Impact investments,evil investments,and something in between: Comparing social banks' investment criteria and strategies with depositors' investment preferences

Since the global financial crisis in 2007, social banks have been flooded with deposits. Previous studies have indicated that customers hold deposits with social banks due to social banks' special placement of assets. However, to date it has been far from clear how social banks select their investments, and consequently to what extent the placement of assets meets depositors' preferences. The purpose of this paper is, therefore, to investigate whether the characteristics of social banks’ placement of assets are relevant to depositors’ choice of social banks. A two-stage study is conducted, using data collected via a document analysis of social banks' investment criteria, a survey of social banks, and an online survey of 609 depositors. The results imply that the characteristics of social banks' placement of assets are indeed relevant to depositors' choice of social banks, but do not explain customer behaviour entirely. Furthermore, the findings indicate that a relevant proportion of customers hold deposits with social banks to avoid “evil” rather than necessarily creating “good.” Based on the findings, a theoretical framework of depositors' choice of social banks is presented that goes far beyond previous explanations by considering various types of social depositors, banks, and borrowers.     

Effects of songs with prosocial lyrics on tipping behavior in a restaurant

Recent research has shown that exposure to songs with prosocial lyrics was associated with prosocial behavior and accessibility of prosocial thoughts. However theses studies were performed in a laboratory setting where participants were instructed to listening songs alone in a room. So the effect of prosocial songs in a natural setting, with several people in a room and with various ambient noises still remained in question. An experiment was carried out in a restaurant in order to test if listening or not, prosocial songs by patrons, was associated with variation in their tipping behavior. Results showed that prosocial songs were associated with a significant increase in tipping behavior.     

So you want to delight your customers: The perils of ignoring heterogeneity in customer evaluations of discretionary preferential treatments

Many firms assume that customers like to feel special and to receive discretionary preferential treatments (DPT). This research argues that the reality is more complicated: the same preferential treatment may delight one customer but enrage or embarrass another. To help companies align their DPT with their customers' preferences, this article identifies four dimensions along which consumers positively or negatively evaluate DPT: justification, imposition, visibility, and surprise. This article then introduces customer heterogeneity in the form of two individual traits that moderate DPT evaluations. Through two studies, the article shows that distinction seekers prefer visible rewards that impose on other customers, but negotiators prefer unjustified, non-surprising privileges. Finally, by tying consumer preferences to two readily available variables (age and gender), this article concludes with a set of practical guidelines for the companies that hope to align their DPT strategy with customer profiles.     

Visible Reserves in Banks – Determinants of Initial Creation,Usage and Contribution to Bank Stability

The opportunity of building up visible “Reserves for General Banking Risks” by the bank management represents a peculiarity in the German financial accounting framework for banks. We investigate German banks' motives for the creation and usage of these reserves and assess their role in financial stability. We find that banks primarily create and use GBR reserves to build up Tier 1 capital for regulatory capital management and earnings management purposes. Most importantly, however, we also reveal that banks using these reserves are less likely to experience a future distress or a bank default event. We therefore conclude that the existence of GBR reserves within the financial accounting framework represents both a convenient capital and earnings management tool for bank managers and a beneficial regulatory instrument to enhance bank stability.     

Crowdfunding models: Keep-It-All vs. All-Or-Nothing

Reward-based crowdfunding campaigns are commonly offered in one of two models via fundraising goals set by an entrepreneur: “Keep-It-All” (KIA), where the entrepreneur keeps the entire amount raised regardless of achieving the goal, and “All-Or-Nothing” (AON), where the entrepreneur keeps nothing unless the goal is achieved. We hypothesize that AON forces the entrepreneur to bear greater risk and encourages crowdfunders to pledge more capital enabling entrepreneurs to set larger goals. We further hypothesize that AON is a costly signal of commitment for entrepreneurs yielding a separate equilibrium with higher quality and more innovative projects with greater success rates. Empirical tests support both hypotheses.     

Insurance Guaranty Schemes in a Contingent Claims Setting

The introduction of an insurance guaranty scheme can have significant influence on the pricing and capital structures in a competitive market. This contribution summarizes the major findings of a working paper written by Schmeiser and Wagner (Working Papers on Risk Management and Insurance (IVW-HSG), No. 80, 2010). The effect on competitive equity-premium combinations is studied while considering a framework with policyholders and equity holders where guaranty fund charges are volume-based, as levied in existing schemes. Several settings with regard to the origin of the fund contributions are assessed and the immediate effects on the incentives of the policyholders and equity holders are analyzed through a one-period contingent claim approach. One result is that introducing a guaranty scheme in a market with competitive conditions entails a shift of equity capital towards minimum solvency requirements. Hence adverse incentives may arise with regard to the overall security level of the industry.     

Insurance guaranty fund—what good is it?

In this paper, we analyze under which conditions a self-supporting insurance guaranty fund can be beneficial for the policyholders in an incomplete market. Within the analyzed setting, we find out that in general, if existent, the potential advantages from its introduction cannot be fairly divided among the participating insurers. Thereby, we have to expect systematic wealth transfers between the policyholders of different insurance companies. We introduce a framework for utility-based fund charges as a solution to this problem.     

On Evaluating the Performance of Problem Structuring Methods: An Attempt at Formulating a Conceptual Model

In the past decade there has been a discussion on the need for and degree of empirical evidence for the effectiveness of problem structuring methods (PSMs). Some authors propose that PSMs are used in unique situations which are difficult to study, both from a methodological and a practical perspective. In another view experimental validation is necessary and, if not obtained, PSMs remain substantially invalidated and thus ‘suspect’ with regard to their claims of effectiveness. Both views agree on one point: the necessity of being clear about the important factors in the context in which a method is used, the method’s aims and its essential elements through which these aims are achieved. A clear formulation of central variables is the core of a theoretical validation, without which empirical testing of effects is impossible. Since the process of PSMs is sometimes referred to as ‘more art than science’, increased clarity on the PSM process also supports the transfer of methods. In this article we consider goals important to most PSMs, such as consensus and commitment. We then focus on outcomes of group model building, and expectations on how context and group modeling process contributes to outcomes. Next we discuss the similarity of these central variables and relations to two sets of theories in social psychology: the theory of planned behavior and dual process theories of persuasion. On the basis of these theories we construct a preliminary conceptual model on group model building effectiveness and address its practical applicability for research on PSM.