...supervision The core principle for effective banking supervision addresses supervisory requirements relating to banking licensing. The licensing authority must have the power to set criteria and reject applications establishment that do not meet the standards set. The licensing process should consist of an assessment of the ownership structure, governance of the bank and that includes: fitness and propriet of board members and senior management, its strategic and operating plan, its internal controls, risk management, projected financial condition and its capital base The purpose of obtaining this information is to review: major shareholders' past banking and non-banking business ventures, their integrity and standing in the business community, their financial strength, their ability to provide further financial support should it be needed, their other interests and the financial condition of these related entities Directors and Senior Management: The board of directors has the responsibility for setting the course for the bank and senior management is responsible for overseeing the bank's day-to-day operations. Their performance is a critical factor for the success of the bank. It is therefore important that the licensing process focus on the traits and...
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...Upjohn Institute Press Book Chapters Upjohn Research home page 2005 Human Resource Management and Safety: Technical Efficiency and Economic Incentives Richard J. Butler Brigham Young University Yong-Seung Park Kyung Hee University Citation Butler, Richard J., and Yong-Seung Park. 2005. "Human Resource Management and Safety: Technical Efficiency and Economic Incentives." In Safety Practices, Firm Culture, and Workplace Injuries. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, pp. 1-12. http://research.upjohn.org/up_bookchapters/33 This title is brought to you by the Upjohn Institute. For more information, please contact ir@upjohn.org. 1 Human Resource Management and Safety Technical Efficiency and Economic Incentives More U.S. workers die each year on the job than were killed in the U.S. military cumulatively from 1998 through November 2004, even after including self-inflicted and accidental military deaths (DIOR 2005). In 2001, there were 8,786 job-related fatal injuries (5,900 not counting the fatalities caused by the terrorist attacks of September 11), or about 3.7 fatal injuries per 100,000 workers. Workers made 2.1 million trips to the emergency room for injuries sustained from accidents at work (Centers for Disease Control and Prevention 2004). Workers’ compensation insurance, which covers all medical expenses and part of lost wages associated with injuries, cost employers $63.9 billion in 2001 (Williams, Reno, and Burton 2003). The...
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...En The Economics of Money, Banking, and Financial Markets, 9e (Mishkin) – Global Edition Chapter 8 An Economic Analysis of Financial Structure 8.1 Basic Facts About Financial Structure Throughout the World 1) American businesses get their external funds primarily from A) bank loans. B) bonds and commercial paper issues. C) stock issues. D) loans from nonbank financial intermediaries. Answer: D Ques Status: Revised 2) Of the sources of external funds for nonfinancial businesses in the United States, loans from banks and other financial intermediaries account for approximately ________ of the total. A) 6% B) 40% C) 56% D) 60% Answer: C Ques Status: Previous Edition 3) Of the sources of external funds for nonfinancial businesses in the United States, corporate bonds and commercial paper account for approximately ________ of the total. A) 5% B) 10% C) 32% D) 50% Answer: C Ques Status: Previous Edition 4) Of the following sources of external finance for American nonfinancial businesses, the least important is A) loans from banks. B) stocks. C) bonds and commercial paper. D) loans from other financial intermediaries. Answer: B Ques Status: Previous Edition 5) Of the sources of external funds for nonfinancial businesses in the United States, stocks account for approximately ________ of the total. A) 2% B) 11% C) 20% D) 40% Answer: B Ques Status: Previous Edition 6) Which of the following statements concerning external...
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...performance based pay provides the agent with incentive to misallocate the earnings to get more compensation. To address the concern of earnings manipulation problem, SEC imposed a strict disclosure regulation in 1993. An optimal managerial contract should be designed not only to provide the agent with an incentive to take actions that enhance the actual profitability of the firm, but also to minimize the agent’s incentive to falsify earnings reports. This paper uses a two-period model to demonstrate that the compensation scheme contingent on reported earnings cannot provide the agent with the incentive both to maximize earnings and to report earnings honestly. In the optimal contract, the principal must still tolerate some degree of earnings management. In addition, with the increase of the misrepresentation penalty, the principal would rather lower the incentive to make the agent work less but report earnings truthfully. I thank Professor Jean-Etienne De Bettignies and Professor Olena Ivus for valuable comments and suggestions. All errors are my own. ** MSc Candidate in Business Economics, Queen’s School of Business. Email: 11rz3@queensu.ca Table of Contents Abstract ........................................................................................................................................... 1 1. INTRODUCTION............................................................................................................................ 3 2. THE MODEL..............
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...* Question 1 0 out of 10 points | | | A Ponzi scheme is characterized by: I. an investment whose growth is financed by high returns on its investment. II. an investment whose growth is financed by new clients who give money. III. an investment that relies on receiving funds from nonprofit institutions. | | | | | Selected Answer: | [None Given] | Answers: | A. I only | | B. II only | | C. III only | | D. I, II, and III | | | | | * Question 2 0 out of 10 points | | | Reasons why indirect finance is so important include: | | | | | Selected Answer: | [None Given] | Answers: | A. the persistent increase in the cost of stocks. | | B. the fact that banks provide liquidity to depositors. | | C. the fact that banks increase transaction costs for savers. | | D. the fact that banks increase transaction costs for investors. | | | | | * Question 3 0 out of 10 points | | | The free-rider problem arises: | | | | | Selected Answer: | [None Given] | Answers: | A. when people benefit from a good without paying for it. | | B. only when markets are perfectly competitive. | | C. if labor unions are strong. | | D. when a country is expanding. | | | | | * Question 4 0 out of 10 points | | | A project pays $125 with a probability of 0.75 or pays $90. What is the expected value of this project? | | | | | Selected Answer: | [None Given] | Answers: | A. $116.25 | | B. $93.75...
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...11-8-2011 Financial Markets & Inst Dodd-Frank Assignment The Dodd Frank Act has been created as a regulatory reaction from the recent financial crisis. The magnitude of its implications and provisions has not been seen since the great depression and will be conducted as a major overhaul to the financial systems rules. Financial regulation within a system that clearly had ulterior motives and lacked market discipline is inevitable. Without clear transparency of what and how borrowers are investing individuals savings will surely lead to moral hazard and conflicting interests. With Dodd Frank hopefully some of this asymmetric information will be largely more apparent to an inspecting investor. This Act aims to promote the financial stability of the United States financial system by implementing rules and regulations to improve accountability and transparency. Dodd Frank mainly addresses issues dealing with ending the "too big to fail" banks, protecting the American taxpayer by ending bailouts, ensuring consumers safety from abusive financial services practices, and for other related purposes. The legislation gives the government more power to step in and "unwind" financial firms that are failing, enables more oversight of the derivatives market, and to protect the individual investor (Bentley). Thanks to Dodd-Frank, we will see whistleblowers offered incentives for reporting compliance violations to a larger and more powerful SEC. The SEC will also have the power to impose...
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... The spectacular corporate scandals and bankruptcies of the past decade have served as a powerful reminder of the risks that are involved in the ownership of enterprise. Unlike other patrons of the firm, owners are residual claimants on its earnings.1 As a result, they have no explicit contract to protect their interests, but rely instead upon formal control of the decision-making apparatus of the firm in order to ensure that their interests are properly respected by managers. In a standard business corporation, it is the shareholders who stand in this relationship to the firm. Yet as the recent wave of corporate scandals has demonstrated once again, it can be extraordinarily difficult for shareholders to exercise effective control of management, or more generally, for the firm to achieve the appropriate alignment of interests between managers and owners. After all, it is shareholders who were the ones most hurt by the scandals at Enron, Tyco, Worldcom, Parmalat, Hollinger, and elsewhere. For every employee at Enron who lost a job, shareholders lost at least US$4 million.2 Furthermore, employees escaped with their human capital largely intact. Creditors and suppliers continue to pick over the bones of the corporation (which still exists, under Chapter 11 bankruptcy protection, and continues to liquidate assets in order to pay off its debts).3 But as far as shareholders are concerned, their investments have simply evaporated, beyond any realistic hope of retrieval. (In fact, one...
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...Chapter 1- About 2.5 billion people live on less than two dollars a day. Two dollars a day does not mean literally mean “two dollars a day.” It is an average over time. Those who live on so little seek to manage their money. They save as much as they can and borrow when they need to. “Money management, for the poor [is] a fundamental and well-understood part of everyday life” (3). -The authors conducted studies that they called financial diaries to discover how the poor managed their money. -Negative net worth was rare in the study; in fact only 3 percent were in that position. -The poor not only save, borrow, and repay in money but also in kind. Wives swap rice or other food items. Another example would be repaying a debt with labor instead of money. -Most changes over the year in the study was financial rather than physical. “financial management is the stepping-stone to understanding how households build net worth” (11). -Every household in the study had savings and debt of some sort. The hardest things for the households are that their income is irregular. Some days they have work and get paid and some days they don’t. -Long-term money management has two concerns in poor households: One: how to cope with risk Two: the need to build or borrow large sums of money. -The three needs that drive the activity in the house hold are 1. Managing basics ex. Food 2. Coping with risk 3. Raising Lump sums Borrowing = starting or expanding a business or financing...
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...when:1998 to 2012. how many:20 countries in Asia Focus / Research Questions 1.what is the different effects for nation governance between the developed countries and developing countries ?（level different in governance and legal structure ） 2.how can Nation governance reducing the moral hazard ？ 3.how can the relationship impact of bank size and risk ？ Focus / Research Questions 1.what is the different effects for nation governance between the developed countries and developing countries ?（level different in governance and legal structure ） 2.how can Nation governance reducing the moral...
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...(Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: (1.2) Goal of firm Answer: b Diff: E [i]. The proper goal of the financial manager should be to maximize the firm's expected profit, since this will add the most wealth to each of the individual shareholders (owners) of the firm. a. True b. False (1.2) Goal of firm Answer: b Diff: E [ii]. If a firm has a single owner, we may say that the proper goal of a financial manager would be to maximize the firm's earnings per share. a. True b. False (1.2) Managerial incentives Answer: b Diff: E [iii]. Executive stock options are shares of stock awarded to managers on the basis of corporate performance. a. True b. False (1.2) Social welfare and finance Answer: b Diff: E [iv]. The goal of maximizing stock price is a detriment to society in that few of the actions that result in maximization of stock price also benefit society. a. True b. False (1.2) Social welfare and finance Answer: a Diff: E [v]. If a firm's managers want to maximize stock price it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate. a. True b. False (1.3) Agency Answer: b Diff: E [vi]. An agency relationship exists when one or more persons hire another person...
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...Medical exam required by insurance company, why? - Info asymmetry exists btw investor (customer investing in policy) and company. If no exam was done, the insurance company would offer the policy at an average price and healthy “good” customers would not buy the policy. Only lemons would purchase the policy and this result is adverse selection. Adverse selection leads to market failure because all the good customers are pushed out of the market and eventually the insurance companies would stop offering policies. Therefore no transactions are occurring and market failure results. - A exam helps fix the issue because it is done by a third party and provides unbiased information. The exam acts as a signal to the insurance company. The signal works because it is costly. The individual must pay for it and there is a negative correlation btw the cost of the exam and the health of the individual. Job market and car market (market failure): - Info asymm btw hirer and applicant. When info asymm exists, the hirer will offer an average salary because they don’t know if they are getting a lemon worker or a good worker. Only lemon workers will be willing to accept the offer and the good workers will refuse the offer. The good workers then “exit the market” leaving only a market for lemons. This results in adverse selection (the average price offered by the hirer pushes the good workers out and leaves only lemons.) When the hirer realizes he is only able to hire lemons, he will stop...
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...Introduction The averaging out of independent risks in a large portfolio is called diversification. The principle of diversification is used routinely in the insurance industry. In this paper I will talk about two different types of home insurance and talk about the different risks associated with each. Discussion A portfolio is used to describe a collection of securities. In finance, the risk of an individual security differs from the risk of a portfolio composed of similar securities. In order to help us understand why, Chapter 10 in the book gave a great example on insurance companies. Let’s consider two types of home insurance: theft insurance and earthquake insurance. Lets also suppose that the risk of these two hazards is similar for a given home in a given area. Based on this information we would know that the risks of the individual policies are similar, however, the risks of the portfolios might be drastically different. For example, if the chance of theft in a given home is 1%, the insurance company would expect about 1% of the 100,000 homes in the area to experience a robbery. Thus the number of claims would be around 1,000 per year. If the insurance company holds reserves sufficient to cover roughly 1,000 claims, it will have enough to meet its obligations on its theft insurance policies. The portfolio for the earthquake insurance is a little riskier. For example, if in a given area, the risk of an earthquake is 1%, the risk of having an earthquake so low...
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... Chapter 7 Why Do Financial Institutions Exist? Chapter Preview A vibrant economy requires a financial system that moves funds from savers to borrowers. But how does it ensure that your hard-earned dollars are used by those with the best productive investment opportunities? Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-3 Chapter Preview In this chapter, we take a closer look at why financial institutions exist and how they promote economic efficiency. Topics include: •Basic Facts About Financial Structure Throughout the World •Transaction Costs •Asymmetric Information: Adverse Selection and Moral Hazard Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-4 Chapter Preview (cont.) • The Lemons Problem: How Adverse Selection Influences Financial Structure • How Moral Hazard Affects the Choice Between Debt and Equity Contracts • How Moral Hazard Influences Financial Structure in Debt Markets • Conflicts of Interest Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-5 Basic Facts About Financial Structure Throughout the World • The financial system is a complex structure including many different financial institutions: banks, insurance companies, mutual funds, stock and bonds markets, etc. Copyright ©2015 Pearson Education, Inc. All rights reserved. 7-6 Basic Facts About Financial Structure Throughout the World • The chart on the next slide shows how nonfinancial business attain external funding in the U.S., Germany, Japan, and Canada...
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...Can Economics Solve the Problem of Global Warming? The potential negative effects of global warming are very serious. Even by just concentrating on economic factors, global warming has the potential to cause unprecedented costs to the global economy. Yet, despite the forecasted dangers and economic costs, there seems to be a disinterest in implementing necessary policies to avert the consequences of global warming. There are many reasons why it is difficult to deal with the issue of global warming such as the problem of “free rider”, externalities, intergenerational externalities etc. Global warming is by definition a phenomena which affects every country. Pollution may be caused by a small percentage of developed countries and yet those who suffer the most may be pacific islands who contribute nothing to global warming. When it comes to reducing carbon emissions there is a classic free rider problem. Countries can benefit from lower emissions by relying on other countries to make sacrifices and reduce their pollution levels. The problem is that countries can then become reluctant to start reducing emissions until other countries start reducing emissions as well. Why should a tiny country like Sweden make sacrifices in reducing carbon emissions, if the US continues to create a large part of the world's CO2 emissions? Global warming is to a large extent caused by externalities. When you drive an SUV, the contribution to global warming is an external cost which you don't...
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...Mr.Vern Furtney,CFP Agent/Owner The Co-operators Vern Furtney Agency 45 Welland Avenue St. Catherines On, L2R2M4 Dear Sir, This is in response to the questions you asked me prior to short listing. Why an Insurance Company? I applied to your insurance company generally because I possess Administrative experience in an organizational setting. I worked for a real estate company directly with the owner and broker of the company. I was involved in a lot of prospecting and I made a lot of cold calls that generated high end listings for the company. My understanding of insurance is that insurance is a form of risk managemement primarily used to hedge against risk of a contingent, uncertain loss. My interest to work for an insurance company has to do with my interest in customer satisfaction and keeping up with the credibility the cooperators has built with their existing customers for as long as they have existed with the company. My honesty and efficiency will help me build up my skills and in the process of my studies hopefully pursue other positions within my field in the company. The Co-operators have been in existence since 1945 and are one of the fastest growing insurance providers in business. I see the potential of learning and acquiring quality experience and also career growth within this company and my eagerness to learn and input my strengths into the success of the company is my aim and plan for starting at the basic step as an administrative assistant...
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