When Does Information Asymmetry Affect the Cost of Capital?

This paper examines when information asymmetry among investors affects the cost of capital in excess of standard risk factors. When equity markets are perfectly competitive, information asymmetry has no separate effect on the cost of capital. When markets are imperfect, information asymmetry can have a separate effect on firms’ cost of capital. Consistent with our prediction, we find that information asymmetry has a positive relation with firms’ cost of capital in excess of standard risk factors when markets are imperfect and no relation when markets approximate perfect competition. Overall, our results show that the degree of market competition is an important conditioning variable to consider when examining the relation between information asymmetry and cost of capital.     

Political Connections and the Informativeness of Insider Trades

We analyze the trading of corporate insiders at leading financial institutions during the 2007 to 2009 financial crisis. We find strong evidence of a relation between political connections and informed trading during the period in which Troubled Asset Relief Program (TARP) funds were disbursed, and that the relation is most pronounced among corporate insiders with recent direct connections. Notably, we find evidence of abnormal trading by politically connected insiders 30 days in advance of TARP infusions, and that these trades anticipate the market reaction to the infusion. Our results suggest that political connections can facilitate opportunistic behavior by corporate insiders.     

‘Freedom from Poverty is Not for Free’: Rural Development and the Microfinance Crisis in Andhra Pradesh,India

Within neoliberal development discourse, the poor are represented as entrepreneurial subjects for whom integration into formalized financial systems can facilitate their escape from poverty. This paper examines how the 2010 microfinance crisis in Andhra Pradesh reveals significant fault lines that underlie this narrative. It argues that the crisis of microfinance in Andhra Pradesh needs to be placed within the context of severe agrarian dislocations stemming from the impact of trade liberalization, drought cycles and a transformation of rural social relations. The contradictions are most strikingly represented in increasing rural differentiation and a generalized crisis of social reproduction among land‐poor farmers and landless labourers. A massive influx of microfinance – driven by both state‐operated programmes and private‐sector institutions leveraged with cross‐border financial flows – found a ready clientele among various agrarian classes seeking to bolster consumption and roll over debt in conditions of significant uncertainty and distress. Yet in banking on this vulnerability, microfinance institutions socialized the contradictions of rural Andhra Pradesh and have ultimately been thrown into limbo through the unleashing of political and social forces unforeseen in neoliberal narratives of agrarian change.     

Funeral Price Disclosure in an Urban Market

During telephone interviews in which funeral directors were asked to provide the least expensive option for a fixed list of services, substantial price dispersion among providers was found. Prospective customers were quoted higher prices than were quoted to consumer researchers. The cost of cremation was one-fifth that of earth burial, and cemetery charges amounted to more than one-half of earth burial costs. A memorial society member was quoted lower prices than were available to private customers of the same firm, and lower prices in relation to other funeral providers. These surveys were supported in an examination of actual funeral bills for memorial society members.     

Deracializing Exploitation? ‘Black Economic Empowerment’ in the South African Wine Industry

This paper considers the discourse and practice of 'Black Economic Empowerment' (BEE) in the South African wine industry. It argues that far from representing a decisive break with an inequitable past, BEE allows the South African wine industry to avoid potentially more uncomfortable options to redress current and past race-based imbalances – such as land redistribution, import boycotts and better working conditions for grape pickers. An essentialist racial discourse, pivoting on ahistorical and dislocated notions of 'blackness', has been used to displace the transformation agenda away from addressing the conditions faced by workers, and to an ameliorism that allows a small cohort of black entrepreneurs to become the preferred beneficiaries of 'transformation' in the wine industry. The new terrain is characterized by branding, advertising and image building on the one side: and by codes of conduct, a sectoral BEE charter, scorecards and auditing on the other. These allow the standardization, legitimation and ostensible deracialization of exploitative labour and social relations in the South African wine industry.     

An Empirical Examination of the Market Returns and Financial Performance of Entities Engaged in Sustainability Reporting

The importance of sustainability reporting to external stakeholders is reflected in the advent of various reporting guidelines and government inquiries. However, evidence of the inadequacy of such reporting, coupled with limited evidence of its use by market participants (such as investors and creditors) for resource-allocation decisions, raises questions about the overall value-relevance of sustainability reporting. This study seeks to identify, in the Australian context, whether the level of sustainable reporting is associated with a range of financial and market performance attributes of the firm.