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date: 04 July 2020

(p. 563) Subject Index

(p. 563) Subject Index

1964 Securities Acts Amendment, executive pay disclosure in, 419–420
accountability, 8
in human resource policy, 213
accounting convergence, global, 465, 472
Accounting for Derivative Instruments and Hedging Activities, 501–502
accounting practices, capital ratios and, 272–276, 273f–275f
country differences in, 272–274, 273f, 274f
on derivatives, 274–276, 274f, 275f
in U.S., 273f, 274, 274f
accounting standards
convergence (harmonization) of, 465, 472
for countries headquarters to biggest banks, 284t
accounting transparency, 456–474, 477
benefits of, 477–478
definition of, 457–458, 477
factors in, 463–465, 463t
country-specific, 463t, 464–465
firm-specific, 463–464, 463t
International Financial Reporting Standards for, 478
international standards in, 465–474
development of, 466
financial reporting standards in, 466–472, 467f, 468t–469t, 471t (see also International Financial Reporting Standards (IFRS))
future of, 473–474
global accounting convergence in, 465, 472
IFRS and US GAAP differences in, 472–473
importance of, 456
interest and demand for, 456
measurement of, 458–463
at country level, 458
country-level proxies of, 459–460
disclosure level in, 460–461
at firm level, 458
firm-level proxies of, 460
market reactions in, 461–463, 462t
methodological issues in study of, 478
actors. See also specific types
incentives for, 12
innovation as interaction of institutions and, 220
in innovation policy transparency, 229–231
administrative state
vs. redistribution, 49–50
social welfare and, 49–50
advanced approach, to risk weights, 264
adverse selection, 7
in corruption and transparency, 331
for shareholders, 413
agency costs, 326
agency factors, in governance transparency, 373
agency relationships, 326
in corruption, 326–330, 327t–328t
agency theory, on equity pay and delta and vega, 415
à la carte integration model, 204
allowance markets, carbon, 181–182
amendments, constitutional, 34–35
rules of 25 countries/federations on, 35, 36t–38t
on stability on Constitution, 44
state ratification of, as Type II errors, 51–52
transparency and, 41
to U.S. Constitution, Article V on, 55–56
anti-self-dealing index, 397–399
vs. Governance Transparency Index, 400–403, 401t–402t
antitrust policy. See also competition policy
as ex post task, 153
optimal, 151
(p. 564) antitrust procedures, 157–162. See also competition policy
disclosure of results in, 160
international competition policy and, 160–162
investigation processes in, 159–160
laws, regulations, and guidelines in, 158–159
life cycle of, 158
arbitrageurs, 297–298
Argentina sovereign crises, 120, 120f
asymmetries, information. See information asymmetries; specific topics
average residuals of banks, European
exercise announcement on, 531, 532t
methodology disclosure in, 531, 532t
results disclosure in, 531, 533t
bailout ratios, of world's biggest banks, 282t–283t
bank failures
capital-to-asset ratios in prediction of, 270–272
causes of, 261
early detection of, 521
prediction of, models for, 259
banking system, shadow, 122
banks
financial crisis and solvency of, 116
market to book ratio of, 521, 522f
organizational reform of, 279–281
banks, world's biggest
accounting standards for countries headquarters to, 284t
bailout and capital ratios of, 282t–283t
capital (to-asset) ratios of, pre-bailout
in bank failure prediction, 270–272
capital-to-asset ratios of, post-crisis, 276–279, 277t, 278t
leverage ratio in, 269, 270f
risk-based, 268–269, 269f, 282t–283t
Tier 1, 268, 268f
Basel Capital Accords, 263–267
Basel II, 263–265
bank models for risk evaluation in, 259
quantitative impact studies of, 259–260
Basel III, 265–267
capital adequacy requirements in, 263
deficiencies of, 266–267
complexity of, 258
drawbacks of, 281
gaming and manipulation of, by banks, 264–265
market discipline in, 265
objective of, 263
risk weights in, 264
behavioral theory, 341–342
beneficial information effect, in forward policy guidance, 86–87
Bertrand-type competition, 150
Bloomberg New Energy Finance (BNEF), 191–192
boards of directors, in governance, 360
boards of directors, transparency of, 374–379
in Europe, 380–383
demographic characteristics in, 281t, 380–382
educational characteristics in, 381t, 382
experience characteristics in, 375f, 381t, 382–383
market-pull perspective on, 376t, 377–378
onion model of governance transparency in, 374–377, 375f
strategic hoarding perspective on, 376t, 378, 379f
Bologna Process, 249
bonds, government
rating stability for, 123–124
ratings on, 123
bottom-up approach, to sovereign default risk assessment, 122, 127–131, 128t, 129t
bribes. See corruption
business performance, transparency and, 341. See also multinational corporations and political actors
capability building, 373, 374
capital adequacy requirements (CAR), 263
deficiencies in, 266–267
capital allocation efficiency, 18
Capital Asset Pricing Model (CAPM) model, 526–527
(p. 565) capital, cost of, corporate transparency and, 17
capital flows, international, 18
capital, public stock of, 42–43
capital structure, corporate transparency on, 394
capital-to-asset ratios
accounting practices and impact on, 272–276, 273f–275f
of largest banks, 282t–283t
of largest banks, post-crisis, 276–279, 277t, 278t
of largest banks, pre-bailout
in bank failure prediction, 270–272
leverage ratio, 269, 270f
risk-based, 268–269, 269f, 282t–283t
tangible equity-to-asset ratio, 269–270, 271f
Tier 1, 268, 268f
measurement of
bank insolvency and, 268–269, 268f, 269f
methods for, 267
regulatory requirements and, 267–272, 268f–271f
carbon-based derivatives, 189
Carbon Disclosure Project, 184
carbon markets, 181–183
allowance markets in, 181–182
annual transactions in, 180
CDM and JI project markets in, 182–183
corporate exposures and disclosures in, 183–187, 185t, 193
deceptive practices in, 188
further research on, 193
government regulation of, 180, 187–189
growth in trading in, 181
issues in, 179
literature on, 192–193
voluntary markets in, 183
carousel fraud, 182
cartels
detection of, 150–151
leniency programs for, 151
market transparency and collusion by, 147–151, 148t
cash pay, executive, 415–416
causality issues, 14–15
Certified Emission Reductions (CERs), 182
dwindling demand for, 183
citizens-government official relationship, corruption in
as agency problem, 327t–328t, 329
transparency of, 331, 333––334
Clean Development Mechanism (CDM), 179
carbon market transactions under, 180
CDM markets in, 182–183
clean surplus, 480
CLEAR factors, 459
climate change policies, markets, and corporate practice transparency, 179–194
carbon markets in, 181–183 (see also carbon markets)
corporate exposures and disclosures in, 183–187, 185t, 193
further research on, 193–194
government policymaking processes and outcomes in, 187–192
further research on, 193
monitoring, reporting, and verifying GHG emissions in, 189–191
monitoring, reporting, and verifying int'l financial flows in, 191–192
regulation of carbon markets in, 180, 187–189
literature to date on, 192–193
transparency in, defining, 180
The Climate Funds Update, 191
Coalition for Environmentally Responsible Economics (CERES), 184
code-word communication, in forward policy guidance, 83
collaboration, innovation from, 225
collective dominance, 155
collusion
market transparency and, 147–151, 148t
price transparency and, 292
Commerce Clause, in ObamaCare case, 60
commitment, to forward policy guidance by central bank, 88–89
Committee of European Banking Supervisors (CEBS)
methodology and data of, 526–531
business models in, 530–531
(p. 566) Committee of European Banking Supervisors (CEBS) (cont.)
cumulative abnormal returns in, 530
financial market briefing on, 530
increased coverage and disclosure level of, 528–530
increased stringency of, 528
stress tests of, 522
compensation consultants, on executive pay and transparency, 424–426
Compensation, Discussion, and Analysis (CD&A) section, 418
competences. See also education; human resource policy transparency
in human resource policy, 206–208, 215
competition
Bertrand-type, 150
in innovation policy transparency, 233
competition law, 144
competition model, perfect, 145–147, 147t
competition policy, 144–162
definition of, 144
elements in, 144, 145f
as game of incomplete information, 145
importance of, 144
information asymmetries in, 144–145, 162
market transparency and collusion in, 147–151, 148t
market transparency and enforcement in, 157–162
disclosure of results in, 160
international competition policy in, 160–162
investigation processes in, 159–160
laws, regulations, and guidelines in, 158–159
market transparency and merger review in, 153–155
market transparency and monopolization in, 152–153
market transparency and network industries regulation in, 155–157
perfect competition model for, 145–147, 147t
transparency as core issue in, 144–145, 162
transparency as detrimental to some agents in, 162
complete openness, in monetary policy transparency, 69–70
comprehensive income
other, 479, 480
disclosure in, 486–489
IFRS 13 on, 481
statement of, 479–480
COMPUSTAT HEDGEGL, 505–506, 507t–508t, 510t–516t
computable general equilibrium (CGE) model, transparency in
AsiaPacific Economic Cooperation (APEC), 174, 175
regional trade agreements and, 174, 175–176
constitution. See also specific nations
amendments on stability of, 44
guarantees in, 41
United Kingdom, protections in, 62–63
United States
amendments to, Article V on, 55–56
Supreme Court changes to, 56–57
constitutional law, 41
constitutional revolution of 1937, 60
constitutional transparency, 33–65
administrative state and social welfare in, 49–50
amendments in, 41
rules of 25 countries/federations on, 35, 36t–38t
on stability, 44
changes in constitutions and, 33–34
from amendments vs. high court interpretations, 34–35
benefits and harms from, 34
classification of, four-way, 34
U.S. Supreme Court decisions on, 35–39
diversification and hedging in, 50–51
documentation in, 40
EU Constitution in, mixed protections to business decision maker in, 60–62
fundamentals of, 60–61
Maastricht and Euro crises lesson on, 61–62
explicability in, 40
institutions and type I–type II errors in, 51–57
EU Constitution in, changing, 56
principles of, 51–56, 55t
U.S. Constitution in, Supreme Court changes in, 56–57
(p. 567) literature on, 34
meanings of, 40
as predictability, 39–42
predictability of guarantees in, 33, 40–41
public stock of capital in, 42–43
redistribution vs. administrative state in, 49–50
rules of the game in, 43
surprise major constitutional change on, 45–49
dynamic adjustment in, 48–49
Hicksian effects on excess demands in, 45–46, 46f
Slutsky equation in, modified, 46–48
Sonnenschein on, 45
static analysis with price adjustment in, 48
Walras' Law in, 45
wealth effects in, 45
UK constitutional protections in, 62–63
U.S. Federal power of economy in, evolution of, 58–60
constitutional revolution of 1937 in, 60
rational basis review in, 59–60
visibility in, 40
whips in, 57–58
wisdom of crowds in, 57–58
constrained Pareto efficiency, 10, 20
consultants, compensation, on executive pay, 424–426
consumers
in market integration
buying in cheaper location by, 294–297
dissatisfaction of, on price differences, 298–299
information on bargaining for better prices by, 297
search costs of
price dispersion and, 290–291
price transparency and, 287
on unfair behavior, 299
content, policy, 8
contract
complexity of, and quality of law, 391
enforcement of, 8
freedom of, 60
convergence, global accounting, 465
obstacles to, 472
conveyance issues, in international trade policy transparency, 176–177
coordination effect, 18
corporate boards. See boards of directors
corporate exposures and disclosures, on climate change, 183–187, 185t, 193
corporate governance
concept of, 359–360
corporate board in, 360(see also boards of directors, in governance)
disclosure vs. transparency in, 363–364
executive compensation in, optimal design of, 413
managerial talent in, best use of, 360
shareholders' interest view of, 360
corporate governance and optimal transparency, 359–369
conclusion on, 368–369
definition of, 359–360
key concepts in, 359–361
literature on, 361–366
bargaining between top management and owners in, 363
corporate governance and transparency as complements vs. substitutes in, 362–363
cost of more transparency in, 365–366
disclosure vs. transparency in, 363–364
endogenous and exogenous decisions in, 362
firm's business on, 364
information disclosure for welfare of investors in, 361
shareholder's view of, 364–366
voluntary information disclosure in, 362
model for, 366–368
social value of, 360
corporate hedging. See hedging, corporate
corporate risk management, 495–518
corporate hedging activity in, lack of transparency on, 495
disclosure and transparency requirements for, 500–502
effectiveness of, 498
measuring activity in, 503–505
extended market model in, 503
financial-statement footnotes in, 504
(p. 568) corporate risk management (cont.)financial statements in, 504–505
industry surveys and proprietary data in, 503
mismeasurement of, 495
performance and, 502
research on, new avenues for, 505–517
disclosing gains and losses on ineffective hedges in, informativeness of, 517
hedging gains and losses and discretionary accruals in, 506, 509, 510t–516t
hedging gains and losses as corporate risk management transparency in, 505–506, 507t–508t, 510t–516t
supply and demand of financial and risk-management transparency in, 496–500
in corporations, 497–500
financial transparency, disclosure, and regulatory process in, 496–497
corporate transparency, 457
accounting
factors in, 463–464, 463t
measurement of, 458
measurement proxies for, 460
on capital structure and equity risks, 394
human capital attrition costs of, 373–374
corruption, 13, 323–335
as agency problem, 326–330, 327t–328t
government officials and citizens in, 327t–328t, 329
government officials and firm managers in, 325–329, 327t–328t
top managers and firm managers in, 327t–328t, 329–330
classification of, 324–325
costs of, 325
definition of, 324
economic growth and, 325, 335
effective levels and monitoring of, 323
effects of, 323
firm managers in, 325
government officials in, 325
importance of, 324
incentives for, 323
metaphors for, 330
private, 324
public, 324
transparency in
on adverse selection, 331
on citizen–government official relationship, 331, 333––334
effectiveness of, complementary mechanisms for, 332–334, 335
on firm manager-government official relationship, 331, 333
incentives for, 334–335
increase in corruption from, 331
as solution, 330–332
on top management–firm manager relationship, 332, 334
Transparency International on, 330–331
views of, 325
Corruption Perceptions Index (CPI), 459
cost of capital, corporate transparency and, 17
cost of equity, governance transparency and, 393–394, 407, 408f
cost of services, true, in microfinance, 438t, 443–444
costs
agency, 326
transaction
actors in, 390
definition of, 390
in governance transparency, 388–390
institutional quality and, 390–391
transparency of institutions in, 391
transformation, 388
costs/benefits, 12, 26
countries, accounting transparency of
factors in, 463t, 464–465
measurement of, 458
proxies for, 459–460
country transparency, empirical studies of, 19
credit default swaps (CDS)
implied probabilities of default from, 131–132, 131f
implied probabilities of default, from Z-metrics vs., 137–138
market implied probabilities of default in, vs. private sector fundamental probabilities of default, 133–136, 134f–136f
market prices of, and volatility and risk, 117
creditors, protection of, 262–263
credit rating agencies
competition between, fostering, 124
(p. 569) transparency of, 124–125
sovereign ratings of, 122–125
Credit Rating Agency Reform Act, 124
cross-border shopping, 294–297
in Europe, 295
on internet, 296–297
in U.S.-Canada, 295
crowds, wisdom of, 57–58, 63–64
culture of equity
characteristics of, 392
governance transparency and, 392–393
national differences in, 392
cumulative average abnormal returns (CAAR), in European banking stress testing for 2006–2013, 527, 527f
between business models, 536, 536t
methodology for, 530
disclosure of, 531, 535f
results for
exercise announcement in, 531, 533f
exercise results in, 531, 535f
customers. See also consumers
impact of, on microfinance, 445–448 (see also under microfinance industry, transparency and disclosure in)
in microfinance, 437, 438–439, 438t
deficit bias, in fiscal policy, 101, 102–103
deficits
government disguising of, 102–103
political economy of, 105–106
demand-side dimension of transparency, 8–9, 10, 25
derivatives
carbon-based, 189
corporate
risk management for, 498
Warren Buffet on, 498
treatment of, in capital ratios, 274–276, 274f, 275f
determinants, of transparency, 12–13. See also specific areas
social norms in, 13–14, 25
Directors’ Remuneration Report Regulations 2002 (DRR), 421
dirty surplus, 480
disclosure. See also specific topics
of antitrust procedure results, 160
on climate change
by Carbon Disclosure Project, 184
corporate, 183–187, 185t, 193
vs. confidentiality, in fiscal policy, 99
for corporate risk management, requirements for, 500–502
“improved,” 9
of monetary policy, effects of, 90
optimal, vs. competitive advantage, 21–22
of other comprehensive income, 486–489
of relevant information, 360–361
vs. transparency, 496–497 (see also transparency)
in corporate governance, 363–364
disclosure indices, 460
disclosures, accounting
information overload in, 461
level of, 460–461
mandatory, 460
voluntary, 460–461
discrimination
information-based, 248–249
in labor market, 248
against migrants, 248–249
dissatisfaction, consumer, on price differences, 298–299
distrust, 14, 351
diversification, in constitutional transparency, 50–51
documentation, in constitutional transparency, 40
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), 280, 418, 419
domain, of policy intervention, 219–220
dominance, collective (oligopolistic), 155
dominant position
abuse of, 152–153
definition of, 152
donors, to microfinance, 437, 438t, 439, 451
double bottom line, in microfinance, 445
dynamic adjustment, from surprise major constitutional change, 48–49
earmarks, 108
Earned Income Tax Credit (EITC), 50
(p. 570) earnings management, in fair value accounting, 484–485
economic-dependent forward policy guidance, 84
economic development, access to finance and, 447
economic efficiency, political and constitutional changes for, 45
economic growth. See growth, economic
economic instruments. See also specific types
in innovation policy transparency, 233
economic transparency, 71, 71f
in education, 209
empirical measures of, 72
macroeconomic, 77–79
practices and trends in, 73–74, 73t
real-time accountability from, 78–79
economy, evolution of U.S. Federal power over, 58–60
constitutional revolution of 1937 in, 60
rational basis review in, 59–60
education. See also human resource policy
dimensioning of, 208–209
on earnings, 209–212, 243
formal adult, benefits and costs of, 211–212, 215
for jobs, 243
political decisions on, 198
standardization of systems for, 249
subsidies to, 201
on wages, 243
effects, of transparency, 15–20
on cost of capital, 17
on economic growth, 16–17, 18–19
on efficiency, 15–17
empirical research on, 19–20
on financial constraints and risk, 18
incentive vs. information, 16
on international capital flows, 18
on investment, 18–19, 25–26
market failures in, 15–16
measurement issues in, 19–20, 26
on social norms, 14, 25
efficiency, 15–17
economic, political and constitutional changes for, 45
in education and training, 203–205, 204f, 214
and growth, 16–17, 18–19, 25
efficiency wages, 245
Eijffinger-Geraats index, 72, 75, 76f
endogeneity
in executive pay, 419
monetary policy transparency on, 90
in price transparency and market integration, 298–299
endogeneity issues, 13, 26
entrepreneurial experimentation, in innovation, 232
equity
cost of, governance transparency and, 393–394, 407, 408f
culture of, national differences in, 392
definition of, 203
in education and training, 203–205, 204f, 214
redistribution channels for, obscuring, 107
equity-based pay, executive, 415–416
equity culture
characteristics of, 392
governance transparency and, 392–393
national differences in, 392
equity risks, influence of corporate transparency on, 394
erga omnes, 310
Ericsson, lobbying in European Union of, 353–354. See also multinational corporations and political actors
European Banking Authority (EBA), stress testing by, 522
effectiveness of, 523
failure of
consequences of, 522–523
value of disclosure of, 523
methodology and data in
business models in, 530–531
cumulative abnormal returns in, 530
financial market briefing on, 530
increased coverage and disclosure level of, 528–530
increased stringency of, 528
European banking, stress testing of, 521–542
by Committee of European Banking Supervisors, 522
by European Banking Authority, 522
literature review on, 523–525
effectiveness of, 524–525
methodology of, 524
methodology and data in, 526–531
3-day event window in, 527–528
CAPM model in, 526–527
cumulative average abnormal returns in, for 2006–2013, 527, 527f
event-study methodology in, standard, 526
methodology and data of CEBS and EBA stress tests in
business models in, 530–531
cumulative abnormal returns in, 530
financial market briefing on, 530
increased coverage and disclosure level of, 528–530
increased stringency of, 528
policy recommendations for, 536–538
results of, 531–536
average residuals of banks in, exercise announcement, 531, 532t
average residuals of banks in, methodology disclosure, 531, 532t
average residuals of banks in, results disclosure, 531, 533t
cumulative average abnormal returns in, exercise announcement, 531, 533f
cumulative average abnormal returns in, exercise results, 531, 535f
cumulative average abnormal returns in, methodology disclosure, 531, 535f
informativeness of, 531
transparency, uncertainty and, 525–526
European Monetary Union (EMU)
failure of, 61–62
market integration, 293–294
European Union Allowances (EUAs), 181–182
European Union Constitution
changes in, 56
mixed protections to business decision makers in, 60–62
fundamentals of, 60–61
Maastricht and Euro crises lesson on, 61–62
sovereign crises and, 119t, 120, 120f
type I–type II errors and, 56
European Union Emissions Trading System (EU ETS), 181
European Union, Ericsson lobbying in, 353–354. See also multinational corporations and political actors
Eurostat, labor statistics from, 253
ex ante transparency, 7
for accountability/disciplining, 11
in human resource policy, 202, 205
in input utilization, 205–206
excess demands, Hicksian effects on, 45–46, 46f
executive compensation. See also pay, executive
equity pay and delta and vega in, 415
optimal design of, 413
executive compensation, transparency in, 413–430
adverse effects of, 413–414
boards on, 422–423
CEO pay and future stock returns in, 420
comparisons across firms in, 414
compensation consultants on, 424–426
endogeneity of, 419
executives on, 423–424
exogenous mandated increases in, 421–422
incentive pay structure in, 414–417
cash, equity-based, and severance pay in, 415–417
moral hazard vs. managers' power in setting their own incentives and salaries in, 415–416
U.S. regulations on, 414
in U.S. vs. other countries, 414–415
in mutual funds and brokerages, 426–427
natural experiments on, 419–421
say-on-pay shareholder proposals on, 421
regulations on, 417–419
in Australia, 419
in Europe, non-U.K., 419
in U.K., 418–419
in U.S., 417–418
executives, on executive pay and transparency, 423–424
(p. 572) expectations, forward policy guidance for
management of, 83
in private sector, 82–83, 87
ex post accountability, optimal transparency in, 80
ex post transparency, 7–8, 9
in human resource policy, 202, 205
in input utilization, 206
explicability, in constitutional transparency, 40
extended market model, 503
externalities, positive
in human resources, 201
from innovation, 232
external transparency, 343
fair value accounting, 477–490
as accounting transparency, 482
accounting transparency in, 477
benefits of, 477–478
International Financial Reporting Standards for, 478
methodological issues in study of, 478
disclosure issues in, 481–482
enhanced disclosure in, 485
experimental studies on, unfavorable view from, 483–485
in financial crisis
criticism of, 480
IASB amendments after, 481
general principles of, 479–482
goals of, initial, 479
vs. historical cost accounting, 480
in inflationary times, 480
International Accounting Standard Board framework of, 477
levels of, IFRS 13, 481
measurement and presentation of, 482–486
measurement and earnings management in, 484–485
procyclicality and financial crisis in, 485–486
relevance and reliability in, 482–484
other comprehensive income in, 479, 480
disclosure in, 486–489
IFRS 13 on, 481
statement of comprehensive income in, 479–480
tax effects of, 489–490
use of, 479
fair value, IRS definition of, 479
fairness, 14
financial architecture, governance transparency and, 395–396, 407, 408f
financial constraints, 18
financial flows, international, government monitoring, reporting, and verification of, 191–192
financial institutions. See also banking; specific types
organizational reform of, 279–281
financial instruments. See also specific types
in innovation policy transparency, 233
financial regulation. See also specific types and contexts
call for greater simplicity in, 258
objective of, 261
of risk, 261
financial regulation transparency, 258–284
banks in, world's biggest
accounting standards for countries headquarters to, 284t
bailout and capital ratios of, 282t–283t
Basel Capital Accords in, 263–267 (see also Basel Capital Accords)
Basel II criteria and, 259–260
capital ratios in (see also capital-to-asset ratios)
accounting practices on, 272–276, 273f–275f (see also accounting practices, capital ratios and)
measurement of, and regulatory requirements, 267–272, 268f–271f
capital ratios in, pre-bailout
in bank failure prediction, 270–272
leverage ratio in, 269, 270f
risk-based, 268–269, 269f, 282t–283t
tangible equity-to-asset ratio in, 269–270, 271f
Tier 1, 268, 268f
creditor protection in, 262–263
definition of, 259
implications of, 262
(p. 573) new direction in, 258, 259
Northern Rock failure and, 260
organizational reform of financial institutions in, 279–281
perfection in, lack of, 258–259
political process transparency in, 262–263
post-crisis regulatory environment in, 276–279, 277t, 278t
public perspective on, 258–259
risk assessment objectivity in, 259
simplicity in, greater, 258, 259
views of, by different parties, 260–263
financial reporting transparency, 457
financial-statement footnotes, for measuring corporate risk management, 504
financial statements, for measuring corporate risk management, 504–505
financial transparency, 15
firm manager–government official relationship, corruption in
as agency problem, 325–329, 327t–328t
transparency on, 331, 333
firm manager–top management relationship, corruption in
as agency problem, 327t–328t, 329–330
transparency on, 332, 334
firms. See also corporate; multinational corporations and political actors; specific types
accounting transparency in
factors in, 463–464, 463t
measurement of, 458
measurement proxies in, 460
first fundamental welfare theorem, 70
fiscal policy
deficit bias in, 101, 102
government behavior in response to, 98
problems in, 98
fiscal policy transparency, 94–113
audience for, 112
call for, 98–99
definitions of, 100–101
democratic legitimacy of choices in, 100
fiscal sustainability in, concern about, 99
governance and practice in, 106–111
amount of transparency in, 108–109
crucial questions in, 106
experience in, 109–110, 111t
fiscal rules and transparency in, 107–108
improvements in fiscal transparency in, 109
novelty of, 106
information disclosure vs. confidentiality in, 99
multiannual fiscal frameworks in, 111
optimal amount of, 112
in policy process, 112
rationale for, 99–106
conceptual bases in, 101–103
political economy of fiscal policy in, 105–106
theories in, 103–105
research orientations in, 111–113
shifts facilitating, 103
worldwide state of, 109–110
fiscal rules
definition of, 101
effectiveness of, 107
market pressure as substitute for, 108
scrutinization of, in EU, 101, 107
transparency and, 107
fiscal sustainability, concern about, 99
fiscal transparency, 100–101
Fitch, sovereign ratings of, 122–125
footnotes, financial-statement, for measuring corporate risk management, 504
foreign direct investment (FDI), 19–20
government competition for, 304
history of, 310
incentives for
history of, 310
host country transparency in, 309
investor transparency in, 312
via norms vs. processes, 309–313
liberalization of, in late 1980s, 310
norms in, 309–311, 313
norms plus process in, 311–313
targeting particular types of, 311
territorial image-building for, 1990s, 311
transparency of
(p. 574) foreign direct investment (FDI) (cont.)current understanding of, 305–307
on quality of FDI, 308–309
on quantity of FDI, 307–308
stickiness of bad decisions and, 309
foreign exchange interventions, monetary policy transparency on, 93
forward policy guidance, central bank, 80–89
beneficial information effect in, 86–87
code-word communication in, 83
commitment to, 88–89
discrete steps in adjustment of, 80
economic-dependent, 84
expectations on
management of, 83
by private sector, 82–83, 87
full description of, impossibility of, 86
minutes and voting records in, 81, 82
monetary policy effectiveness and, 87
noisy information and, 86
policy inclination announcement in, 80–81
projected policy path in, 85–86
rationale for, 81–82
state-contingent, 84–85
time-dependent, 84
time-inconsistency problem and, 87–88
usefulness of, 86
foundation approach, to risk weights, 264
freedom of contract, 60
free-riding problem, in microfinance, 436
full transparency, 6
future path of policy, effects of, 90
gains and losses, from corporate hedging
as corporate risk management transparency (COMPUSTAT HEDGEGL), 505–506, 507t–508t, 510t–516t
disclosure of ineffective hedges in, informativeness of, 517
discretionary accruals and, 506, 509, 510t–516t
gaming and manipulation by banks, of Basel Capital Accords, 264–265
General Purpose Financial Reports (GPFR), 457–458
Generally Accepted Accounting Principles (GAAP), 472
vs. International Financial Reporting Standards, 472–473
geographical market (space), 288–290
transparency and price dispersion in, 290–291
global accounting convergence, 465, 472
Global Initiative for Fiscal Transparency (GIFT), 99, 110, 111t
global microfinance industry, transparency and disclosure in. See microfinance industry, transparency and disclosure in
global risk assessments, 441–442
governance. See also specific types
corporate (see corporate governance)
multilevel, supranational, 4
governance transparency, 15
agency factors in, 373
definition of, 371
demand for, 396
importance and benefits of, 387
influence on economic growth, 388
institutional factors in, 372–373
literature on, 371
governance transparency and capitalism, 387–409
asymmetric information and transaction costs in, 388–390
demand for, 396
importance of, 392–396
cost of equity in, 393–394, 407, 408f
culture of equity in, 392–393
evidence of, 407–408, 407f, 408f
financial architecture in, 395–396, 407, 408f
stock market participation in, 394–395, 407, 407f
institutional structure in, 390–391
link between, conclusions on, 409
measurement of, 397–406
anti-self-dealing index in, 397–399
descriptive statistics and comparison of measures of, 400–403, 401t–402t
Governance Transparency Index in, 399
social trust in, 403–404, 404f
trust formation in, 405–406, 406f
Governance Transparency Index, 399
vs. anti-self-dealing index, 400–403, 401t–402t
(p. 575) government bonds
rating stability for, 123–124
ratings of, 123
government official–citizens relationship, corruption in
as agency problem, 327t–328t, 329
transparency on, 331, 333––334
government official–firm manager relationships, corruption in
as agency problem, 325–329, 327t–328t
transparency on, 331, 333
governments, sovereign. See also specific governments and issues
crises of, in modern history, 119–121, 119t, 120f
financial crisis and solvency of, 116
Grameen Bank, 437
Greece
credit ratings of, 123
sovereign crises in, 119t, 120, 120f
green house gas (GHG) emission
government monitoring, reporting, and verification of, 189–191
leakage problem in, 193
growth, economic
influence of corruption on, 325, 335
influence of efficiency on, 16–17, 18–19, 25
influence of governance transparency on, 388
innovation in, 219
transparency and, research on, 344
guidelines. See also regulation; specific types and regulating bodies
for antitrust procedures, 158–159
on competition policy, market transparency and, 158–159
harmonization, global accounting, 465, 472
hedging, in constitutional transparency, 50–51
hedging, corporate
Accounting for Derivative Instruments and Hedging Activities for, 501–502
disclosure of ineffective hedges in, informativeness of, 517
firm value and, 502
gains and losses in
as corporate risk management transparency, 505–506, 507t–508t, 510t–516t
discretionary accruals and, 506, 509, 510t–516t
lack of transparency on, 495
Hicksian substitution and wealth effects, on excess demands with surprise major constitutional change, 45–46, 46f
human capital
attrition costs of corporate transparency in, 373–374
vs. human resources, 198–199
vs. real capital, 200
human resource management, efficacy and equity in, 203–205, 204f, 214
human resource policy, 198–199
dynamic nature of, 201
market failures in, 198, 200–201
human resource policy transparency, 198–215
aspects relevant for, 202–212
benefits and costs in, 209–212, 215
education and labor market in, dimensioning of, 208–209
efficacy and equity in, 203–205, 204f, 214
input utilization in, 205–206, 215
skills and competences in, 206–208, 215
definition of, 201–202
measures for improvement of, 212–214
rationale for, 199–201
human resources, vs. human capital, 198–199
IFRS Conceptual Framework, 470
IFSR 13
on other comprehensive income, 481
on tax, 481–482
imperfect transparency, 7
incentive effects, 16
in macroeconomic transparency, 78
in monetary policy transparency, 70
negative, 70
incentive pay structure transparency, executive, 414–417
cash, equity-based, and severance pay in, 415–417
moral hazard vs. managers' power in setting their own incentives and salaries in, 415–416
U.S. regulations on, 414
in U.S. vs. other countries, 414–415
(p. 576) incentive regulations, 157
incentives
for actors, 12
for foreign direct investment, transparency in
multilevel, coordination and, 315–316
multilevel, homogenization and, 316–317
top-down, 314–315
for innovation systems, 232
in principle–agent relationship, 12
of sender and receiver, 12
for transparency, 22
inclination announcement, policy, 80–81
income, comprehensive
other, 479, 480
disclosure in, 486–489
IFRS 13 on, 481
statement of, 479–480
income statement, 480
individualized integration model, 204
industry surveys, for measuring corporate risk management, 503
inflation
fair value accounting with, 480
macroeconomic transparency on
forecasts in, 77, 79
volatility in, 77–78
monetary policy transparency on, 89–90
information asymmetries, 5, 9, 24–25. See also transparency; specific types
Adam Smith on, 458
characteristics and behavior in, 7
in competition policy, 144–145, 162
in corruption, 326, 331 (see also corruption)
in governance transparency, 388–390
in human resource policy, 200
market failures and, 15–16
principal–agent relationships and, 7
sender–receiver relationship and, 6–7, 9, 24
transparency and, 6
information effects, 16
in monetary policy transparency, 70
information transfer, 6, 9
innovation, 219
attributes of, 223–225
collaboration in, 225
as growth-enhancing, 220
intellectual property rights protection for, 233–234
as interaction of actors and institutions, 220
in systemic context, 225
innovation policy
context on form of, 230
definition of, 228
legitimacy of, 232
policy coordination and integration in, 230–231
innovation policy transparency, 219–236
attributes in, 223–225
definition of, 219
dimensions in, 229
domain of, 219–220
functional areas of, 231–234
generic issues in, 228–229
inherent problems in, 228
institutions and actors in, 229–231
instruments in, 231
international, 236
lack of, 235
measurement of, studies on, 222–223, 235
process and outcomes in, 235–236
public debate on, 235
rationale for, 226–228
science and technology policy in, 220–223
innovation processes, 224
innovation systems, 224
cognitive dimension of, 229
construction of, 227
definition of, 225–226
economic dimension of, 229
incentives for, 232
key characteristics of, 226
organizational/institutional dimension of, 229
transient nature of, 234
innovation systems policy
as coordination problem, 227–228
to create new businesses, 228
globalization in, 228
investments in, 226–227
market failures in, 227
rationale for, 226–228
(p. 577) input utilization, in human resource policy, 205–206, 215
institutional factors, in governance transparency, 372–373
institutional structure, in governance transparency, 390–391
institutions, type I–type II errors and, 51–57
EU Constitution in, changing, 56
principles of, 51–56, 55t
U.S. Constitution in, Supreme Court changes in, 56–57
instrumental/efficiency rationale, 10–11, 15, 25. See also effects, of transparency
insurance industry, optimal disclosure vs. competitive advantage in, 21–22
insurance, in remuneration, 246
intellectual property rights (IPR) protection
for innovation, 233–234
in international standards, 222
measurement of, studies on, 222–223, 235
in science and technology policy, 221–222
interest rates
nominal, transparency increases on, 90
predictability of, influence of monetary policy transparency on, 91
Interfaith Center for Corporate Responsibility (ICCR), 184
intermediate scrutiny, 59
internal transparency, 343
International Accounting Standards (IAS), 467, 468t–469t
International Accounting Standards Committee (IASC), 466
International Budget Partnership, 99
international capital flows, 18
international financial flows, government monitoring, reporting, and verification of, 191–192
International Financial Reporting Standards (IFRS), 466, 467–470, 468t, 478
in China, 470–471, 471t
“clutter” in annual reports from, 474
country pressures for modification of, 473
global adoption of
obstacles to, 472
support for, 470, 471t
in India, 471, 471t
in Japan, 471–472, 471t
for small- and medium-sized enterprises, 470
in U.S. and E.U., 470, 471t
vs. US Generally Accepted Accounting Principles, 472–473
International Financial Reporting Standards (IFRS) Foundation
governance structure of, 467, 467f
objectives of, 466–467
on presentation of financial statements, 467–470
standards issued by, 467, 468t–469t
standards setting responsibility of, 467
International Integrated Reporting Council (IIRC), 461
international labor market, 247–249, 251
migrants in, 248–249
migration in, 247–248
International Labour Organization (ILO), 253
International Monetary Fund (IMF), 4, 75, 103, 110, 279, 522
standards and codes of, 98
transparency in, calls for, 4
International Organization for Migration (IOM), 253
international standard setting, accounting transparency and. See accounting transparency
international trade policy transparency, 166–177
conveyance issues in, 176–177
definitions of, 166–167
economic literature on, dearth of, 166–167
importance of, 166
legal rules on, 167
policy transparency in, 168–171
regional trading arrangements and, 175–176
regulatory transparency in, 171–175
internet
cross-border purchases on, 296–297
and life insurance prices, 291
effect on price transparency and market integration, 286–287
interpretations, of constitution, high court, 34–35
(p. 578) investment, 18–19, 25–26
foreign direct (see foreign direct investment (FDI))
in innovation systems policy, 226–227
investor transparency, in foreign direct investments
plus public transparency toward public at large, 319
toward public agency, 318
investors, corporate information disclosure for welfare of, 361
inward foreign direct investment (FDI), 304
inward investment incentives, transparency and, 304–320
history of FDI incentives in, 310
literature review on, 305–309
current understanding of, 305–307
transparency and stickiness of bad FDI decisions in, 309
transparency on quality of FDI in, 308–309
transparency on quantity of FDI in, 307–308
multilevel transparency in, 313–317
important aspects of, 313
multilevel incentives, coordination, and transparency in incentives toward FDI in, 315–316
multilevel incentives, homogenization, and transparency in incentives toward FDI in, 316–317
top-down incentives in, 314–315
multiparty transparency in, 317–319
investor plus public transparency toward public at large in, 319
investor transparency toward public agency in, 318
national entity transparency toward other territorial levels in, 318–319
norms vs. process in, 309–313
norms in, 309–311
norms plus process in, 311–313
Ireland, credit ratings of, 123
job productivity
education on, 243
information on, 245
promotion on, 245
wages on, 243
job shopping, 242–243
job vacancies, finding, 249–250
Joint Implementation (JI) program, of Kyoto Protocol, 179
carbon market transactions under, 180
markets in, 182–183
KMV model, 126
knowledge. See also education
development and diffusion of, 232
skills and competences in, 206–208, 215
Kyoto Protocol, on carbon markets, 187
labor demand, 244–245
labor market
dimensioning of, 208–209
information on, sources of, 251–252
information role in, 241
international, 247–249, 251
migrants in, 248–249
migration in, 247–248
vs. other markets, 241
labor market policy, 250
labor market transparency, 241–254
information in, 251–254
on labor market, 251–252
on migration and for migrants, 252–254
international labor market in, 247–249, 251
migrants in, 248–249
migration in, 247–248
lack of, sources of, 242–247, 250–251
labor demand in, 244–245
labor supply in, 242–244
remuneration in, 246–247
political decisions in, 249–250, 251
supply side vs. demand side, 242
uniqueness of, 241
labor supply, 242–244
Lake Wobegon effect, 423–424
Latin America sovereign crises, 119–120, 119t, 120f
law. See also specific types and contexts
on antitrust procedures, 158–159
on competition, 144
(p. 579) on competition policy, market transparency and, 158–159
complexity of contracts and quality of, 391
constitutional, 41
demand for, 396
statutory, 41
supply and demand for, 391
law of one price (LOP), 288
differences in goods and, 297
national borders and, 293
leakage problem, 193
legal origin, in stock market participation, 394
legitimacy
of choices, democratic, 100
of innovation, 232
in multinational corporation–political actor relationships, 346–349, 348f
transparency, trust, and, 345–346, 346f
trust and, 350–351
of political units, 347
Lehman Brothers bankruptcy, 279
leverage ratio, 269, 270f
Liikanen proposal, 280
Liquidity Coverage Ratio (LCR), 266
living wills, 280
lobbying, 351
Lochner Era, 60
logit model, default probabilities estimation via, 126, 140
Long-Term Capital Management (LTCM), 498–499
loss given default (LGD), 264
Maastricht Treaty, 61–62
macroeconomic transparency, 76–80
effects of, 77
effects on inflation volatility, 77–78
incentive effects of, 78
inflation forecasts in, 77, 79
monetary policy rate r in, 78
stylized model of, 76–77
supply shocks in
anticipated aggregate, 77–78
harmful information effects of, 80
unanticipated transmission, 79
Maimonides' rule, 206
management guidance, on executive pay and transparency, 422–423
management, top. See top management
market failures
causes of, 15–16
definition of, 220
in human resource policy, 198, 200–201
innovation policy and, 220–221, 227
market information, on microfinance, 438t, 443–444
market integration
endogeneity in, 298–299
European Monetary Union on, 293–294
market delineation in, 288–290
price levels in, 291–292
market integration forces, 294–299. See also price transparency and market integration
arbitrageurs in, 297–298
consumer dissatisfaction on price differences in, 298–299
consumers choosing to buy in cheaper location in, 294–297
information on consumer bargaining for better price in, 297
market-pull perspective, 372
development of theory of, 372–373
institutional point of view of, 376t, 377–378
market reactions (proxies), for accounting transparency, 461–463, 462t
market to book ratio, banking, 521, 522f
market transparency. See also competition policy
collusion and, 147–151, 148t
competition policy enforcement procedures and, 157–162
disclosure of results in, 160
international competition policy in, 160–162
investigation processes in, 159–160
laws, regulations, and guidelines in, 158–159
merger review and, 153–155
monopolization of markets and, 152–153
markets
delineation of, in price transparency and market integration, 288–290
(p. 580) markets (cont.)expectations of, monetary policy transparency and, 92
formation of, in innovation, 232
geographical space in, 288–290
imperfect, 146
monopolization of, market transparency and, 152–153
perfectly competitive, 145–147, 147t
product space in, 288–289
segmentation of, along national borders, 292–294
measurement issues, 19–20, 26
merger review, market transparency and, 153–155
Metallgesellshaft, 498–500
Michigan, as right to work state, 45
microfinance
definition of, 434
extremes in market for, 434–435
growth and scope of, 434
microfinance industry, transparency and disclosure in, 434–452
among stakeholders, 435–440
customers in, 437, 438–439, 438t
donors in, 437, 438t, 439, 451
economic foundation in, 436
investors in, 440
key issues in, 438–440
manager accountability in, 435
owners in, 437, 438t, 439–440
social performance dimension in, 435–436
importance and scope of, 434–435, 451
market information and true costs of services in, 438t, 443–444
nongovernmental organizations in, 437
ratings of, 441–442
regulation of, 440–441
social mission in, 437
social performance and customer impact in, 445–448
country-level effects in, 447–448
economic development in, 447
measurement issues in, 445–447
randomized controlled trials on, 447
Schreiner's framework for, 445–446
sustainability and financial performance in, 448–450
Microfinance Transparency initiative, 444
migrants
information for, 252–254
on international labor market, 248–249
migration
information on, 252–254
on international labor market, 247–248
Mincer equation, 243
minutes, on forward policy guidance, 81, 82
mixmarket, 442
Modigliani–Miller argument, 498
monetary policy
effects of forward policy guidance on effectiveness of, 87
recent changes in making of, 94
surprise in, 99–100
monetary policy rate r, in macroeconomic transparency, 78
monetary policy transparency, 68–94
conceptual framework for, 69–71, 71f
argument in favor of, 70
complete openness in, 69–70
five policymaking aspects of, 70–71, 71f
incentive effects in, 70
information effects in, 70
definition of, 69
empirical evidence on, 89–93
central bank communications in, 91
confounding factors in, 92–93
endogeneity in, 90
foreign exchange interventions in, 93
future path of policy in, 90
individual policymaker communications in, 91
inflation in, 89–90
interest rate predictability in, 91–92
interest rates in, nominal, 90
market expectations in, 92
minutes of monetary policy meetings in, 91
operational implementation of, 92
policy statements in, 90–91
predictability of decisions in, 92
forward policy guidance in, 80–89 (see also forward policy guidance, central bank)
(p. 581) importance central banks give to, 68
macroeconomic transparency in, 76–80 (see also macroeconomic transparency)
measures and trends in, 71–76
empirical measures in, 71–72
practices and trends in, 72–76, 73t, 76f
other surveys on, 69
policy announcements and reports in, 70
rise in, 68–69
monitoring, reporting, and verifying (MRV)
of GHG emissions, 189–191
of international financial flows, 191–192
monopolies
market, market transparency and, 152–153
natural, 156–157
Mons typology, 204–205
Moody's sovereign ratings
methodology for, 125
transparency in, 122–125
moral hazard, 7
in cartel's price-fixing activities, 149
in executive incentive pay, 415–416
for shareholders, 413
multilevel, supranational governance, 4
multilevel transparency, in foreign direct investments, 313–317
important aspects of, 313
multilevel incentives and transparency in
coordination and, 315–316
homogenization and, 316–317
top-down incentives in, 314–315
multinational corporations and political actors, 341–354
examples of, 352–354
Ericsson lobbying in European Union, 353–354
Teliasonera in Uzbekistan, 352–353
information asymmetries and business–political relationship specificity in, 342–343
legitimacy–trust in, 350–351
research on, 341–342
transparency in, 343
transparency–legitimacy in, 346–349, 348f
transparency, legitimacy, and trust in, 345–346, 346f
transparency, opacity, and, 343–345, 345f
transparency–trust in, 349–350
transparent behavior in, 343
multiparty transparency, in foreign direct investments, 317–319
investor plus public transparency toward public at large in, 319
investor transparency toward public agency in, 318
national entity transparency toward other territorial levels in, 318–319
mutual fund manager pay, transparency and, 426–427
national entity transparency toward other territorial levels, in foreign direct investment, 318–319
natural monopolies, 156–157
negative incentive effects, in monetary policy transparency, 70
net profit, 480
“normal,” 480
Net Stable Funding Ratio (NSFR), 266
network industries
market transparency and regulation of, 155–157
utility industries as, 153
New Keynesian model, 86–87
New Keynesian Phillips curve, 82
noisy information, on forward policy guidance, 86
Nordic Statistical Yearbook, 253
norms (normativity), 309–310
Northern Rock failure, 260
NRSRO status, 123
ObamaCare Supreme Court case, Commerce Clause in, 60
objectives. See also specific topics
of financial regulation, 261
of principle and agent, 12, 25
observability, 8
oligopolistic dominance, 155
onion model, of governance transparency, 374–377, 375f
on-the-job training, private effects of, 212
opacity
definition of, 343
degrees of, 344–354, 345f
(p. 582) opacity (cont.)specificity of, 344
transparency and, 343–345, 345f
Opacity Index, 459
Open Budget Index (OBI), 110
Open Government Directive, 4
Open Method of Coordination (OMC), 10, 201
openness, complete, in monetary policy, 69–70
operational implementation of monetary policy, 92
operational separability, of subsidiaries, 280
operational transparency, 71, 71f
in education, 209
empirical measures of, 72
macroeconomic transparency in, 79
practices and trends in, 73t, 74–75
optimal disclosure, vs. competitive advantage, 21–22
optimal transparency, 20–24, 26
benefit of transparency, marginally decreasing and, 20–21
corporate, 21
cost to sender in, 21–22
costs in, 20
defining, difficulties with, 161, 162
information processing costs of receiver and, 22–23
in ex post accountability, 80
fiscal policy, 22
imprecise information on, 23–24
for international competition, 161
macroeconomic transparency on, 79–80
for network industries, 156, 160
policy, 21–22
Organisation for Economic Co-operation and Development (OECD), 4, 109, 146, 207, 466
desirable practices of, 98
migration information from, 253
on transparency, 5, 172, 173
other comprehensive income, 479, 480
disclosure in, 486–489
IFRS 13 on, 481
owner–top management bargaining, 363
owners, in microfinance, 437, 438t, 439–440
ownership transparency, in governance transparency measures, 400, 401t–402t, 409
Pareto improvement, 9
pay, executive. See also executive compensation, transparency in
cash, 415–416
endogeneity in, 419
equity-based, 415–416
equity pay and delta and vega in, 415
incentive, moral hazard of, 415–416
optimal design of, 413
regulations on, 414
Say-on-Pay Bill on disclosure of, 421
severance, 415, 416–417
stock returns and, future, 420
in U.S. vs. other countries, 414–415
pay, executive, disclosure of, 419–429. see also executive compensation, transparency in
1964 Securities Acts Amendment on, 419–420
compensation consultants on, 424–426
executive on, 423–424
incentive pay in, 414–417
cash, equity-based, and severance pay in, 415–417
moral hazard vs. managers’ power in setting their own incentives and salaries in, 415–416
U.S. regulations on, 414
in U.S. vs. other countries, 414–415
management guidance on, 422–423
Securities and Exchange Commission on
1993 enhanced compensation disclosure requirement of, 418, 420
Compensation, Discussion, and Analysis section in, 418
Dodd-Frank on, 418, 419
early history of, 417–418
Sarbanes–Oxley Act on, 418, 420–421, 427
say-on-pay regulations in, 421
pay, transparency and
for brokers, 426–427
for mutual fund managers, 426–427
performance
business, transparency and, 341
corporate risk management and, 502
financial, in microfinance, 438t, 448–450
personnel economics, 244
piece-rate payment, 244
policy. See also specific types
evaluation of, for innovation policy transparency, 233
future path of, effects of disclosure on, 90
government behavior in response to, 98
public
generic issues for, 228–229
rationale for transparency in, 12
policy inclination announcement, 80–81
policy intervention, domain of, 219–220
policy statements, effects of, 90–91
policy transparency, 8, 71, 71f
in education, 209
empirical measures of, 72
international, 168–171
practices and trends in, 73t, 74
political actors, multinational corporations and. See multinational corporations and political actors
political decisions, on labor market transparency, 249–250, 251
political economy, of fiscal deficits, 105–106
political transparency, 71, 71f
in education, 209
empirical measures of, 72
in financial regulation transparency, 262–263
practices and trends in, 73, 73t
political units, legitimacy of, 347
pork barrel, 108
positive externalities
in human resources, 201
from innovation, 232
precision, information, 9, 10
predatory pricing, 152–153
predictability, 7. See also ex ante transparency
of constitutional guarantees, 33, 40–41
constitutional transparency as, 39–42
of monetary policy decisions, monetary policy transparency on, 92
price-cap regulations, 157
price transparency. See also competition policy
anticompetitive effects of, 149–150
collusion, cartels, and, 148–151, 162
definition of, 287
increase in, significant, on markets, 147
in market monopolization, 152
in oligopolistic markets, 148–150, 162
as pro-competitive, 148
in public procurement, 150–151
price transparency and market integration, 286–300
consumer search costs in, 287
effect of internet on, 286–287
empirical results on, 290–294
market segmentation along national borders in, 292–294
price dispersion within a market in, 290–291
price levels in, 291–292
endogeneity of transparency in, 298–299
forces in market integration in, 294–299
arbitrageurs in, 297–298
consumer dissatisfaction with price differences in, 298–299
consumers choosing to buy in cheaper location in, 294–297
information on consumer bargaining for better price in, 297
fundamentals of, 286–288
market delineation in, 288–290
prices
differences in, in market delineation, 289
dispersion in a market of, transparency and, 290–291
effect of location on, 286
levels of, price transparency and, 291–292
movements of, in market delineation, 289–290
principal–agent relationship, 7
incentives in, 12, 22
in policy analysis, 7–8
valuable signal in, 9
(p. 584) probabilities of default (PDS)
bank, 132–133, 133t
implied from credit default swaps, 131–132, 131f
private sector fundamental vs. credit default swaps market implied, 133–136, 134f–136f
procedural transparency, 8, 71, 71f
in education, 209
empirical measures of, 72
practices and trends in, 73t, 74
procyclicality, in fair value accounting, 485–486
productivity, job
education on, 243
information on, 245
promotion on, 245
wages on, 243
product space, 288–289
profit and loss statement, 480
Programme for the International Assessment of Adult Competencies (PIAAC), 207
prohibition, U.S. Supreme Court decision on, 35
projected policy path, 85–86
promotion, on productivity, 245
proprietary data, for measuring corporate risk management, 503
public employment exchanges, 249
public human resource policy. See human resource policy
public policy
generic issues for, 228–229
rationale for transparency in, 12
public procurement, price transparency and cartels in, 150–151
public stock of capital, 42–43
purchases, cross-border, 294–297
in Europe, 295
on internet, 296–297
in U.S.-Canada, 295
purchasing power parity (PPP), across national borders, 293
quality, information, 9, 10, 24–25
ratings
by credit rating agencies
fostering competition in, 124
sovereign, of, 122–125
transparency in, 124–125
for government bonds
stability of, 123–124
of microfinance industry, 441–442
rational basis review, 59–60
rationale, for transparency, 10–15, 25
causality issues in, 14–15
corruption and, 13
costs/benefits and, 12, 26
determinants of, 12–13
endogeneity issues in, 13, 26
incentives of sender and receiver in, 12
instrumental/efficiency, 10–11, 15, 25 (see also effects, of transparency)
objectives of principle and agent in, 12, 25
in public policy, 12, 228–229
social norms and, 13–14, 25
trust in, engendering, 11–12, 14
value driven, 10–11, 25
welfare in, 12
receiver attention, 8
receiver distortion, 8
receiver, of information, 6, 9
reciprocity, 14
recovery and resolution plans, 280
REDD (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries), 190–191
redistribution
vs. administrative state, 49–50
from constitutional changes, 49–50
Hicksian effects on excess demands in, 45–46, 46f
Slutsky equation on, modified, 46–48
static analysis with price adjustment for, 48
political and constitutional changes for, 45–48
redistribution programs, 35
U.S. Supreme Court mistakes on, 38–39
regional trading arrangements, international trade policy transparency and, 175–176
(p. 585) regulation. See also fiscal rules; specific types and contexts
antitrust procedures in, 158–159
of competition policy, market transparency and, 158–159
of executive compensation
CEO pay in, 414
transparency of, 417–419
financial
call for greater simplicity in, 258
objective of, 261
of risk, 261
incentive, 157
in innovation policy, 233
of microfinance industry, 440–441, 450
price-cap, 157
regulatory transparency, international, 171–175
remuneration. See also executive compensation; wages
for labor, 246–247
resource mobilization, in innovation, 232
resource picking, 373, 374
respect, 43
right to work state, 45
ringfencing, 280
risk, 18
risk assessment
global, 441–442
objectivity of, 259
risk-based capital-to-asset ratios, 268–269, 269f, 282t–283t
risk management
corporate (see corporate risk management)
definition of, 497
in financial crisis, 497
risk-management services
costs vs. benefits of, 498
increased demand for, 497–498
Risk Metrics Group, 117, 126. See also Z-Metrics
risk weights, Basel II approaches to, 264
rule-based macroeconomic stabilization policies, 3–4
rules of the game, 43
Russian sovereign crises, 119t, 120, 120f
Sarbanes–Oxley Act
on executive pay, 418, 420–421
on firm value, 427
net benefits vs. costs of, 498
Say-on-Pay Bill, on executive pay disclosure, 421
say-on-pay shareholder proposals, 421
scarcity, information on, 8
science and technology policy transparency, 220–223. See also innovation policy
scrutiny, intermediate, 59
search costs, consumer
price dispersion and, 290–291
price transparency and, 287
Securities Acts Amendment, 1964, on executive pay disclosure, 419–420
Securities and Exchange Commission (SEC), on executive pay disclosure
1993 enhanced compensation disclosure requirement of, 418, 420
Compensation, Discussion, and Analysis section in, 418
Dodd-Frank on, 418, 419
early history of, 417–418
Sarbanes–Oxley Act on, 418, 420–421, 427
say-on-pay regulations on, 421
segmentation, market, along national borders, 292–294
selection, adverse, 7
self-dealing disclosure, 388, 409
anti-self-dealing index for, 387–399
anti-self-dealing index vs. Governance Transparency Index for, 400–403, 401t–402t
Governance Transparency Index for, 399
sender, of information, 6, 9
sender–receiver relationship, 6–7, 9
separation model, 204
of financial activities in independent entities, 280
severance pay, executive, 415, 416–417
shadow banking system, 122
shareholders’ interest view, of corporate governance, 360
shopping, cross-border, 294–297
in Europe, 295
on internet, 296–297
in U.S.-Canada, 295
(p. 586) signaling game, 6
skills. See also education; human resource policy transparency
in human resource policy, 206–208, 215
Slutsky equation of individual i for good X1, 46
modified, 47–48
SMART campaign, 445
social performance (impact), in microfinance
as donor concern, 437, 438t
measurement of, 435–436, 445–446
Schreiner’s six aspects of, 445–446
transparency among stakeholders on, 435–436
truth in advertising in, 445
Social Security, economic problems with, 35–38
social trust
governance transparency and, measurement of, 403–404, 404f
in stock market participation, 394–395
social welfare, administrative state in, 49–50
“soft” instruments, in innovation policy transparency, 233
sorting, 243
South Korea sovereign crises, 119t, 120–121
sovereign default risk assessment, 116–140
accurate estimation of, difficulty with, 124
bank probabilities of default as supplement to analysis of, 132–133, 133t
bottom-up approach to, 122, 127–131, 128t, 129t
conclusion on, 138–139
credit agency sovereign ratings and, transparency of, 122–125
probabilities of default in
credit default swaps implied, 131–132, 131f
logit model estimation of, 140
private sector fundamental vs. credit default swaps market implied, 133–136, 134f–136f
probabilities of default results based on privately owned vs. publicly owned firm models in, comparing, 128t, 129t, 136–137, 137t
recent financial crisis and, 116–117
in sovereign crises in modern history, 119–121, 119t, 120f
top-down analysis and macro approaches to, 117
VaR calculations in, 117
Z-Metrics approach to, 117–119, 125–127, 127f
Z-Metrics vs. implied credit default swaps probabilities of default in, 137–138
Spain
credit ratings of, 123
sovereign crises in, 119t, 120–121, 120f
specialization effect, 203–204
standardization approach, to risk weights, 264
Standard&Poor’s sovereign ratings
methodology for, 125
transparency in, 122–125
state-contingent forward policy guidance, 84–85
statement of comprehensive income, 479–480
static analysis with price adjustment, for surprise major constitution change, 48
statutory law, 41
stock market participation
governance transparency and, 394–395, 407, 407f
legal origin and, 394
social trust and, 394–395
stock returns, future, executive pay and, 420
strategic hoarding perspective of transparency, 372
development of theory of, 372, 373–374
institutional point of view of, 376t, 378, 379f
stress testing, of European banking, 521–542. See also European banking, stress testing of
by Committee of European Banking Supervisors, 522 (see also Committee of European Banking Supervisors (CEBS))
effectivenenss of, 524–525
by European Banking Authority, 522 (see also European Banking Authority (EBA), stress testing by)
history of, 523–524
literature review on, 523–525
effectivenenss of, 524–525
methodology of, 524
methodology of, general, 524
results of, 531–536
(p. 587) average residuals of banks in, exercise announcement, 531, 532t
average residuals of banks in, methodology disclosure, 531, 532t
average residuals of banks in, results disclosure, 531, 533t
CAAR differences between business models in, 536, 536t
cumulative average abnormal returns in, exercise announcement, 531, 533f
cumulative average abnormal returns in, exercise results, 531, 535f
cumulative average abnormal returns in, methodology disclosure, 531, 535f
impact on nonviable banks of, 534
impact on valuation of banks in, 534
informativeness of, 531
most effective methods in, 534
viable vs. nonviable banks in, 534
stress-tested banks in, 539t–542t
transparency, uncertainty and, hypothesis on relation among, 525–526
structural distance-to-default measures, 126
subsidiaries, operational separability of, 280
supplementary compensation, 246
supply and demand, of financial and risk-management transparency, 496–500
in corporations, 497–500
financial transparency, disclosure, and regulatory process in, 496–497
supply shocks. in macroeconomic transparency
aggregate, anticipated, 77–78
harmful information effects of, 80
unanticipated, transmission of, 79
Supreme Court, U.S. See also U.S. Supreme Court
constitution changes of, 56–57
decisions of, 35–39
on prohibition, 35
surplus
clean, 480
dirty, 480
surveys, industry, for measuring corporate risk management, 503
sustainability, in microfinance, 448–450
tangible equity-to-asset ratio, capital-to-asset ratio in, 269–270, 271f
tax effects, of fair value accounting, 489–490
other comprehensive income disclosure in, 486–489
tax havens, 387–388
Tax Power Clause, 60
technology policy transparency, 220–222. See also innovation policy
Teliasonera, in Uzbekistan, 352–353. See also multinational corporations and political actors
Tiebout competition, 214
Tier 1 capital-to-asset ratios, 268, 268f
time-based wage, 244
time-dependent forward policy guidance, 84
time-inconsistency problem, forward policy guidance and, 87–88
top-down incentives, in foreign direct investments, 314–315
top management–firm manager relationship, corruption in
as agency problem, 327t–328t, 329–330
transparency on, 332, 334
top management, in corporate governance, 360
top management–owner bargaining, 363
top of organization, transparency at, 371–385
board of directors and top management team types of, 374–379
market-pull perspective in, 376t, 377–378
onion model of governance transparency in, 374–377, 375f
strategic hoarding perspective in, 376t, 378, 379f
data and methods in
sample in, 379, 380t
variables and measures in, 379–380, 381t
differences in, concluding discussion on, 383–385
European board of directors and top management team patterns in, 380–383
demographic characteristics in, 281t, 380–382
educational characteristics in, 381t, 382
experience characteristics in, 375f, 381t, 382–383
(p. 588) top of organization, transparency at (cont.)governance transparency in
definition of, 371
disadvantages of, 371
theory development for, 372–374
market-pull perspective in, 372–373
strategic hoarding perspective in, 372, 373–374
tracking, in education, 203–204
trade policy transparency, international, 166–177. See also international trade policy transparency
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), 222
trading
in carbon markets, 181
regional trading arrangements for, 175–176
training. See also education; human resource policy
effect on earnings of, 209–212
political decisions on, 198
subsidies to, 201
transaction cost economics, 389
transaction costs
actors in, 390
definition of, 390
in governance transparency, 388–390
institutional quality and, 390–391
transparency of institutions in, 391
transfer, information, 6, 9
transformation costs, 388
transparency, 5–10. See also specific types and topics
adverse selection in, 7
vs. availability of information, 106
business performance and, 341
in business world, scandals and new regulations/codes on, 4
as catchword, 3
concept of, 4
definitions of, 413
in corporate governance, 359–361
in financial regulation, 259
in financial transparency, 15
in fiscal policy, 100–101
in fiscal transparency, 100–101
in governance transparency, 15, 371
in human resource policy, 201–202
in innovation policy, 219
in international trade policy, 166–167
in monetary policy, 69
in multinational corporations and political actors, 343
by OECD, 5
in price transparency, 287
in risk management, 496
by UNCTAD, 5
by WTO, 5
degrees of, 344–345, 345f
demand-side dimension in, 8–9, 10, 25
vs. disclosure, 496–497
in corporate governance, 363–364
of economic policy and government bodies, 3
as endogenous, 13, 26
ex ante (see ex ante transparency)
ex post (see ex post transparency)
external, 343
full, 6
“improved,” 9
information disclosure in, relevant, 360–361
information technology and, 4
information transfer in, 6, 9
internal, 343
in International Monetary Fund and World Trade Organization, 4
moral hazard in, 7
opacity and, 343–345, 345f
as passive process, 496
predictability and, 7
rationale for, 10–15
recent interest in, 1990s, 3
rule-based macroeconomic stabilization policies and, 3–4
sender and receiver in, 6–7, 9
specificity of, 344
trust and, 496
uncertainty and European banking stress testing in, 525–526
(p. 589) transparency international
on corruption, 330–331
Corruption Perceptions Index of, 459
transparency–legitimacy, in multinational corporations and political actors, 346–349, 348f
transparency, meaning of, 5–10, 24–25
accountability in, 8
common denominators in, 5
context on, 5
economic, 69
in economic research, 5
ex ante and ex post, 7–8, 9 (see also ex ante transparency; ex post transparency)
as information asymmetry reduction, 6–7, 9, 24–25
multiple, 4, 5–6
observability in, 8
precision (quality) of information in, 9, 10, 24–25
principal–agent relationship in, 7–8
receiver attention and distortion in, 8
sender–receiver relationship in, 6–7, 9
trustworthiness of information in, 9
valuable signals in, 9
transparency trap, 110
transparent behavior, 343
Troubled Asset Relief Program (TARP), choice of banks to bail out in, 270–272
trust, 11–12, 14
definition of, 349
in multinational corporation–political actor relationships
legitimacy and, 350–351
transparency and, 349–350
transparency and legitimacy of, 345–346, 346f
social
governance transparency and, measurement of, 403–404, 404f
in stock market participation, 394–395
in transparency, 496
trust formation, measurement of governance transparency in, 405–406, 406f
trustworthiness
of information, 9, 10
of microfinance financial reports, 448
type I–type II errors, institutions and, 51–57
EU Constitution in, changing, 56
principles of, 51–56, 55t
U.S. Constitution in, Supreme Court changes in, 56–57
uncertainty, transparency, and stress testing of European banking, 525–526
UN Framework Convention on Climate Change (UNFCCC)
on carbon markets
administration and oversight of, 187
reforms in, 183
Kyoto Protocol of, 179, 180
monitoring, reporting, and verifying requirements of, 190
uniform integration model, 204
United Kingdom Constitution, protections in, 62–63
United States Constitution
amendments to, Article V on, 55–56
Supreme Court changes to, 56–57
U.S. Federal power over economy, evolution of, 58–60
constitutional revolution of 1937 in, 60
rational basis review in, 59–60
U.S. Generally Accepted Accounting Principles (GAAP), 472
vs. International Financial Reporting Standards, 472–473
U.S. Supreme Court
changes to Constitution by, 56–57
decisions of, 35–39
on Prohibition, 35
Uzbekistan, Teliasonera in, 352–353. See also multinational corporations and political actors
valuable signal, 9
value-added tax (VAT) fraud, 182
Value at Risk (VaR), 117
value-driven rationale, 10–11, 25
value-relevance studies, 483
visibility, in constitutional transparency, 40
(p. 590) Volcker rule, 280
voluntary markets, carbon, 183
voting records, on forward policy guidance, 81, 82
wages, 246–247. See also executive compensation; pay
Adam Smith on, 246–247
education on, 243
efficiency, 245
piece-rate, 244
in productivity, 243
time-based, 244
Walras’ Law, 45
wealth effects, 45
Hicksian, with surprise major constitutional change, 45–46, 46f
welfare, 12
improvements in, 8
Whips, 57–58
wills, living, 280
wisdom of crowds, 57–58, 63–64
World Economic Forum’s Competitiveness Index, 18–19
World Trade Organization (WTO), 4, 166, 170, 222, 315
transparency in, 175, 318
calls for, 4
definition of, 5
Yardstick competition method, 157
Z-Metrics, 117–119, 125–138
approach of, 125–127, 127f
for European countries and U.S., 2008-2012, 128–131, 128t, 129t
vs. probabilities of default implied in credit default swaps, 137–138
probabilities of default in
bank, 132–133, 133t
in logit model estimation, 126, 140
private sector fundamental vs. credit default swaps market implied in, 133–136, 134f–136f
of privately owned vs. publicly owned firm models, comparison of, 128t, 129t, 136–137, 137t
Z-score model, Altman’s original, 117, 140
predicting sovereign defaults with, 122