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This is a research paper aiming to re‐examine Fama's proxy hypothesis which states that inflation is negatively related to real economic activity and the negative relationship between stock returns and inflation reflects the positive impact of real variables on stock returns.

Two issues are addressed, first if there is a relationship between the real and financial sectors and once this is established the next step is to investigate the type of relationship present. The study uses annual data covering the years 1960‐2000, on the German economy, and builds a VAR model to test the hypothesis of the negative impact of real economic activity on stock returns.

The findings suggest that in Germany employment growth has a negative effect on stock returns and influences positively inflation. The rational lies in the fact that employment growth forecasts inflation which is expected to erode firm's profits. This is expressed through falling stock returns.

Germany is the largest economy in the European Union, the findings suggest that over the period under examination, the economy operated close to its potential level of output and this has implications for policy formulation. It would have been of interest to use quarterly data, so that the unification factor could be tested. More case studies to this direction should be undertaken.

It adds to the understanding and knowledge on a debate that is as current as ever from the point of view of the macroeconomist as well as the politician.

Outlines the effect of exchange rate fluctuations on bank performance and investigates the relationship between exchange rate exposure and stock value for eight major Greek banks. Explains the methodological problems involved, develops a mathematical model and applies it to 1995‐1998 data for the banks. Discusses the results for each bank individually and suggests that although their stock returns are affected by exchange rate variations, other factors (e.g. asset/liability structure, management style etc.) are also important. Calls for further research on the impact of changes in exchange rates.

This paper aims to explore the effect of interlocking directorates on agency conflicts and corporate performance in the shipping industry.

The authors use social network analysis to discover central nodes in the network of personal and corporate connections in an international sample of 110 listed shipping companies.

Assessing network structure, the authors find that the network of corporate leaders is denser than the network of shipping companies. The network of shipping companies is populated with many isolated nodes; the network of shipping executives and directors is populated with many cohesive groups in which the longest distance between two corporate leaders is two companies. The authors find that interlocking corporate leadership can help resolve agency conflicts in the shipping industry, bearing a negative effect on the magnitude of agency costs. The extent of leadership overlaps is associated with board size, financial leverage and profitability. The relationship between profits and interlocks is bidirectional, implying that interlocking directorates bear a positive effect on asset returns.

The authors map the relational structures in the social networks of companies and company leaders in the shipping industry and discover the cross-sectional determinants of interlocks in the shipping industry. The finding about the effect of interlocks on profitability and agency costs bears policy implications for the design of corporate governance in the shipping industry.

The purpose of this paper is to investigate the interface between the banking and insurance sectors. Using capital market data, the paper aims to discover any significant equity returns around the announcement date of these bank‐insurance interfaces.

The analysis employs an event study methodology to evaluate the equity performance of these institutions. The empirical findings are based on well‐known financial intermediaries taken from an international sample.

The magnitude and sign of equity returns appear to differ among the cases examined. Some firms exhibit considerable abnormal returns, while others remain passive to any corporate restructuring revelation, or even undrape stock market losses. In many cases, the latter is associated with the overall economic environment, and/or with investments that are not compatible with the general banking philosophy of “fast growth within short‐term horizons.” Based on equity returns, the bank‐insurance interface seems to be the most preferable business restructuring; while insurance divestments and horizontal mergers, among financial intermediaries, do not perform as profitably as expected.

The paper will be of value to those interested in capital markets with emphasis on universal banking and insurance. It is suitable for academics as well as practitioners.