Finanzialisierung,Demokratie und Gesellschaft – zehn Jahre nach Beginn der Finanzkrise

This introduction to the special issue—ten years after the collapse of the investment bank Lehman Brothers and the beginning of a worldwide financial, economic, and debt crisis—reflects on the extent to which the economic crisis affected a turning point in society overall. The current state of research into the relationship between financialization, democracy, and social conditions strongly suggests that while the processes of financialization that favored the emergence of a crisis were influenced by the financial crisis, they were not completely reversed. In fact, the financial market regulation, which was changed in response to the crisis, did not exert any modifying pressure in terms of a restructuring of the financial system. An epochal shift in financial market regulation therefore cannot be identified from the steps taken in the reform process. Elseways there is clear evidence that the financial crisis has had a lasting impact on the European integration process, confidence in democracy, and political culture. The financial crisis is therefore likely to be perceived as a historical watershed, mainly due to its impact on societal areas beyond the financial system itself.     

Children as risky investment

This article provides a theoretical model to explain endogenous fertility and use the panel data of 169 countries to analyze the extent to which fertility behaviors are influenced by financial development and social security tax. A negative effect of financial development on fertility supports the evidence that people in countries with lower levels of financial development tend to have more children. Those people in countries, where there is limited access to other risky investments, tend to have more children. In addition, those who are poor are more likely to have more children, which will lower their overall welfare, and further reduce their investment in capital markets. Social security tax also has a negative impact on fertility behaviors.     

„Da gibt es Sachen,die macht man einfach nicht“ – Deutungsmuster von Banken im Kontext von Nachhaltigkeit und Krise

Banks in Germany are experiencing a profound legitimacy crisis. In the wake of financial and economic crises, failures, and bailouts, as well as new oversight and stricter regulations, banks have lost the reputation and trust they once had. The present article uses an analysis of interpretative patterns to examine how banks seek to legitimize themselves in times of crisis, with reference to sustainability as a guiding principle of society. Following the concept of social legitimacy by new institutionalism in sociology, and based on discursive interviews with 18 representatives of German banks, we reconstructed three interpretative patterns: a) the differentiation from “bad” banks, which abandons profit-maximizing business models and promotes the moral superiority of sustainable banking, b) responsibility for society, which promotes the role and responsibility of banks as socially relevant actors that spur social change, and c) “right” return, whereby banks seek an appropriate relationship between their value orientation and a return on investments. Although a return on investment is economically necessary and confers legitimacy, it may not be understood as an end in itself. Banks discredited during the crisis can refocus on a banking model which promises social legitimacy by referring to sustainability.     

INTERNATIONAL DEAL EXPERIENCE AND CROSS‐BORDER ACQUISITIONS

I show that corporate directors' human capital facilitates international investments. Directors' experience with cross‐border transactions positively influences firms' decisions to conduct their first cross‐border acquisitions. Cross‐border acquirers are more likely to buy firms headquartered in countries with which the directors have prior deal experience. This effect is strongest for target firms headquartered in culturally and institutionally dissimilar countries. Announced cross‐border acquisitions are received more favorably by financial markets and are more likely to be completed successfully when the announcing firm has a director with cross‐border acquisition experience. These effects are not driven by investment bank involvement in the deal process or by other forms of directors' human capital, and they are robust to endogeneity of director hires. (JEL F23, F21, J24, L23)     

The leap from ROI to SROI: Farther than expected?

Social return on investment (SROI) is a popular method for evaluating the impact that organizations have on society and the environment. It has its roots in finance, where return on investment (ROI) is used to evaluate investments. Over the past ten years, SROI has made the leap from a tool for building private wealth to one that advances the public good. Has it landed us in a better place? To answer the question, I describe the general approach to financial analysis, how it is applied to financial decisions, and how it has been adapted to evaluate impact. I then consider the strengths and weaknesses of SROI, and suggest how, by pushing beyond the constraints of financial analysis, it can give stakeholders voice and provide evidence of success from diverse perspectives. Along the way, I propose a conceptual model for value, a foundational concept in SROI that has been criticized by some as underdeveloped, and I include a technical appendix that identifies potential sources of statistical bias in SROI estimates. I conclude by acknowledging our growing need to incorporate efficiency as one of multiple success criteria and the role that SROI—properly implemented—can play.     

Commitment among ethical investors: An experimental approach

Recent studies have highlighted two apparent `contradictions' in the behaviour of ethical investors: it is not unusual for people to waive the interest on their ethical investments but say they would invest more if the interest rate was raised and it is common for people to invest both in ethical and standard funds. Lewis and Mackenzie have proposed that these contradictions can be resolved using the ideas of framing and mental accounts. The current paper uses an experimental approach to explore these issues. Participants took part in a role-play of a consultation with a `virtual' financial advisor. This was setup on the World Wide Web. Participants used the Netscape browser to provide financial and other information to the financial advisor. They were then presented with a variety of investment choices. The study revealed that ethical investors were generally committed to ethical investment, and kept such investments even if they performed badly or were ethically ineffective.     

Social Impact Bonds und der Disput um die Wohlfahrt

Social Impact Bonds are novel financial mechanisms for social welfare programs. What’s new about them is that they include professional financial investors into state provision of welfare. Its promise is to help states save public money in times of austerity by becoming more effective and selling their risk of failed social investments to the financial market. Against it, its critics see a further mode of capitalization of the public sphere (Landnahme). This article investigates Social Impact Bond s between the poles of de- and repolitization. On the one hand, the Social Impact Bond prevents public and democratic debates over welfare by means of privatization and methodical rationalization, on the other hand it addresses the welfare state and public expenditures to be important again. This is new, after decades of diminishing welfare states. Which sort of dispute the Social Impact Bond will bring about depends on the institutional context of its implementation.     

The Relationship Between Life Satisfaction Among Wives and Financial Preparedness of Households in Japan

The wealth gap between the rich and poor is widening and contributing to Japan’s shrinking middle class. This study examined concerns about the future and life satisfaction and their association with household financial preparedness (e.g., savings, investments, life insurance) among married women in Japan. Double-hurdle models assessed the probability of having savings and the amount of these savings, using the sample from the 2006 Japanese Panel Survey of Consumers (n = 1,206). Supporting earlier works from several other countries, concerns about the future were positively associated with the probability of having supplemental life insurance. Moreover, life satisfaction levels were positively associated with the probabilities of having savings, investments, and supplemental life insurance and with the amount of the investments. The findings suggest economic inequalities among women could widen in the future, as those who have and are expecting to have more financial resources are more likely to be prepared for future financial needs than those who do not.     

Quantifying the Value of Collecting: Implications for Financial Advisers

This paper documents the extent to which collectors—specifically, those owning collectible classic US postage stamps—experience an opportunity cost associated with expenditures on their collection. Results show, based on stamp price, S&P 500, bond, and T-bill rate data over the period 1969 through 2013, that collectible stamps tend to underperform stocks and bonds on a risk-adjusted basis. Using estimates based on the Modigliani measure (M²), it was determined that collectors incur an opportunity cost when selecting collectible stamps over more traditional investments. However, it is known that collecting as a hobby provides sociological and psychological benefits. This paper adds to the literature by illustrating how collecting also provides psychic return benefits that can be valued similarly to investment returns. In this study, the foregone return rate of stamp collecting for those who allocate a significant percent of available resources to their collection equates to between 3 and 13 % on an annual basis.     

Measuring Social Return on Investment

Strategic decision making and evaluation in philanthropic giving and social investment requires good‐quality information about the social impacts of that investment. One way to meet this need is by calculating a social return on investment (SROI) measure, akin to the return on investment (ROI) approach used in business analysis. Despite much buzz in the field, SROI measurements are rarely used, in part because of the complexity of the calculations but also because of a number of thorny and often expensive organizational challenges associated with implementing an SROI process. This article explores these implementation challenges by comparing four social venture organizations in the health care field—two in the Netherlands and two in the United States—that have utilized some sort of SROI measurement. We summarize the SROI process and identify the specific organizational challenges in each case. Lessons learned from this analysis include the value of process versus product and the importance of fitting the type of measurement to the organizational context. We conclude with a summary of best practices for organizations and social investors who might try to make effective use of SROI measures.     

Warum es kaum Pensionsfonds in Deutschland gibt. Kapitalmarktrisiken,Finanzindustrie und die Politik der Mindestverzinsung

Studies of the rise of private defined-contribution pension plans have traditionally focused on social policy concerns about the allocation of risks and costs for beneficiaries and employers. There is however another dimension of pension privatization, which situates it in the context of financial markets and—more broadly—the economic system. Here, regulations forcing private pension providers to guarantee a minimum rate of return on individuals’ pension assets make a crucial difference for financial markets because they incentivize fund managers to invest a greater chunk of plan portfolios in fixed-income securities and therefore away from equities. While different segments of the financial industry have divergent preferences over minimum return guarantees, politicians are caught in a dilemma: Should they prioritize predictable benefit levels or the development of equity markets? Using the case of the introduction of the German Riester Rente, we argue that, as politicians linked the introduction of private defined-contribution plans with cuts in statutory pensions, insurance firms in coalition with trade unions insisted on minimum guarantees, thereby restricting the expansion of equity markets in Germany.     

Effect of perceived cost on judgments regarding the efficacy of investment

Three experiments examined the effect of costs associated with investments on the judgments of the causal effectiveness of those investments, and on the type of information utilised when making those judgements. Using operant conditioning technology, in an experimental analogue of making economic investments, it was found that greater costs associated with an investment reduced the judgement about the effectiveness of the response (Experiment 1). Greater investment costs tended to bias the subject toward using information integrated over a longer period of time; whereas low costs tended to produce judgements made on the basis of the conditions prevailing immediately prior to the return being acquired (Experiments 1–3). The effect of cost was modulated by the subjects' own financial background. The same absolute cost being treated as “greater” by those from less wealthy backgrounds compared to those from more affluent backgrounds (Experiments 2 and 3). These results suggest that as well as the nature of the schedule relating investment to return, the perceived cost of the investment determines the manner in which it is judged with respect to its efficacy.     

Knitted warmth: the simple analytics of social cohesion

Self-interested agents are randomly matched to play a variant of the prisoners dilemma in which social capital increases the return to mutual cooperation. The stock of society-wide social-capital investments is social cohesion; the rate of return to social-capital investment increases with social cohesion. I derive sufficient conditions for equilibrium cooperation when agents know only the level of social cohesion. In communities, there exists better information and some social standard of behavior that supports equilibrium cooperation. I distinguish between characteristics of individuals and those of populations, and between mechanisms that favor cooperation in low-information “mass society” and in information-rich settings.     

UNDERSTANDING THE EFFECTS OF MARRIAGE AND DIVORCE ON FINANCIAL INVESTMENTS: THE ROLE OF BACKGROUND RISK SHARING

We investigate how changes in marital status affect financial investments and how these effects vary with background risk. We use detailed register‐based panel data and difference‐in‐differences estimators to benchmark common unobserved influences on financial investments. Women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite behavior. Households whose joint labor income risk is reduced more by marriage have a higher increase in their exposure to risky assets in marriage. Thus income risk sharing in the household is important for financial risk taking and investment responses to marital transitions. (JEL G11, J12, J16, D14)     

Terror and trade of individual investors

A great number of psychological studies document the influence of emotions on individuals’ decision-making processes. This paper contributes to this literature by analyzing the possible impact of terrorism on financial trade by individual investors. Using account data for over 3000 households obtained from a large Israeli bank, we look into reactions of common stock investments to terrorist incidents in the years 1998–2002. The empirical analysis indicates that terror has a significant adverse effect on actual trade, possibly limiting the scope of risk-sharing available through traded securities. Several psychological explanations for investors’ reluctance to trade are provided. Amongst them are the increase in public fear (resulting in pessimistic risk estimates and risk averse choices); the sense of ambiguity caused by terror; repercussions of anxiety and depression disorders; a desire to avoid future regret. Our results add to the recent literature documenting the harmful effects terrorist acts have on various facets of the economy.     

Social Impact Investing in Germany: Current Impediments from Investors’ and Social Entrepreneurs’ Perspectives

The paper provides empirical evidence on impediments of the emerging social impact investment field in Germany. The study is based on 19 in-depth interviews with social impact investing funds, investment advisors, and social entrepreneurs as investees. It takes an explorative approach because of the nascent stage of research on the subject. By systematically relating the perspectives of the actors involved, the study gives a broad empirical picture on the major challenges for social impact investing in Germany. Results reveal nine critical problem areas we have arranged along three dimensions: financial returns, social returns, and relationships and infrastructure. They comprise investors’ and social entrepreneurs’ practices, institutional settings which are still heavily influenced by peculiarities of the German welfare systems, as well as undeveloped framework conditions in the social investment market. By interpreting the results through a lens of conflicting institutional logics, we further contribute to this research stream by showcasing social impact investing as a core area of friction between the logics of the market and civil society.     

Gambling versus investment: Lay theory and loss aversion

Gambling and investment are two domains that involve financial decisions. The present research investigates people’s lay theories about gambling and investment, and how these lay theories affect loss aversion in these domains. Lay people’s understanding of gambling and investment is often largely based on information that is immediately available to them. Moreover, information about losing money by gambling and earning money through investments are more predominant than information about earning money by gambling and losing money through investments. Hence, we hypothesized and found that people tend to hold lay theories that gambling is more likely to cause losses and less likely to bring gains compared to investment (Study 1); and we observed a stronger loss aversion when the same monetary decision was framed as gambling rather than as an investment (Studies 2 to 6). This domain-framing effect held in both hypothetical and incentivized settings.     

Investor preferences for positive social externalities and state-owned enterprises’ facilitated access to capital

State-ownership of commercial companies exists around the world, and it is important to understand its effect on financing and investment decisions. Empirically, firms that are partially state-owned (SOE) usually profit from easier access to capital. We propose a novel explanation for this: investors’ social preferences can affect capital allocation if SOEs are perceived as socially beneficial. In support of this we found that people attribute social benefits more to SOEs than to private firms, and their propensity to invest depends on this attitude. Further, in an incentivized modified stochastic public goods game, participants invested in risky options with positive externalities even when the aggregate of private return and externality was lower than the return of an investment option with only private returns. For the case of the EU, we discuss alternative explanations such as state guarantees and political lending in the light of regulations of state aid. We conclude that even if these regulations prohibit direct or indirect state aid for SOEs, state-ownership can affect capital allocation through investors’ social preferences.     

OPTIMAL COPYRIGHT LENGTH AND EX POST INVESTMENT: A MICKEY MOUSE APPROACH

This paper considers a theoretical model of copyright protection in which the value of an intellectual work changes over time because of depreciation and value‐enhancing ex post investments. The first main finding is that, in the case of a single project, granting infinitely lived copyright protection maximizes social welfare when the return on ex post investments is high relative to the return on the initial investment. We also provide simulation results of our model for the case of multiple heterogeneous projects that show how social welfare varies with the length of copyright protection and the returns on initial and ex post investments. We then consider what our framework says concerning the social‐welfare effects of the 1998 Copyright Term Extension Act. Here we show that, depending on the importance of ex post investments, the act may have either increased or decreased social welfare. Our final analysis considers the social‐welfare implications of replacing fixed‐length copyright protection with Landes and Posner's (University of Chicago Law Review, 70(2), 2003, 471–518) idea of indefinitely renewable copyright protection. We find that implementing indefinitely renewable copyright protection frequently increases social welfare provided the returns on ex post investments are sufficiently large. We also provide a brief history of Disney's Mickey Mouse and argue that the history of that character matches quite well with the predictions of our theoretical approach. (JEL O34, K00, L82)     

Dispositional optimism and stock investments

This paper analyzes the relationship between dispositional optimism and stock investments, controlling for cognitive skills and personality traits such as trust, social interactions and risk aversion. We use data from the Survey of Health, Ageing and Retirement in Europe (SHARE) on investors aged 50+ in twelve European countries. Our results show that dispositional optimism and personality matter for financial decisions. Optimism is positively and significantly related to both the ownership of stocks and the share of gross financial wealth invested in these assets and its role is especially relevant for risk tolerant investors and investors with little trust in others.