Modelling Deposit Insurance Scheme Losses in a Basel 2 Framework

This paper extends the existing literature on deposit insurance by proposing a new approach for the estimation of the loss distribution of a Deposit Insurance Scheme (DIS) that is based on the Basel 2 regulatory framework. In particular, we generate the distribution of banks’ losses following the Basel 2 theoretical approach and focus on the part of this distribution that is not covered by capital (tail risk). We also refine our approach by considering two major sources of systemic risks: the correlation between banks’ assets and interbank lending contagion. The application of our model to 2007 data for a sample of Italian banks shows that the target size of the Italian deposit insurance system covers up to 98.96% of its potential losses. Furthermore, it emerges that the introduction of bank contagion via the interbank lending market could lead to the collapse of the entire Italian banking system. Our analysis points out that the existing Italian deposit insurance system can be assessed as adequate only in normal times and not in bad market conditions with substantial contagion between banks. Overall, we argue that policy makers should explicitly consider the following when estimating DIS loss distributions: first, the regulatory framework within which banks operate such as (Basel 2) capital requirements; and, second, potential sources of systemic risk such as the correlation between banks’ assets and the risk of interbank contagion.     

Bank support and export: evidence from small Italian firms

The ability of a country and its businesses to grow is tightly related to the possibility of exporting and penetrating into foreign markets. The aim of this article is to study whether bank support can help small businesses (SBs) exporting at the extensive as well as the intensive margin. We address this issue by using a large database on small Italian firms. We provide an empirical analysis of the role of bank support in affecting the firms’ export decisions. Our results show that among the exporting SBs those using bank services to support their exports have a higher probability of being better placed in both the intensive and the extensive margin. Moreover, these positive impacts on export are statistically significant only when the main bank of the firm is an internationalized bank. These results have relevant policy implications as well as consequences for the business models of internationalized banks.     

New development: Alternative reporting formats: a panacea for accountability dilemmas?

ABSTRACT

The need for accountability has given rise to new formats of reporting for public sector organizations. This article discusses the relative strengths and weaknesses of the main formats and concludes with a proposal for the adoption of an ‘Integrated Popular Report’ (IPR) to connect public sector organizations with ordinary people and encourage democratic participation in decision-making.     

Corporate sustainability in action

Recent developments in management have highlighted the need for research on corporate sustainability strategies at the value chain level and in particular in the context of franchising. Although franchising is a widespread phenomenon, there is little empirical evidence of how companies approach the issue. By employing a multi-method research approach, this study explores the importance that franchisors assign to sustainability and the way they deal with it. Our findings show that franchisors adopt three main different sustainability strategies, with an increasing relevance of social sustainability as an enabler of environmental sustainability. The study sheds some light also on the interplay between the franchisor–franchisee relationship features and the company's approach toward sustainability. Preliminary propositions are presented as a starting point for further research in this area.     

The role of perceived value in vertical brand extensions of luxury and premium brands

Abstract

This study examines the role of perceived value in the relationship between brand attitude, perceived fit, extension attitude and consumers’ purchase intention of downscale vertical extensions of luxury and premium brands in two product categories: cars and shoes. Results from 236 individuals with different income levels show that extension attitude is positively related to purchase intention both directly and indirectly, via the perceived value of the extension; the latter is more strongly correlated than extension attitude to consumers’ purchase intention. Brand attitude is also positively associated with perceived value. Overall, perceived value partially mediates the relationships of brand attitude and of extension attitude with purchase intention. The product category affects the strength of some of the relationships in the model, including the role of fit.     

Autonomy and improved performance: lessons from an NHS policy reform

Autonomy is currently seen by policy-makers in many countries as a possible mechanism for enhancing public sector performance. The authors examine a service reform (the National Health Service in England) in which more autonomy was given to better performing hospitals. Drawing on data from interviews with senior managers, the research suggests that despite being enmeshed in a politicized culture of regulations and guidance, autonomy is increasingly perceived positively and appears to depend on the extent to which organizations have the incentives and the capacity to respond to increased autonomy. The article presents findings that will be of value to policy-makers in many countries.     

Territories in action,territories for action: the territorial dimension of Italian local development policies

Current changes in territorial organization are interpreted by focusing on two main aspects that are different yet closely interrelated. The first aspect concerns relationships between unfolding processes of territorial redefinition and changes imposed by globalization processes and by European integration, and by the loss of centrality and of part of the power of nation‐state government. The second aspect concerns the change in forms and procedures of collective action in urban and territorial policies, recognizing, in particular, the consolidation — including in practices — of forms of partnership, inter‐institutional cooperation, strategic planning and governance. Within this general context, this article aims to present and discuss changes, both ongoing and recent, by (1) presenting the changes that are emerging in the framework of Italian urban and territorial policies; and (2) discussing critically, with reference to the Italian case, the relationship between change in the idea of local territories and change in urban and territorial policies. Our aim is to verify whether, within what limits and from what point of view, the innovations introduced in the Italian context may be interpreted as changes that are moving towards more place‐focused forms of urban and territorial governance. On interprète les évolutions actuelles de l'organisation territoriale à travers deux aspects dominants, différents quoique étroitement liés. Le premier concerne les relations entre les processus d'explication de la redéfinition territoriale et les changements imposés par les processus de mondialisation et l'intégration européenne, et par la disparition de la centralité et d'une partie de la puissance gouvernementale de l'Énation. Le second porte sur la transformation des formes et procédures d'action collective dans les politiques publiques urbaines et territoriales, celles‐ci reconnaissant notamment la fusion — y compris dans les pratiques — de formes de partenariat, coopération inter‐institutions, planification stratégique et gouvernance. Dans ce contexte général, l'article cherche à exposer et étudier les évolutions actuelles et récentes, d'une part en présentant les changements qui apparaissent dans le cadre des politiques urbaines et territoriales italiennes, d'autre part en abordant de façon critique, par rapport au cas italien, le lien entre un changement d'idée sur les territoires locaux et une transformation des politiques urbaines et territoriales. Il s'agit de vérifier si les innovations introduites dans le contexte italien peuvent s'interpréter comme des changements tendant à des formes de gouvernance urbaine et territoriale plus soucieuses des lieux, et ce dans quelle mesure et de quel point de vue.     

Stage Financing and the Role of Convertible Securities

Venture capital financing is characterized by extensive use of convertible securities and stage financing. In a model where a venture capitalist provides staged financing for a project, we illustrate an advantage of convertible debt (or warrants) over a mixture of debt and equity. Essentially, when the venture capitalist retains the option to abandon the project, the entrepreneur has an incentive to engage in window dressing and bias positively the short-term performance of the project, reducing the probability that it will be liquidated. An appropriately designed convertible security prevents such behaviour because window dressing also increases the probability that the venture capitalist will exercise the conversion option becoming the owner of a substantial fraction of the project's equity.     

Demographic processes in a model of innovation diffusion with dynamic market

In this paper we study a binomial innovation diffusion model for a variable size market by modelling the demographic process of entrance-exit from each market compartment. We examine from a theoretical point of view the effect of the simultaneous presence of economic and demographic parameters under the exponential market growth hypothesis, by presenting some general results on the adoptions and sales time path. We also enlighten the relevance of considering these variables in relative terms and show how, in presence of a dynamic, the diffusion process never saturates the market. Finally, we test our model on a data set for cellular phones market in different countries.