Hedge funds and financial stability: Regulating prime brokers will mitigate systemic risks

We review key characteristics of the hedge fund industry, and identify conditions under which this sector can pose a threat to financial stability. Direct regulation of hedge funds that increases transparency does not appear feasible, may create a moral-hazard problem, and may reduce market liquidity. Indirect regulation by prime brokers and market discipline by creditors, counterparties, and investors have been effective in limiting the risks from the hedge fund sector. To reduce systemic risks, more regulation of prime brokers is warranted to avoid competitive dynamics from undermining counterparty risk management practices.     

Empirical studies of trade marks – The existing economic literature

This paper surveys empirical studies employing trade mark data that exist in the economic literature to date. In the introductory section we summarise the theory of trade marks. Section 2 documents the use of trade marks by firms of different size and industry and by firms in several advanced countries, including Australia, the UK, and the USA. Section 3 reviews various attempts to gauge the function of a trade mark as an indicator of innovation and product differentiation. Section 4 surveys studies that have demonstrated firms' incentives to use trade marks, including transferring information to consumers, realising synergies between different types of intellectual property rights, strategies to raise rivals' costs and using trade mark portfolios as debt collateral. In Section 5, we provide an overview of the importance of trade-mark-use for firm survival and the association of trade marks with several dimensions of firm performance, including productivity and their ability to generate well-paid jobs.     

Managing supplier sustainability risks in a dynamically changing environment—Sustainable supplier management in the chemical industry

Varying definitions and interpretations of sustainability standards have become a major concern for purchasing and supply management (PSM). As the foremost interface to an increasingly global supply base, PSM plays an important role in the mitigation of sustainability-related risks. By conducting responsible purchasing and supplier management, the risk of corporate reputational damage to the buying firm, caused by supplier misconduct, can be avoided. However, resources for effective risk-mitigation are limited and the applicability of supply risk assessment and supplier assessment methods have not been evaluated for sustainability. In this paper, we explore how leading PSM functions identify, assess, and treat supplier sustainability risks and elaborate on the integration of sustainability risk management in supplier management processes. Based on the findings from a multiple case study in the chemical industry and by drawing on the dynamic capabilities view (DCV), we propose that mature and sustainable supplier management capabilities are a source of competitive advantage in terms of lower exposure to reputational risks and enhanced operational performance.     

Turning Agents into Psychological Principals: Aligning Interests of Non‐Owners through Psychological Ownership

Principals who delegate tasks to agents face the perennial challenge of overcoming agency problems. We investigate whether feelings of ownership among senior managers in the absence of formal ownership can align agents' interests with those of principals, thus turning agents into psychological principals. Using a moderated mediation model, we find that psychological ownership is positively related to company performance through the mediating effect of individual‐level entrepreneurial behaviour. We also find that the effect of psychological ownership on individual‐level entrepreneurial behaviour and, ultimately, company performance is weaker for high levels of monitoring compared to low levels. These findings offer important contributions to agency, psychological ownership, and entrepreneurship literatures.     

Still unanswered quibbles with fractional reserve free banking

Anthony Evans and Steven Horwitz readily admit that their own understanding of monetary theory is imperfect, and do not even “attempt a rebuttal of [our] claims.” George Selgin accepts that some of the arguments we put forward in Bagus and Howden (2010) make for “interesting theory”. He fails to rebuff our claim that precautionary reserves are unable to constrain credit creation in a fractional reserve free banking system. While calling for us to provide historical evidence to validate the quibbles we put forward, Selgin himself overstates the evidence. He also claims that we have distorted what he has written, and that we use incorrect monetary theory. These allegations are false.     

Rater Bias and Incentive Provision

The tendency of supervisors to judge an employee as either good or bad and then to seek out evidence supporting that earlier established opinion is regarded as one of the major problems of performance appraisal. We investigate the implications of this rater bias in a dynamic moral hazard model with a wealth‐constrained agent. Although rater bias weakens the agent's incentives to exert effort in late periods, at the same time it strengthens implicit incentives in early periods. Under the optimal contract, as long as rater bias is not overly strong, its adverse effect on late‐period incentives is fully offset by exploitation of stronger early‐period incentives and thereby leaves the principal's profits unchanged.     

Is inequality an inevitable by-product of skill-biased technical change?

This article examines trends in relative wages between high- and medium-skilled workers and between medium- and low-skilled workers in Finland, Germany, Italy, South Korea and the US over the period 1970–2005. It is found that there are large differences in the evolution wage inequality across the countries in our sample, with some countries showing a long-run upward trend in relative wages (such as the US, Germany and Italy) and others showing a long-run downward trend (such as Finland and Korea). The main conclusion from our results is that inequality is not an inevitable by-product of technological change.     

FDI and Income Inequality—Evidence from Latin American Economies

This paper analyzes whether foreign direct investment (FDI) has contributed to the wide income gaps in Latin America. Panel cointegration techniques as well as regression analysis are performed to assess the impact of inward FDI stocks on income inequality among households in Latin American host countries. The panel cointegration analysis typically reveals a significant and positive effect on income inequality. There is no evidence for reverse causality. The findings are fairly robust to the choice of different estimation methods, sample selection and the period of observation.