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The impact of economic prosperity on CEO ethics
Prior research suggests that economic booms are associated with overconfidence and risk-taking. In a new paper, Emily Bianchi, assistant professor of organization & management, and coauthor Aharon Mohliver (London Business School) build on that research by showing that prosperous times are also associated with more ethical lapses. The authors examined whether CEOs were more likely to backdate their stock options during prosperous economic times. Backdating stock options was relatively common during the late 1990s to early 2000s. It was also unethical. A backdating CEO would receive a stock option grant on one day but report that the options were assigned on an earlier date when the stock price was lower. This would allow the CEO to realize greater gains when he or she sold the stock. Also, it required lying to the SEC and came at the expense of company profits. To test their theory, Bianchi and Mohliver looked at the backdating patterns of 2,139 CEOs of US publically traded companies between 1996 and 2005. They found that CEOs were more likely to backdate in good economic times. They also found that “CEOs who began their careers in prosperous times were more likely to backdate stock option grants later in their careers.” The findings indicate that economic prosperity influences the likelihood of corporate misconduct. Source:
Reconstructing the past to forecast how climate change may alter our future
The scientific world all agrees – climate change is real, it’s here and it is something we need to know more about. As the climate on Earth changes – everything from temperatures, weather patterns, wind rain and snow will all in some way or another be altered. Even minor and fractional adjustments in some aspects of climate may result in drastic differences to temperatures, precipitation, ocean levels and ecology. In order for us to understand the impacts of climate change and to try and predict how populations will have to adapt scientists at the University of Mary Washington are currently working on a long-term project to re -construct past climate by looking at the geochemistry of oyster shells. This research could prove vital as the Chesapeake Bay region is expected to experience more extremes in precipitation with human-caused warming, so more heavy rain events and more prolonged drought events. These changes in rainfall will cause drastic swings in salinity in the Bay from changes in the freshwater river input. It’s important research and the experts at the University of Mary Washington are available to help explain how oyster shells may hold the answer to the region’s future climate challenges. Dr. Pamela Grothe is an Assistant Professor in the Department of Earth and Environmental Sciences as the University of Mary Washington and is an expert on climate change. Dr. Grothe is available to speak with media regarding this subject – simply click on her icon to arrange an interview. Source:
The return on international investment products
Individual investors have access to an ever-increasing number of US-registered equity funds that invest in international assets, as well as institutional investment products focused on global assets. Despite the growing importance of global equity markets for US investors, there is little academic research devoted to their study. Jeffrey Busse, associate professor of finance, Amit Goyal (University of Lausanne), and Sunil Wahal (Arizona State U) advanced the research, tackling the common theory that less developed markets are less efficient and, consequently, “exploitable by active fund managers.” The trio analyzed a large sampling of active retail mutual funds and institutional products investing in global equity markets, concentrating their research on a sample period from 1991 to 2009. The authors used quarterly returns net of trading costs and gross of fees. They also collected information on annual fee schedules, portfolio turnover, and assets under management. On average and in the aggregate, the data showed a lack of “superior performance” for the sampling. The research paper won the Spangler IQAM Best Paper in Investments Prize at the 2014 European Finance Association Annual Meeting in Lugano, Switzerland. Source:
Speculation and its impact on trading volume
Financial researchers have long wondered exactly which economic forces cause variation in asset prices and returns. For instance, traders will often target financial instruments due to their volatile and highly liquid nature, such as US treasury bonds. This speculative behavior takes advantage of the frequent price movements of the product. But the influence of that behavior remains the subject of debate. Francisco Barillas, assistant professor of finance, and Kristoffer Nimark (Cornell U) take a deep dive into the issue by investigating the impact of speculative trading activity on the variation of long maturity US bond yields. For their analysis, Barillas and Nimark use public information to develop a rational model to track “informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices.” They argue that their research takes a more “suitable approach for empirical work” by factoring in how traders exploit private information that other traders may not have. The authors note that bond prices alone are not enough information for predicting bond returns. The two write, “If traders have access to different information, this price may differ from what an individual trader would be willing to pay for the bond if he had to hold it until maturity.” Ultimately, they find that this speculation remains a key driver of trading volume, accounting for a “substantial fraction of the variation in historical US bond yields along with the usual analysis of estimating returns based on bond prices.” Source:
The rise of ETFs and market impact
As the popularity of exchange-traded funds (ETFs) continues to grow at a rapid pace, the role that these basket or index-linked products play in the market is an ever-growing concern. For instance, ETFs now constitute more than 30% of the daily value traded in US exchanges. Suhas A. Sridharan, assistant professor of accounting, and coauthors Doron Israeli (Interdisciplinary Center Herzliya) and Charles M. C. Lee (Stanford U) dive into the issue by examining the impact of ETF ownership on the availability of information on individual securities and the market for those same securities. The trio analyzes a sample of 443 unique ETFs for the firm-year between 2000 and 2014. They note that ETFs are a particularly attractive investment vehicle for less informed traders. With trading costs for individual securities rising as a result of the flow to ETFs, more informed traders have less of an incentive “to expend resources to obtain firm-specific information.” As the depth and size of the ETF market grows, individual stock prices become less informative. Source:
Securitized loan modification and loan performance
After the collapse of the housing market, the wave of foreclosures in the US changed the economic landscape of many neighborhoods across the country. Some academics and policymakers have argued that the renegotiation of those loans was a much better alternative than foreclosure and that incentives should have been offered to financial institutions to encourage it. However, little research exists to understand the performance of loans that were modified. Gonzalo Maturana, assistant professor of finance, takes a close look at loan modifications made early in the recent housing crisis to better understand the value of offering incentives to modify securitized non-agency loans. According to Maturana, researchers contend that the small number of loan modifications added to the number of foreclosures during the subprime crisis. His analysis consisted of slightly more than 835,000 non-agency securitized loans that became delinquent between August 2007 and February 2009. Maturana found that loan “modification reduces loan losses by 35.8% relative to the average loss, which suggests that the marginal benefit of modification likely exceeded the marginal cost.” Additionally, modifications resulted in fewer liquidations. He also found that modifications were particularly useful “in preventing future loan losses in times of large increases in delinquencies when servicers are more likely to be working at full capacity.” Source:
Unconventional Tech Conference Brings International Audience to UMW
Join us July 30 – August 3! Educators from Canada to Cairo, the UK and across the U.S. will attend the University of Mary Washington’s Digital Pedagogy Lab. Dynamic keynote speakers like NPR’s lead education blogger, Anya Kamenetz, and Columbia University’s Jade E. Davis will ask participants to re-imagine technology’s role in higher education, finding the best ways to teach with and about it. Hosted by UMW’s trend-setting Division of Teaching and Learning Technologies (think ground-breaking initiatives like Domain of One's Own), DPL delves deep into digital pedagogy, covering everything from cultural humility to “mad genius” storytelling. We’re also on Twitter – so follow along and join in on the conversation - @DigPedLab and #digped. Source:
Today, US President Donald Trump and Russian President Vladimir Putin met at the presidential palace in Helsinki to discuss the relationship between their respective countries. Prior to the meeting, Trump cited national security concerns and trade as agenda items. Since the start of the meeting, the two presidents have also discussed the tension between the two countries and accused election meddling. At Augusta University, our experts have been following the historic meeting, and made the following observations: • Trump is correct in asserting the importance of having Russia as an ally. • The US is currently facing Russian cyberaggression, so how Trump addresses this issue has immediate concerns. • US posture in Syria is at stake. • It is important to keep this meeting in the context of “America First.” Trump will push messages at the summit that fall in line with his national security interests. What are the implications of this summit for every-day Americans? Will this meeting improve the relationship between the United States and Russia? How will this meeting effect the United States’ relationship with other European allies? There are a lot of questions to answer – and that’s where our experts can help. Dr. Craig Albert is an expert on American politics and political philosophy. He was recently appointed director of Augusta University’s new Masters of Arts in Intelligence and Security Studies. Dr. Albert has experience with all forms of national and local news organizations and is available to speak to media regarding the Helsinki Summit. Simply click on his icon to arrange an interview. Source:
This is not honoring military service -- it is disgracing it.
“The dismissal of service members from the Armed Forces because of their immigration status is an insult to everyone who has worn the uniform. Those who have worn the uniform know the sacrifices that serving in the military involves. To callously dismiss those very few who have chosen to serve is an act of moral cowardice. Every veteran and service member should be outraged. This is not honoring service, it is disgracing it.” Source:
6 Facts We Learned Working with Migrants and Refugees Around the World Working with migrants and refugees is our business at Catholic Relief Services. CRS was founded in 1943 to assist refugees during World War II. Seventy-five years later, we are still coming to the aid of people escaping conflict, violence and natural disasters. While CRS doesn’t resettle refugees in the United States (these programs are run by the Catholic Church’s Migration and Refugee Service and Catholic Charities), our rich history has taught us valuable lessons on how to best help families fleeing crisis. 5. Adults Need Work and Income. We know from experience that people find pride and purpose in helping earn an income for their families, no matter how small. Refugees and migrants are looking for a hand-up, not a handout and being integrated with their host communities benefits everyone. Caroline Brennan is the Emergency Communications Director for Catholic Relief Services. In her role, she travels to and/or works in areas facing natural or man-made emergencies. See her contact information at the bottom. 6. The Poorest Countries House the Most Refugees and Migrants. Although media stories can give the impression that the U.S. is swamped with migrants, the reality is that 85% of the world’s refugees are in the developing world. The country with the largest refugee population is Turkey, with almost 3 million. One in 3 people in Lebanon is a refugee. The Bidi Bidi Refugee Camp in Uganda alone is home to 229,000 South Sudanese who have fled civil unrest. Richer nations like the U.S. should look at the lessons of how these countries with far fewer resources welcome and host refugees. Caroline Brennan is the Emergency Communications Director for Catholic Relief Services. In her role, she travels to and/or works in areas facing natural or man-made emergencies. See her contact information at the bottom. The experts at Catholic Relief Services are available to help with any media coverage or insight that is required regarding this ongoing news story and issue that is continuing in America. Simply click on any of their icons to arrange a time for an interview. Source:
