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The 2007–2009 financial crisis initially appeared to have destroyed a huge amount of wealth in the United States. Housing prices dropped about 21% across the country and as much as 50% in some places, and the stock market dropped by nearly 50% as well. This chapter examines how the financial crisis differentially affected households at different parts of the income and wealth distributions. Our results show that all households lost about the same percentage of their wealth in that period. But because households in the top 10% of the wealth distribution owned many different kinds of assets, their wealth soon recovered. The bottom 80% of the wealth distribution had more of their wealth tied up in housing. We show that financial distress, indexed by foreclosures, being behind in mortgage payments, and changes in house prices were particularly concentrated in households in the bottom 80% of the wealth distribution. These households lost a large part of their wealth and have not yet recovered. Households that were most deeply affected were those who entered the housing market late and took out subprime loans. African American and Hispanic households were particularly susceptible as they bought houses late in the price bubble often with subprime loans.

This paper aims to empirically analyze the success of European bank mergers and acquisitions (M&As) by an analysis of the shareholder value implications of stock market reactions to announced and canceled M&As in the period from 1999 to 2015.

The analysis of a sample of 467 announced and 54 canceled European bank M&As is conducted using event study methodology. The determinants of the shareholder value creations in M&A are observed in cross-sectional regressions. The likelihood of M&As being canceled is estimated in logit regressions.

The paper finds that European bank M&As have not been successful in terms of shareholder value creation for acquiring banks, whereas targets experienced significant value gains. Abnormal returns for bidders and targets exhibit the same characteristics upon the announcement of M&As that are canceled at a later date, whereas the results for transaction cancelations deviate. Targets experience negative abnormal returns at a larger size than upon the transaction announcement. The findings for bidders are striking, as they destroy shareholder value upon the transaction cancelation, also, consequently they suffer twice. In particular, banks with higher profitability, higher efficiency and lower liquidity experience negative abnormal returns around the announcement dates. Negative abnormal returns prior to the transaction announcement and provision for loan losses increase significantly the likelihood of M&A cancelation.

This paper contributes to the literature expanding existing analyses to the shareholder value implications of canceled European bank M&As in a 17-year long time period. The findings reveal the destructive characteristics of canceled bank M&As and provide innovative insights into European capital market reaction to canceled M&As.

Though contemporaries, Adam Smith and Sir James Steuart are commonly portrayed as if they belonged to different eras. Whereas Smith went down in history as both founder of the science of political economy and patron saint of economic liberalism, Steuart became known as the last, outdated advocate for mercantilist policies in Britain. Smith himself was responsible for popularizing the notion of the “system of commerce” as an approach to political economy that dominated the early modern period. As a historiographical concept, the mercantile system became a misguided international trade theory grounded upon the Midas fallacy and the favorable balance of trade doctrine. Smith’s treatment of international trade in the Wealth of Nations, however, was criticized for its inconsistencies and lack of analytical clarity even by some among his own followers. Given Smith’s doubtful credentials as an international trade theorist, the chapter investigates the reasons that led him and Steuart to be placed on opposite sides of the mercantilist divide. The authors analyze the works of both authors in depth, showing that their disagreements had chiefly to do with different views on money and monetary policy. Additionally, the authors explore how early nineteenth-century writers such as Jean-Baptiste Say and J. R. McCulloch helped forge the intellectual profiles of both Steuart and Smith.

The paper aims to analyze the reasons for the unremarkable increase in value relevance of new impairment testing of goodwill following the introduction of new accounting standards SFAS 141 and 142.

After surveying main research about market reactions to announcements of goodwill write‐off before and after the introduction of the new SFAS the paper shows why the two‐step procedure of impairment testing risks undermining the very economic substance of the test.

The analysis shows the inadequacy of the impairment test to measure the destruction of wealth experienced by acquiring firms’ shareholders and to supply value‐relevant information owing to the lack of disclosure of information after the first stage of the test. It also shows the consequences of management's discretionary power in setting forth projections.

The paper lays the groundwork for interpreting the empirical evidence on the limited information content of goodwill write‐offs.

The purpose of this study is to determine the impacts of related party transactions on the performance of Islamic banks in Pakistan. In addition, this study aims to determine whether corporate governance mechanisms enhance company performance and mitigate agency problems associated with related party transactions in the Islamic banks.

Sample includes all Islamic banks domiciled in Pakistan from 2017 to 2021. To run the regression models, the regression assumptions about normality, heteroskedasticity, autocorrelation and multicollinearity are determined.

This study finds that institutional ownership has a significant impact on mitigating agency problems associated with tunneling. Related party borrowings indicate expropriation and conflict of interest, whereas related party revenues indicate propping and efficient transactions.

This study uses data from all Islamic banks and specialized Islamic branches working in Pakistan. In the future, data of other institutions offering Islamic finance in Pakistan and in other emerging economies can be used to determine the role of related party transactions.

A thorough understanding of related party interrelationships in the Islamic banking system is essential, as these transactions can result in either the creation of wealth or the destruction of wealth. It is also necessary to determine the type of transactions that ultimately benefit Islamic investors.

The impacts of different related party transactions (in terms of cash inflows and outflows) of Islamic banks are investigated. Prior studies generally look at the impact of related party transactions on firm performance in totality.

The purpose of this study is to show that corporations may resort to legal compliance instead of acting voluntarily towards abatement of environmental damages as a strategy for improving their reputation.

Based on the natural philosophy and postulate of business, theoretical models have been developed to justify the purpose of this paper. Financial impacts of Indian revenue law on environmental damage prevention by the polluting firms have been gauged mathematically.

Corporate environmental responsibilities have seemed to be more reputation-led than innovation-led or efficiency-led. Reputation-led environmental responsibilities can have ways to bypass innovations and some firms can simply comply with regulations at the society’s cost (may be to a sizeable extent). If penalty is imposed on companies in the form of taxation for damaging the environment, then companies get chances to pass the financial burden to the shareholders in the form of lower dividend pay-outs. Unless the capital market supports corporate green initiatives, there may be destruction of shareholder wealth.

Extensive empirical analysis have not been conducted as the paper concentrates on developing theoretical understanding of the models of “green cost”.

The exploration and outcomes of this paper can offer several directions to the government, business and social activists in articulating green economic policy for the benefits of all.

The civil society will understand better what the corporate environmental responsibility really means for them.

This paper has made a modest endeavour to develop theoretical models of both “green cost internalisation” and “green cost externalisation”. It has paved the path for further deliberations and research.

The purpose of this paper is to expand understanding of the current global financial crisis in light of other large‐scale financial crises.

The phenomenon of large‐scale financial crisis has not been modeled well by neo‐classical general equilibrium approaches; the paper explores whether evolutionary and complex systems approaches might be more useful. Previous empirical work and current data are coalesced to identify fundamental drivers of the boom and bust phases of the current crisis.

Many features of financial crisis occur naturally in evolutionary and complex systems. The boom phase leading to this current crisis (early 1980s through 2006) and bust phase (2007‐) are associated with structural changes in institutions, technologies, monetary processes, i.e. changing “meso structures”. Increasingly, purely financial constructs and processes are dominant infrastructures within the global economy.

Rigorous analytical predictions of financial crisis variables are at present not possible using evolutionary and complex systems approaches; however, such systems can be fruitfully studied through simulation methods and certain types of econometric modeling.

Common patterns in large‐scale financial crises might be better anticipated and guarded against. Better money‐liquidity supply decisions on the part of official institutions might help prevent economy‐wide money‐liquidity crises from turning into systemic solvency crises.

Scholars, policymakers, and practitioners might appreciate the more comprehensive evolutionary and complex systems framework and see that it suggests a new political economy of financial crisis. Despite a huge scholarly literature (organized recently as first‐ second‐ and third‐generation models of financial crises) and a flurry of topical essays in recent months, systemic understanding has been lacking.

Since Hayek’s pioneering work in the 1930s, the Austrian business cycle theory (ABCT) has been presented as a disequilibrium theory populated by less-than-perfectly rational agents. In contrast, we maintain that (1) the Austrian business cycle theory is consistent with rational expectations and (2) the post-boom adjustment process can be understood in an equilibrium framework. Hence, we offer a new interpretation of the existing theory. In doing so, we also address concerns raised with Garrison’s (2001) diagrammatic approach, wherein the economy moves beyond the production possibilities frontier. Our interpretation might accurately be described as a monetary disequilibrium approach grounded in an implicit general equilibrium framework with positive costs of reallocation.

The resolution of conflicts between shareholders and managers, at minimal cost, is the goal of corporate governance. In 1999, an intriguing series of events occurred that dramatically reshaped the Canadian airline industry. This clinical study considers these events in relation to four corporate governance mechanisms. The results of this clinical study suggest that these four mechanisms may not be sufficient to control a management team that is committed to a course of action and to retaining their positions. In practice, corporate governance can be severely limited, even when the majority of board members are outside directors. In addition, institutional shareholders may not be the disciplining force that theory and logic suggests. Overall, the results imply that managerial entrenchment is a powerful motivating force that may be impossible to counter even for a large, poorly performing corporation that is subject to a very attractive takeover offer.

The literature on executive options has burgeoned over the past decade. While early literature tended to expound the benefits associated with the adoption of options plans, more recent literature has taken on a more cautionary tone. Recent empirical research has suggested a range of conditions under which the adoption of options plans might result in unanticipated outcomes. This paper adds to the literature by discussing options holding concentration, which we define as the proportion of options outstanding under a firm's executive options plan held by a firm's board and the top five non-board executives. We examine previous empirical literature on executive options plans and some of the incentive problems associated with the implementation of such plans, which have been reported in the literature. On the basis of these discussions, we discuss why it might plausibly be expected that options holding concentration could represent a variable with the power to explain the degree to which incentive problems are encountered by organisations, which employ executive options schemes. We report observed options holding concentration for a sample of Australian listed corporations between 1997 and 2002, but demonstrate that while significantly inversely associated with firm size, holdings concentration does not appear to be associated with factors which point towards organisational risk taking and cash payment policy choices. We discuss possible reasons for our findings and suggest potential future research extensions flowing from our work.