Risk-based forecasting and planning and management earnings forecasts

This study examines the association between a firm’s internal information environment and the accuracy of its externally disclosed management earnings forecasts. Internally, firms use forecasts to plan for uncertain futures. The risk management literature argues that integrating risk-related information into forecasts and plans can improve a firm’s ability to forecast financial outcomes. We investigate whether this internal information manifests itself in the accuracy of external earnings guidance. Using detailed survey data and publicly disclosed management earnings forecasts from a sample of publicly traded U.S. companies, we find that more sophisticated risk-based forecasting and planning processes are associated with smaller earnings forecast errors and narrower forecast widths. These associations hold across a variety of different planning horizons (ranging from annual budgeting to long-term strategic planning), providing empirical support for the theoretical link between internal information quality and the quality of external disclosures.     

Industrieversicherung in der Türkei im Vergleich zu Deutschland

In conjunction with the rapidly advancing industrialization of Turkey, the segment of industrial insurance has also steadily gained in importance. People seeking cover for industrial risks situated in Turkey, however, face several rather significant constrictions. Whilst some of those may be circumvented at least partially, the Turkish situation raises the question of the need for legislative reform (possibly inspired by German law) in this area. Such would foster the development of more innovative and adequate insurance products by the Turkish insurance market.     

Returns to Retail Banking and Payments

The present paper examines the fundamental relationship between the country-level infrastructure of the retail payment market and overall bank performance. Using data from across 27 European markets over the period 2000–07, the results confirm that the performance of banks in countries with more developed retail payment service markets is better. This relationship is stronger in countries with a relatively high adoption of retail payment transaction technologies. Retail payment transaction technology itself can also improve bank performance, and evidence shows that heterogeneity in retail payment instruments is associated with enhanced bank performance. Similarly, higher usage of electronic retail payment instruments seems to stimulate banking business. We also show that retail payment services have a more significant impact on savings and cooperative bank performance, although they have a positive influence on the performance of commercial banks as well. Additionally, the findings reveal that the impact of retail services on bank performance is more pronounced through fee income, although their impact through interest income is also positive. Finally, an effective payment service market is found to be associated with higher bank stability. Our findings are robust to different regression specifications.     

Advertising intensity,investor recognition,and implied cost of capital

The main purpose of this paper is to test Merton’s (J Finance 42(3):483–510, 1987) hypothesis that better investor recognition is correlated with lower expected returns. We measure investor recognition with the firms’ advertising intensity and offer consistent evidence that higher advertising intensity is associated with lower implied cost of capital, as derived from Value Line target prices and dividend forecasts. Investor recognition plays an important role in attracting investors, improving liquidity, and ultimately reducing the cost of capital. The findings shed light on the capital market implications of advertising expenditures and complement the extant research on investor recognition.     

Erhöht Solvency II den Bedarf an Rückversicherung im Schaden-/Unfallgeschäft in Deutschland?

Reinsurers and reinsurance brokers are often of the opinion that the introduction of Solvency II will lead to changes in how re-insurance is purchased. Our analysis of these assumptions for the German property and casualty insurance market lead to a market survey. This survey revealed that overall the participating insurance companies expect no significant changes for their companies, although they do anticipate changes in buying patterns of the rest of the market and in the overall market environment. This paper examines the reasons for this difference in expectations between those of individual companies and those of the overall market.     

Are college students at greater risk of credit card abuse? Age,gender, materialism and parental influence on consumer response to credit cards

Two studies examine age, gender, parental influence and materialism effects on consumers’ credit card attitudes and behavior. Credit card commitment and use are greater among older adults than college students. Women outperform men in managing balances. Materialism heightens commitment, trust and use, but interferes with outstanding balance management. Parental influence can improve students’ commitment, trust, use and balance management while discouraging overuse. Parental influence also mediates materialism's effect on trust and balance management. Overall, findings show college students are not more vulnerable than older adults to credit card abuse, but that students who are female, materialistic and with less parental influence are at more risk.     

Raising Capital in an Insurance Oligopoly Market

We consider an oligopoly market where firms offer insurance coverage against a risk characterised by aggregate uncertainty. Firms behave as if they were risk averse for a standard reason of costly external finance. The model consists in a two-stage game where firms choose their internal capital level at stage one and compete on price at stage two. We characterise the subgame perfect Nash equilibria of this game and focus attention on the strategic impact of insurers capital choice. We discuss the model with regard to the insurance industry specificities and regulation.     

Risk and the Endogenous Economist: Some Comparisons of the Treatment of Risk in Physics and Economics

This is a talk, rather than a research or survey paper. Very little of what I say will be original, but I wish to stimulate discussion on a set of issues that arise from the nature of risk and that I consider problematic to our profession. The paper is not exhaustive of references and many of my arguments have been treated elsewhere. However, I suspect few will have approached the issues from the same starting point and assembled them in the same way.     

Attitudes Towards Income Risk in the Presence of Quantity Constraints

Considering a consumer with standard preferences, I trace out how quantity constraints on markets impact on relative risk aversion and prudence. I first show how this impact decomposes into a local curvature effect and an endogenously changing risk aversion/prudence effect. Next, I calibrate both effects on relative risk aversion and prudence, using estimates on household demand for durables and labour supply. The calibrations show that commitments to durable goods have large effects on attitudes towards risk. And while small wedges between realised and desired levels of labour supply have only moderate effects, becoming full time unemployed on a 60 per cent unemployment benefit significantly raises risk aversion and prudence.