CSR,Transparency and the Role of Intermediate Organisations

Transparency is a crucial condition to implement a CSR policy based on the reputation mechanism. The central question of this contribution is how a transparency policy ought to be organised in order to enhance the CSR behaviour of companies. Governments endorsing CSR as a new means of governance have different strategies to foster CSR transparency. In this paper we discuss the advantages and disadvantages of two conventional policy strategies: the facilitation policy and the command and control strategy. Using three criteria (efficiency, freedom and virtue) we conclude that both strategies are defective. Most attention is paid to the facilitation strategy since governments nowadays mainly use this. In evaluating this strategy we analyse the Dutch case. As an alternative we introduce a third government policy: the development of a self-regulating sub-system. By construing an analogy with the historical development of corporate financial disclosure, we point out that the vital step in the creation of a self-regulating subsys- tem is the creation of strong informational intermediate organisations.     

Hard assets: The returns on rare diamonds and gems

This note examines the investment performance of diamonds and other gems (sapphires, rubies, and emeralds) over the period 1999–2010, using a novel data set of auction transactions. Over our time frame, the annualized real USD returns for white and colored diamonds equaled 6.4% and 2.9%, respectively. Since 2003, the average returns have been 10.0%, 5.5%, and 6.8% for white diamonds, colored diamonds, and other gems, respectively. Both white and colored diamonds outperformed stocks between 1999 and 2010. Nevertheless, gem returns covary positively with stock returns, underlining the importance of wealth-induced demand for luxury consumption in collectibles markets.     

Human Capital and Growth: New Evidences from African Data

Assuming that all firms have rising marginal costs, merger between a dominant firm and one of the firms in the competitive fringe is considered. The effects on market price and output, profits and market power are shown when the dominant firm operates as a two-plant firm after merger and output arises from both plants. It is proved that if merger offers no efficiency gain, then market price always rises; and if merger results in efficiency gain, then market price falls if and only if there are sufficiently large number of firms in the fringe. In any case, there is profit incentive for merger to take place. [611]     

Central Bank Balance Sheets and the Transmission of Financial Crises

Central banks usually “park” their foreign exchange reserves in safe or highly liquid foreign assets. The paper illustrates that when central banks invest instead in risky foreign assets, then domestic banking crises can cause a crisis in the market for the foreign asset and vice versa. The paper takes its motivation from Asian central banks’ recent appetite for US government agency-debt securities such as those issued by Fannie Mae and Freddy Mac.     

Environmental Dynamism as a Moderator of Familiness and Performance in Mexican SMEs

This research explores how the environmental dynamism affects the relationship between familiness and a family firm’s performance in an emerging economy. To achieve this goal, we used an instrument to measure three familiness theoretical dimensions (process, human, and organizational resources). To collect data, we interviewed owners of family firms characterized as SMEs in México. Contrary to what is expected, our findings suggest that familiness, as a source of competitive advantage for family firms, may be more suitable in stable environments characterized by certainty of conditions. In other words, the effect of familiness on a family firm’s performance diminishes in highly dynamic environments.     

Behavior of Household Portfolios in France: the Role of Housing

The two-dimensional aspects of dwellings occupied by their owner, consumption and investment, make the analysis of households' portfolio choice and the analysis of housing purchases more difficult. But it seems difficult to analyze portfolio decisions without taking account of owner-occupied housing that has an important effect on wealth composition over the life cycle. In this paper we estimated a portfolio choice model where the different dwellings are defined as assets and we showed that we cannot separate investment decisions from housing consumption. Especially, risky assets demand should be greatly influenced by attitudes toward home property.     

On the significance of the incremental returns from hedging international portfolios

This paper investigates whether hedging the currency risk associated with international portfolios diversified into established and emerging markets leads to significant incremental returns. From the empirical results, for the period August 1989 to December 1997, the ineffectiveness of hedging for generating superior returns could be explained by the low correlations among the observed markets and the presence of negative index/currency correlations in many assets. In the particular case of emerging markets, the predominance of positive index/currency correlations suggests that the currency risk could compound the risk posed by these markets beyond the power of a hedging strategy.     

The incentive to give incentives: On the relative seniority of debt claims and managerial compensation

We show that the relative seniority of debt and managerial compensation has important implications for the design of remuneration contracts. Whereas the traditional literature assumes that debt is senior to remuneration, there are in reality many cases in which remuneration contracts are de facto senior to debt claims in financially distressed firms and in workouts. We theoretically show that risky debt changes the incentive to provide the manager with performance-related incentives (a “contract substitution” effect). In other words, the relative degree of seniority of managers’ claims and creditors’ claims in case a bankruptcy procedure starts is crucial to determine the optimal incentive contract ex-ante. If managerial compensation is more senior than debt, higher leverage leads to lower power incentive schemes (lower bonuses and option grants) and a higher base salary. In contrast, when compensation is junior, we expect more emphasis on pay-for-performance incentives in highly-levered firms.