Operational risk and reputation in the financial industry

By examining stock market reactions to the announcement of operational losses by financial companies, this paper attempts to disentangle operational losses from reputational damage. Our analysis deals with 154 events coming from the FIRST database of OpVantage. Events occurred between 1990 and 2004 in companies belonging to the financial sector and that are listed on the major European and US Stock Exchanges. Results show significant, negative abnormal returns at the announcement date of the loss, along with an increase in the volumes of trade. In cases of internal fraud, the loss in market value is greater that the operational loss amount announced, which is interpreted as a sign of reputational damage. Negative impact is proportionally greater when the loss amount represents a larger share in the company’s net profit.     

Reflections on social forecasting

Social forecasting in its present state is inadequate to deal with the enormous changes taking place in human societies. New concepts of space and time are evolving, and the development of data processing has provided techniques highly suited to technological forecasting. What is also needed for social forecasting, however, is an attitude towards the future which is open-minded, takes account of man in his entirety and stresses that he can play a creative part in decision making by determining the kind of future he wants.     

Antecedents and outcomes of bifurcated compensation in family firms: A multilevel view

Through a multilevel view, this article challenges the dominant assumption in the literature suggesting that family employees will receive more compensation than their non-family peers, which will violate the latter group justice perceptions and will lead them to lower their inputs to retrieve equity. We start by discussing how competing socioemotional priorities combine with the degree of collectivism at the societal level to affect which group will bifurcated compensation favor. We suggest that embeddedness in a collectivist culture will generate a strong desire and a moral obligation to cater to the financial well-being of family members, hence leading to bifurcated compensation favoring family employees. In individualist cultures, however, the family will accord high importance to achieving family prominence, which leads to bifurcated compensation favoring non-family employees. Moving forward, we discuss how nepotism types shape the effect of bifurcated compensation on the under-privileged group work inputs and how this relationship is moderated by the extent of power distance embedded in society. Theoretical and empirical implications are discussed at the end of the paper.     

The impact of prudence on optimal prevention revisited

We re-examine the link between absolute prudence and self-protection activities. We show that the level of effort chosen by an agent with decreasing absolute prudence is larger than the optimal effort chosen by a risk-neutral agent if the degree of absolute prudence is less than a threshold that is utility-independent and empirically verifiable.