Collateral, default risk, and relationship lending : an empirical study on financial contracting

This paper provides further insights into the nature of relationship lending by analyzing the link between relationship lending, borrower quality and collateral as a key variable in loan contract design. We used a unique data set based on the examination of credit files of five leading German banks, thus relying on information actually used in the process of bank credit decision-making and contract design. In particular, bank internal borrower ratings serve to evaluate borrower quality, and the bank's own assessment of its housebank status serves to identify information-intensive relationships. Additionally, we used data on workout activities for borrowers facing financial distress. We found no significant correlation between ex ante borrower quality and the incidence or degree of collateralization. Our results indicate that the use of collateral in loan contract design is mainly driven by aspects of relationship lending and renegotiations. We found that relationship lenders or housebanks do require more collateral from their debtors, thereby increasing the borrower's lock-in and strengthening the banks' bargaining power in future renegotiation situations. This result is strongly supported by our analysis of the correlation between ex post risk, collateral and relationship lending since housebanks do more frequently engage in workout activities for distressed borrowers, and collateralization increases workout probability. First version: March 12, 199

Latent provisions for building information modeling (BIM) contracts: a social network analysis approach

The effective adoption and use of Building Information Modeling (BIM) require appropriate contract design to fairly allocate the contracting parties’ rights and responsibilities. Several standards for BIM protocols and contracts have been developed for the industry. However, the awareness and the use of these are rather limited, leading to unclear provisions in BIM contracts. Therefore, the research aims to identify the influential legal aspects that serve as the latent contract provisions in BIM contracts. A questionnaire survey was conducted to survey experts and active BIM users in construction projects. The data were analyzed using social network analysis (SNA) by assuming interdependent relationships among various the legal aspects in BIM contacts. The key legal aspects associated with BIM contracts pertain to the roles and responsibilities of the project participants. The results also reveal that data security is the center of all latent legal aspects in the contracts. The study provides significant new insights into clarifying the required contract provisions in BIM contracts

Composition of behavioural assume-guarantee contracts

The growing complexity of modern engineering systems necessitates a method for design and analysis that is inherently modular. Methods based on using contracts for system design have successfully tackled this issue for a variety of system classes, but mostly in the context of discrete software systems. Motivated by this, we present assume-guarantee contracts for continuous linear dynamical systems with inputs and outputs. Such contracts serve as system specifications through two aspects. The assumptions specify the dynamic behaviour of the environment of the system, which provides inputs for it, while the guarantees specify the desired dynamic behaviour of the output of the system when interconnected with a relevant environment. This is formalized by utilizing the behavioural approach to system theory. We define and characterize notions of contract implementation and contract refinement, where the latter is used to compare contracts. We also define and characterize two notions of contract composition that allow one to reason about two types of system interconnections: series and feedback. The properties of refinement and composition allow contracts to be used for modular design and analysis.</p

Contracts for Systems Design: Methodology and Application cases

Recently, contract based design has been proposed as an ”orthogonal” approach that can beapplied to all methodologies proposed so far to cope with the complexity of system design. Contract baseddesign provides a rigorous scaffolding for verification, analysis and abstraction/refinement. Companionreport RR-8759 proposes a unified treatment of the topic that can help in putting contract-based design in perspective.This paper complements RR-8759 by further discussing methodological aspects of system design withcontracts in perspective and presenting two application cases.The first application case illustrates the use of contracts in requirement engineering, an area of system designwhere formal methods were scarcely considered, yet are stringently needed. We focus in particular to thecritical design step by which sub-contracts are generated for suppliers from a set of different viewpoints(specified as contracts) on the global system. We also discuss important issues regarding certification inrequirement engineering, such as consistency, compatibility, and completeness of requirements.The second example is developed in the context of the Autosar methodology now widely advocated inthe automotive sector. We propose a contract framework to support schedulability analysis, a key step inAutosar methodology. Our aim differs from the many proposals for compositional schedulability analysisin that we aim at defining sub-contracts for suppliers, not just performing the analysis by parts—we knowfrom companion paper RR-8759 that sub-contracting to suppliers differs from a compositional analysis entirelyperformed by the OEM. We observe that the methodology advocated by Autosar is in contradiction withcontract based design in that some recommended design steps cannot be refinements. We show how tocircumvent this difficulty by precisely bounding the risk at system integration phase. Another feature ofthis application case is the combination of manual reasoning for local properties and use of the formalcontract algebra to lift a collection of local checks to a system wide analysis

Surrogate Immunity: The Government Contract Defense and Products Liability

The government contract defense is an affirmative defense that shields a manufacturer from liability if the product causing injury complied strictly with design specifications set forth in a government procurement contract. The defense was first used by public works contractors to bar claims against them for damage to land and other property. However, in recent years, product manufacturers have invoked the government contract defense to avoid liability to third parties for defectively designed products supplied to the government. Despite widespread judicial acceptance of the government contract defense in products liability litigation, a number of issues are still being hotly debated. One controversy involves whether the government contract defense should be limited to military equipment or whether it might apply to other products such as vaccines supplied to the government under contract. Another question is whether the government contract defense should be allowed when the contractor participates extensively in the design of the product. In addition, the courts disagree about whether the government contract defense is controlled by state law or federal common law. This article takes the position that the real objective of the government contract defense is to protect governmental decision-making against collateral attacks in the courts. This concern is similar to the interest promoted by the discretionary function exception to the Federal Tort Claims Act. The discretionary function exception prevents litigants from bringing tort suits against the government in order to challenge the correctness of policy decisions by members of the executive branch; the government contract defense bars tort actions against suppliers in a similar manner when such litigation would threaten the exercise of discretion by government officials in the procurement area. Part I of this article introduces some of the principles that have influenced the modern government contract doctrine and provides an overview of significant recent decisions. Part II analyzes the policies which underlie the concept of strict products liability and examines the rationale for the government contract defense. Finally, Part III discusses some aspects of the government contract defense that have not been completely resolved by the courts

Price to win through value modelling for service offering

a contract to deliver product service systems, and make a profit. Design/methodology/approach: Industrial case studies are used as the test bed. Combinations of subjective probability and value modelling have been used in this research. Findings: Current approaches to determine the price to win for a product oriented service contract have mainly focussed on the cost of the physical asset and its’ specification. There is little research, where the ‘value’ of the tangible and intangible aspects of a product service system to the customer is considered. The proposed approach provides the decision-maker with information on the value of their/and their competitors offering, assisting in selecting the price to bid for the service contract. Practical implications: Our approach can be used by industry to model the key value drivers for their customers and provide information on the probability of winning and probability of making a profit. This research provides a step-by-step approach for identifying uncertainties eliciting the value of the service being offered to the customer and modelling these to estimate the probability of winning. Social implications: This research provides practical guidance to decision makers and bid teams. Originality/value: Highlights how the tangible and intangible aspects of a Product Service System can be quantified in monetary terms to assist in decision-making

Organizational citizenship behavior, identification, psychological contract and leadership frames : the example of primary school teachers in Taiwan

Purpose (mandatory) The study examines organizational citizenship behavior (OCB) by combining two heterogeneous perspectives, integrating OCB-related factors at work using both personal and organizational perspectives, thus contributing to our knowledge of OCB. . . Design/methodology/approach (mandatory) Two studies are conducted using surveys in Taiwan with a snowball sampling technique to enlarge participation. Study 1 analyzes the relationships between organizational identification, expected psychological contract, perceived psychological contract and OCB. Study 2 analyzes the relationship between OCB and principals’ (or head teachers’) leadership frames. . . Findings (mandatory) Study 1 finds that organizational identification is an antecedent of OCB and that expected psychological contract moderates the organizational identification-OCB relationship. Study 2 finds that the symbolic leadership frame is the only antecedent of OCB and that different leadership frames influence each other in predicting OCB. Expected psychological contract is found to moderate the organizational identification-OCB relationship, indicating that primary school teachers’ with higher levels of expected psychological contract are more likely to demonstrate OCB at school. Interestingly, perceived psychological contract did not demonstrate such a moderating effect. . . Originality/value (mandatory) The study makes three contributions. First, we analyze composite OCB via Identity and Psychological Contract theories (Study 1). Second, we scrutinize specific aspects of OCB via Leader-Member-Exchange and Leadership Frame theories. These aspects include assisting colleagues, job commitment, working morale and non-selfish behavior (Study 2). Third, we increase understanding of primary school teachers' OCB, discussing important implications for school principals and human resource managers as well as perhaps others in similar sectors. . . Key words: Organizational Citizenship Behavior; Leadership; Identification; Psychological Contract; Primary School Teachers; Principals

Farmer attitudes and beliefs toward a bull beef supply contract : a thesis submitted in partial fulfilment of the requirements for the degree, Master of Agricultural Science in Farm Management

The objective of this research was to establish the reasons why past-users (1990- 92) of a Riverlands weaner bull supply contract (RWBC) had entered and exited the contract, and what aspects of the current RWBC prevented them from re-signing. A mail survey of past RWBC users in the central North Island who were still farming bull beef was conducted. Useful responses were obtained from 22 of the 35 eligible farmers. The survey design incorporated the Ajzen-Fishbein Theory of Reasoned Action to establish how past-user's subjective beliefs and evaluative attitudes towards aspects of the current contract influenced their overall attitude towards re-signing a RWBC. Information about RWBC entry and exit reasons, and farmer requirements of future meat supply contracts was also obtained. The results suggest that respondents originally entered a RWBC to obtain the equivalent of 100% funding for cattle at low interest rates, and to increase cattle numbers (which at that stage were more profitable than sheep) by access to such funding. Farmers exited the contract because slaughter prices in the RWBC had become uncompetitive, and because of inflexibility associated with the range of dates available to slaughter cattle. Low belief strengths that a RWBC provides competitive prices compared to the free market, flexible dates for killing cattle, and improved farm profitability compared to non-contract weaner bull systems, are acting against farmers re-entering a RWBC. A future meat supply contract therefore, needs to incorporate price premiums, flexible killing dates, low interest rates, and competitive pricing before respondents, such as those involved in this study, would be prepared to sign. The Ajzen-Fishbein Theory of Reasoned Action provided an effective methodology to identify key aspects of an individual's belief structure which influenced their decision to not sign a 1993 RWBC. Future research in the area of meat supply contracts should examine more closely, using techniques such as COPE (e.g. Hurley & Valentine, 1993), the cognitive structures farmers hold towards issues such as competitive pricing, farm profitability under contract, and killing date flexibility