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Helgason: Governance of United Nations Development: Recharging multilateral cooperation for the post-2015 era

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Executive Summary: The universal post-2015 development agenda, to be adopted by the General Assembly in September 2015, will constitute a significantly different mission for United Nations Development than the current one driven by the Millennium Development Goals, both in terms of strong focus on the integration of the

Mauboussin & Callahan: A Long Look at Short Termism

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ASBTRACT: Short-termism is said to plague all parties in the investment community, including investment managers, companies, and investors. However, it is very difficult to prove. To assess and evaluate the impact of market short-termism, the right level of analysis is not what individuals say but rather what the

Höpner, Petring, Seikel & Werner: Liberalization Policy – An Empirical Analysis of Economic and Social Interventions in Western Democracies

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ABSTRACT: Political-economic classics of different schools agreed that capitalism inherently and inevitably leads to a decline of market principles. Analyzing indicators of liberalization policies for 21 OECD-countries in five economic and social policy fields, we demonstrate that Western industrialized countries are subject to a convergent trend towards market-creating policies. This stands

Case Study: Randazzo, Bui, and Gilroy on Pension Debt – Omaha’s Billion Dollar Problem

pension

Summary: The city of Omaha pension system’s two plans are currently facing four problematic trends: 1. Pension Benefit Promises are Growing Faster than Pension Assets 2. Omaha Has Been Systematically Underfunding Its Pension Systems 3. Pension Debt Has Nearly Tripled Over the Last 10 Years

Bossone: Secular Stagnation

Marriner_S._Eccles_Federal_Reserve_Board_Building

ABSTRACT: This study analyzes the emergence of secular stagnation as the consequence of a rise in the preference for liquidity. Such a rise is caused by a persistent set of pessimistic expectations. This study also investigates the effectiveness of a broad range of demand-management policies in dealing with

Helgason: Governance of United Nations Development: Recharging multilateral cooperation for the post-2015 era

seed

Executive Summary:

The universal post-2015 development agenda, to be adopted by the General Assembly in September 2015, will constitute a significantly different mission for United Nations Development than the current one driven by the Millennium Development Goals, both in terms of strong focus on the integration of the economic, social and environmental pillars of sustainable development but also because of the increased emphasis on global challenges. The responsibility for achieving the MDGs, in comparison, was primarily located at the domestic level of developing countries with international support. At the outset of the post-2015 era, the distinction between country and global level development challenges has also become less-and-less obvious. The world has seen an increasing trend in recent years of environmental, health and financial disturbances in one geographical area being cascaded over national borders and amplified into systemic risks for everyone. Development cooperation is increasingly called upon to help developing countries to benefit from globalization, as well as to mitigate its negative impact by supporting the development of policies and institutions to build resilience.

As the functions of UN Development change in the post-2015 era, the organizational model and governance capacity of the Organization will need to be adapted to meet the new requirements. A shift from the present organizational model of specialization to one characterized by greater emphasis on integration in response to the demands of the post-2015 development agenda, for example, will require UN development to develop stronger capacity for horizontal governance and coordination at the intergovernmental and interagency levels. This poses several challenges with implications for governance:

Firstly, the post-2015 development agenda with significant focus on the integration of country and global development action will require innovations in the application of the principles of sovereignty and global responsibility in governance of UN Development;

Secondly, UN Development will increasingly have to work as one in an environment characterized by growing diversity of both national development experiences and sources of financing. This will require UN Development to develop strong governance capacity for internal and external coordination;

Thirdly, in the post-2015 era, UN Development will need to develop an organizational capability anchored in integrated approaches that reduce duplication and fragmentation and enable entities to exploit opportunities for synergy in programming and operations.

 

Available for download here.

Mauboussin & Callahan: A Long Look at Short Termism

images (3)

ASBTRACT:

Short-termism is said to plague all parties in the investment community, including investment managers, companies, and investors. However, it is very difficult to prove.
To assess and evaluate the impact of market short-termism, the right level of analysis is not what individuals say but rather what the stock market does. For many companies, a contraction in time horizon is a proper response to economic reality. Corporate executives and investors who suffer from short-termism are partners in a dance who are attracted to one another based on their characteristics.
The holding period that is relevant in portfolio construction is the time an investor is exposed to an asset class, not the turnover for a particular stock or fund. We provide specific recommendations to deal with the pressures of short-termism for investment managers, companies, and investors.

 

Available for download here.

Höpner, Petring, Seikel & Werner: Liberalization Policy – An Empirical Analysis of Economic and Social Interventions in Western Democracies

seed

ABSTRACT:

Political-economic classics of different schools agreed that capitalism inherently and inevitably leads to a decline of market principles. Analyzing indicators of liberalization policies for 21 OECD-countries in five economic and social policy fields, we demonstrate that Western industrialized countries are subject to a convergent trend towards market-creating policies. This stands in stark contrast to the theoretical expectations of classical works in the field of political economy. Since the first half of the 1980s at the latest, Western democracies have entered a new phase of economic liberalization. From a methodological perspective, our findings suggest that the methods for the causal analysis of convergent liberalization policies cannot be identical with the methods that have been used for analyzing the development and consolidation of the varieties of capitalism in the postwar era.

 

Available for download here.

Case Study: Randazzo, Bui, and Gilroy on Pension Debt – Omaha’s Billion Dollar Problem

pension

Summary:

The city of Omaha pension system’s two plans are currently facing four problematic trends:

1. Pension Benefit Promises are Growing Faster than Pension Assets
2. Omaha Has Been Systematically Underfunding Its Pension Systems
3. Pension Debt Has Nearly Tripled Over the Last 10 Years
4. Pension Costs are Consuming More and More Taxpayer Resources
This brief discusses how these trends have been caused by poor actuarial assumptions and irresponsible public policy decisions. Omaha is using an unrealistic assumed rate of return on its investments, and is inappropriately depending on savings from the recently adopted deferred retirement option plan for current employees. The only real way to reform Omaha’s public employee pension plans is to adopt a new system that is not wholly reliant
on the speculative forecasts of financial risk professionals.

 

Available for download here.

Bossone: Secular Stagnation

Marriner_S._Eccles_Federal_Reserve_Board_Building

ABSTRACT:

This study analyzes the emergence of secular stagnation as the consequence of a rise in the preference for liquidity. Such a rise is caused by a persistent set of pessimistic expectations. This study also investigates the effectiveness of a broad range of demand-management policies in dealing with secular stagnation. To obtain these results, this study uses a model where agents derive utility from holding assets of different degrees of liquidity. In this environment, rational expectations interact with changes in market sentiment, to produce secular stagnation.

 

Available for download here.

Lazzarini & Musacchio: State Ownership and Firm-level Performance

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ABSTRACT:

State-owned enterprises (SOEs) remain widespread in various countries even after decades of privatization and liberalization reforms. In this paper we analyze a large dataset of listed SOEs, both majority- and minority-owned, covering several countries and industries between 1997 and 2012. We compare these SOEs to a sample of private firms using matching methods combined with differences-in-differences estimation to control for the endogenous choice of state ownership. In line with arguments proposing an inherent “liability of stateness,” we find that SOEs exhibit significant performance gaps—i.e., they underperform private firms with similar characteristics based on indicators of profitability and efficiency—especially when these firms are subject to external changes that require rapid adjustment or that increase the temptation of the government to intervene (namely, economic recessions and election years). However, these negative effects are relatively less relevant in the case of minority SOEs. Furthermore, adopting novel techniques to gauge heterogeneous treatment effects, we find some evidence of negative selection in the choice of state ownership: firms more likely selected as SOEs tend to have a larger performance gap around recessions, compared to private firms. Although the effect of elections seems to disappear in developed economies, majority-owned SOEs in those economies still exhibit significant performance gaps around events of strong economic downturn.

 

Available for download here.

Rehbein, Waddock & Graves: Corporate Social Exposure, Risk, and Shareholder Resolutions

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ABSTRACT:

Why do some companies get targeted by shareholder activists and others not? Despite the volume of shareholder resolutions submitted, little is known about why certain corporations become the targets of social policy shareholder resolutions (IRRC, 1999). This study takes the position that targeted companies are more “socially exposed” (Miles, 1987) in a variety of ways and that it is this social exposure that draws attention from activists. Social exposure is potentially evidenced through size and profitability, high levels of CEO compensation, problems of corporate governance, diversity, and human rights, products that are problematic in the eyes of some investors, overall risk, as well as in the very nature of the industry in which a company participates.

The present study uses nearly 3000 social-policy shareholder resolutions (or proxies) submitted to companies between 1988-1999 and social research firm of KLD’s database on corporate responsibility. We find significant relationships between corporate practices and activists’ targeting of companies with social policy resolutions for size, CEO compensation, governance, human rights, product characteristics, and some industries, but not for profitability, diversity, or risk. We conclude that shareholders activists appear to provide a social monitoring function. They single out firms that may be qualitatively  worse than other corporations with respect to their social agenda on specific issues of concern.

 

Available for download here.

Larusson: Commercial or Political Interests – Oil and Gas in the Russian Arctic

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Summary:

The Russian efforts of developing the natural resources in the Arctic region have intensified during the last years, and the leadership of the country is underlining the importance of speeding up the process of doing do. Putin has states that the current resources on land are depleting, and that a substitute needs to be found. But the Russian state companies Gazprom and Rosneft, the two companies who have been granted licenses to develop the Arctic shelf, are struggling against heavy bureaucracy and tight restrictions. Not the least because the Russian energy sector is considered an issue of national security, foreign involvement is heavily restricted. Furthermore, profitability of such offshore Arctic projects is uncertain, due to large demands for investments and high technology and the need for a high world oil price.

The dubious nature of developing the Arctic thus spurs the question of why the Russian government is so keen on landing these oil and gas reserves. By highlighting the economic viability of developing the northern oil and gas resources and putting them in contrast to other potential reasons for developing the regions resources, this study attempts to present possible drivers for the Russian development of the Arctic oil and gas riches. Furthermore, the question of what the state oil and gas companies do to try to affect the regulations for their Arctic endeavors is studied.

Even though the Arctic is expected to hold large amounts of resources, the economic viability of developing the Arctic region is questionable. The crucial oil price, which recently has experienced a sharp decline, could pose difficulties for the profitability of the oil and gas development projects. Furthermore there are potential development sites on land that do not require the same costs and risks. Russian governmental officials however, have pointed to the development of the Arctic as a way of giving a boost to the Russian economy, not just by sales of oil and gas, but also by using domestic technology and expertise to support the Arctic activities. As a result of the Ukraine sanctions against Russia, Rosneft has stated that it could replace the foreign equipment used in a matter of three to four years.

Having this dubious economic outlook for developing the Arctic, other drivers are suggested. One driver connects to the image-making of Putin. Being one of the first to land resources in the unhospitable conditions of the Arctic is a feather in the hat for Putin, and leads to a positive international reputation.

Another highly topical potential driver is geopolitics. The planned increased military presence is portrayed as a guarantor for the safety and security of the commercial activities in the Arctic, but it should also be able to discourage other powers from engaging in any of the contested sea areas. Furthermore, the increased US interest in the Arctic, as well as the deteriorating relations between Russia and the West as a result of the events in Ukraine, could be seen as factors instigating this driver.

For Rosneft and Gazprom the Arctic is a difficult place to operate and the profits are uncertain. However, their Arctic ventures attract capital investments, something which both companies are in need of. In order to facilitate their work on the shelf, they do try to influence the leadership. Letters leaked to the media, sent to the president and the government from the state companies, give an indication of how they try to lobby the state and what issues they focus on. One of the major issues the state companies lobbied against was to allow any other actors onto the shelf. To date, it appears as if this has been successful – only Rosneft and Gazprom are allowed access. Another result of the lobbying efforts could be seen in the Interdepartmental Commission for removing administrative barriers for subsoil development. Rosneft had prior to this sent letters to state representatives about the tight regulations and excessive red tape for the oil and gas business. As these letters were surely preceded and succeeded by informal and non-public lobbying efforts, the result is still clear. Both state companies were to be included in the Interdepartmental Commission, which gives them a better position to influence and present their views. Similar lobbying efforts had earlier been attempted by e.g. Lukoil, but without any success. Igor Sechin’s arrival as the President of Rosneft has made the state companies’ voice stronger and seemingly more influential. His close ties with Putin and his understanding of the political drivers and the commercial realities of oil and gas development in such difficult areas as the High North, has given him a unique position in the development of the Russian Arctic.

 

Available for download here.

Soltes, Srinivasan, Vijayaraghavan: What Else do Shareholders Want? Shareholder Proposals Contested by Firm Management

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ABSTRACT:

Shareholder proposals provide investors an opportunity to exercise their decision rights within a firm. However, not all proposals created by shareholders receive consideration. Managers can seek permission from the Securities and Exchange Commission (SEC) to exclude specific proposals from the proxy statement. From 2003-2013, we find that managers seek to exclude 40% of all proposals they receive, but the SEC does not permit exclusion in over a quarter of the cases. Of the proposals that managers seek to exclude but the SEC does not allow, 28% win shareholder support or the firm voluntarily implements prior to a vote. Our analysis of contested shareholder proposals suggests that managers often seek to avoid the implementation of legitimate shareholder interests.

 

Available for download here.

Fornero: Economic-Financial Literacy and (Sustainable) Pension Reforms: Why the Former is Key to the Latter

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ABSTRACT:

Financial literacy has important implications for economic reforms. Reforms are meant to change people’s behavior and their effectiveness crucially depends on the ability of citizens to recognize and generally approve their necessity, their general design, and their “sense of direction.” Without basic understanding by citizens, reforms risk having little or no effect or even being reversed. Informed judgment about economic reforms requires information and numeracy as well as literacy. This is particularly true of pension reforms because of their profound impact on people’s life plans. The 2011 Italian pension reform is a case in point.

 

Available for download here.

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