Boards and Sustainability: the Contingent Influence of Director Interlocks on Corporate Environmental Performance

This paper highlights the importance of a firm's board with respect to sustainability issues by analysing the relationship between director interlocks, i.e. directors who simultaneously belong to the boards of directors of several companies, and a firm's environmental performance. The previous literature has focused on the influence of firm‐level resources on corporate environmental performance. This study utilizes insights from a resource‐based view and research on social capital to demonstrate that the environmental performance of a firm is also influenced by the difficult‐to‐imitate capabilities that are embedded in the network relationships of its directors. Our results support a contingency perspective of the social capital theory that finds that director interlocks are positively connected with the environmental performance of a firm in two specific situations: (1) when the firm is linked to a larger parent company and (2) in cases of low and high levels of interlock diversity. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Price and Inventory Dynamics of Primary Commodities

The paper develops a simple framework for the analysis of price and inventory dynamics of primary commodities under the assumption of rational expectations. The analysis shows that if an unanticipated shock primarily affects the demand conditions for inventories, the effect on prices is only temporary. However, when the flow conditions of production and consumption are altered, the change in price tends to become permanent. These results highlight the crucial importance of identifying the markets which originate fluctuations in prices when setting out policy measures to stabilize these fluctuations. [210]     

‘Just one of us’: consumers playing oligopoly in mixed markets

Consumer cooperatives represent a highly successful example of democratic form of enterprises operating in developed countries. They are usually medium to large-scale companies competing with the profit-maximizing firms in the retail sector. This paper describes this situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and, in return, refund them with a share of the profits corresponding to the ratio of their individual spending to the cooperative’s total sales. We show that when consumers possess quasi-linear preferences over a bundle of symmetrically differentiated goods, and companies operate using a linear technology, the presence of consumer cooperatives positively affects total industry output, as well as welfare. The effect of cooperatives on welfare proves to be even more significant when goods are either complements or highly differentiated, and when competition is à la Cournot rather than à la Bertrand.     

Strategic Choice of the Price Structure and Entry Deterrence Under Price Cap Regulation

This paper shows that a price‐capped firm under the threat of entry in some of the markets it serves can strategically manipulate its price structure to deter entry. In doing so, the regulated firm uses the price cap constraint as a commitment device to an aggressive pricing behaviour in case of entry. A (dynamic) price cap generally entails that the prices allowed today are a function of the previous‐period prices and that the tighter is the constraint on each price, the larger is the quantity sold of this good in the previous period. Hence, the regulated firm may strategically choose its price structure before entry to place a tighter regulatory control on the prices set in the (potentially) competitive markets and to make it optimal to charge in these markets – in case of entry – prices so low that entry is unprofitable.     

REGULATION AND RISK: A CROSS‐COUNTRY SURVEY OF REGULATED COMPANIES

This paper tests empirically whether regulation characterized by high incentives implies more risk to firms than regulation characterized by low incentives. Using a worldwide panel of 170 regulated companies operating in electricity, gas, water, telecommunication and transportation sectors during the period 1995–2004, I find that different regulatory regimes do not result in different levels of risk to their regulated firms. This result could be driven by a higher level of development of financial markets combined with a sophisticated diversifying behaviour of regulated firms.     

An Average-Based Accounting Approach to Capital Asset Investments: The Case of Project Finance

Literature and textbooks on capital budgeting endorse net present value (NPV) and generally treat accounting rates of return as not being reliable tools. This paper shows that accounting numbers can be reconciled with NPV and fruitfully employed in real-life applications. Focusing on project finance transactions, an average return on investment (AROI) is drawn from the pro forma financial statements, obtained as the ratio of aggregate income to aggregate book value. We show that such a metric correctly captures a project's economic profitability, as long as it is compared with a comprehensive weighted average cost of capital (WACC) that includes a correction factor that takes account of the capital foregone by the investors. In contrast to the internal rate of return, AROI is unique, and we provide an explicit functional relation that links it to the NPV. The approach holds for levered and unlevered projects, constant and non-constant leverage ratios, and constant and non-constant WACCs.     

Loan Supply Shocks and the Business Cycle

This paper provides empirical evidence on the role played by loan supply shocks over the business cycle in the euro area, the UK and the USA from 1980 to 2011 by estimating time‐varying parameter vector autoregression models with stochastic volatility and identifying these shocks with sign restrictions consistent with the recent macroeconomic literature. The evidence suggests that in all three economic areas loan supply shocks appear to have a significant effect, with clear signs of an increasing impact over the past few years. Moreover, the role of loan supply shocks is estimated to be particularly important during recessions. Copyright © 2016 John Wiley & Sons, Ltd.