Loupias, who began to think with them on the subject and to an anonymous referee for useful suggestions and improvements.     

The Hungarian Insurance Market: Economic Transition in the Insurance Sector

This article analyzes Hungary's insurance sector as an important part of the country's economic transition from a centrally planned economy to a market economy. It details the historic economic development of the Hungarian insurance market from a state monopoly to a competitive insurance market where foreign-owned insurance companies have a dominant market share.