Search results

Pledging collateral to secure loans is a prominent feature in financing contracts around the world. Existing theories disagree on why borrowers pledge collateral. It is even more challenging to understand why in some countries collateral coverage exceeds, for example, 300% of the value of a loan. This study looks at the association between collateral coverage and country-level governance and various institutional proxies. It investigates the economic implications of steep collateral coverage and sketches policy options to lower ex-ante asymmetric information and ex-post agency problems. Within this framework, should a lender collect the debt forcibly on default and liquidated assets fetch prices below outstanding loan values, the lender’s loss is covered through credit insurance, which would significantly reduce the need for steep collateral coverage. This proposal may increase level of private credit, investment and growth; particularly, in a number of developing countries where collateral spread is the main inhibitor of finance.

Strategic management researchers have devoted increasing attention to the study of corporate reputation over the past two decades. Reputation has been conceptualized as a valuable intangible asset, and numerous studies have sought to identify its antecedents and foundations. This chapter recommends a dynamic approach toward reputation research. We argue that studies should examine the processes through which reputational assets are accumulated and depleted over time (i.e. that they should attend to reputational “flows” in addition to reputational “stocks”). We specifically suggest that research focus upon particular corporate actions, examining how (and if) corporate reputations change in their wake. We provide pragmatic and theoretical rationales for this approach toward reputation research. We construct a framework for conducting dynamic, action-focused studies of reputational change. We provide general guidelines for designing such studies, and also provide some specific (i.e. “nuts and bolts”) advice about executing them. We provide one in-depth example of research conducted within this framework. We also identify a number of other corporate actions that could be readily examined using the same methodological and theoretical approach.

Working to improve organizations is the mainstay of organization development (OD) practice and includes figuring out the sources of workplace disruptions and dysfunctions. Casting aside the focus of most change-management initiatives, the organization, organizing intelligence (OQ) relies on paying attention to what people actually do, making meaning of complex, messy human-social organizing activities, in the interests of fostering productive workplaces. Resting on dialog with and among participants “feeling their way” as they organize their work, OQ is an exercise in synthesis rather than analysis. A holistic understanding of organizing activities is helped by exploring the roles of a triad of closely interwoven factors – organizing structures, work-practices, and relationships – in how people get things done, while understanding how these are interconnected. This chapter examines why the capacity for OQ matters, why and how OQ differs from widely practiced, technically framed, organizational analysis, and what distinguishes people with OQ from those with a more conventional interest in organizational change. A case study of the Dutch home-nursing organization, Buurtzorg, illustrates OQ in practice. With small groups of nurses who self-organize, this is a structure that changes both the way people work and their relationships, to the benefit of nurses and the quality of life and care of their patients, while reducing costs; clearly an example of a more productive workplace.

To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and results in banking under asymmetric information.

The review includes recently published or working papers (2006–2013) that exclusively employ experimental economics methodology, especially for studying the impact of formal or informal institutions on lending in credit markets.

The results of the reviewed experimental studies provide support for the important role of both informal (e.g., relationship banking and reputation) and formal (e.g., third-party enforcement; collateral) institutions and their impact on credit market performance, as well as the importance of studying the interaction of the two types of institutions.

The number of studies reviewed is fairly small but growing, indicating that this is the area of growing significance.

Controlled economic experiments are better able to address the questions regarding the direction of causality in empirical relationships. Economic experiments are particularly useful in studying complex markets like credit and capital and in eliciting specific effects of institutions on credit market performance. Such well-established empirical relationships will be able to provide guidance for policy making for financial market reform.

This is the first review of laboratory research in banking and lending under asymmetric information that aims to call attention to this area of research and serves as a starting point for an interested researcher and provide future direction.

Granting mortgages to customers likely to become insolvent was widespread in Spain during the housing bubble that burst in 2007, resulting in an unprecedented rate of home repossessions. The practice was usually legal, but if power relations, structural determinations, and asymmetrical access to information are taken into account, it appears abusive and socially harmful. Several sorts of people were involved in it: bank staff who, under pressure from managers, took advantage of their long-standing relationships with customers; real estate agents and mortgage brokers who saw a business opportunity in people’s aspiration to home ownership; and investment banking executives who devised sophisticated financial products aimed at masking risk. For them, selling risky mortgages was not only a profitable business but also a way to comply with norms, values, and expectations at play in their social settings. This chapter will show how mortgage lending and its evaluation as wrong or acceptable by actors in different social positions has a relational nature, and is based on diverging moral economies that guide economic action in the framework of neoliberalism.

Much of the criticism directed toward banking in China revolves around self-dealing in relationships between bankers and their clients. Corruption, nepotism, high levels of non-performing loans, and the inefficiency of government-directed lending have all been laid at the door of embedded guanxi networks. While valid to an extent, this criticism ignores two important, related points: guanxi networks bring disciplining mechanisms as well as the potential for corruption, and those mechanisms may improve banking governance.

Employing theory from relationship banking, information economics, and the business ethics of guanxi, I examine how monitoring by netizens will lead to greater disclosure.

Relationship banking in a Chinese context – with the influence of guanxi in banking – further increases reputational costs when self-dealing is uncovered. Costs of bad banking behavior are increasing just as benefits from staying rich increase. Increased disclosure affects chances of staying rich as disclosure increases the chance that a corrupt relationship will lead to loss of wealth and reputation.

This paper presents a theoretical construct informed by selected examples. An empirical analysis of netizen monitoring leading to improved banking governance would provide additional support for the theoretical construct.

Bankers, financiers, and government officials must be aware of monitoring by netizens, which forces more ethical financial contracting.

Rather than weakening financial system governance, guanxi may begin to strengthen the disciplinary measures inherent in relationship banking as information disclosure increases and private sector monitoring grows.

This paper provides an extension to private monitoring theory in financial contracting which may be applied to netizen monitoring in other regions and countries.

Recent institutional scholarship has discovered new possibilities for change in both the accumulation of incremental transformations and in the skillful action, institutional work, and creative activities of political and institutional entrepreneurs. Lurking behind stability and change lie actors who can act reflexively within and with existing institutions, and who do so on a routine, rather than exceptional basis, redeploying, recombining, and transposing extant systems to solve problems of identity and control. This paper probes the potentials and limits of those possibilities – and the prospects for reform in American banking – via a case study of the Bank of North Dakota and efforts to transpose its hybrid model of state and community logics into other states. The analysis first finds a full range of institutional labors and skillful activities emphasized by recent work as the foundation for transposition. It finds crisis; the presence of multiple logics; the mobilization of boundary spanning networks; the use of conferences and theorization to sustain independent discourse and collective identities; skillful framing; and substantial editing and recombination to fit the model with receiving states’ institutions. It then juxtaposes these conditions with outcomes in the states, developing some implications for actor-centered institutionalisms, current preoccupations with mechanisms, and state-level strategies for financial reform.

Modern organizational forms are subject to isomorphic processes (Di Maggio & Powell, 1983) that create a narrow range of organizational types. These types dominate discussion in the management literature, creating the impression that they represent the proper, advanced way to organize. As a consequence, critical scholars are calling for management research and education to become committed to praxis, “the ongoing construction of social arrangements that are conducive to the flourishing (our emphasis) of the human condition” (Prasad & Caproni, 1997, p. 288). According to this view, researchers should seek to generate knowledge of alternative social forms that provide options to organizational leaders. This chapter represents our attempt to do so.