Conflicts of Interest Arising from the Prudent Investor Rule: Ethical Implications for Over-the-Counter Derivative Securities

The Prudent Investor Rule creates a potential ethical dilemma for investment advisors selling over-the-counter financial products issued by their firms. The "opportunity" to defraud investors using complex, over-the-counter derivative securities designed for client-specific risk management is much higher than for exchange traded securities. This paper emphasizes the ethical responsibility held by trustees and their organizations to eliminate potential conflict of interests through internal control and monitoring. Independent evaluations of the performance of investment advisors and independent appraisals of complex over-the-counter securities are important in reducing the risks of conflicts of interest. Recent lessons learned from the corporate ethics crisis and requirements of the 2002 Sarbanes Oxley Act would suggest that conflict of interest must be eliminated with third party validation of derivative pricing. By performing due diligence and validation, the trustee is able to satisfy the requirements under the Prudent Investor Rule.     

Student Reports and Faculty Perceptions of Academic Dishonesty

As college students prepare for the businessworld, what they learn as acceptable behavioron campus may well inform their expectations ofacceptable behavior in their professionallives. Numerous studies have reported thatmost college students admit to cheating onmultiple occasions (e.g., McCabe and Trevino,1993; Sims, 1993; McCabe, Trevino andButterfield, 1996, 1999). Furthermore,studies have linked academic integrity withethical business practices (McCabe, Trevinoand Butterfield, 1996; Sims, 1993). Oneapproach to reducing academic dishonesty hasbeen the student honor code. Such codes havebeen on the rise for the last decade (Pavelaand McCabe, 1993). Honor codes have been usedas a teaching tool to underscore the importanceof professional ethics among business students(Kidwell, 2001).In the effort to establish a culture ofacademic integrity, a university must firstunderstand the current state. This paperdiscusses a two-year study at a small liberalarts university without an honor code at thepresent time. Students were surveyed abouttheir cheating behaviors as well as theirreceptiveness to an honor code. Over seventypercent of the students surveyed reported thatthey were habitual cheaters, i.e., they hadcheated on exams, plagiarized papers, orcommitted other forms of academic dishonesty onmultiple occasions. A survey similar to thatadministered to students was subsequentlyadministered to faculty in order to determinetheir understanding of student cheating norms. This paper compares the student and facultyperceptions, and the prospects for an honorcode at the university are also explored.     

Small business formation by unemployed and employed workers

This paper uses data from the Current Population Surveys for 1968–1987 and from the National Longitudinal Survey of Young Men to examine the relationship among unemployment and small business formation and dissolution for white men and women. We find that self-employed workers are more likely to have experienced unemployment than are wage workers because their higher entry rate into self-employment offsets their higher exit rate out of self-employment. Unemployed men and women who enter self-employment experience a larger drop in their earnings than the unemployed who return to wage work.The authors are Vice President, National Economic Research Associates and Associate Professor, Fordham University, respectively. This research was supported by the U.S. Small Business Administration under contract no. SBA-2102-AER-87. We retain responsibility for the views expressed below.     

State of the science: violence prevention efforts in developing and developed countries

Violence is an important global public health problem that claims the lives of over 1.6 million people each year and results in numerous other health and social consequences. It is also a preventable health problem. This paper provides an overview of the current status of prevention efforts in developing and developed countries, describes what is known about the effectiveness of different approaches and highlights some of the important challenges in building the evidence-base for violence prevention programmes. Research conducted to date shows an imbalance in the emphasis of prevention programmes across the different types of violence. This imbalance is reflected in the timing of response, the nature and level of influence of interventions and programmes and the outcomes studied. Promising and effective approaches have been identified, but many more still require rigorous testing, particularly in developing countries. The current state of the science in violence prevention reveals both progress and a number of remaining challenges.     

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

Interest rate changes by central banks are a strong monetary policy tool that has a significant impact on the performance of the real economy via various channels. Despite extensive theoretical and empirical studies in this area, the current literature lacks a comprehensive assessment of the relationship between interest rate volatility and the shadow economy. This study explores the link between interest rate volatility and the shadow economy for 38 Organisation for Economic Co-operation and Development (OECD) member countries over the period 1991–2021 using both linear and non-linear ARDL models. The use of the non-linear ARDL specification will allow for the possibility of an asymmetric effect of interest rate volatility on the shadow economy. In addition to the examination of the potential asymmetric effects, we also discuss the ramifications for policymakers with respect to monetary and financial policies while considering each country's specific economic structure.     

The moderating effect of innovation on the relationship between environmental and financial performance: Evidence from high emitters in Australia

This study examines whether environmental-related innovation moderates the association between environmental and financial performance measured respectively as carbon emissions and return on assets (ROA). The sample comprises 119 companies subject to Australia's National Greenhouse Energy Reporting Act (NGER) for the period 2009–2017. The results show that environmental innovation positively moderates the relationship between environmental performance and financial performance. The findings also imply that the impact of environmental innovation in improving environmental performance is observable with a 1-year lag. The results are robust to the alternative financial performance measures of Tobin's Q and Altman's Z score. The findings have important implications for company managers and policymakers and provide useful information on innovation's role in enhancing environmental and financial performance.     

Exploiting context-dependent preferences to protect borrowers

Journal of Financial Services Marketing - Focusing bias is one of the key contributors to over-borrowing. It describes how people, when making choices, give disproportionate attention and weight to...     

Are electronic government innovations helpful to deter corruption? Evidence from across the world

Electronic government innovations have been a critical development in public administration in recent years. Many countries have implemented e-government policies to enhance efficiency and transparency and combat corruption. This paper examines the impact of e-government on corruption using longitudinal data for more than 170 countries from 2002 to 2020. The empirical results suggest that e-government serves as a deterrent to corrupt activities. We analyse which e-government domains affect corruption, which types of corruption are more affected by e-government and the circumstances under which e-government is more effective in reducing corruption. The empirical results suggest that online service completion and e-participation are important features of e-government as an anticorruption tool. Evidence suggests that e-participation reduces corrupt legislature activities, public sector theft, executive bribery, and corrupt exchanges. The potential of e-government to deter corruption is higher in countries where corruption is moderate or high and economic development is lower. Higher levels of GDP per capita, foreign direct investment, and political rights are also associated with lower levels of corruption.     

Correction to: Exploiting context-dependent preferences to protect borrowers

Journal of Financial Services Marketing -